UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549


Form 10-K
ýANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 2020
or
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended September 30, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to


Commission file number: 1-35040


PHENIXFIN CORPORATION

MEDLEY CAPITAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Delaware 27-4576073
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

445 Park Avenue, 10th Floor, New York, NY 
280 Park Avenue, 6th Floor East, New York, NY 100171001710022
(Address of Principal Executive Offices) (Zip Code)


(212) 759-0777
859-0390

(Registrant’s Telephone Number, Including Area Code)

 _____________________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange
on which registered
Common Stock, par value $0.001 per shareMCCPFXThe New York Stock ExchangeNASDAQ Global Market
6.125% Notes due 2023MCVPFXNLThe New York Stock ExchangeNASDAQ Global Market
5.25% Notes due 2028PFXNZThe NASDAQ Global Market

Securities registered pursuant to Section 12(g) of the Act: None


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ ☐ No ý


☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ ☐ No ý


☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý ☒ No ¨


☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ¨ ☐ No ¨


☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ¨☐    Accelerated filer ¨☐    Non-accelerated filer ý☒    Smaller reporting company ¨☐    Emerging growth company ¨


☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨




☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ¨


☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ¨☐ No ý


☒

The aggregate market value of the registrant’s common stock held by non-affiliates of the Registrant as of March 31, 20202021 was $23,170,287.$79,167,958. The Registrant had 2,723,7092,517,221 shares of common stock, $0.001 par value, outstanding as of December 11, 2020.

15, 2021.


DOCUMENTS INCORPORATED BY REFERENCE


DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant'sregistrant’s proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A in connection with the registrant's 2021registrant’s 2022 Annual Meeting of Stockholders, which will be filed subsequent to the date hereof, are incorporated by reference in to Part III of this Form 10-K. Such proxy statement will be filed with the Securities and Exchange Commission not later than 120 days following the end of the registrant'sregistrant’s fiscal year ended September 30, 2020.

2021.



MEDLEY CAPITAL

PHENIXFIN CORPORATION


TABLE OF CONTENTS

 Page
1
  
Business
1
  
Risk Factors
25
27
  
Unresolved Staff Comments
46
50
  
Properties
46
50
  
Legal Proceedings
46
50
  
Mine Safety Disclosures
47
51
  
48
52
  
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
48
52
  
Selected Financial Data
48
54
  
Management’s Discussion and Analysis of Financial Condition and Results of Operations
50
55
  
Quantitative and Qualitative Disclosures About Market Risk
68
73
  
Consolidated Financial Statements and Supplementary Data
69
74
  
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
71
75
  
Controls and Procedures
71
75
  
Other Information
71
75
  
72
76
  
Directors, Executive Officers and Corporate Governance
72
76
  
Executive Compensation
72
76
  
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
72
76
  
Certain Relationships and Related Transactions, and Director Independence
72
76
  
Principal Accountant Fees and Services
72
76
  
73
77
  
Exhibits and Financial Statement Schedules
73
77
  
75
79

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PART I

In this annual report on Form 10-K, except as otherwise indicated, the terms: 

•“we”, “us”, “our”, “Medley Capital” and the “Company” refer to Medley Capital Corporation, a Delaware corporation, and its subsidiaries for the periods after our consummation of the formation transaction and to Medley Capital BDC LLC, a Delaware limited liability company, for the periods prior to our consummation of the formation transaction described elsewhere in this Form 10-K;

•“MCC Advisors” and the “Adviser” refer to MCC Advisors LLC, our current investment adviser; MCC Advisors is a wholly owned subsidiary of Medley LLC, which is controlled by Medley Management Inc. (“MDLY”), a publicly traded asset management firm, which in turn is controlled by Medley Group LLC, an entity wholly owned by the senior professionals of Medley LLC; and

•“Medley” refers, 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.

Item 1. Business


GENERAL

GENERAL

Medley Capital

PhenixFIN Corporation (“PhenixFIN”, the “Company,” “we” and “us”) is aan internally-managed non-diversified closed endclosed-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”), commencing with our first taxable year as a corporation. We are currently. On November 18, 2020, the board of directors of the Company (the “Board”) 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 our investment adviser, MCC Advisors LLC (“MCC Advisors”), pursuant to an investment management agreement. EffectiveMCC Advisors is a wholly owned subsidiary of Medley LLC, which is controlled by Medley Management Inc. (NYSE: 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 herein. Since January 1, 2021 however,the Company has been managed pursuant to an internalized management structure.

On March 26, 2013, our wholly owned subsidiary, Medley SBIC, LP (“SBIC LP”), a Delaware limited partnership that we will be internally managed. See “Business – own directly and through our wholly owned subsidiary, Medley SBIC GP, LLC, received a license from the Small Business Administration (“SBA”) to operate as a Small Business Investment Company (“SBIC”) under Section 301(c) of the Small Business Investment Company Act of 1958, as amended. Effective July 1, 2019, SBIC LP surrendered its SBIC license and changed its name to Medley Small Business Fund, LP. In addition, Medley SBIC GP, LLC changed its name to Medley Small Business Fund GP, LLC. Medley Small Business Fund, LP and Medley Small Business Fund GP, LLC have since changed their names to PhenixFIN Small Business Fund, LP and PhenixFIN Small Business Fund GP, LLC, respectively.

The Adviser – Internalized Management Structure”.


OurCompany 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.

The Company’s investment objective is to generate current income and capital appreciation by lending directlyappreciation. The management team seeks to privately held middle market companies,achieve this objective primarily through directly originated transactionsmaking 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 real estate investment trusts (“REITs”).) We may also pursue other strategic opportunities and invest in other assets or operate other businesses to help these companies expand their business, refinanceachieve our investment objective, such as operating and make acquisitions. Our investmentmanaging 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. In connection with some of our investments,Occasionally, we will receive warrants or other equity participation features which we believe will have the potential to increase the 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.

We believe the middle-market private debt market is undergoing structural shifts that are creating significant opportunities for non-bank lenders and investors. The underlying drivers of these structural changes include:include reduced participation by banks in the private debt markets particularly within the middle-market, and demand for private debt created by committed and uninvested private equity capital. We focus on taking advantage of this structural shift by lending directly to companies that are underserved by the traditional banking system and generally seek to avoid broadly marketed investment opportunities. We source investment opportunities primarily through direct relationships with financial sponsors, industry specialists, as well as financial intermediaries such as investment banks and commercial banks.


Our investment activities are currently managed by our investment adviser, MCC Advisors, which is registered with the Securities and Exchange Commission (the “SEC”) as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). MCC Advisors is an affiliate of Medley and is based in New York.

Our Investment Team which currently is provided for by MCC Advisors, is responsible for sourcing investment opportunities, conducting industry research, performing diligence on potential investments, structuring our investments and monitoring our portfolio companies on an ongoing basis. MCC Advisors’ teamOur Investment Team draws on its expertise in lending to predominantly privately held borrowers in a range of sectors, including industrials, and transportation, energy and natural resources, financials, gemstones/jewelry and real estate. In addition, MCC Advisorsour Investment Team seeks to diversify our portfolio of loans by company type, asset type, transaction size, industry and geography.


Our current Investment Team has extensive experience in the credit business, including originating, underwriting, principal investing and loan structuring. Our Adviser, through Medley, has access to over 50 employees, including over 25 investment, origination and credit management professionals, and over 25 operations, marketing and distribution professionals, each with extensive experience in their respective disciplines.

MCC Advisors also currently serves as our administrator and provides us with office space, equipment and other office services. The responsibilities of our administrator include overseeing our financial records, preparing reports to our stockholders and reports filed with the SEC and generally monitoring the payment of our expenses and the performance of administrative and professional services rendered to us by others.

As a BDC, we are required to comply with regulatory requirements, including limitations on our use of debt. We are permitted to, and expect to continue to, finance our investments through borrowings. However, as a BDC, we are only generally allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% (or 150% if certain requirements under the 1940 Act are met) after such borrowing. The amount of leverage that we employ will depend on our assessment of market conditions and other factors at the time of any proposed borrowing.


As of September 30, 2020,2021, the Company’s asset coverage was 199.2%285.6% after giving effect to leverage and therefore the Company’s asset coverage is belowwas greater than 200%, the minimum asset coverage requirement applicable presently to the Company under the 1940 Act. As a result, the Company is prohibited from making distributions to stockholders, including the payment of any dividend, and may not employ further leverage until the Company’s asset coverage is at least 200% after giving effect to such leverage.


Opportunities for co-investments may arise when MCC Advisors or an affiliated investment adviser becomes aware of investment opportunities that may be appropriate for the Company, other clients, or affiliated funds. On November 25, 2013, the Company obtained an exemptive order from the SEC that permits us to participate in negotiated co-investment transactions with certain affiliates, each of whose investment adviser is Medley, LLC or
1






an investment adviser controlled by Medley, LLC in a manner consistent with our investment objective, strategies and restrictions, as well as regulatory requirements and other pertinent factors (the “Prior Exemptive Order”). On March 29, 2017, the Company, MCC Advisors and certain other affiliated funds and investment advisers received an exemptive order (the “Exemptive Order”) that supersedes the Prior Exemptive Order and allows affiliated registered investment companies to participate in co-investment transactions with us that would otherwise have been prohibited under Section 17(d) and 57(a)(4) of the 1940 Act and Rule 17d-1 thereunder. On October 4, 2017, the Company, MCC Advisors and certain of our affiliates received an exemptive order that supersedes the Exemptive Order (the “Current Exemptive Order”) and allows, in addition to the entities already covered by the Exemptive Order, Medley LLC and its subsidiary, Medley Capital LLC, to the extent they hold financial assets in a principal capacity, and any direct or indirect, wholly or majority owned subsidiary of Medley LLC that is formed in the future, to participate in co-investment transactions with us that would otherwise be prohibited by either or both of Sections 17(d) and 57(a)(4) of the 1940 Act. Co-investment under the Current Exemptive Order is subject to certain conditions, including the condition that, in the case of each co-investment transaction, our board of directors determines that it would be in our best interest to participate in the transaction. However, neither we nor the affiliated funds are obligated to invest or co-invest when investment opportunities are referred to us or them.

In situations where co-investment with other funds managed by MCC Advisors or its affiliates is not permitted or appropriate, such as when there is an opportunity to invest in different securities of the same issuer or where the different investments could be expected to result in a conflict between our interests and those of other MCC Advisors clients, MCC Advisors will need to decide which client will proceed with the investment. MCC Advisors will make these determinations based on its policies and procedures, which generally require that such opportunities be offered to eligible accounts on an alternating basis that will be fair and equitable over time. Moreover, except in certain circumstances, we will be unable to invest in any issuer in which a fund managed by MCC Advisors or its affiliates has previously invested. Similar restrictions limit our ability to transact business with our officers or directors or their affiliates.

On March 26, 2013, our wholly owned subsidiary, Medley SBIC LP (“SBIC LP”), a Delaware limited partnership, received a license from the Small Business Administration (“SBA”) to operate as a Small Business Investment Company (“SBIC”) under Section 301(c) of the Small Business Investment Company Act of 1958, as amended. Effective July 1, 2019, SBIC LP surrendered its SBIC license and changed its name to Medley Small Business Fund, LP (“Medley Small Business Fund”). In addition, Medley SBIC GP, LLC changed its name to Medley Small Business Fund GP, LLC. See Note 5 for further information.

Our principal executive office is located at 280445 Park Avenue, 6th10th Floor, East, New York, NY 10017 and our telephone number is (212) 759-0777.859-0390.



Investment Process Overview


We view our current investment process as consisting of three distinct phases described below:

Sourcing and Origination   MCC Advisors sources. We typically source investment opportunities through access to aour management team’s network of contacts developedlong-standing relationships. Our sourcing efforts are led by our senior investment professionals, who leverage their experience in the financial services and related industries by Medley. It is the Adviser’s responsibility to identify specific opportunities, to refine opportunities through rigorous due diligence of the underlying facts and circumstances while remaining flexible and responsive to client’s needs. With over 25 investment professionals based in New York involved in sourcing and origination for MCC Advisors, each investment professional is able to maintain long-standing relationships and responsibility for a specified market.

An investment pipeline is maintained to manage all prospective investment opportunities and is reviewed weekly by the Investment Committee of MCC Advisors (“Investment Committee”)investments.

Initial Evaluation. The purpose of the investment pipeline, which is comprised of all prospective investment opportunities at various stages of due diligence and approval, is to evaluate, monitor and approve all of our investments, subject to the oversight of our Investment Committee. 


Credit EvaluationWe utilizeuse a systematic, consistent approach to credit evaluation, developed by Medley, withwhich typically consists of (i) a particular focus on determining the value of a business in a downside scenario. The key criteria that we consider and attributes that we seek include: (i) strong and resilient underlying business fundamentals; (ii) a substantial equity cushion in the form of capital ranking junior in the right of payment to our investment; (iii) sophisticated management teams with a minimum operating history of two years; (iv) a conclusion that overall downside risk is manageable; (v) collateral support in the form of accounts receivable, inventory, machinery, equipment, real estate, IP, overall enterprise value and other assets; and (vi) limited requirements for future financing beyond the proposed commitment. The firstpreliminary due diligence review of an opportunity is conducted using the above-mentioned analysis to determine if the opportunity meets MCC Advisors' general investment criteria. The next three reviews performed by the Investment Committee includeCompany, (ii) an initial diligence meeting with the following: (1)Company’s management team, investment bank or private equity sponsor, (iii) an Early Read Memo, (2) a Green Light Memo,initial indication of interest and (3) Investment Committee approval memo. MCC Advisors maintains a rigorous in-house due diligence process. Prior to making each investment, MCC Advisors subjects eachterms, and (iv) preparation of memoranda including potential portfolio company to an extensive creditoverviews, investment considerations and risks, financial model and return information.

Due Diligence & Underwriting. We typically undertake continued diligence, which expands on the investment thesis, risks and mitigants, and competition factors of our potential investment opportunities. We may conduct third party reviews, on-site visits and/or background checks in connection with our potential investments in portfolio companies.

Portfolio Management. We undertake a proactive monitoring process of our portfolio companies, whereby we conduct monthly financial review process, including analysisand monitoring of market and operational dynamics as well as both historical and projected financial information. Areas of additional focus include management or sponsor experience, industry and competitive dynamics, and tangible asset values. Background checks and tax compliance checks are typically required on allcovenants, maintain ongoing dialogue with portfolio company management teams.


Our due diligence process typically entails:
•negotiation and execution of a term sheet;

•on-site visits;

•interviews with management, employees, customersowners, and vendors;

•review of loan documents and material contracts, as applicable;

•obtaining  background checks on all principals/partners/founders;

2






•completing customer and supplier calls;

•review of tax and accounting issues related to a contemplated capital structure;

•developing a financial model with sensitivity analysis that includes a management case, expected case and downside case;

•receiving third party reports such as environmental, appraisal and consulting reports, as applicable.

Monitoring  MCC Advisors views active portfolio monitoring as a vital part of our investment process. MCC Advisors utilizes an investment management system, which maintains a centralized, dynamic electronic reporting system which houses, organizes and archives all portfolio data by investment. This is the primary system that tracks all changes to investment terms and conditions. On a quarterly basis, the asset management team produces a report for each investment within the portfolio by summarizing the investment’s general information, terms and structure, financial performance, covenant package, and business updates. This feature enables MCC Advisors to track the history of every investment, while maintaining access to the most recent reporting information available, ensuring accurate reporting of the investment.

MCC Advisors will typically require portfolio companies to adhere to certain affirmative covenants requiring the following reports:
monthly or quarterly financial statementsannual audits and management letters
monthly or quarterly covenant certificatesquarterly industry updates
monthly or quarterly management discussion & analysisquarterly customer and supplier concentration updates
monthly or quarterly bank statementsquarterly backlog/pipeline reports
annual insurance certificatesannual budgets and forecasts.

MCC Advisors holds regular portfolio reviewsexercise board observer rights where the Investment Committee reviews each transaction in detail and reassesses the risk rating presently assigned.
appropriate.

Rating Criteria   In addition to external risk management research and internal monitoring tools, weWe use an investment rating system to characterize and monitor the credit profile and our expected level of returns on each investment in our portfolio. We use a five-level numeric rating scale. The following is a description of the conditions associated with each investment rating:


Credit
Rating		 
RatingDefinition
   
1 Investments that are performing above expectations.
2 
2 Investments that are performing within expectations, with risks that are neutral or favorable compared to risks at the time of origination.
All new loans are rated ‘2’.
3 
3 Investments that are performing below expectations and that require closer monitoring, but where no loss of interest, dividend or principal is expected.
Companies rated ‘3’ may be out of compliance with financial covenants, however, loan payments are generally not past due.
4 Investments that are performing below expectations and for which risk has increased materially since origination.
Some loss of interest or dividend is expected but no loss of principal.
In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due (but generally not more than 180 days past due).
5 Investments that are performing substantially below expectations and whose risks have increased substantially since origination.
Most or all of the debt covenants are out of compliance and payments are substantially delinquent.
Some loss of principal is expected.
Investment Committee
The purpose of the Investment Committee, which is comprised of a minimum of three members selected from senior members of MCC Advisors’ Investment Team, is to evaluate and approve all of our investments. The Investment Committee process is intended to bring the diverse experience and perspectives of the committee’s members to the analysis and consideration of each investment. The Investment Committee serves to provide investment consistency and adherence to our core investment philosophy and policies. The Investment Committee also determines appropriate investment sizing and suggests ongoing monitoring requirements.
In addition to reviewing investments, Investment Committee meetings serve as a forum to discuss credit views and outlooks. Potential transactions and deal flow are reviewed on a regular basis.  Members of the investment team are encouraged to share information and views on credits with the Investment Committee early in their analysis.  We believe this process improves the quality of the analysis and assists the investment team members to work more efficiently.
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Each transaction is presented to the Investment Committee in a formal written report. All of our new investments and the exit or sale of an existing investment must be approved by a majority vote of the Investment Committee, although unanimous agreement is sought.
Investment Structure

Once we have determined that a prospective portfolio company is suitable for investment, we work with the management of that company and its other capital providers to structure an investment. We negotiate among these parties to agree on how our investment is expected to perform relative to the other capital in the portfolio company’s capital structure.


We typically structure our investments which typically have maturities of three to seven years, as follows:


Senior Secured First Lien Term LoansWe structure these investments as senior secured loans. We obtain security interests in the assets of the portfolio companies that serve as collateral in support of the repayment of such loans. This collateral generally takes the form of first-priority liens on the assets of the portfolio company borrower. Our senior secured loans may provide for amortization of principal with the majority of the amortization due at maturity.


Senior Secured Second Lien Term LoansWe structure these investments as junior, secured loans. We obtain security interests in the assets of these portfolio companies that serves as collateral in support of the repayment of such loans. This collateral generally takes the form of second-priority liens on the assets of a portfolio company. These loans typically provide for amortization of principal in the initial years of the loans, with the majority of the amortization due at maturity.



Senior Secured First Lien NotesWe structure these investments as senior secured loans. We obtain security interests in the assets of these portfolio companies that serve as collateral in support of the repayment of such loans. This collateral generally takes the form of priority liens on the assets of a portfolio company. These loans typically have interest-only payments (often representing a combination of cash pay and payment-in-kind, or ("PIK"(“PIK”) interest), with amortization of principal due at maturity. PIK interest represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term and recorded as interest income on an accrual basis to the extent such amounts are expected to be collected.


Warrants and Minority Equity SecuritiesIn some cases, we may also receive nominally priced warrants or options to buy a minority equity interest in the portfolio company in connection with a debt investment. As a result, as a portfolio company appreciates in value, we may achieve additional investment return from this equity interest. We may structure such warrants to include provisions protecting our rights as a minority-interest holder, as well as a “put,” or right to sell such securities back to the issuer, upon the occurrence of specified events. In many cases, we may also seek to obtain registration rights in connection with these equity interests, which may include demand and “piggyback” registration rights.


Unitranche LoansWe structure our unitranche loans, which combine the characteristics of traditional senior secured first lien term loans and subordinated notes as senior secured loans. We obtain security interests in the assets of these portfolio companies that serve as collateral in support of the repayment of these loans. This collateral generally takes the form of first-priority liens on the assets of a portfolio company. Unitranche loans typically provide for amortization of principal in the initial years of the loans, with the majority of the amortization due at maturity.

Unsecured DebtWe structure these investments as unsecured, subordinated loans that provide for relatively high, fixed interest rates that provide us with significant current interest income. These loans typically have interest-only payments (often representing a combination of cash pay and payment-in-kind, or PIK interest), with amortization of principal due at maturity. Subordinated notes generally allow the borrower to make a large lump sum payment of principal at the end of the loan term, and there is a risk of loss if the borrower is unable to pay the lump sum or refinance the amount owed at maturity. Subordinated notes are generally more volatile than secured loans and may involve a greater risk of loss of principal. Subordinated notes often include a PIK feature, which effectively operates as negative amortization of loan principal.


We tailor the terms of each investment to the facts and circumstances of the transaction and the prospective portfolio company, negotiating a structure that protects our rights and manages our risk while creating incentives for the portfolio company to achieve its business plan and improve its operating results.  We seek to limit the downside potential of our investments by:

•selecting investments that we believe have a low probability of loss of principal;

•requiring a total return on our investments (including both interest and potential equity appreciation) that we believe will compensate us appropriately for credit risk; and

•negotiating covenants in connection with our investments that afford our portfolio companies as much flexibility in managing their businesses as possible, consistent with the preservation of our capital. Such restrictions may include affirmative and negative covenants, default penalties, lien protection, change of control provisions and board rights, including either observation or rights to a seat on the board of directors under some circumstances.

We expect to hold most of our investments to maturity or repayment, but we may realize or sell some of our investments earlier if a liquidity event occurs, such as a sale or recapitalization transaction, or the worsening of the credit quality of the portfolio company.

The Company has invested in its affiliate, FlexFIN, LLC (“FlexFIN”), which operates an asset-based lending business under which it enters into secured loans and secured financing structures with borrowers engaged in the gemstone/jewelry industry. FlexFIN will generally structure these loans as sale/repurchase transactions under which the collateral (that is, the gemstones/jewelry) remains under FlexFIN’s ownership during the entire term of the loan.


Managerial Assistance

As a BDC, we offer, and must provide upon request, managerial assistance to certain of our portfolio companies. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. MCC Advisors provides such managerial assistance on our behalf to portfolio companies that request this assistance. We may receive fees for these services and will reimburse MCC Advisors,services.


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Leverage






as our administrator, for its allocated costs in providing such assistance, subject

As a BDC, we are generally only allowed to employ leverage to the review and approval byextent that our board of directors, including our independent directors.


Leverage

Through any credit facility that we may enter intoasset coverage, as defined in the future, we may borrow funds1940 Act, equals at least 200% after giving effect to make additional investments, a practice known as “leverage,” to attempt to increase return to our stockholders.such leverage. The amount of leverage that we employ at any particular time will dependdepends on our Adviser's and our boardassessment of directors’ assessments ofthe market and other factors at the time of any proposed borrowing. We are also subject to certain regulatory requirements relating to our borrowings. For a discussion of such requirements, see “Regulation - Senior Securities.”

We may, from time to time, seek to retire or repurchase our common stock through cash purchases, as well as retire, cancel or purchase our outstanding debt through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. The amounts involved may be material.


Competition

Competition

Our primary competitors to provide financing to private middle-market companies are public and private funds, commercial and investment banks, commercial finance companies, other BDCs, SBICs and private equity and hedge funds. Some competitors may have access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC or to the distribution and other requirements we must satisfy to maintain our favorable RIC tax treatment.


Human Capital Resources

Employees

As of September 30, 2021, the internalized management team consists of 4 investment professionals and 7 employees/consultants overall. This team includes our executive officers, investment and finance professionals, and administrative staff. Our senior management team consists of David Lorber, our chief executive officer, and Ellida McMillan, our chief financial officer.

In response to the COVID-19 pandemic, we have instituted a temporary work-from-home policy, pursuant to which our professional team has and continues to primarily work remotely without disruption to our operations. This policy will remain in effect until it is deemed safe to return to our office.

As an internally managed BDC, the success of our business and investment strategy, including achieving our investment objective, depends in material part on our professional team. We depend upon the members of our management team and our investment professionals for the identification, final selection, structuring, closing and monitoring of our investments. Our professional team has critical experience and relationships on which we rely to implement our business plan. We expect that the members of our management team and our investment professionals will maintain key informal relationships, which we will use to help identify and gain access to investment opportunities. If we do not have any employees. Our day-to-dayattract, develop and retain highly talented professionals, we may not be able to operate our business as we expect and our operating results could be adversely affected. See “Item 1A, Risk Factors.”

Administration

We previously entered into (on January 11, 2011) and, prior to January 1, 2021, operated pursuant to an investment operations are managed by our Adviser. Our Adviser employs over 25 investment professionals, including its principals. In addition, we reimburse our administrator formanagement agreement with MCC Advisors (the “Investment Management Agreement”) in accordance with the allocable portion of overhead and other expenses incurred by it in performing its obligations under an administration agreement, including1940 Act. The Investment Management Agreement became effective upon the compensationpricing of our Chief Financial Officerinitial public offering. Under the Investment Management Agreement, MCC Advisors agreed to provide us with investment advisory and Chief Compliance Officermanagement services. For these services, we agreed to pay a base management fee equal to a percentage of our gross assets and their respective staffs.


Administration

an incentive fee based on our performance. The Investment Management Agreement expired December 31, 2020 and effective January 1, 2021, we operate pursuant to an internalized management structure.

We havealso entered into an administration agreement pursuant to whichwith MCC Advisors furnishesas our administrator on January 19, 2011. The administration agreement became effective upon the pricing of our initial public offering. Under the administration agreement, MCC Advisors agreed to furnish us with office facilities and equipment, andprovide us clerical, bookkeeping recordkeeping and record keeping services at such facilities and provide us with other administrative services at such facilities. Undernecessary to conduct our administration agreement,day-to-day operations. MCC Advisors performs, or oversees the performance of,also provided on our required administrative services, which include, among other things, being responsible for the financial recordsbehalf significant managerial assistance to those portfolio companies to which we are required to maintain and preparing reports to our stockholders and reports filedprovide such assistance. The administration agreement expired at the close of business on December 31, 2020, in connection with the SEC.


TerminationCompany’s adoption of Agreements and Planan internalized management structure. In connection with the adoption by the board of Mergers

On July 29, 2019,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”). Effective January 1, 2021, U.S. Bancorp acts as our administrator. Under the Fund Accounting Servicing Agreement and Administration Servicing Agreement, U.S. Bancorp serves as custodian and provides us with fund accounting and financial reporting services.


Termination of Agreements

We entered into an investment management agreement with MCC Advisors on January 11, 2011 (the “Investment Management Agreement”), which expired December 31, 2020.

Under the terms of the Investment Management Agreement, MCC Advisors:

●determined the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes;

●identified, evaluated and negotiated the structure of the investments we made (including performing due diligence on our prospective portfolio companies); and

●executed, closed, monitored and administered the investments we made, including the exercise of any voting or consent rights.

MCC Advisors’ services under the Investment Management Agreement were not exclusive, and it was free to furnish similar services to other entities so long as its services to us were not impaired.

Pursuant to the Investment Management Agreement, we paid MCC Advisors a fee for investment advisory and management services consisting of a base management fee and a two-part incentive fee.

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. Moreover, the revised incentive fee includes a netting mechanism and is subject to a rolling three-year look back from January 1, 2016 forward. Under no circumstances would the new fee structure result in higher fees to MCC Advisors than fees under the prior investment management agreement.

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 Income Corporation (“Sierra”(the “Amended MCC Merger Agreement”), pursuant to which the Company would, on the terms and subject to the conditions set forth was in effect, but no longer than a year; provided that, if the Amended MCC Merger Agreement merge with and intois terminated by Sierra, with Sierra asthen the surviving company intermination of the merger (the “MCC Merger”). In addition, on July 29, 2019, Sierra and MDLY entered into the Amended and RestatedInvestment Management Agreement and Plan of Merger, dated as of July 29, 2019 (the “Amended MDLY Merger Agreement”), by and among MDLY, Sierra, and Sierra Management, Inc., a wholly owned subsidiary of Sierra (“Merger Sub”), pursuant to which MDLY would be effective on the terms and subject30th day following receipt of Sierra’s notice of termination to the conditions set forth in the Amended MDLY Merger Agreement, merge with and into Merger Sub, with Merger Sub as the surviving company in the merger (the “MDLY Merger”).


Company. On May 1, 2020, the Company received a notice of termination from Sierra of the Amended MCC Merger Agreement.Agreement from Sierra. Under the Amended MCC Merger Agreement, either party could have,was permitted, subject to certain conditions, terminatedto terminate the Amended MCC Merger Agreement if the MCC Merger hadmerger was not been consummated by March 31, 2020. RepresentativesSierra elected to do so on May 1, 2020. As result of the termination by Sierra informed the Company that in determining to terminateof the Amended MCC Merger Agreement Sierra considered a number of factors, including, among other factors, changes in the relative valuation of the Company and Sierra, the changed circumstances and the unpredictable economic conditions resulting from the global health crisis caused by the coronavirus (COVID-19) pandemic, and the uncertainty regarding the parties’ ability to satisfy the conditions to closing the MCC Merger in a timely manner.

In addition, on May 1, 2020, MDLY received a noticethe Investment Management Agreement would have been terminated effective as of termination from SierraMay 31, 2020. On May 21, 2020, the Board, including all of the Amended MDLY Merger Agreement. Underindependent directors, extended the Amended MDLY Mergerterm of the Investment Management Agreement either party could have, subject to certain conditions, terminatethrough the Amended MDLY Mergerend 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 ifthrough September 30, 2020. On September 29, the MDLY Merger had not been consummated by MarchBoard, including all of the independent directors, extended the term of the Investment Management Agreement through December 31, 2020. RepresentativesMr. Brook Taube, Chairman and Chief Executive Officer through December 31, 2020 and director through January 21, 2021 and Mr. Seth Taube, director through January 21, 2021 are affiliated with MCC Advisors and Medley.

On November 18, 2020, the Board approved the adoption of Sierra informed MDLY that in determining to terminatean internalized management structure effective January 1, 2021. The new management structure replaces the Amended MDLY Merger Agreement, Sierra considered a numbercurrent 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 factors, including, among other factors, changes inDavid Lorber, who has served as an independent director of the relative valuationCompany since April 2019, as interim Chief Executive Officer, and Ellida McMillan as Chief Financial Officer of MDLYthe 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 Sierra,Corporate Governance Committee of the changed circumstancesBoard, and the unpredictable economic conditions resulting fromSpecial Committee of the global health crisis caused by the coronavirus (COVID-19) pandemic, and the uncertainty regarding the parties’ ability to satisfy the conditions to closing the MDLY Merger in a timely manner.Board.



Information Available
5







We maintain a website at http://www.medleycapitalcorp.comwww.phenixfc.com. We make available, free of charge, on our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission, or the SEC. Information contained on our website is not incorporated by reference into this annual report on Form 10-K and you should not consider information contained on our website to be part of this annual report on Form 10-K or any other report we file with the SEC.


Summary of Risk Factors

Investing in our securities involves a high degree of risk. You should carefully consider the information in “Item 1A. Risk Factors”, including, but not limited to, the following risks:


Risks Related to our Business

●We have determined to internalize our operating structure, including our management and investment functions, with the expectation that we will be able to operate more efficiently with lower costs, but this may not be the case.

●As an internally managed BDC, we are dependent upon our management team and other professionals and if we are not able to hire and retain qualified personnel, we will not realize the anticipated benefits of the internalization.

●We may suffer credit and capital losses.

●Because we use borrowed funds to make investments or fund our business operations, we are exposed to risks typically associated with leverage which increase the risk of investing in us.

●The lack of liquidity in our investments may adversely affect our business.

●A substantial portion of our portfolio investments will be recorded at fair value as determined in good faith by or under the direction of our board of directors and, as a result, there may be uncertainty regarding the value of our portfolio investments.

●We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer.

●Our ability to enter into transactions with our affiliates will be restricted, which may limit the scope of investments available to us.

●We will be exposed to risks associated with changes in interest rates.

●Changes relating to the London Interbank Offering Rate (“LIBOR”) calculation process may adversely affect the value of the LIBOR-indexed, floating-rate debt securities in our portfolio.

●Because we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income.

●If our investments are not managed effectively, we may be unable to achieve our investment objective.

●We may experience fluctuations in our periodic operating results.

●Any failure on our part to maintain our status as a BDC would reduce our operating flexibility.

●We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.

●We may not be able to pay you distributions and our distributions may not grow over time.

●The highly competitive market in which we operate may limit our investment opportunities.


●Because we expect to distribute substantially all of our net investment income and net realized capital gains to our stockholders, we will need additional capital to finance our growth and such capital may not be available on favorable terms or at all.

●Our board of directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.

●There are significant potential conflicts of interest that could affect our investment returns.

●Our management team may, from time to time, possess material non-public information, limiting our investment discretion.

●Because we borrow money, the potential for loss on amounts invested in us will be magnified and may increase the risk of investing in us.

●We are highly dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay distributions.

●A failure of cybersecurity systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning could impair our ability to conduct business effectively.

●Our business and operations could be negatively affected if we become subject to any securities class actions and derivative lawsuits, which could cause us to incur significant expense, hinder execution of investment strategy and impact our stock price.

•We have determined to internalize our operating structure, including our management and investment functions, with the expectation that we will be able to operate more efficiently with lower costs, but this may not be the case.

•As an internally managed BDC, we will be dependent upon our management team and other professionals and if we are not able to hire and retain qualified personnel, we will not realize the anticipated benefits of the internalization.
•We may suffer credit losses.
•Because we use borrowed funds to make investments or fund our business operations, we are exposed to risks typically associated with leverage which increase the risk of investing in us.
•The lack of liquidity in our investments may adversely affect our business.
•A substantial portion of our portfolio investments will be recorded at fair value as determined in good faith by or under the direction of our board of directors and, as a result, there may be uncertainty regarding the value of our portfolio investments.
•We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer.
•Our ability to enter into transactions with our affiliates will be restricted, which may limit the scope of investments available to us.
•We will be exposed to risks associated with changes in interest rates.
•Changes relating to the LIBOR calculation process may adversely affect the value of the LIBOR-indexed, floating-rate debt securities in our portfolio.
•Because we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income.
•If our investments are not managed effectively, we may be unable to achieve our investment objective.
•We may experience fluctuations in our periodic operating results.
•Any failure on our part to maintain our status as a BDC would reduce our operating flexibility.
•We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.
•We may be required to pay incentive fees on income accrued, but not yet received in cash.
•We may not be able to pay you distributions and our distributions may not grow over time.
•The highly competitive market in which we operate may limit our investment opportunities.
•Because we expect to distribute substantially all of our net investment income and net realized capital gains to our stockholders, we will need additional capital to finance our growth and such capital may not be available on favorable terms or at all.
•Our board of directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.
•There are significant potential conflicts of interest that could affect our investment returns.
•There may be conflicts of interest related to obligations MCC Advisors’ senior management and Investment Team and members of its Investment Committee have to other clients.
•MCC Advisors may, from time to time, possess material non-public information, limiting our investment discretion.
•Our incentive fee structure may create incentives for MCC Advisors that are not fully aligned with the interests of our stockholders.
•Because we borrow money, the potential for loss on amounts invested in us will be magnified and may increase the risk of investing in us.
•Our incentive fee may induce our investment adviser to make certain investments, including speculative investments.
•We may be obligated to pay our investment adviser incentive compensation even if we incur a loss and may pay more than 20% of our net capital gains because we cannot recover payments made in previous years.
•The valuation process for certain of our portfolio holdings creates a conflict of interest.
•Other arrangements with MCC Advisors may create conflicts of interest.
6






•The investment management agreement and administration agreement with MCC Advisors were not negotiated on an arm’s length basis and may not be as favorable to us as if they had been negotiated with an unaffiliated third party.
•Our ability to sell or otherwise exit investments in which affiliates of MCC Advisors also have an investment may be restricted.
•We are highly dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay distributions.
•A failure of cybersecurity systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning could impair our ability to conduct business effectively.
•Our business and operations could be negatively affected if we become subject to any securities class actions and derivative lawsuits, which could cause us to incur significant expense, hinder execution of investment strategy and impact our stock price.

Risks Related to our Investments

●We may not realize gains from our equity investments.

●Our investments are very risky and highly speculative.

●Our investments in private portfolio companies may be risky, and you could lose all or part of your investment.

●Our portfolio companies may prepay loans, which prepayment may reduce stated yields if capital returned cannot be invested in transactions with equal or greater expected yields.

●We may acquire indirect interests in loans rather than direct interests, which would subject us to additional risk.

●Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio and our ability to make follow-on investments in certain portfolio companies may be restricted.

●Our ability to invest in public companies may be limited in certain circumstances.

●Our investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments.

●Our affiliate’s asset-based lending activities are influenced by volatility in prices of gemstones/jewelry.


●Hedging transactions may expose us to additional risks.

●We may invest in “unitranche” debt instruments that combine both senior and subordinated debt into one debt instrument. Unitranche debt instruments typically pay a higher rate of interest than traditional senior debt instruments, but may also pose greater risk associated with a lesser amount of asset coverage.

●We may invest in, or obtain exposure to, obligations that may be “covenant-lite,” which means such obligations lack certain financial maintenance covenants.

●The disposition of our investments may result in contingent liabilities.

●If we invest in the securities and obligations of distressed and bankrupt issuers, we might not receive interest or other payments.

•We may not realize gains from our equity investments.

•Our investments are very risky and highly speculative.
•Our investments in private middle-market portfolio companies may be risky, and you could lose all or part of your investment.
•Continuation of the current decline in oil and natural gas prices for a prolonged period of time could have a material adverse effect on the Company.
•Our portfolio companies may prepay loans, which prepayment may reduce stated yields if capital returned cannot be invested in transactions with equal or greater expected yields.
•We may acquire indirect interests in loans rather than direct interests, which would subject us to additional risk.
•Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio and our ability to make follow-on investments in certain portfolio companies may be restricted.
•Our ability to invest in public companies may be limited in certain circumstances.
•Our investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments.
•Our ability to invest in public companies may be limited in certain circumstances.
•Hedging transactions may expose us to additional risks.
•The disposition of our investments may result in contingent liabilities.
•If we invest in the securities and obligations of distressed and bankrupt issuers, we might not receive interest or other payments.

Risks Related to our Operations as a BDC and a RIC

●Regulations governing our operation as a BDC may limit our ability to, and the way in which we raise additional capital, which could have a material adverse impact on our liquidity, financial condition and results of operations.

●Changes in the laws or regulations governing our business, or changes in the interpretations thereof, and any failure by us to comply with these laws or regulations, could have a material adverse effect on our business, results of operations or financial condition.

●We cannot predict how tax reform legislation will affect the Company, our investments, or our stockholders, and any such legislation could adversely affect our business.

●If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC, which would have a material adverse effect on our business, financial condition and results of operations.

●We will become subject to corporate-level U.S. federal income tax if we are unable to maintain our qualification as a regulated investment company under Subchapter M of the Code or satisfy regulated investment company distribution requirements.


•Regulations governing our operation as a BDC may limit our ability to, and the way in which we raise additional capital, which could have a material adverse impact on our liquidity, financial condition and results of operations.

•Changes in the laws or regulations governing our business, or changes in the interpretations thereof, and any failure by us to comply with these laws or regulations, could have a material adverse effect on our business, results of operations or financial condition.
•We cannot predict how tax reform legislation will affect the Company, our investments, or our stockholders, and any such legislation could adversely affect our business.
•Legislation that became effective in 2018 may allow the Company to incur additional leverage, which could increase the risk of investing in the Company.
•If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC, which would have a material adverse effect on our business, financial condition and results of operations.
•We will become subject to corporate-level U.S. federal income tax if we are unable to maintain our qualification as a regulated investment company under Subchapter M of the Code or satisfy regulated investment company distribution requirements.

Risks Relating to an Investment in our Securities

●Investing in our securities may involve an above average degree of risk.

●Shares of closed-end investment companies, including business development companies, may, as is currently the case with the Company, at times, trade at a discount to their net asset value (“NAV”).

●The market price of our common stock may fluctuate significantly.

●Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.

●Certain provisions of the Delaware General Corporation Law and our certificate of incorporation and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock.

●The NAV per share of our common stock may be diluted if we sell shares of our common stock in one or more offerings at prices below the then current NAV per share of our common stock or securities to subscribe for or convertible into shares of our common stock.

●Our 6.125% Notes due 2023 (the “Notes”) are unsecured and therefore are effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future.

●The Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.

●The indenture under which the Notes were issued contains limited protection for holders of the Notes.

●An active trading market for the Notes may not develop or be sustained, which could limit the market price of the Notes or your ability to sell them.

●If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.

●If we issue preferred stock, the NAV and market value of our common stock may become more volatile.

●Holders of any preferred stock we might issue would have the right to elect members of the board of directors and class voting rights on certain matters.

•Investing in our securities may involve an above average degree of risk.

•Shares of closed-end investment companies, including business development companies, may, at times, trade at a discount to their NAV.
•The market price of our common stock may fluctuate significantly.
•Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.
•Certain provisions of the Delaware General Corporation Law and our certificate of incorporation and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock.
7






•The NAV per share of our common stock may be diluted if we sell shares of our common stock in one or more offerings at prices below the then current NAV per share of our common stock or securities to subscribe for or convertible into shares of our common stock.
•The Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future.
•The Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.
•The indenture under which the Notes were issued contains limited protection for holders of the Notes.
•An active trading market for the Notes may not develop or be sustained, which could limit the market price of the Notes or your ability to sell them.
•If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.
•If we issue preferred stock, the NAV and market value of our common stock may become more volatile.
•Holders of any preferred stock we might issue would have the right to elect members of the board of directors and class voting rights on certain matters.

General Risk Factors

●We are currently operating in a period of capital markets disruptions and economic uncertainty. Such market conditions may materially and adversely affect debt and equity capital markets, which may have a negative impact on our business, financial condition and operations.

●Events outside of our control, including public health crises, could negatively affect our portfolio companies and our results of our operations.

●Political, social and economic uncertainty, including uncertainty related to the COVID-19 pandemic, creates and exacerbates risks.

●Further downgrades of the U.S. credit rating, automatic spending cuts, or another government shutdown could negatively impact our liquidity, financial condition and earnings.

●Economic recessions or downturns could impair our portfolio companies and harm our operating results.


•INVESTMENTSWe are currently operating in a period of capital markets disruptions and economic uncertainty. Such market conditions may materially and adversely affect debt and equity capital markets, which may have a negative impact on our business, financial condition and operations.

•Events outside of our control, including public health crises, could negatively affect our portfolio companies and our results of our operations.
•Political, social and economic uncertainty, including uncertainty related to the COVID-19 pandemic, creates and exacerbates risks.
•Further downgrades of the U.S. credit rating, automatic spending cuts, or another government shutdown could negatively impact our liquidity, financial condition and earnings.
•Economic recessions or downturns could impair our portfolio companies and harm our operating results.

INVESTMENTS

We have built a diverse portfolio that includes senior secured first lien term loans, senior secured second lien term loans, unitranche loans, senior secured first lien notes, subordinated notes, and warrants and minority equity securities by investing approximately $10 million to $50 million of capital, on average, in the securities of middle-market companies.


The following table shows the portfolio composition by industry grouping at fair value atas of September 30, 20202021 (dollars in thousands):

 Fair ValuePercentage
Construction & Building$51,964 21.1 %
Multisector Holdings41,019 16.6 
High Tech Industries26,165 10.6 
Healthcare & Pharmaceuticals23,481 9.5 
Services:  Business21,841 8.9 
Hotel, Gaming & Leisure12,337 5.0 
Wholesale12,278 5.0 
Containers, Packaging & Glass11,987 4.8 
Consumer goods:  Durable9,520 3.8 
Banking, Finance, Insurance & Real Estate6,557 2.7 
Consumer goods:  Non-durable6,164 2.5 
Environmental Industries5,846 2.4 
Energy:  Oil & Gas5,626 2.3 
Metals & Mining3,530 1.4 
Forest Products & Paper2,991 1.2 
Aerospace & Defense2,942 1.2 
Media:  Broadcasting & Subscription1,110 0.5 
Automotive1,043 0.4 
Retail343 0.1 
Total$246,744 100.0 %

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   Fair Value  Percentage 
Construction & Building $31,619   20.8%
Banking, Finance, Insurance & Real Estate  27,916   18.4 
High Tech Industries  21,210   14.0 
Services: Business  12,415   8.2 
Automotive  11,967   7.9 
Hotel, Gaming & Leisure  11,931   7.9 
Manufacturing  9,270   6.1 
Environmental Industries  8,100   5.3 
Energy: Oil & Gas  3,579   2.4 
Forest Products & Paper  3,455   2.3 
Metals & Mining  3,077   2.0 
Aerospace & Defense  2,490   1.6 
Consumer goods: Durable  2,361   1.6 
Healthcare & Pharmaceuticals  2,250   1.5 
Total $151,640   100.0%

The following table shows the portfolio composition by industry grouping at fair value atas of September 30, 20192020 (dollars in thousands):

  Fair Value  Percentage 
Construction & Building $51,964   21.1%
Multisector Holdings  41,019   16.6 
High Tech Industries  26,165   10.6 
Healthcare & Pharmaceuticals  23,481   9.5 
Services: Business  21,841   8.9 
Hotel, Gaming & Leisure  12,337   5.0 
Wholesale  12,278   5.0 
Containers, Packaging & Glass  11,987   4.8 
Consumer goods: Durable  9,520   3.8 
Banking, Finance, Insurance & Real Estate  6,557   2.7 
Consumer goods: Non-durable  6,164   2.5 
Environmental Industries  5,846   2.4 
Energy: Oil & Gas  5,626   2.3 
Metals & Mining  3,530   1.4 
Forest Products & Paper  2,991   1.2 
Aerospace & Defense  2,942   1.2 
Media: Broadcasting & Subscription  1,110   0.5 
Automotive  1,043   0.4 
Retail  343   0.1 
Total $246,744   100.0%


 Fair ValuePercentage
Multisector Holdings$69,949 17.6 %
Construction & Building59,608 15.0 
Services:  Business49,512 12.5 
High Tech Industries38,254 9.6 
Healthcare & Pharmaceuticals25,698 6.5 
Energy:  Oil & Gas23,632 6.0 
Hotel, Gaming & Leisure21,127 5.3 
Wholesale13,850 3.5 
Services:  Consumer13,278 3.3 
Containers, Packaging & Glass12,637 3.2 
Capital Equipment10,680 2.7 
Automotive10,375 2.6 
Banking, Finance, Insurance & Real Estate10,000 2.5 
Aerospace & Defense8,604 2.2 
Consumer goods:  Non-durable6,326 1.6 
Consumer goods:  Durable6,170 1.6 
Environmental Industries3,991 1.0 
Metals & Mining3,436 0.9 
Forest Products & Paper2,830 0.7 
Media:  Broadcasting & Subscription2,408 0.6 
Chemicals, Plastics & Rubber2,277 0.6 
Media: Advertising, Printing & Publishing1,715 0.4 
Retail532 0.1 
Total$396,889 100.0 %

The following table sets forth certain information as of September 30, 20202021 for each portfolio company in which we had an investment. Other than these investments, our only formal relationship with our portfolio companies is the managerial assistance that we provide upon request and the board observer or participation rights we may receive in connection with our investment.

Name of Portfolio Company Sector Security
Owned		 Maturity Interest
Rate (1)		  Principal
Due at
Maturity		  Fair
Value		  % of 
Net
Assets		 
                   
1888 Industrial Services, LLC Energy: Oil & Gas Senior Secured First Lien Term Loan A 9/30/2021(2)    6.00% $9,946,741  $—   0.0%
1888 Industrial Services, LLC Energy: Oil & Gas Senior Secured First Lien Term Loan B 9/30/2021(2)  9.00%  25,937,520   —   0.0%
1888 Industrial Services, LLC Energy: Oil & Gas Senior Secured First Lien Term Loan C 9/30/2021(2)  6.00%  1,231,932   24,637   0.0%
1888 Industrial Services, LLC Energy: Oil & Gas Revolving Credit Facility 9/30/2021(2)  6.00%  3,554,069   3,554,069   2.5%
1888 Industrial Services, LLC Energy: Oil & Gas Equity        21,562   —   0.0%
Alpine SG, LLC High Tech Industries Senior Secured First Lien Term Loan 11/16/2022  6.75%  4,715,808   4,715,809   3.3%
Alpine SG, LLC High Tech Industries Senior Secured Incremental First Lien Term Loan 11/16/2022  9.50%  472,087   472,087   0.3%
Alpine SG, LLC High Tech Industries Senior Secured Incremental First Lien Term Loan 11/16/2022  7.50%  4,174,037   4,174,037   2.9%
Alpine SG, LLC High Tech Industries Senior Secured Incremental First Lien Term Loan 11/16/2022  7.50%  1,000,000   1,000,000   0.7%
Alpine SG, LLC High Tech Industries Senior Secured Incremental First Lien Term Loan 11/16/2022  7.50%  2,999,802   2,999,802   2.1%
Alpine SG, LLC High Tech Industries Senior Secured First Lien Delayed Draw Term Loan 11/16/2022  6.75%  2,277,293   2,277,293   1.6%
Alpine SG, LLC High Tech Industries Revolving Credit Facility 11/16/2022  6.75%  —   —   0.0%
Autosplice, Inc. Automotive Senior Secured First Lien Term Loan 4/30/2022  11.00%  11,826,036   11,826,036   8.2%
Be Green Packaging, LLC Containers, Packaging & Glass Equity        1   —   0.0%
Black Angus Steakhouses, LLC Hotel, Gaming & Leisure Senior Secured First Lien Term Loan 6/30/2022  10.00%  8,412,596   2,279,814   1.6%
Black Angus Steakhouses, LLC Hotel, Gaming & Leisure Senior Secured First Lien Super Priority DDTL 6/30/2022  10.00%  1,500,000   1,500,000   1.0%
Black Angus Steakhouses, LLC Hotel, Gaming & Leisure Senior Secured First Lien Delayed Draw Term Loan 6/30/2022  10.00%  758,929   758,929   0.5%
Caddo Investors Holdings 1 LLC Forest Products & Paper Equity        2,528,826   3,454,786   2.4%
Chimera Investment Corp. Banking, Finance, Insurance & Real Estate Preferred Equity        117,310   3,019,559   2.1%
Cleaver-Brooks, Inc. Manufacturing Senior Secured Notes 3/1/2023  7.88%  9,364,000   9,270,360   6.5%
CM Finance SPV, LLC Energy: Oil & Gas Unsecured Debt        101,463   —   0.0%
CPI International, Inc. Aerospace & Defense Senior Secured Second Lien Term Loan 7/28/2025  8.25%  2,607,062   2,489,744   1.7%
DataOnline Corp. High Tech Industries Senior Secured First Lien Term Loan 11/13/2025  7.25%  4,912,500   4,863,375   3.4%
DataOnline Corp. High Tech Industries Revolving Credit Facility 11/13/2025  7.25%  714,286   707,143   0.5%
Dividend and Income Fund Banking, Finance, Insurance & Real Estate Equity        87,483   1,275,502   0.9%


Name of Portfolio Company Sector Security
Owned		 Maturity Interest
Rate (1)		  Principal
Due at
Maturity		  Fair
Value		  % of 
Net
Assets		 
                   
Dream Finders Homes, LLC Construction & Building Preferred Equity    8.00%  4,905,011   4,757,860   3.3%
Dynamic Energy Services International LLC Energy: Oil & Gas Senior Secured First Lien Term Loan 12/31/2021  13.50%  12,109,957   —   0.0%
Dynamic Energy Services International LLC Energy: Oil & Gas Equity        12,350,000   —   0.0%
FlexFIN LLC Services: Business Equity Interest         2,500,000   2,500,000   1.7%
Footprint Acquisition, LLC Services: Business Equity        150   —   0.0%
Footprint Acquisition, LLC Services: Business Preferred Equity    8.75%  4,049,398   2,956,061   2.1%
Global Accessories Group, LLC Consumer goods: Non-durable Equity    ��   380   —   0.0%
Great AJAX Corp. Banking, Finance, Insurance & Real Estate Equity        253,651   3,421,752   2.4%
Impact Group, LLC Services: Business Senior Secured First Lien Term Loan 6/27/2023  8.37%  —   —   0.0%
Impact Group, LLC Services: Business Senior Secured First Lien Delayed Draw Term Loan 6/27/2023  8.37%  —   —   0.0%
InterFlex Acquisition Company, LLC Containers, Packaging & Glass Senior Secured First Lien Term Loan 8/18/2022  10.00%  —   —   0.0%
Invesco Mortgage Capital, Inc. Banking, Finance, Insurance & Real Estate Preferred Equity        205,000   5,217,250   3.6%
JFL-NGS Partners, LLC Construction & Building Equity        57,300   26,862,813   18.7%
JFL-WCS Partners, LLC Environmental Industries Equity        129,588   8,099,949   5.6%
Kemmerer Operations, LLC Metals & Mining Senior Secured First Lien Term Loan 6/21/2023  15.00%  2,381,985   2,360,547   1.6%
Kemmerer Operations, LLC Metals & Mining Senior Secured First Lien Delayed Draw Term Loan 6/21/2023  15.00%  163,915   162,441   0.1%
Kemmerer Operations, LLC Metals & Mining Equity        7   553,746   0.4%
Lighting Science Group Corporation Containers, Packaging & Glass Warrants        5,000,000   —   0.0%
MFA Financial, Inc. Banking, Finance, Insurance & Real Estate Preferred Equity        31,692   778,989   0.5%
New Residential Investment Corp. Banking, Finance, Insurance & Real Estate Preferred Equity        206,684   5,206,370   3.6%
New York Mortgage Trust, Inc. Banking, Finance, Insurance & Real Estate Preferred Equity        165,000   4,182,750   2.9%

Name of Portfolio CompanySectorSecurity OwnedMaturity
Interest Rate(1)
Principal Due at MaturityFair Value% of Net Assets
1888 Industrial Services, LLCEnergy:  Oil & GasSenior Secured First Lien Term Loan A9/30/20216.00 %$9,946,741 $— 0.0 %
1888 Industrial Services, LLCEnergy:  Oil & GasSenior Secured First Lien Term Loan B9/30/20219.00 %25,937,520 — 0.0 %
1888 Industrial Services, LLCEnergy:  Oil & GasSenior Secured First Lien Term Loan C9/30/20216.00 %1,231,932 1,166,763 0.8 %
1888 Industrial Services, LLCEnergy:  Oil & GasRevolving Credit Facility9/30/20216.00 %3,554,069 3,554,069 2.4 %
1888 Industrial Services, LLCEnergy:  Oil & GasEquity— — 0.0 %
Access Media Holdings, LLCMedia:  Broadcasting & SubscriptionSenior Secured First Lien Term Loan7/22/202010.00 %11,105,630 1,110,563 0.7 %
Access Media Holdings, LLCMedia:  Broadcasting & SubscriptionPreferred Equity Series A1,600,000 — 0.0 %
Access Media Holdings, LLCMedia:  Broadcasting & SubscriptionPreferred Equity Series AA800,000 — 0.0 %
Access Media Holdings, LLCMedia:  Broadcasting & SubscriptionPreferred Equity Series AAA971,200 — 0.0 %
Access Media Holdings, LLCMedia:  Broadcasting & SubscriptionEquity— — 0.0 %
Alpine SG, LLCHigh Tech IndustriesSenior Secured First Lien Term Loan11/16/20226.75 %4,715,809 4,466,815 3.0 %
Alpine SG, LLCHigh Tech IndustriesSenior Secured Incremental First Lien Term Loan11/16/20229.50 %472,087 472,087 0.3 %

9






Name of Portfolio CompanySectorSecurity OwnedMaturity
Interest Rate(1)
Principal Due at MaturityFair Value% of Net Assets
Alpine SG, LLCHigh Tech IndustriesSenior Secured First Lien Delayed Draw Term Loan11/16/20226.75 %2,277,293 2,157,052 1.4 %
Alpine SG, LLCHigh Tech IndustriesRevolving Credit Facility11/16/20229.50 %1,000,000 947,200 0.6 %
American Dental Partners, Inc.Healthcare & PharmaceuticalsSenior Secured Second Lien Term Loan9/25/20239.50 %4,387,500 3,948,750 2.6 %
Autosplice, Inc.High Tech IndustriesSenior Secured First Lien Term Loan12/17/20219.00 %12,780,349 11,898,505 7.9 %
Avantor, Inc.WholesaleEquity— 12,277,988 8.2 %
Be Green Packaging, LLCContainers, Packaging & GlassEquity— — 0.0 %
Black Angus Steakhouses, LLCHotel, Gaming & LeisureSenior Secured First Lien Delayed Draw Term Loan12/31/202010.00 %758,929 758,929 0.5 %
Black Angus Steakhouses, LLCHotel, Gaming & LeisureSenior Secured First Lien Term Loan12/31/202010.00 %8,412,596 5,047,557 3.4 %
Black Angus Steakhouses, LLCHotel, Gaming & LeisureEquity— — 0.0 %
Caddo Investors Holdings 1 LLCForest Products & PaperEquity— 2,990,776 2.0 %
CM Finance SPV, LLCBanking, Finance, Insurance & Real EstateUnsecured Debt6/24/20213.00 %101,463 101,463 0.1 %
CPI International, Inc.Aerospace & DefenseSenior Secured Second Lien Term Loan7/28/20258.25 %2,607,062 2,219,392 1.5 %
Crow Precision Components, LLCAerospace & DefenseEquity— 723,131 0.5 %
CT Technologies Intermediate Holdings, Inc.Healthcare & PharmaceuticalsSenior Secured Second Lien Term Loan12/1/202210.00 %7,500,000 6,832,500 4.5 %
DataOnline Corp.High Tech IndustriesSenior Secured First Lien Term Loan11/13/20257.25 %4,962,500 4,786,331 3.2 %
DataOnline Corp.High Tech IndustriesRevolving Credit Facility11/13/20257.25 %535,714 510,357 0.3 %
Dream Finders Homes, LLCConstruction & BuildingPreferred Equity8.00 %4,531,472 3,928,786 2.6 %
Dynamic Energy Services International LLCEnergy:  Oil & GasSenior Secured First Lien Term Loan12/31/202113.74 %12,930,235 905,116 0.6 %
Dynamic Energy Services International LLCEnergy:  Oil & GasEquity— — 0.0 %
Footprint Acquisition, LLCServices:  BusinessPreferred Equity8.75 %3,969,998 3,969,998 2.6 %
Footprint Acquisition, LLCServices:  BusinessEquity— 1,960,830 1.3 %
Global Accessories Group, LLCConsumer goods:  Non-durableEquity— — 0.0 %
Impact Group, LLCServices:  BusinessSenior Secured First Lien Term Loan6/27/20238.37 %3,219,964 2,994,565 2.0 %
Impact Group, LLCServices:  BusinessSenior Secured First Lien Delayed Draw Term Loan6/27/20238.37 %9,330,056 8,676,952 5.8 %
InterFlex Acquisition Company, LLCContainers, Packaging & GlassSenior Secured First Lien Term Loan8/18/20229.00 %12,098,406 11,987,100 8.0 %
JFL-NGS Partners, LLCConstruction & BuildingPreferred Equity - A-2 Preferred3.00 %1,795,034 1,795,034 1.2 %
JFL-NGS Partners, LLCConstruction & BuildingPreferred Equity - A-1 Preferred3.00 %232,292 232,292 0.2 %
JFL-NGS Partners, LLCConstruction & BuildingEquity— 38,780,067 25.7 %
JFL-WCS Partners, LLCEnvironmental IndustriesPreferred Equity6.00 %1,310,649 1,310,649 0.9 %
JFL-WCS Partners, LLCEnvironmental IndustriesEquity— 4,535,580 3.0 %
10






Name of Portfolio CompanySectorSecurity OwnedMaturity
Interest Rate(1)
Principal Due at MaturityFair Value% of Net Assets
Kemmerer Operations, LLCMetals & MiningSenior Secured First Lien Term Loan6/21/202315.00 %2,051,705 2,051,705 1.4 %
Kemmerer Operations, LLCMetals & MiningSenior Secured First Lien Delayed Draw Term Loan6/21/202315.00 %515,699 515,699 0.4 %
Kemmerer Operations, LLCMetals & MiningEquity— 962,717 0.6 %
Lighting Science Group CorporationContainers, Packaging & GlassWarrants2/19/2024— — 0.0 %
Manna Pro Products, LLCConsumer goods:  Non-durableSenior Secured First Lien Term Loan12/8/20237.00 %5,343,674 5,123,515 3.4 %
Manna Pro Products, LLCConsumer goods:  Non-durableSenior Secured First Lien Delayed Draw Term Loan12/8/20237.00 %1,085,219 1,040,508 0.7 %
MCC Senior Loan Strategy JV I LLCMultisector HoldingsEquity— 41,018,500 27.2 %
NVTN LLCHotel, Gaming & LeisureSenior Secured First Lien Term Loan12/31/20245.00 %6,565,875 4,530,078 3.0 %
NVTN LLCHotel, Gaming & LeisureSenior Secured First Lien Super Priority DDTL12/31/20245.00 %2,000,000 2,000,000 1.3 %
NVTN LLCHotel, Gaming & LeisureSenior Secured First Lien Term Loan B12/31/202410.25 %14,963,195 — 0.0 %
NVTN LLCHotel, Gaming & LeisureSenior Secured First Lien Term Loan C12/31/202413.00 %10,014,223 — 0.0 %
NVTN LLCHotel, Gaming & LeisureEquity— — 0.0 %
Path Medical, LLCHealthcare & PharmaceuticalsSenior Secured First Lien Term Loan A10/11/202110.50 %5,905,080 5,905,080 3.9 %
Path Medical, LLCHealthcare & PharmaceuticalsSenior Secured First Lien Term Loan B10/11/202114.00 %7,783,840 6,794,514 4.5 %
Path Medical, LLCHealthcare & PharmaceuticalsWarrants1/9/2027— — 0.0 %
Point.360Services:  BusinessSenior Secured First Lien Term Loan7/8/20202,777,366 186,083 0.1 %
RateGain Technologies, Inc.Hotel, Gaming & LeisureUnsecured Debt7/31/2020704,106 — 0.0 %
RateGain Technologies, Inc.Hotel, Gaming & LeisureUnsecured Debt7/31/2021761,905 — 0.0 %
Redwood Services Group, LLCServices:  BusinessRevolving Credit Facility6/6/20237.00 %700,000 647,500 0.4 %
Sendero Drilling Company, LLCEnergy:  Oil & GasUnsecured Debt8/31/20218.00 %488,750 — 0.0 %
Seotowncenter, Inc.Services:  BusinessEquity— 686,834 0.5 %
SFP Holding, Inc.Construction & BuildingSenior Secured First Lien Term Loan9/1/20227.25 %4,776,955 4,733,962 3.1 %
SFP Holding, Inc.Construction & BuildingSenior Secured First Lien Delayed Draw Term Loan9/1/20227.25 %1,852,522 1,835,850 1.2 %
SFP Holding, Inc.Construction & BuildingEquity— 657,578 0.4 %
SMART Financial Operations, LLCRetailEquity— 343,000 0.2 %
Stancor, Inc.Services:  BusinessEquity— 150,374 0.1 %
Starfish Holdco, LLCHigh Tech IndustriesSenior Secured Second Lien Term Loan8/18/202510.00 %1,000,000 926,500 0.6 %
URT Acquisition Holdings CorporationServices:  BusinessUnsecured Debt6/23/202110.00 %2,567,929 2,567,929 1.7 %
US Multifamily, LLCBanking, Finance, Insurance & Real EstateSenior Secured First Lien Term Loan6/17/202110.00 %5,123,913 5,123,913 3.4 %
11






Name of Portfolio CompanySectorSecurity OwnedMaturity
Interest Rate(1)
Principal Due at MaturityFair Value% of Net Assets
US Multifamily, LLCBanking, Finance, Insurance & Real EstateEquity— 1,332,000 0.9 %
Velocity Pooling Vehicle, LLCAutomotiveSenior Secured First Lien Term Loan4/28/202312.00 %1,014,440 1,014,440 0.7 %
Velocity Pooling Vehicle, LLCAutomotiveEquity— 12,841 0.0 %
Velocity Pooling Vehicle, LLCAutomotiveWarrants3/30/2028— 15,354 0.0 %
Walker Edison Furniture Company LLCConsumer goods:  DurableSenior Secured First Lien Term Loan9/26/20247.25 %3,519,878 3,519,878 2.3 %
Walker Edison Furniture Company LLCConsumer goods:  DurableEquity— 6,000,000 4.0 %
Watermill-QMC Midco, Inc.AutomotiveEquity— — 0.0 %

(1)
Name of Portfolio Company Sector Security
Owned		 Maturity Interest
Rate (1) 		  Principal
Due at
Maturity		  Fair
Value		  % of 
Net
Assets		 
                   
NVTN LLC Hotel, Gaming & Leisure Senior Secured First Lien Term Loan B 12/31/2024    10.25%  14,963,195   —   0.0%
NVTN LLC Hotel, Gaming & Leisure Senior Secured First Lien Term Loan C 12/31/2024  13.00%  10,014,223   —   0.0%
NVTN LLC Hotel, Gaming & Leisure Senior Secured First Lien Super Priority DDTL 12/31/2024  5.00%  1,000,000   977,000   0.7%
NVTN LLC Hotel, Gaming & Leisure Senior Secured First Lien Delayed Draw Term Loan 12/31/2024  5.00%  6,565,875   6,414,860   4.5%
NVTN LLC Hotel, Gaming & Leisure Equity        9,550,922   —   0.0%
Path Medical, LLC Healthcare & Pharmaceuticals Senior Secured First Lien Term Loan A 10/11/2021  10.50%  5,805,894   2,249,835   1.6%
Path Medical, LLC Healthcare & Pharmaceuticals Senior Secured First Lien Term Loan B 10/11/2021  14.00%  7,646,823   —   0.0%
Path Medical, LLC Healthcare & Pharmaceuticals Warrants        123,867   —   0.0%
Point.360 Services: Business Senior Secured First Lien Term Loan 7/8/2020  6.00%  2,777,366   —   0.0%
RateGain Technologies, Inc. Hotel, Gaming & Leisure Unsecured Debt 4/1/2024      704,762   —   0.0%
RateGain Technologies, Inc. Hotel, Gaming & Leisure Unsecured Debt 10/2/2023      532,671   —   0.0%
Redwood Services Group, LLC Services: Business Revolving Credit Facility 6/6/2023  7.00%  175,000   175,000   0.1%
Sendero Drilling Company, LLC Energy: Oil & Gas Unsecured Debt 8/1/2022  9.00%  233,750   —   0.0%
Seotowncenter, Inc. Services: Business Equity        3,434,170   —   0.0%
SFP Holding, Inc. Services: Business Senior Secured First Lien Term Loan 9/1/2022  7.25%  —   —   0.0%
SFP Holding, Inc. Services: Business Senior Secured First Lien Delayed Draw Term Loan 9/1/2022  7.25%  —   —   0.0%
SFP Holding, Inc. Services: Business Equity        —   —   0.0%
SMART Financial Operations, LLC Retail Preferred Equity        700,000   —   0.0%
Stancor, Inc. Services: Business Equity        263,814   —   0.0%
Thryv Holdings, Inc. Services: Business Senior Secured First Lien Term Loan B 3/1/2026  9.50%  5,770,000   5,863,763   4.1%
URT Acquisition Holdings Corporation Services: Business Unsecured Debt 12/4/2024  10.00%  —   —   0.0%
URT Acquisition Holdings Corporation Services: Business Warrants        28,912   920,000   0.6%
US Multifamily, LLC Banking, Finance, Insurance & Real Estate Preferred Equity        33,300   2,236,261   1.6%
US Multifamily, LLC Banking, Finance, Insurance & Real Estate Senior Secured First Lien Term Loan 12/31/2022  10.00%  2,577,418   2,577,418   1.8%
Velocity Pooling Vehicle, LLC Automotive Equity        5,441   64,167   0.0%
Velocity Pooling Vehicle, LLC Automotive Senior Secured First Lien Term Loan 4/28/2023  12.00%  —   —   0.0%
Velocity Pooling Vehicle, LLC Automotive Warrants 3/30/2028      6,506   76,727   0.1%
Walker Edison Furniture Company LLC Consumer goods: Durable Equity        10,244   2,361,242   1.6%
Watermill-QMC Midco, Inc. Automotive Equity        518,283   —   0.0%
Wingman Holdings, Inc. (f/k/a Crow Precision Components, LLC) Aerospace & Defense Equity        350   —   0.0%

(1)All interest is payable in cash and/or PIK, and all London Interbank Offering Rate (“LIBOR”) represents 1 Month LIBOR and 3 Month LIBOR unless otherwise indicated. For each debt investment, we have provided the current interest rate as of September 30, 2021.
(2)The maturity date was extended to May 1, 2023 subsequent to September 30, 2021. 


As of September 30, 2020.


2021, our income-bearing investment portfolio, which represented 86.6% of our total portfolio, had a weighted average yield based upon cost of our portfolio investments of approximately 6.75%, and 74.6% of our income-bearing investment portfolio bore interest based on floating rates, such as LIBOR, while 25.4% of our income-bearing investment portfolio bore interest at fixed rates. As of September 30, 2020, our income-bearing investment portfolio, which represented 61.2% of our total portfolio, had a weighted average yield based upon cost of our portfolio investments of approximately 8.5%, and 87.4% of our income-bearing investment portfolio bore interest based on floating rates, such as LIBOR, while 12.6% of our income-bearing investment portfolio bore interest at fixed rates. As of September 30, 2019, the weighted average yield based upon cost of our total portfolio was approximately 9.5%. The weighted average yield of our total portfolio does not represent the total return to our stockholders. The weighted average yield on income producing investments is computed based upon a combination of the cash flows to date and the contractual interest payments, principal amortization and fee notes due at maturity without giving effect to closing fees received, base management fees, incentive fees or general fund related expenses. For each floating rate loan, the projected fixed-rate equivalent coupon rate used to forecast the interest cash flows was calculated by adding the interest rate spread specified in the relevant loan document to the fixed-rate equivalent floating rate, duration-matched to the specific loan, adjusted by the floating rate floor and/or cap in place on that loan.


Overview of Portfolio Companies

Set forth below is a brief description of the business of our portfolio companies as of September 30, 2020:

2021:

Portfolio CompanyBrief Description of Portfolio Company
1888 Industrial Services, LLC1888 Industrial Services, LLC (“1888”) provides field support services to oil and gas independent producers, drilling companies and midstream companies in the Denver-Julesburg   Basin and Permian Basin. 1888 builds, repairs, modifies and maintains oil and gas production equipment, sites, wells and pipelines.
Access Media Holdings, LLCAccess Media Holdings, LLC (d/b/a Access Media 3, Inc.) headquartered in Oak Brook, IL, is a triple-play provider of digital satellite television, high speed internet and voice services to the residential multi-dwelling unit market in the United States.
Alpine SG, LLCAlpine SG, LLC ("(“Alpine SG"SG”) is an aggregator of niche, vertically oriented software businesses. Each acquired business operates independently with oversight from the Alpine   SG management team.
American Dental Partners, Inc.American Dental Partners, Inc., founded in 1995 and headquartered in Wakefield, MA, provides dental groups with critical administrative functions, enabling dentists to focus on clinical care.
Autosplice, Inc.Autosplice, Inc. (“Autosplice”), founded in 1954 and headquartered in San Diego, CA, is a global supplier of highly engineered, mission-critical electrical interconnectors to OEMs   and Tier 1 suppliers. Autosplice serves a wide variety of end-markets, providing the automotive, industrial, telecommunications, medical, transportation, consumer, and other applications.
Avantor, Inc.Avantor, Inc. is a global provider of products and services to the biopharma, healthcare, education & government, and advanced technologies & applied materials industries.
Be Green Packaging, LLCBe Green Packaging, LLC, founded in 2007 and headquartered in Thousand Oaks, CA, designs and manufactures sustainable, tree-free, molded fiber products and packaging for   the food service and consumer packaged goods end markets.
Black Angus Steakhouses, LLCBlack Angus Steakhouses, LLC, founded in 1964 and headquartered in Los Altos, CA, operates restaurants across six states including California, Arizona, Alaska, New Mexico,   Washington, and Hawaii.

Caddo Investors Holdings 1 LLC

Caddo Investors Holdings 1 LLC (d/b/a TexMark Timber Treasury, L.P.), consists of ~1.1approximately 1.1 million acres of high quality and relatively young timber lands located in East Texas.

Chimera Investment Corp.

Chimera Investment Corp. is an internally managed REIT that is primarily engaged in the business of investing in a diversified portfolio of mortgage assets, including residential mortgage loans, Agency residential mortgage-backed securities (“RMBS”), Non-Agency RMBS, Agency commercial mortgage-backed securities (“CMBS”), and other real estate-related assets.
Cleaver-Brooks, Inc.Cleaver-Brooks, Inc. is a fully integrated boiler room solutions provider, based in Thomasville, Georgia.
CM Finance SPV LLCCM Finance SPV LLC is a wholly-owned subsidiary of Investcorp Credit Management BDC, Inc., a specialty finance company that invests primarily in the debt of U.S. middle-market companies.
CPI International, Inc.CPI International, Inc., headquartered in Palo Alto, CA. develops and manufactures microwave, radio frequency, power, and control products for critical communications, defense   and medical applications.
Crow Precision Components, LLCCrow Precision Components, LLC is a Fort Worth, TX based forger of aluminum and steel used for mission critical aircraft components, among other end markets.

12






Portfolio CompanyBrief Description of Portfolio Company
CT Technologies Intermediate Holdings, Inc.CT Technologies Intermediate Holdings, Inc., founded in 1976 and located in Alpharetta, GA, is a provider of outsourced release-of-information services, which involves the interaction between healthcare providers, who possess protected medical information, and authorized requestors, who are entitled to receive that information for various commercial, legal, or personal purposes.
DataOnline Corp.DataOnline Corp. ("DataOnline"(“DataOnline”) is a global provider of M2M solutions specifically for the monitoring of both fixed and mobile remote industrial assets. DataOnline specializes in robust and reliable devices & sensors, remote data collection, global wireless communications & web-based applications.
Dividend and Income FundDividend and Income Fund is a diversified closed end management investment company that seeks to achieve primarily high current income and secondarily capital appreciation by investing at least 50% of its total assets in income generating equity securities.
Dream Finders Homes, LLCDream Finders Homes, LLC ("DFH"(“DFH”), founded in 2009 and headquartered in Jacksonville, FL, is a residential home builder currently operating in the greater Jacksonville, Orlando, Colorado, Savannah, Austin, and Washington DC markets. DFH builds both single-family homes and townhomes.
Dynamic Energy Services International LLCDynamic Energy Services International LLC, headquartered in New Orleans, LA, is a provider of full-service fabrication, construction and maintenance services to a broad range of worldwide markets including oil and gas, industrial and petrochemical markets.
FlexFIN LLC

FlexFIN operates an asset-based lending business under which it enters into secured loans and secured financing structures with borrowers engaged in the gemstone/jewelry industry.

Footprint Acquisition, LLCFootprint Acquisition, LLC is a provider of in store merchandising and logistics solutions to major retailers and consumer packaged goods manufacturers.
Global Accessories Group, LLCGlobal Accessories Group, LLC, headquartered in New York City, designs, manufactures, and sells custom-themed jewelry and accessory collections. These collections are tailored to leading retailers in the specialty, department store, off-price and juniors markets.
Impact Group, LLCImpact Group, LLC
Great AJAX Corp.Great Ajax Corp. is a Boise, Idaho based salesREIT that acquires, invests in, and marketing agency providing outsourced sales, marketingmanages a portfolio of residential mortgage and merchandising services to consumer packaged goods manufacturers.small balance commercial mortgage loans.
InterFlex Acquisition Company, LLCInterFlex Acquisition Company, LLC, headquartered
Invesco Mortgage Capital, Inc.Invesco Mortgage Capital Inc. is an externally managed REIT primarily focused on investing in, Wilkesboro, NC, is a comprehensive provider of specialized printedfinancing, and converted flexible packaging solutions for foodmanaging mortgage-backed securities (“MBS”) and consumer packaged goods producers throughout the USA and UK.other mortgage-related assets. 
JFL-NGS Partners, LLCJFL-NGS Partners, LLC (d/b/a NorthStar Group Services, Inc.), is a one-stop provider of demolition and environmental remediation services including demolition, asset & scrap recovery, abatement of asbestos, lead, and mold, and disaster response.
JFL-WCS Partners, LLCJFL-WCS Partners, LLC (d/b/a Waste Control Specialists LLC) operates a state-of-the-art facility for the processing, treatment, storage and disposal of LLRW, hazardous waste, and mixed hazardous and radioactive wastes.
Kemmerer Operations, LLCKemmerer Operations, LLC, location in Wyoming, is a producer of high-value thermal coal and surface-mined coal.
Lighting Science Group CorporationLighting Science Group Corporation (“LSG”) is a light emitting diode (“LED”) lighting technology company. LSG designs, develops and markets general illumination products that exclusively use LEDs as their light source. The LSG’s product portfolio includes LED-based retrofit lamps (replacement bulbs) used in existing light fixtures as well as purpose-built LED-based luminaires (light fixtures).
Manna Pro Products, LLCManna Pro Products, LLC (“Manna Pro”), founded in 1985 and headquartered in Chesterfield, MO, is a manufacturer and distributor of pet nutrition and care products. Manna Pro targets five core animal end markets: dog & cat, horse, backyard chicken, other backyard pets and deer.
MCC Senior Loan Strategy JV I LLCMFA Financial, Inc.MCC Senior Loan Strategy JV I LLC commenced operations on July 15, 2015 and generates current income and capital appreciation byMFA Financial, Inc. is an internally-managed REIT primarily engaged in investing primarily in the debt of privately-held middle market companies in the United Statesresidential mortgage assets, with a focus on senior secured first lien termresidential whole loans, (see Note 3 "Investments"residential mortgage securities, and mortgage servicing rights-related assets.
New Residential Investment Corp.New Residential Investment Corp. (“New Residential”) is a vertically integrated investment management and mortgage platform externally managed by Fortress Investment Group. New Residential’s investments focus on servicing and origination, residential securities and loans, and consumer loans.
New York Mortgage Trust, Inc.NY Mortgage Trust is a REIT that acquires, invests in, Item 8. "Consolidated Financial Statementsfinances and Supplementary Data").manages mortgage-related single-family and multi-family residential assets in the US.
NVTN LLCNVTN LLC (d/b/a “Dick’s Last Resort”), established in 1985 and headquartered in Nashville, TN, is a “eatertainment” restaurant concept with locations throughout the US, mostly   in budget friendly tourist destinations. DLRNVTN LLC has developed an identifiable brand for its high-energy, unique themed restaurant concept that targets tourists and business travelers in   high foot traffic locations.

Portfolio CompanyBrief Description of Portfolio Company
Path Medical, LLCPath Medical, LLC, founded in 1993, is a provider of fully-integrated acute trauma treatment and diagnostic imaging solutions to patients injured in automobile and non-work   related accidents throughout Florida.
Point.360
Point.360  Point.360, headquartered in Los Angeles, CA is a full-service content management company with several facilities strategically located throughout Los Angeles supporting all   aspects of postproduction.
RateGain Technologies, Inc.RateGain Technologies, Inc. provides hospitality and travel technology solutions for revenue management decision support, rate intelligence, electronic distribution and brand   engagement helping customers across the world in streamlining their operations and sales.
Redwood Services Group, LLCRedwood Services Group, LLC is a group of regional IT managed service providers that provide fully outsourced IT services to small and medium sized businesses.
Sendero Drilling Company, LLCSendero Drilling Company, LLC is a land drilling contractor headquartered in San Angelo, TX.

Seotowncenter, Inc.Seotowncenter, Inc. is a tech-enabled business services company that delivers white label search engine optimization and local search and digital campaign fulfillment to the small   and midsize business market.
SFP Holding, Inc.SFP Holding, Inc. is a provider of fire and life safety security systems.
SMART Financial Operations, LLCSMART Financial Operations, LLC, headquartered in Orlando, FL, is a specialty retail platform initially comprised of three distinct retail pawn store chains and a pawn industry   consulting firm.
Stancor, Inc.Stancor, Inc., founded in 1985 and based out of Monroe, CT, is a designer and manufacturer of electric submersible pumps, control, accessories, and parts.
Starfish Holdco, LLCStarfish Holdco, LLC (d/b/a Syncsort or Precisely) through its subsidiaries

Thryv Holdings, Inc.

Thryv Holdings, Inc. is a global software company specializing in Big Data, high speed sorting products, data protection, data qualityprovider of print and integration softwaredigital marketing solutions to small and services, for mainframe, power systemsmedium sized businesses and open system environments to enterprise customers.

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SaaS end-to-end customer experience tools.

Portfolio CompanyBrief Description of Portfolio Company
URT Acquisition Holdings CorporationURT Acquisition Holdings Corporation (d/b/a United Road Towing or “URT”) headquartered in Mokena, IL is an integrated towing company in the United States. URT provides a complete range of towing, vehicle storage and vehicle auction services.
US Multifamily, LLCUS Multifamily, LLC (“US Multifamily”) is a real estate platform focused on distressed multifamily assets primarily located in the Southeastern United States.
Velocity Pooling Vehicle, LLCVelocity Pooling Vehicle, LLC, headquartered in Coppell, TX, is a manufacturer, distributor and retailer of branded aftermarket products for the powersports industry. The Company'sCompany’s brands include Vance & Hines, Kuryakyn, Mustang, Performance Machine, and others.
Walker Edison Furniture Company LLCWalker Edison Furniture Company LLC ("(“Walker Edison"Edison”) is an e-commerce furniture platform exclusively selling through the websites of top online retailers. Walker Edison operates a data-driven business model to sell a variety of home furnishings in the discount category including TV stands, bedroom furniture, chairs & tables, desks and other.
Watermill-QMC Midco, Inc.Watermill-QMC Midco, Inc. (d/b/a Quality Metalcraft, Inc.), founded in 1964 and headquartered in Livonia, MI, is a provider of complex assemblies for specialty automotive production, prototype and factory assist applications.

Wingman Holdings, Inc. (f/k/a Crow Precision

Components, LLC)

Wingman Holdings, Inc. (f/k/a Crow Precision Components, LLC) is a Fort Worth, TX based forger of aluminum and steel used for mission critical aircraft components, among other end markets. 


PREVIOUS RELATIONSHIP WITH MCC ADVISORS

THE ADVISER

Prior to the effectiveness of our internalized management structure on January 1, 2021, MCC Advisors, currently serves as our investment adviser and is registered with the SEC as an SEC-registered investment adviser under the Advisers Act. SubjectAct, served as our investment adviser pursuant to an investment management agreement. Effective January 1, 2021, subject to the overall supervision of our board of directors, MCC Advisorsour internal management team manages the day-to-day operations of PhenixFIN, and provides investment advisory and management services to us pursuant to an investment management agreement by and between the Company and MCC Advisors. Effective January 1, 2021, however, we will be internally managed.services. See “- Internalized Management Structure” below.below for further information.



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 our investment management agreement,the Investment Management Agreement, MCC Advisors:


•determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes;

•identifies, evaluates and negotiates the structure of the investments we make (including performing due diligence on our prospective portfolio companies); and

•executes, closes, monitors and administers the investments we make, including the exercise of any voting or consent rights.

●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); and

●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 areInvestment Management Agreement were not exclusive, and it iswas free to furnish similar services to other entities so long as its services to us arewere not impaired.


Pursuant to our investment management agreement,the Investment Management Agreement, we paypaid MCC Advisors a fee for investment advisory and management services consisting of a base management fee and a two-part incentive fee.


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. Moreover, the revised incentive fee includes a netting mechanism and is subject to a rolling three-year look back from January 1, 2016 forward. Under no circumstances will the new fee structure result in higher fees to MCC Advisors than fees under the prior investment management agreement.

The following discussion of our base management fee and two-part incentive fee reflectsreflect 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 arewere effective as of January 1, 2016 and arewere 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 providesprovided under the investment management agreement.Investment Management Agreement. The Fee Waiver Agreement doesdid not change the second component of the incentive fee, which iswas 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. On May 1, 2020, the Company received a notice of termination of the Amended MCC Merger Agreement from Sierra. Under the Amended MCC Merger Agreement, either party was permitted, subject to certain conditions, to terminate the Amended MCC Merger Agreement if the merger was not consummated by March 31, 2020. Sierra elected to do so on May 1, 2020. As result of the termination by Sierra of the Amended MCC Merger Agreement on May 1, 2020, the Investment Management Agreement would have been terminated effective as of May 31, 2020. On May 21, 2020, the Board, including all of the independent directors, extended the term of the Investment Management Agreement through the end of the then-current quarter, June 30, 2020. On June 12, 2020, the Board, including all of the independent directors, extended the term of the Investment Management Agreement through September 30, 2020. On September 29, 2020, the Board, including all of the independent directors, extended the term of the Investment Management Agreement through December 31, 2020. Mr. 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 interim Chief Executive Officer, and Ellida McMillan as Chief Financial Officer of the Company, each effective January 1, 2021. In connection with his appointment, Mr. Lorber stepped down from the Compensation Committee of the Board, the Nominating and Corporate Governance Committee of the Board, and the Special Committee of the Board.


Base Management Fee

For

Through December 31, 2020, for providing investment advisory and management services to us, MCC Advisors receivesreceived a base management fee. The base management fee iswas 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 iswas payable quarterly in arrears. The base management fee will bewas calculated based on the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters and will be appropriately pro-rated for any partial quarter. On May 4, 2018, MCC Advisors voluntarily elected to waive $380,000 of the base management fee payable for the quarter ended March 31, 2018, which is shown on the Consolidated Statements of Operations.quarters.



Incentive Fee

The

Through December 31, 2020, the incentive fee hashad two components, as follows:


Incentive Fee Based on Income
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The first component of the incentive fee iswas payable quarterly in arrears and iswas based on our pre-incentive fee net investment income earned during the calendar quarter for which the incentive fee iswas being calculated. MCC Advisors iswas entitled to receive the incentive fee on net investment income from us if our Ordinary Income (as defined below) exceedsexceeded a quarterly “hurdle rate” of 1.5%. The hurdle amount iswas 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.


Beginning with the calendar quarter that commenced on January 1, 2016, the incentive fee on net investment income is determined and paid quarterly in arrears at the end of each calendar quarter by reference to our aggregate net investment income, as adjusted as described below, from the calendar quarter then ending and the eleven preceding calendar quarters (or if shorter, the number of quarters that have occurred since January 1, 2016). We refer to such period as the “Trailing Twelve Quarters.”

The hurdle amount for the incentive fee on net investment income is determined on a quarterly basis, and is equal to 1.5% multiplied by the Company’s net asset value at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. The hurdle amount is 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 incentive fee for any partial period will be appropriately prorated. Any incentive fee on net investment income will be paid to MCC Advisors on a quarterly basis, and will be based on the amount by which (A) aggregate net investment income (“Ordinary Income”) in respect of the relevant Trailing Twelve Quarters exceeds (B) the hurdle amount for such Trailing Twelve Quarters. The amount of the excess of (A) over (B) described in this paragraph for such Trailing Twelve Quarters is referred to as the “Excess Income Amount.” For the avoidance of doubt, Ordinary Income is net of all fees and expenses, including the reduced base management fee but excluding any incentive fee on Pre-Incentive Fee net investment income or on the Company’s capital gains.

Quarterly Incentive Fee Based on Income

The incentive fee on net investment income for each quarter is determined as follows:

•No incentive fee on net investment income is payable to MCC Advisors for any calendar quarter for which there is no Excess Income Amount;

•100% of the Ordinary Income, if any, that exceeds the hurdle amount, but is less than or equal to an amount, which we refer to as the “Catch-up Amount,” determined as the sum of 1.8182% multiplied by the Company’s net assets at the beginning of each applicable calendar quarter, as adjusted as noted above, comprising the relevant Trailing Twelve Quarters is included in the calculation of the incentive fee on net investment income; and

•17.5% of the Ordinary Income that exceeds the Catch-up Amount is included in the calculation of the incentive fee on net investment income.

The amount of the incentive fee on net investment income that will be paid to MCC Advisors for a particular quarter will equal the excess of the incentive fee so calculated minus the aggregate incentive fees on net investment income that were paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant Trailing Twelve Quarters but not in excess of the Incentive Fee Cap (as described below).

The incentive fee on net investment income that is paid to MCC Advisors for a particular quarter is subject to a cap (the “Incentive Fee Cap”). The Incentive Fee Cap for any quarter is an amount equal to (a) 17.5% of the Cumulative Net Return (as defined below) during the relevant Trailing Twelve Quarters minus (b) the aggregate incentive fees on net investment income that were paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant Trailing Twelve Quarters.

“Cumulative Net Return” means (x) the Ordinary Income in respect of the relevant Trailing Twelve Quarters minus (y) any Net Capital Loss (as described below), if any, in respect of the relevant Trailing Twelve Quarters. If, in any quarter, the Incentive Fee Cap is zero or a negative value, the Company will pay no incentive fee on net investment income to MCC Advisors for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is a positive value but is less than the incentive fee on net investment income that is payable to MCC Advisors for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company will pay an incentive fee on net investment income to MCC Advisors equal to the Incentive Fee Cap for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is equal to or greater than the incentive fee on net investment income that is payable to MCC Advisors for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company will pay an incentive fee on net investment income to MCC Advisors, calculated as described above, for such quarter without regard to the Incentive Fee Cap.

“Net Capital Loss” in respect of a particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or unrealized, and dilution to the Company’s net assets due to capital raising or capital actions, in such period and (ii) aggregate capital gains, whether realized or unrealized and accretion to the Company’s net assets due to capital raising or capital action, in such period.

Dilution to the Company’s net assets due to capital raising is calculated, in the case of issuances of common stock, as the amount by which the net asset value per share was adjusted over the transaction price per share, multiplied by the number of shares issued. Accretion to the Company’s net assets due to capital raising is calculated, in the case of issuances of common stock (including issuances pursuant to our dividend reinvestment plan), as the excess of the transaction price per share over the amount by which the net asset value per share was adjusted, multiplied by the number of shares issued. Accretion to the Company’s net assets due to other capital action is calculated, in the case of repurchases by the Company of its own
15






common stock, as the excess of the amount by which the net asset value per share was adjusted over the transaction price per share multiplied by the number of shares repurchased by the Company.

For the avoidance of doubt, the purpose of the new incentive fee calculation under the Fee Waiver Agreement is to permanently reduce aggregate fees payable to MCC Advisors by the Company, effective as of January 1, 2016. In order to ensure that the Company will pay MCC Advisors lesser aggregate fees on a cumulative basis, as calculated beginning January 1, 2016, we will, at the end of each quarter, also calculate the base management fee and incentive fee on net investment income owed by the Company to MCC Advisors based on the formula in place prior to January 1, 2016. If, at any time beginning January 1, 2016, the aggregate fees on a cumulative basis, as calculated based on the formula in place after January 1, 2016, would be greater than the aggregate fees on a cumulative basis, as calculated based on the formula in place prior to January 1, 2016, MCC Advisors shall only be entitled to the lesser of those two amounts.

The second component of the incentive fee iswas determined and payable in arrears as of the end of each calendar year (or upon termination of the investment management agreementInvestment Management Agreement as of the termination date) and equalsequaled 20.0% of our cumulative aggregate realized capital gains less cumulative realized capital losses, unrealized capital depreciation (unrealized depreciation on a gross investment-by-investment basis at the end of each calendar year) and all capital gains upon which prior performance-based capital gains incentive fee payments were previously made to the investment adviser.


Under GAAP, the Company calculates the second component of the incentive fee as if the Company had realized all assets at their fair values as of the reporting date. Accordingly, when applicable, the Company accrues a provisional capital gains incentive fee taking into account any unrealized gains or losses. As the provisional capital gains incentive fee is subject to the performance of investments until there is a realization event, the amount of the provisional capital gains incentive fee accrued at a reporting date may vary from the capital gains incentive that is ultimately realized and the differences could be material.

For the year ended September 30, 2020,2021, the Company incurred net base management fees payable to MCC Advisors of $6.4$1.1 million and did not incur any incentive fees related to pre-incentive fee net investment income.


The following is a graphical representation of the calculation of the income-related portion of the incentive fee effectiveInvestment Management Agreement terminated as of January 1, 2016 pursuant toDecember 31, 2020, and the Fee Waiver Agreement:
Pre-incentive Fee NetCompany no longer incurs base management fees or incentive fees under the Investment Income
(ExpressedManagement Agreement as a Percentage of the Value of Net Assets)
result.


incentivefeegrapha061a.jpg

Examples of Quarterly Incentive Fee Calculation

Example 1: Income Related Portion of Incentive Fee:
•Quarter 1
•Net Asset Value at the start of Quarter 1 = $100.0 million (1 million shares)
•Quarter 1 Ordinary Income = $5.0 million
•Quarter 1 Issue 1 million shares at $101 per share = $1.0 million
•Quarter 1 Capital Gain = $1.0 million
•Quarter 1 Hurdle Amount = $1.5 million (calculated based on a quarterly 1.5% hurdle rate)
•Quarter 1 Catchup Amount = $1.81818 million (calculated based on a quarterly 1.81818% rate)
•Quarter 2
•Net Asset Value at the start of Quarter 2 = $100.0 million (1 million shares)
•Quarter 2 Ordinary Income = $1.5 million
•Quarter 2 Capital Gain = $1.0 million
•Quarter 2 Hurdle Amount = $1.5 million (calculated based on a quarterly 1.5% hurdle rate)
•Quarter 2 Catchup Amount = $1.81818 million (calculated based on a quarterly 1.81818% rate)
•Quarter 3
•Net Asset Value at the start of Quarter 3 = $100.0 million (1 million shares)
•Quarter 3 Ordinary Income = $4.0 million
•Quarter 3 Repurchase 500,000 shares at $99 per share = $0.50 million
•Quarter 3 Capital Loss = ($8.0) million
•Quarter 3 Hurdle Amount = $1.5 million (calculated based on a quarterly 1.5% hurdle rate)
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•Quarter 3 Catchup Amount = $1.81818 million (calculated based on a quarterly 1.81818% rate)
•Quarter 4
•Net Asset Value at the start of Quarter 4 = $100.0 million (1 million shares)
•Quarter 4 Ordinary Income = $4.0 million
•Quarter 4 Capital Gain = $3.0 million
•Quarter 4 Hurdle Amount = $1.5 million (calculated based on a quarterly 1.5% hurdle rate)
•Quarter 4 Catchup Amount = $1.81818 million (calculated based on a quarterly 1.81818% rate)

Determination of Incentive Fee Based on Income:
In Quarter 1, the Ordinary Income of $5.0 million exceeds the Hurdle Amount of $1.50 million and the Catchup Amount of $1.8182 million. There is $2 million of Net Capital Gains, including a capital gain of $1 million and accretion to the Company’s net asset value of $1 million as a result of issuing shares at a transaction price that exceeds the net asset value per share. As a result, an Incentive Fee based on income of $875,000 ((100% of $318,182) + (17.5% of $3,181,818)) is payable to our investment adviser for Quarter 1.
In Quarter 2, the Quarter 2 Ordinary Income of $1.50 million does not exceed the Quarter 2 Hurdle Amount of $1.50 million, but the aggregate Ordinary Income for the Trailing Twelve Quarters of $6.50 million exceeds the aggregate Hurdle Amount for the Trailing Twelve Quarters of $3.0 million and the aggregate Catchup Amount for the Trailing Twelve Quarters of $3.6364 million. There are no Net Capital Losses. As a result, an Incentive Fee based on income of $262,500 ($1,137,500 (100% of $636,364) + (17.5% of 2,863,636) minus $875,000 paid in Quarter 1) would be payable to our investment adviser for Quarter 2.
In Quarter 3, the aggregate Ordinary Income of the Trailing Twelve Quarters of $10.5 million exceeds the aggregate Hurdle Amount for the Trailing Twelve Quarters of $4.5 million and the aggregate Catchup Amount for the Trailing Twelve Quarters of $5.4545 million. However, there is an aggregate Net Capital Loss of ($4.5) million for the Trailing Twelve Quarters. As a result, the Incentive Fee Cap would apply. The Incentive Fee Cap equals $(87,500), calculated as follows:
(17.5% x ($10.5 million minus $4.5 million)) minus $1,137,500 paid in Quarters 1 and 2. Because the Incentive Fee Cap is a negative value, there is no Incentive Fee based on income payable to the adviser for Quarter 3.
In Quarter 4, the aggregate Ordinary Income of the Trailing Twelve Quarters of $14.50 million exceeds the aggregate Hurdle Amount for the Trailing Twelve Quarters of $6.0 million and the aggregate Catchup Amount for the Trailing Twelve Quarters of $7.2727 million. The calculation of the Incentive Fee based on income would be $1.40 million ($2,537,500 (100% of $1,272,727) + (17.5% of $7,227,272) minus $1,137,500 million paid in Quarters 1 and 2). However, there is an aggregate Net Capital Loss of $(1.50) million for the Trailing Twelve Quarters. As a result, the Incentive Fee Cap would apply. The Incentive Fee Cap equals $1,137,500 calculated as follows:
(17.5% X ($14.5 million minus $1.5 million)) minus $1,137,500. Because the Incentive Fee Cap is positive but less than the Incentive Fee based on Income of $1.40 million calculated prior to the Incentive Fee Cap, an Incentive Fee based on Income of $1,137,500 is payable to our investment adviser for Quarter 4.
Example 2: Capital Gains Portion of Incentive Fee:
Alternative 1:
Assumptions

Year 1:  $20 million investment made in Company A (“Investment A”), and $30 million investment made in Company B (“Investment B”)
Year 2:  Investment A sold for $50 million and fair market value, or FMV, of Investment B determined to be $32 million
Year 3:  FMV of Investment B determined to be $25 million
Year 4:  Investment B sold for $31 million
The capital gains portion of the incentive fee would be:
Year 1:  None
Year 2:  Capital gains incentive fee of $6.0 million ($30 million realized capital gains on sale of Investment A multiplied by 20.0%)
Year 3:  None; $5.0 million (20.0% multiplied by ($30 million cumulative capital gains less $5 million cumulative capital depreciation)) less $6.0 million (previous capital gains fee paid in Year 2) (the $1.0 million difference would not be deducted from future capital gains incentive fees)
Year 4:  Capital gains incentive fee of $200,000; $6.2 million ($31 million cumulative realized capital gains multiplied by 20.0%) less $6.0 million (capital gains fee paid in Year 2)

Alternative 2:
Assumptions
Year 1:  $20 million investment made in Company A (“Investment A”), $30 million investment made in Company B (“Investment B”) and $25 million investment made in Company C (“Investment C”)
Year 2:  Investment A sold for $50 million, FMV of Investment B determined to be $25 million and FMV of Investment C determined to be $25 million
Year 3:  FMV of Investment B determined to be $27 million and Investment C sold for $30 million
Year 4:  FMV of Investment B determined to be $35 million
Year 5:  Investment B sold for $20 million
The capital gains portion of the incentive fee would be:
Year 1:  None
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Year 2:  Capital gains incentive fee of $5.0 million; 20.0% multiplied by $25 million ($30 million realized capital gains on Investment A less $5 million unrealized capital depreciation on Investment B)
Year 3:  Capital gains incentive fee of $1.4 million; $6.4 million (20.0% multiplied by $32 million ($35 million cumulative realized capital gains less $3 million unrealized capital depreciation on Investment B)) less $5.0 million capital gains fee received in Year 2
Year 4:  None
Year 5:  None; $5.0 million of capital gains incentive fee (20.0% multiplied by $25 million (cumulative realized capital gains of $35 million less realized capital losses of $10 million)) less $6.4 million cumulative capital gains fee paid in Year 2 and Year 3 (the $1.4 million difference would not be deducted from future capital gains incentive fees)
As noted above, in order to ensure that the Company will pay MCC Advisors a lesser base management fee and incentive fee on net investment income on a cumulative basis, as calculated beginning January 1, 2016, the Company will, at the end of each quarter, also calculate the base management fee and incentive fee on net investment income owed by the Company to MCC Advisors based on the formula in place prior to the Fee Waiver Agreement, and pay lesser of those two amounts. Set forth below is a description of the base management fee and the incentive fee on net investment income payable to MCC Advisors prior to the Fee Waiver Agreement.
Base Management Fee — Prior to Fee Waiver Agreement
The base management fee was calculated at an annual rate of 1.75% of our gross assets, and is payable quarterly in arrears. The base management fee is based on the average value of our gross assets at the end of the two most recently completed calendar quarters.
Incentive Fee — Prior to Fee Waiver Agreement
The incentive fee based on net investment income was calculated as 20.0% of the amount, if any, by which our pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets calculated as of the end of the calendar quarter immediately preceding the calendar quarter for which the incentive fee is being calculated, exceeds a 2.0% (which is 8.0% annualized) hurdle rate but also includes a “catch-up” provision. Under this provision, in any calendar quarter, our investment adviser receives no incentive fee until our net investment income equals the hurdle rate of 2.0%, but then receives, as a “catch-up”, 100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5%. The effect of this provision is that, if pre-incentive fee net investment income exceeds 2.5% in any calendar quarter, our investment adviser will receive 20% of our pre-incentive fee net investment income as if the hurdle rate did not apply. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies accrued during the calendar quarter, minus our operating expenses for the quarter including the base management fee, expenses payable under the administration agreement, and any interest expense and any dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee. Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with payment-in-kind interest and zero coupon securities), accrued income that we have not yet received in cash.
Payment of Our Expenses
All

Since January 1, 2021, we are internally managed and do not pay any external investment advisory fees, but instead directly incur the operating costs associated with employing professionals and staff of MCC Advisors, when, and to the extent, engaged in providing investment advisory and management services to us, and the compensation and routine overhead expenses of such personnel allocable to such services, is provided and paid for by MCC Advisors.staff. We bear all other costs and expenses of our operations and transactions, including, those relating to:


•our organization and continued corporate existence;

•calculating our net asset value (“NAV”) (including the cost and expenses of any independent valuation firms);

•expenses, including travel expense, incurred by MCC Advisors or payable to third parties performing due diligence on prospective portfolio companies, monitoring our investments and, if necessary, enforcing our rights;

•interest payable on debt incurred to finance our investments;

•the costs of  all offerings of common shares and other securities;

•the base management fee and any incentive management fee;

•distributions on our shares;

•administration fees payable under our administration agreement;

•the allocated costs incurred by MCC Advisors as our administrator in providing managerial assistancebut not limited to those portfolio companies that request it;

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

•transfer agent and custodial fees;

•all registration and listing fees;

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•U.S. federal, state and local taxes;

•independent directors’ fees and expenses;

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

•the costs of any reports, proxy statements or other notices to our stockholders, including printing costs;

•our fidelity bond;

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

•indemnification payments;

•direct costs and expenses of administration, including audit and legal costs; and

•all other expenses reasonably incurred by us or MCC Advisors in connection with administering our business, such as the allocable portion of overhead under our administration agreement, including rent and other allocable portions of the cost of our Chief Financial Officer and Chief Compliance Officer and their respective staffsrelated to:

●our organization and continued corporate existence;

●calculating our net asset value (“NAV”) (including travel expenses).

We reimburse MCC Advisors for costs and expenses incurred for office space rental, office equipment and utilities allocable to the performance by MCC Advisors of its duties under the administration agreement, as well as any costs and expenses incurred relating to any non-investment advisory, administrative or operating services provided to us or in the form of managerial assistance to portfolio companies that request it.
From time to time, MCC Advisors pays amounts owed by us to third party providers of goods or services.  We subsequently reimburse MCC Advisors for such amounts paid on our behalf.

Limitation of Liability and Indemnification

The investment management agreement provides that MCC Advisors and its officers, directors, employees and affiliates are not liable to us or any of our stockholders for any act or omission by it or its employees in the supervision or management of our investment activities or for any loss sustained by us or our stockholders, except that the foregoing exculpation does not extend to any act or omission constituting willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations under the investment management agreement. The investment management agreement also provides for indemnification by us of MCC Advisors’ members, directors, officers, employees, agents and control persons for liabilities incurred by it in connection with their services to us, subject to the same limitations and to certain conditions.

Duration and Termination

The investment management agreement was initially approved by our board of directors on November 3, 2010 and was executed on January 11, 2011. Pursuant to its terms and under the 1940 Act, the investment management agreement had an initial two-year term, and then was subject to an annual approval by our board of directors. Unless terminated earlier as described below, it will continue in effect from year to year if approved annually by our board of directors or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not interested persons. The investment management agreement will automatically terminate in the event of its assignment. The investment management agreement may be terminated by either party without penalty upon not more than 30 days’ written notice to the other.

Board Approval of the cost and expenses of any independent valuation firms);

●expenses, including travel expense, incurred by our professionals or payable to third parties performing due diligence on prospective portfolio companies, monitoring our investments and, if necessary, enforcing our rights;

●interest payable on debt incurred to finance our investments;

●the costs of all offerings of common shares and other securities;

●operating costs associated with employing investment professionals and other staff;

●distributions on our shares;

●administration fees payable under our administration agreement;

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

●transfer agent and custodial fees;

●all registration and listing fees;


●U.S. federal, state and local taxes;

●independent directors’ fees and expenses;

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

●the costs of any reports, proxy statements or other notices to our stockholders, including printing costs;

●our fidelity bond;

●the operating lease of our office space;

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

●indemnification payments; and

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

Investment Management Agreement


Board Approval and Expiration

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 MCC Merger Agreement, was in effect, but no longer than a year; provided that, if the Amended MCC Merger Agreement were to be 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 such termination to the Company. In that regard, on 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. 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, without further action by our board of directors. On May 21, 2020, our board of directors, including all of the independent directors, extended the term of the investment management agreement through the end of the quarter ended June 30, 2020. On June 15, 2020, our board of directors, including all of the independent directors, extended the term of the investment management agreement through the end of the quarter ended September 30, 2020. On September 29, 2020, our board of directors, including all of the independent directors, extended the term of the investment management agreement through the end of the quarter ended December 31, 2020.

The Investment Management 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.


Expense Support Agreement

On June 12, 2020, the Company entered into an expense support agreement (the “Expense Support Agreement”) with MCC Advisors and Medley LLC, pursuant to which MCC Advisors and Medley LLC agreed (jointly and severally) to cap the management fee and all of the Company’s other operating expenses (except interest expenses, certain extraordinary strategic transaction expenses and other expenses approved by the special committee of the board of directors, comprised solely of directors who are not “interested persons” of the Company as such term isSpecial Committee (as defined in Section 2(a)(19) of the 1940 Act (the “Special Committee”) (as described in Note 10)) at $667,000 per month (the “Cap”). Under the Expense Support

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Agreement, the Cap became effective on June 1, 2020 and expiredexpires on September 30, 2020. On September 29, 2020, the board of directors, including all of the independent directors, extended the term of the Expense Support Agreement through the end of quarter ending December 31, 2020. The Expense Support Agreement expired by its terms at the close of business on December 31, 2020, in connection with the adoption of the internalized management structure by the board of directors.

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Administration Agreement

On January 19, 2011, the Company entered into an administration agreement with MCC Advisors. Pursuant to the administration agreement, MCC Advisors furnishesfurnished us with office facilities and equipment, clerical, bookkeeping, recordkeeping and other administrative services related to the operations of the Company. We reimbursereimbursed 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 staff.staffs. From time to time, our administrator maywas able to pay amounts owed by us to third-party service providers and we willwould 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 U.S. Bancorp. The administration agreement with MCC Advisors terminated by its terms on December 31, 2020. Effective January 1, 2021, U.S. Bancorp serves as our administrator under the Fund Accounting Servicing Agreement and Administration Agreement. Pursuant to these agreements, U.S. Bancorp serves as custodian and provides us with fund accounting and financial reporting services. For the years ended September 30, 2021, 2020, 2019 and 2018,2019, we incurred $0.6 million, $2.2 million, $3.3 million, and $3.6$3.3 million in administrator expenses, respectively.


License Agreement

We have entered into a license agreement with Medley Capital LLC under which Medley Capital LLC has agreed to grant us a non-exclusive, royalty-free license to use the name “Medley”. Under this agreement, we will have a right to use the “Medley” name for so long as MCC Advisors or one of its affiliates remains our investment adviser. Other than with respect to this limited license, we have no legal right to the “Medley” name. This license agreement will remain in effect for so long as the investment management agreement with MCC Advisors is in effect.

Internalized Management Structure

On November 18, 2020, the board of directors approved adoption of an internalized management structure effective January 1, 2021. The new management structure will replacereplaced the current investment management and administration agreements with MCC Advisors, which expireexpired on December 31, 2020. The board approved the establishment of a committee, consisting of Arthur Ainsberg, Karin Hirtler-Garvey, Lowell Robinson and Howard Amster, to oversee the transition to the internalized management structure.


To lead the internalized management team, the board appointed David Lorber, who has served as an independent director of the Company since April 2019, as interim Chief Executive Officer and Ellida McMillan, who previously served as Chief Financial Officer and Chief Operating Officer of Alcentra Capital Corporation, a NASDAQ-traded BDC, from April 2017 until it merged into Crescent Capital BDC, Inc. in February 2020, as Chief Financial Officer of the Company, each effective January 1, 2021. Mr. Lorber will beis paid an annual base salary of $425,000, and Ms. McMillan will beis paid an annual base salary of $300,000, and each will beis eligible for aone or more discretionary cash bonus.


bonuses.

The internalized management team will beis responsible for the day-to-day management and operations of the Company, under the oversight of the board. As partThe internalized management team presently consists of the team, we have engaged a senior4 investment professional with significant credit experience to serve as the lead portfolio strategist,professionals and 7 employees/consultants overall. The Company retained Alaric Compliance Services, LLC, whose officer will serveserves as the Company’s Chief Compliance Officer. TheAs discussed above, the Company has also 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. The remainder ofwhich serves as the team members are in the process of being assembled.Company’s administrator.



REGULATION

REGULATION


General

General

We have elected to be regulated as a BDC under the 1940 Act. The 1940 Act contains prohibitions and restrictions relating to transactions between BDCs and their affiliates, (including any investment advisers or sub-advisers), principal underwriters and affiliates of those affiliates or underwriters and requires that a majority of the directors be persons other than “interested persons”, as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by “a majority of our outstanding voting securities.”


As a BDC, we are required to meet an asset coverage ratio, reflecting the value of our total assets to our total senior securities, which include all of our borrowings and any preferred stock we may issue in the future, of at least 200%. However, in March 2018, the Small Business Credit Availability Act (the “SBCA”) 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 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 on 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. The Company has not sought stockholder or independent director approval to reduce its coverage ratio to 150%.


On March 23, 2018, the SBCA was signed into law and, among other things, instructs the SEC to issue rules or amendments to rules allowing BDCs to use the same registration, offering and communication processes that are available to operating companies. The rules and amendments specified by the SBCA became self-implementing on March 24, 2019. On April 8, 2020, the SEC adopted rules and amendments to implement certain provisions of the SBCA (the “Final Rules”) that, among other things, modify the registration, offering, and communication processes available to BDCs relating to: (i) the shelf offering process to permit the use of short-form registration statements on Form N-2 and incorporation by reference; (ii) the ability to qualify for well-known seasoned issuer status; (iii) the immediate or automatic effectiveness of certain filings made in connection with continuous public offerings; and (iv) communication processes and prospectus delivery. In addition, the SEC adopted rules that will require BDCs to comply with certain structured data and inline XBRL requirements. The Final Rules generally became effective on August 1, 2020, except that a BDC eligible to

20






file short-form registration statements on Form N-2, like the Company, must comply with the Inline XBRL structurestructured data requirements for its financial statements, registration statement cover page, and certain prospectus information by August 1, 2022

2022.

We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our directors who are not interested persons and, in some cases, prior approval by the SEC.



Qualifying Assets

Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. The principal categories of qualifying assets relevant to our business are the following:


(1)Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which:

▪is organized under the laws of, and has its principal place of business in, the United States;

▪is not an investment company (other than a small business investment company wholly owned by the Company) or a company that would be an investment company but for certain exclusions under the 1940 Act; and

▪satisfies either of the following:

•has a market capitalization of less than $250 million or does not have any class of securities listed on a national securities exchange; or

•is controlled by a BDC or a group of companies including a BDC, the BDC actually exercises a controlling influence over the management or policies of the eligible portfolio company, and, as a result thereof, the BDC has an affiliated person who is a director of the eligible portfolio company.

(2)Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company.

(3)Securities received in exchange for or distributed on or with respect to securities described above, or pursuant to the exercise of warrants or rights relating to such securities.

(4)Securities of any eligible portfolio company which we control.

(5)Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.

(6)Cash, cash equivalents, U.S. Government securities or high-quality debt securities maturing in one year or less from the time of investment.

(1)Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which:

●is organized under the laws of, and has its principal place of business in, the United States;

●is not an investment company (other than a small business investment company wholly owned by the Company) or a company that would be an investment company but for certain exclusions under the 1940 Act; and

●satisfies either of the following:

●has a market capitalization of less than $250 million or does not have any class of securities listed on a national securities exchange; or

●is controlled by a BDC or a group of companies including a BDC, the BDC actually exercises a controlling influence over the management or policies of the eligible portfolio company, and, as a result thereof, the BDC has an affiliated person who is a director of the eligible portfolio company.

(2)Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company.

(3)Securities received in exchange for or distributed on or with respect to securities described above, or pursuant to the exercise of warrants or rights relating to such securities.

(4)Securities of any eligible portfolio company which we control.

(5)Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.

(6)Cash, cash equivalents, U.S. Government securities or high-quality debt securities maturing in one year or less from the time of investment.

The regulations defining and interpreting qualifying assets may change over time. We may adjust our investment focus needed to comply with and/or take advantage of any regulatory, legislative, administrative or judicial actions in this area.



Managerial Assistance to Portfolio Companies

A BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in “Regulation — Qualifying Assets” above. However, in order to count portfolio securities as qualifying assets for the purpose of the 70% requirement, the BDC must either control the issuer of the securities or must offer to make available to the issuer of the securities (other than small and solvent companies described above) significant managerial assistance. Where the BDC purchases such securities in conjunction with one or more other persons acting together, the BDC will satisfy this test if one of the other persons in the group makes available such managerial assistance. Making available managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company.


Temporary Investments

Pending investment in other types of “qualifying assets”, as described above, our investments may consist of cash, cash equivalents, U.S. Government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets. Typically, we will invest in highly rated commercial paper, U.S. Government agency notes, U.S. Treasury bills or in repurchase agreements relating to such securities that are fully collateralized by cash or securities issued by the U.S. Government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price which is greater than the purchase price by an amount that reflects

21






an agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, certain diversification tests that must be met in order to qualify as a RIC for U.S. federal income tax purposes will typically require us to limit the amount we invest with any one counterparty. Our investment adviserWe will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.


Senior Securities

We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 200% (or 150% if certain requirements are met) immediately after each such issuance. In addition, while any preferred stock or publicly traded debt securities are outstanding, we may be prohibited from making distributions to our stockholders or the repurchasing of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage. For a discussion of the risks associated with leverage, see “Item 1A. Risk Factors—Risks Related to our Business—If we use borrowed funds to make investments or fund our business operations, we will be exposed to risks typically associated with leverage which will increase the risk of investing in us.”


Code of Ethics

We and MCC Advisors have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to each code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code’s requirements. The code of ethics is available at our website, www.medleycapitalcorp.comwww.phenixfc.com, and is available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov.



Privacy Policy

We are committed to maintaining the privacy of stockholders and to safeguarding our non-public personal information. The following information is provided to help you understand what personal information we collect, how we protect that information and why, in certain cases, we may share information with select other parties.


Generally, we do not receive any nonpublic personal information relating to our stockholders, although certain nonpublic personal information of our stockholders may become available to us. We do not disclose any nonpublic personal information about our stockholders or former stockholders to anyone, except as permitted by law or as is necessary in order to service stockholder accounts (for example, to a transfer agent or third party administrator).


We restrict access to nonpublic personal information about our stockholders to our investment adviser’s employees with a legitimate business need for the information. We maintain physical, electronic and procedural safeguards designed to protect the nonpublic personal information of our stockholders.


Proxy Voting Policies and Procedures

We have delegated our proxy voting responsibility to MCC Advisors. The

Our Proxy Voting Policies and Procedures of MCC Advisors are set forth below. The guidelines are reviewed periodically by MCC Advisorsmanagement and our independent directors, and, accordingly, are subject to change.


MCC Advisors is registered with the SEC as an investment adviser under the Advisers Act. As an investment adviser registered under the Advisers Act, MCC Advisors will have fiduciary duties to us. As part of this duty, MCC Advisors recognizes that it must vote client securities in a timely manner free of conflicts of interest and in our best interests and the best interests of our stockholders. MCC Advisors’ Proxy Voting Policies and Procedures have been formulated to ensure decision-making consistent with these fiduciary duties.

These policies and procedures for voting proxies for our investment advisory clients are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.


Proxy Policies

MCC Advisors evaluates routine

Our proxy matters, such as proxy proposals, amendments or resolutionsvoting decisions are made by our investment professionals, who review on a case-by-case basis. Routine matters are typically proposedcase- by-case basis each proposal submitted to a shareholder vote to determine its impact on the portfolio securities held by management and MCC Advisors will normally supportthe Company. Although the Company generally votes against proposals that may have a negative impact on our portfolio securities, we may vote for such matters so long as theya proposal if there exists compelling long-term reasons to do so. We generally do not measurably changebelieve it is necessary to engage the structure, management control, or operationservices of the corporationan independent third party to assist in issue analysis and are consistent with industry standards as well as the corporate laws of the state of incorporation.


MCC Advisors also evaluates non-routine matters on a case-by-case basis. Non-routine proposals concerning social issues are typically proposed by stockholders who believe that the corporation’s internally adopted policies are ill-advised or misguided. If MCC Advisors has determined that management is generally socially responsible, MCC Advisors will generally vote against these types of non-routinerecommendation for proxy proposals. Non-routine proposals concerning financial or corporate issues are usually offered by managementUnder certain circumstances and seek to change a corporation’s legal, business or financial structure. MCC Advisors will generally vote in favor of such proposals provided the position of current stockholders is preserved or enhanced. Non-routine proposals concerning stockholder rights are made regularly by both management and stockholders. They can be generalized as involving issues that transfer or realign board or stockholder voting power. MCC Advisors typically would oppose any proposal aimed solely at thwarting potential takeovers by requiring, for example, super-majority approval. At the same time, MCC Advisors believes stability and continuity promote profitability. MCC Advisors’ guidelines in this area seek a balanced view and individual proposals will be carefully assessedwhen deemed in the contextbest interests of theirshareholders, the Company may, in the discretion of its officers, refrain from exercising its proxy voting right for a particular circumstances.
22







Ifdecision.

To ensure that our vote is not the product of a vote may involve a material conflict of interest, priorwe require that: (i) anyone involved in the decision making process disclose to approving such vote, MCC Advisors must consult with itsour Chief Compliance Officer to determine whether theany potential conflict that he or she is materialaware of and if so,any contact that he or she has had with any interested party regarding a proxy vote; and (ii) employees involved in the appropriate methoddecision making process or vote administration are prohibited from revealing how we intend to resolvevote on a proposal in order to reduce any attempted influence from interested parties, unless such conflict. If the conflict is determined not to be material, MCC Advisors’ employees shall vote the proxy in accordance with MCC Advisors’ proxy voting policy.employee has received pre-approval from our Chief Compliance Officer.



Proxy Voting Records

You may obtain information about how we voted proxies by making a written request for proxy voting information to:


Chief Compliance Officer

Medley Capital

PhenixFIN Corporation

280

445 Park Avenue, 6th10th Floor East

New York, NY 10017

10022


Other

Other

Under the 1940 Act, we are not generally able to issue and sell our common stock at a price below NAV per share. We may, however, issue and sell our common stock, at a price below the current NAV of the common stock, or issue and sell warrants, options or rights to acquire such common stock, at a price below the current NAV of the common stock if our board of directors determines that such sale is in our best interest and in the best interests of our stockholders, and our stockholders have approved our policy and practice of making such sales within the preceding 12 months. In any such case, the price at which our securities are to be issued and sold may not be less than a price which, in the determination of our board of directors, closely approximates the market value of such securities. However, we currently do not have the requisite stockholder approval, nor do we have any current plans to seek stockholder approval, to sell or issue shares of our common stock at a price below NAV per share.


In addition, at our 2012 Annual Meeting of Stockholders we received approval from our stockholders to authorize us, with the approval of our board of directors, to issue securities to, subscribe to, convert to, or purchase shares of the Company’s common stock in one or more offerings, subject to certain conditions as set forth in the proxy statement. Such authorization has no expiration.


We expect to be periodically examined by the SEC for compliance with the 1940 Act.


We are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.


We and MCC Advisors adopted written policies and procedures reasonably designed to prevent violation of the federal securities laws, and will review these policies and procedures annually for their adequacy and the effectiveness of their implementation. We and MCC Advisors have designated a Chief Compliance Officer to be responsible for administering the policies and procedures.


Election to Be Taxed as a RIC

As a BDC, we

We have elected and qualifiedintend to qualify annually to be treated as a RIC under Subchapter M of the Code. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that we timely distribute to our stockholders as dividends. To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, we must distribute to our stockholders, for each taxable year, at least 90% of our “investment company taxable income,” which is generally our net ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses (the “Distribution Requirement”).


Taxation as a RIC

As a RIC, if we satisfy the Distribution Requirement, we will not be subject to U.S. federal income tax on the portion of our investment company taxable income and net capital gain, defined as net long-term capital gains in excess of net short-term capital losses, we timely distribute to stockholders. We will be subject to U.S. federal income tax at regular corporate rates on any net income or net capital gain not distributed to our stockholders.


Medley Capital

We will be subject to a nondeductible U.S. federal excise tax of 4% on undistributed income if it doeswe do not distribute at least the sum of 98% of itsour ordinary income in any calendar year, 98.2% of itsour capital gain net income for each one-year period ending on October 31, and any income and capital gain net income that the Companywe recognized in preceding years, but were not distributed during such years, and on which the Companywe did not pay U.S. federal income tax. Depending on the level of investment company taxable income (“ICTI”) earned in a tax year and the amount of net capital gains recognized in such tax year, the Companywe may choose to carry forward ICTI in excess of current year dividend distributions into the next tax year. In order to eliminate our liability for income tax, and to the extent necessary to maintain our qualification as a RIC, any such carryover ICTI and net capital gains must be distributed before the end of that next tax year through a dividend declared prior to the 15th day of the 9th month after the close of the taxable year in which such ICTI was generated. To the extent that the Company determineswe determine that itsour estimated current year annual taxable income will be in excess of estimated current year dividend distributions for U.S. federal excise tax purposes, the Company accrueswe accrue U.S. federal excise tax, if any, on estimated excess taxable income as taxable income is earned.



In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things:


•qualify to be treated as a BDC under the 1940 Act at all times during each taxable year;

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•derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale of stock or other securities, or other income derived with respect to our business of investing in such stock or securities, and net income derived from interests in “qualified publicly traded partnerships” (partnerships that are traded on an established securities market or tradable on a secondary market, other than partnerships that derive 90% of their income from interest, dividends and other permitted RIC income) (the “90% Income Test”); and

•diversify our holdings so that at the end of each quarter of the taxable year:

•at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and

•no more than 25% of the value of our assets is invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer or of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or in the securities of one or more qualified publicly traded partnerships (the “Diversification Tests”).

●qualify to be treated as a BDC under the 1940 Act at all times during each taxable year;

●derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale of stock or other securities, or other income derived with respect to our business of investing in such stock or securities, and net income derived from interests in “qualified publicly traded partnerships” (partnerships that are traded on an established securities market or tradable on a secondary market, other than partnerships that derive 90% of their income from interest, dividends and other permitted RIC income) (the “90% Income Test”); and

●diversify our holdings so that at the end of each quarter of the taxable year:

●at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and

●no more than 25% of the value of our assets is invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer or of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or in the securities of one or more qualified publicly traded partnerships (the “Diversification Tests”).

We may invest in partnerships, including qualified publicly traded partnerships, which may result in our being subject to state, local or foreign income and franchise or withholding liabilities.


Any underwriting fees paid by us are not deductible. We may be required to recognize taxable income in circumstances in which we do not receive cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, with increasing interest rates or issued with warrants), we must include in income 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 us in the same taxable year. Because any original issue discount accrued will be included in our investment company taxable income for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the Distribution Requirement, even though we will not have received any corresponding cash amount.


Although we do not presently expect to do so, we are authorized to borrow funds and to sell assets in order to satisfy distribution requirements.the Distribution Requirement. However, under the 1940 Act, we are not permitted to make distributions to our stockholders while our debt obligations and other senior securities are outstanding unless certain “asset coverage” tests are met. See “Business — Regulation — Senior Securities.” Moreover, our ability to dispose of assets to meet our distribution requirementssatisfy the Distribution Requirement may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our qualification as a RIC, including the Diversification Tests. If we dispose of assets in order to meet the Distribution Requirement or avoid the imposition of excise tax, requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous.


Some of the income and fees that we may recognize will not satisfycount towards satisfaction of the 90% Income Test. In order to ensure that such income and fees do not disqualify us as a RIC for a failure to satisfy the 90% Income Test, we may be required to recognize such income and fees indirectly through one or more entities treated as corporations for U.S. federal income tax purposes. Such corporations will be required to pay corporate level U.S. federal income tax on their earnings, which ultimately will reduce our return on such income and fees.


Failure to Qualify as a RIC

If we were unable to continue to qualify for treatment as a RIC, we would be subject to U.S. federal income tax on all of our taxable income at regular corporate rates. We would not be able to deduct distributions to stockholders, nor would they be required to be made. Distributions, including distributions of net long-term capital gain, would generally be taxable to our stockholders as ordinary dividend income to the extent of our current and accumulated earnings and profits. Subject to certain limitations under the Code, corporate distributees would be eligible for the dividends received deduction. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain. If we fail to qualify as a RIC for a period greater than two taxable years, to qualify as a RIC in a subsequent year we may be subject to regular corporate level U.S. federal income tax on any net built-in gains with respect to certain of our assets (i.e., the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized with respect to such assets if we had been liquidated) that we elect to recognize on requalification or when recognized over the next five years.



Company Investments

Certain of our investment practices are subject to special and complex U.S. federal income tax provisions that may, among other things, (1) disallow, suspend or otherwise limit the allowance of certain losses or deductions, including the dividends received deduction, (2) convert lower taxed long-term capital gains and qualified dividend income into higher taxed short-term capital gains or ordinary income, (3) convert ordinary loss or a deduction into capital loss (the deductibility of which is more limited), (4) cause us to recognize income or gain without a corresponding receipt of cash, (5) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (6) adversely alter the characterization of certain complex financial transactions and (7) produce income that will not qualify as good income for purposes of the 90% annual gross income requirementIncome Test described above. We will monitor our transactions and may make certain tax elections and may be required to borrow money or dispose of securities to mitigate the effect of these rules and prevent disqualification as a RIC.


Investments we make in securities issued at a discount or providing for deferred interest or payment of interest in kind are subject to special tax rules that will affect the amount, timing and character of distributions to stockholders. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, with increasing interest rates or issued with warrants), we will generally be required to accrue daily as income a portion of the discount and to distribute such income each year to avoid U.S. federal income and excise taxes. Since in certain circumstances we may recognize income before or without receiving cash representing

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such income, we may have difficulty making distributions in the amounts necessary to satisfy the requirements for maintaining RIC tax treatment and for avoiding U.S. federal income and excise taxes. Accordingly, we may have to sell some of our investments at times we would not consider advantageous, raise additional debt or equity capital or reduce new investment originations to meet these distribution requirements. If we are not able to obtain cash from other sources, we may fail to qualify for tax treatment as a RIC and thereby be subject to corporate-level U.S. federal income tax.

Gain or loss realized by us from warrants acquired by us as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss. Such gain or loss generally will be long term or short term, depending on how long we held a particular warrant.


In the event we invest in foreign securities, we may be subject to withholding and other foreign taxes with respect to those securities. In that case, our yield on those securities would be decreased. We do not expect to satisfy the requirements necessary to pass through to our stockholders their share of the foreign taxes paid by us.


If we purchase shares in a ‘‘passive“passive foreign investment company’’ (a ‘‘PFIC’“PFIC’’), we may be subject to U.S. federal income tax on a portion of any ‘‘excess“excess distribution’’ or gain from the disposition of such shares even if such income is distributed as a taxable dividend by us to our stockholders. Additional charges in the nature of interest may be imposed on us in respect of deferred taxes arising from such distributions or gains. If we invest in a PFIC and elect to treat the PFIC as a ‘‘qualified“qualified electing fund’’ under the Code (a ‘‘QEF’“QEF’’), in lieu of the foregoing requirements, we will be required to include in income each year a portion of the ordinary earnings and net capital gain of the QEF, even if such income is not distributed to us. Alternatively, we canmay be able to elect to mark-to-market at the end of each taxable year our shares in a PFIC;certain PFICs; in this case, we will recognize as ordinary income any increase in the value of such shares, and as ordinary loss any decrease in such value to the extent it does not exceed prior increases included in income. Under either election, we may be required to recognize in a year income in excess of our distributions from PFICs and our proceeds from dispositions of PFIC stock during that year, and such income will nevertheless be subject to the Annual Distribution Requirement and will be taken into account for purposes of the 4% U.S. federal excise tax.


Income inclusions from a QEF will be ‘‘good“good income’’ for purposes of the 90% Income Test provided that they are derived in connection with our business of investing in stocks and securities or the QEF distributes such income to us in the same taxable year in which the income is included in our income.


Item 1A.Risk Factors


Before you invest in our securities, you should be aware of various risks, including those described below. You should carefully consider these risk factors, together with all of the other information included in this Form 10-K, before you decide whether to make an investment in our securities. The risks set out below are not the only risks we face. The risks described below, as well as additional risks and uncertainties presently unknown by us or currently not deemed significant could negatively affect our business, financial condition and results of operations. In such case, our NAV and the trading price of our common stock or other securities could decline, and you may lose all or part of your investment.



RISK RELATING TO OUR BUSINESS AND STRUCTURE


Certain Risks in the Current Environment


We are currently operating in a period of capital markets disruptions and economic uncertainty. Such market conditions may materially and adversely affect debt and equity capital markets, which may have a negative impact on our business, financial condition and operations.

From time to time, capital markets may experience periods of disruption and instability. The U.S. capital markets have experienced extreme volatility and disruption following the global outbreak of coronavirus (“COVID-19”) that began in December 2019. Some economists and major investment banks have expressed concern that the continued spread of the COVID-19 globally could lead to a world-wide economic downturn. Even after the COVID-19 pandemic subsides, the U.S. economy, as well as most other major economies, may continue to experience a recession, and we anticipate our businesses would be materially and adversely affected by a prolonged recession in the United States and other major markets. Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. The COVID-19 outbreak continues to have, and any future outbreaks could have, an adverse impact on the ability of lenders to originate loans, the volume and type of loans originated, the ability of borrowers to make payments and the volume and type of amendments and waivers granted to borrowers and remedial actions taken in the event of a borrower default, each of which could negatively impact the amount and quality of loans available for investment by the Company and returns to the Company, among other things. With respect to the U.S. credit markets, (in particular for middle market loans), the COVID-19 outbreak has resulted in, and until fully resolved is likely to continue to result in, the following among other things: (i) increased draws by borrowers on revolving lines of credit and other financing instruments; (ii) increased requests by borrowers for amendments and waivers of their credit agreements to avoid default, increased defaults by such borrowers and/or increased difficulty in obtaining refinancing at the maturity dates of their loans; (iii) greater volatility in pricing and spreads and difficulty in valuing loans during periods of increased volatility; and (iv) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general which will not necessarily adequately address the problems facing the loan market and middle-market businesses. These and future market disruptions and/or illiquidity could have an adverse effect on our business, financial condition, results of operations and cash flows. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could limit our investment originations, limit our ability to grow and have a material negative impact on our operating results and the fair values of our debt and equity investments. We may have to access, if available, alternative markets for debt and equity capital, and a severe disruption in the global financial markets, deterioration in credit and financing conditions or uncertainty regarding U.S. government spending and deficit levels or other global economic conditions could have a material adverse effect on our business, financial condition and results of operations.


For example, between 2008 and 2009, the U.S. and global capital markets were unstable as evidenced by periodic disruptions in liquidity in the debt capital markets, significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of major financial institutions. Despite actions of the U.S. federal government and foreign governments, these events contributed to worsening

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general economic conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular.

Equity capital may be difficult to raise during periods of adverse or volatile market conditions because, subject to some limited exceptions, as a BDC, we are generally not able to issue additional shares of our common stock at a price less than NAV without first obtaining approval for such issuance from our stockholders and our independent directors. Volatility and dislocation in the capital markets can also create a challenging environment in which to raise or access debt capital. The current market and future market conditions similar to those experienced from 2008 through 2009 for any substantial length of time could make it difficult to extend the maturity of or refinance our existing indebtedness or obtain new indebtedness with similar terms and any failure to do so could have a material adverse effect on our business. The debt capital that will be available to us in the future, if at all, may be at a higher cost and on less favorable terms and conditions than what we currently experience, including being at a higher cost in a rising interest rate environment. If any of these conditions appear, they may have an adverse effect on our business, financial condition, and results of operations. These events could limit our investment originations, limit our ability to increase returns to equity holders through the effective use of leverage, and negatively impact our operating results.


In addition, significant changes or volatility in the capital markets may also have a negative effect on the valuations of our investments. While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan on holding an investment through its maturity). Significant changes in the capital markets may also affect the pace of our investment activity and the potential for liquidity events involving our investments. Thus, the illiquidity of our investments may make it difficult for us to sell our investments to access capital if required, and as a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them for liquidity purposes. An inability to raise or access capital could have a material adverse effect on our business, financial condition or results of operations.


Governmental authorities worldwide have taken increased measures to stabilize the markets and support economic growth. The success of these measures is unknown and they may not be sufficient to address the market dislocations or avert severe and prolonged reductions in economic activity.


We also face an increased risk of investor, creditor or portfolio company disputes, litigation and governmental and regulatory scrutiny as a result of the effects of COVID-19 on economic and market conditions.



Events outside of our control, including public health crises, could negatively affect our portfolio companies and our results of our operations.

Periods of market volatility have occurred and could continue to occur in response to pandemics or other events outside of our control. These types of events have adversely affected and could continue to adversely affect operating results for us and for our portfolio companies. In December 2019, COVID-19 surfaced in China and has since spread and continues to spread to other countries, including the United States. COVID-19 spread quickly and has been identified as a global pandemic by the World Health OrganizationOrganization. The COVID-19 pandemic continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. In response, beginning in March 2020, in affected jurisdictionjurisdictions including the United States, unprecedented actions were and continue to be taken by governmental authorities and businesses, including quarantines, “stay at home” orders, travel and hospitality restrictions and bans, and the temporary closures and limited operations of many businesses (including corporate offices, retail stores, restaurants, fitness clubs, manufacturing facilities and factories, and other businesses). The actions to contain the COVID-19 pandemic vary by country and by state in the United States. COVID-19 has caused the effective cessation of all business activity deemed non-essential by such governmental authorities. While certain state and local governments across the United States have taken steps to re-open their economies by lifting “stay at home” orders and re-opening businesses, a number of states and local governments have needed to pause or slow the re-opening or impose new shut-down orders as the number of cases of COVID-19 has continued to rise. COVID-19 and the resulting economic dislocations have had and continue to have adverse consequences for the business operations and financial performance of some of our portfolio companies, which may in turn impact the valuation of our investments and have adversely affected, and threaten to continue to adversely affect, our operations. Local, state and federal and numerous non-U.S. governmental authorities have imposed travel and hospitality restrictions and bans, business closures or limited business operations and other quarantine measures on businesses and individuals that remain in effect on the date of this Annual Report on Form 10-K. We cannot predict the full impact of COVID-19, including the duration and the impact of the closures and restrictions described above. As a result, we are unable to predict the duration of these business and supply-chain disruptions, the extent to which COVID-19 will negatively affect our portfolio companies’ operating results or the impact that such disruptions may have on our results of operations and financial condition. With respect to loans to portfolio companies, the Company will be impacted if, among other things, (i) amendments and waivers are granted (or are required to be granted) to borrowers permitting deferral of loan payments or allowing for PIK interest payments, (ii) borrowers default on their loans, are unable to refinance their loans at maturity, or go out of business, or (iii) the value of loans held by the Company decreases as a result of such events and the uncertainty they cause. Portfolio companies may also be more likely to seek to draw on unfunded commitments we have made, and the risk of being unable to fund such commitments is heightened during such periods. Depending on the duration and extent of the disruption to the business operations of our portfolio companies, we expect some portfolio companies, particularly those in vulnerable industries, such as travel and hospitality, to experience financial distress and possibly to default on their financial obligations to us and/or their other capital providers. In addition, if such portfolio companies are subjected to prolonged and severe financial distress, we expect some of them to substantially curtail their operations, defer capital expenditures and lay off workers. These developments would be likely to permanently impair their businesses and result in a reduction in the value of our investments in them.


The Company will also be negatively affected if the operations and effectiveness of MCC Advisors or our portfolio companies (or any of the key personnel or service providers of the foregoing) are compromised or if necessary or beneficial systems and processes are disrupted as a result of stay-at-home orders or other related interruptions to business operations.


Political, social and economic uncertainty, including uncertainty related to the COVID-19 pandemic, creates and exacerbates risks.

Social, political, economic and other conditions and events (such as natural disasters, epidemics and pandemics, terrorism, conflicts and social unrest) will occur that create uncertainty and have significant impacts on issuers, industries, governments and other systems, including the financial markets, to which companies and their investments are exposed. As global systems, economies and financial markets are increasingly interconnected, events

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that once had only local impact are now more likely to have regional or even global effects. Events that occur in one country, region or financial market will, more frequently, adversely impact issuers in other countries, regions or markets, including in established markets such as the U.S. These impacts can be exacerbated by failures of governments and societies to adequately respond to an emerging event or threat.



Uncertainty can result in or coincide with, among other things: increased volatility in the financial markets for securities, derivatives, loans, credit and currency; a decrease in the reliability of market prices and difficulty in valuing assets (including portfolio company assets); greater fluctuations in spreads on debt investments and currency exchange rates; increased risk of default (by both government and private obligors and issuers); further social, economic, and political instability; nationalization of private enterprise; greater governmental involvement in the economy or in social factors that impact the economy; changes to governmental regulation and supervision of the loan, securities, derivatives and currency markets and market participants and decreased or revised monitoring of such markets by governments or self-regulatory organizations and reduced enforcement of regulations; limitations on the activities of investors in such markets; controls or restrictions on foreign investment, capital controls and limitations on repatriation of invested capital; the significant loss of liquidity and the inability to purchase, sell and otherwise fund investments or settle transactions (including, but not limited to, a market freeze); unavailability of currency hedging techniques; substantial, and in some periods extremely high, rates of inflation, which can last many years and have substantial negative effects on credit and securities markets as well as the economy as a whole; recessions; and difficulties in obtaining and/or enforcing legal judgments.


For example, the COVID-19 pandemic outbreak has led and for an unknown period of time will continue to lead to disruptions in local, regional, national and global markets and economies affected thereby. The COVID-19 pandemic has impacted the U.S. credit markets (in particular for middle market loans).markets. See “We are currently operating in a period of capital markets disruptions and economic uncertainty. Such market conditions may materially and adversely affect debt and equity capital markets, which may have a negative impact on our business, financial condition and operations” and “Events outside of our control, including public health crises, could negatively affect our portfolio companies and our results of our operations.”


Although it is impossible to predict the precise nature and consequences of these events, or of any political or policy decisions and regulatory changes occasioned by emerging events or uncertainty on applicable laws or regulations that impact us, our portfolio companies and our investments, it is clear that these types of events are impacting and will, for at least some time, continue to impact us and our portfolio companies and, in many instances, the impact will be adverse and profound. The effects of the COVID-19 pandemic may materially and adversely impact (i) the value and performance of us and our portfolio companies, (ii) the ability of our borrowers to continue to meet loan covenants or repay loans provided by us on a timely basis or at all, which may require us to restructure our investments or write down the value of our investments, (iii) our ability to repay debt obligations, on a timely basis or at all, or (iv) our ability to source, manage and divest investments and achieve our investment objectives, all of which could result in significant losses to us.


Further downgrades of the U.S. credit rating, automatic spending cuts, or another government shutdown could negatively impact our liquidity, financial condition and earnings.

U.S. debt ceiling and budget deficit concerns have increased the possibility of additional credit-rating downgrades and economic slowdowns, or a recession in the United States. Although U.S. lawmakers passed legislation to raise the federal debt ceiling on multiple occasions, ratings agencies have lowered or threatened to lower the long-term sovereign credit rating on the United States. The impact of this or any further downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness could adversely affect the U.S. and global financial markets and economic conditions. Absent further quantitative easing by the Federal Reserve, these developments could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms. In addition, disagreement over the federal budget has caused the U.S. federal government to shut down for periods of time. Continued adverse political and economic conditions could have a material adverse effect on our business, financial condition and results of operations.


Economic recessions or downturns could impair our portfolio companies and harm our operating results.

Many of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our debt investments during these periods. The recent global outbreak of COVID-19 has disrupted economic markets, and the prolonged economic impact isremains uncertain. Many manufacturers of goods in China and other countries in Asia have seen a downturn in production due to the suspension of business and temporary closure of factories in an attempt to curb the spread of the illness. As the impact of COVID-19 spreads to other parts of the world, similar impacts may occur with respect to affected countries.illness.. In the past, instability in the global capital markets resulted in disruptions in liquidity in the debt capital markets, significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of major domestic and international financial institutions. In particular, in past periods of instability, the financial services sector was negatively impacted by significant write-offs as the value of the assets held by financial firms declined, impairing their capital positions and abilities to lend and invest. In addition, continued uncertainty surrounding the negotiation of trade deals between Britain and the European Union following the United Kingdom’s exit from the European Union and uncertainty between the United States and other countries, including China, with respect to trade policies, treaties, and tariffs, among other factors, have caused disruption in the global markets. There can be no assurance that market conditions will not worsen in the future.


In an economic downturn, we may have non-performing assets or non-performing assets may increase, and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions may also decrease the value of any collateral securing our loans. A severe recession may further decrease the value of such collateral and result in losses of value in our portfolio and a decrease in our revenues, net income, assets and net worth. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us on terms we deem acceptable. These events could prevent us from increasing investments and harm our operating results.


The occurrence of recessionary conditions and/or negative developments in the domestic and international credit markets may significantly affect the markets in which we do business, the value of our investments, and our ongoing operations, costs and profitability. Any such unfavorable economic conditions, including rising interest rates, may also increase our funding costs, limit our access to capital markets or negatively impact our ability to obtain financing, particularly from the debt markets. In addition, any future financial market uncertainty could lead to financial market disruptions and

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could further impact our ability to obtain financing. These events could limit our investment originations, limit our ability to grow and negatively impact our operating results and financial condition.



Risks Related to Our Business


We have determined to internalizeinternalized our operating structure, including our management and investment functions, with the expectation that we will be able to operate more efficiently with lower costs, but this may not be the case.

On November 18, 2020, the board of directors approved adoption of an internalized management structure, which we have operated under effective January 1, 2021. There can be no assurances that internalizing our management structure will be and remain beneficial to us and our stockholders, as we may incur the costs and experience the risks discussed below, and we may not be able to effectively replicate the services previously provided to us by our former investment adviser and administrator, MCC Advisors.


administrator.

While we will no longer bear the costs of the various fees and expenses we previously paid to MCC Advisors under theirthe investment management and administration agreements with our previous adviser and administrator, we have other significant direct expenses will substantially increase.expenses. These will include general and administrative costs, legal, accounting and other governance expenses SEC reporting and compliance costs, and costs and expenses related to managing our portfolio. Certain of these costs may be greater during the early stages of the transition process. We will also incur the compensation and benefits costs of our officers and other employees and consultants. In addition, we may be subject to potential liabilities commonly faced by employers, such as workers disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances.

We may also experience operational disruptions as weresulting from the transition from external to internal management, and we could fail to effectively manage our internalization over the longer term, all of which could adversely affect our performance.

If the expenses we incur as a result of our internalizationan internally-managed company are higher than the expenses we would have paid and/or reimbursed to MCC Advisors,under the externally-managed structure, our earnings per share may be lower, potentially decreasing the funds available for distribution, and our share value could suffer.

As an internally managed BDC, we will becomeare dependent upon our management team and other professionals, and if we are not able to hire and retain qualified personnel, we will not realize the anticipated benefits of the internalization.


Our ability to achieve our investment objectives and to make distributions to our stockholders will dependdepends upon the performance of our management team and professionals. In connection with internalizing our operating structure, weWe may experience difficulty identifying, engaging and retaining management, investment and general and administrative personnel with the necessary expertise and credit-related investment experience.

As an internally managed BDC, our ability to offer more competitive and flexible compensation structures, such as offering both a profit-sharing plan and an equity incentive plan, will beis subject to the limitations imposed by the 1940 Act, which could limit our ability to attract and retain talented investment management professionals.

If we are unable to attract and retain highly talented professionals for the necessary talent required to internally manageinternal management our Company, we will not realize the anticipated benefits of the internalization, and the results of our operation could deteriorate.


We may suffer credit and capital losses.

Private debt in the form of secured loans to corporate and asset-based borrowers is highly speculative and involves a high degree of risk of credit loss, and therefore an investment in our securities may not be suitable for someone with a low tolerance for risk. These risks are likely to increase during an economic recession, such as the economic recession or downturn that the United States and many other countries have recently experienced or are experiencing.


Because we use borrowed funds to make investments or fund our business operations, we are exposed to risks typically associated with leverage which increase the risk of investing in us.

We have borrowed funds, including through the issuance of $77.8 million and $74.0 million in aggregate principal amount of 6.125% unsecured notes due March 30, 2023 (the "2023 Notes"“Notes”) and 6.50% unsecured notes due January 30, 2021 (the "2021 Notes" and together with the 2023 Notes, the "Notes"), respectively, to leverage our capital structure, which is generally considered a speculative investment technique. In addition, although we voluntarily satisfied and terminated our Revolving Credit Facility in September 2018, we may replace the facility with another revolving or other credit facility. As a result:

●our common stock may be exposed to an increased risk of loss because a decrease in the value of our investments may have a greater negative impact on the value of our common stock than if we did not use leverage;

●if we do not appropriately match the assets and liabilities of our business, adverse changes in interest rates could reduce or eliminate the incremental income we make with the proceeds of any leverage;

●our ability to pay distributions on our common stock may be restricted if our asset coverage ratio with respect to each of our outstanding senior securities representing indebtedness and our outstanding preferred shares, as defined by the 1940 Act, is not at least 200% and any amounts used to service indebtedness or preferred stock would not be available for such distributions;

●any credit facility to which we became a party may be subject to periodic renewal by our lenders, whose continued participation cannot be guaranteed;

●any credit facility to which we became a party may contain covenants restricting our operating flexibility;

●we, and indirectly our stockholders, bear the cost of issuing and paying interest or dividends on such securities; and

●any convertible or exchangeable securities that we issue may have rights, preferences and privileges more favorable than those of our common shares.


•our common stock may be exposed to an increased risk of loss because a decrease in the value of our investments may have a greater negative impact on the value of our common stock than if we did not use leverage;

•if we do not appropriately match the assets and liabilities of our business, adverse changes in interest rates could reduce or eliminate the incremental income we make with the proceeds of any leverage;

•our ability to pay distributions on our common stock may be restricted if our asset coverage ratio with respect to each of our outstanding senior securities representing indebtedness and our outstanding preferred shares, as defined by the 1940 Act, is not at least 200% and any amounts used to service indebtedness or preferred stock would not be available for such distributions;

•any credit facility to which we became a party may be subject to periodic renewal by our lenders, whose continued participation cannot be guaranteed;

•any credit facility to which we became a party may contain covenants restricting our operating flexibility;
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•we, and indirectly our stockholders, bear the cost of issuing and paying interest or dividends on such securities; and

•any convertible or exchangeable securities that we issue may have rights, preferences and privileges more favorable than those of our common shares.

Under the provisions of the 1940 Act, we are permitted, as a BDC, to issue debt securities or preferred stock and/or borrow money from banks and other financial institutions, which we collectively refer to as “senior securities”, only in amounts such that our asset coverage ratio equals at least 200% (or 150% if, pursuant to the 1940 Act, certain requirements are met) after each issuance of senior securities.


For a discussion of the terms of the Notes, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition, Liquidity and Capital Resources.”


As of September 30, 2020,2021, the Company’s asset coverage was 199.2%285.6% after giving effect to leverage and therefore the Company’s asset coverage is belowabove 200%, the minimum asset coverage requirement under the 1940 Act. As a result, the Company is prohibited from making distributions to stockholders, including the payment of any dividend, and may not employ further leverage until the Company’s asset coverage is at least 200% after giving effect to such leverage.


The lack of liquidity in our investments may adversely affect our business.

We anticipate that our investments generally will be made in private companies. Substantially all of these securities will be subject to legal and other restrictions on resale or will be otherwise less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to sell such investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded our investments. In addition, we may face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we or MCC Advisors hashave material non-public information regarding such portfolio company.


A substantial portion of our portfolio investments will be recorded at fair value as determined in good faith by or under the direction of our board of directors and, as a result, there may be uncertainty regarding the value of our portfolio investments.

The debt and equity securities in which we invest for which market quotations are not readily available will be valued at fair value as determined in good faith by or under the direction of our board of directors. Most, if not all, of our investments (other than cash and cash equivalents) will be classified as Level 3 under Accounting Standards Codification Topic 820 - Fair Value Measurements and Disclosures. This means that our portfolio valuations will be based on unobservable inputs and our own assumptions about how market participants would price the asset or liability in question. We expect that inputs into the determination of fair value of our portfolio investments will require significant management judgment or estimation. Even if observable market data are available, such information may be the result of consensus 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 disclaimers materially reduces the reliability of such information. We have retained the services of independent valuation firms to review the valuation of thesevarious loans and securities. The types of factors that our board of directors may take into account in determining the fair value of our investments generally include, as appropriate, comparison to publicly traded securities including such factors as yield, maturity and measures of credit quality, the enterprise value of a portfolio company, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these loans and securities existed. Our NAV could be adversely affected if our determinations regarding the fair value of our investments were materially higher or lower than the values that we ultimately realize upon the disposal of such loans and securities.


We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer.

We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. We also have not adopted any policy restricting the percentage of our assets that may be invested in a single portfolio company. To the extent that we assume large positions in the securities of a small number of issuers, our NAV may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. Beyond our income tax diversification requirements under Subchapter M of the Code, we do not have fixed guidelines for diversification, and our investments could be concentrated in relatively few portfolio companies.


Our ability to enter into transactions with our affiliates will be restricted, which may limit the scope of investments available to us.

We are prohibited under the 1940 Act from participating in certain transactions with our affiliates without the prior approval of our independent directors and, in some cases, of the SEC. Any person that owns, directly or indirectly, five percent or more of our outstanding voting securities will be our affiliate for purposes of the 1940 Act, and we are generally prohibited from buying or selling any security from or to such affiliate, absent the prior approval of our independent directors. The 1940 Act also prohibits certain “joint” transactions with certain of our affiliates, which could include investments in the same portfolio company, without prior approval of our independent directors and, in some cases, of the SEC. We are prohibited from buying or selling any security from or to any person who owns more than 25% of our voting securities or certain of that person’s affiliates, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC. As a result of these restrictions, we may be prohibited from buying or selling any security (other than any security of which we are the issuer) from or to any portfolio company of a private equity fund managed by our investment adviser or its affiliates without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to us.


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We may, however, co-invest with our investment adviser and its affiliates’ other clients in certain circumstances where doing so is consistent with applicable law and SEC staff interpretations. For example, we may co-invest with such accounts consistent with guidance promulgated by the SEC staff permitting us and such other accounts to purchase interests in a single class of privately placed securities so long as certain conditions are met, including that MCC Advisors, acting on our behalf and on behalf of other clients, negotiates no term other than price. We may also co-invest with our investment adviser’s other clients as otherwise permissible under regulatory guidance, applicable regulations and MCC Advisors’ allocation policy. Under this allocation policy, a fixed percentage of each opportunity, which may vary based on asset class and from time to time, will be offered to us and similar eligible accounts, as periodically determined by MCC Advisors and approved by our board of directors, including our independent directors. The allocation policy further provides that allocations among us and these other accounts will generally be made pro rata based on each account’s capital available for investment, as determined, in our case, by MCC Advisors. It is our policy to base our determinations as to the amount of capital available for investment based on such factors as the amount of cash on-hand, existing commitments and reserves, if any, the targeted leverage level, the targeted asset mix and diversification requirements and other investment policies and restrictions set by our board of directors or imposed by applicable laws, rules, regulations or interpretations. We expect that these determinations will be made similarly for other accounts. However, we can offer no assurance that investment opportunities will be allocated to us fairly or equitably in the short-term or over time.

In addition, we have received an order from the SEC that permits us to negotiate the terms of co-investments with other funds managed by MCC Advisors or its affiliates subject to the conditions included therein. In situations where co-investment with other funds managed by MCC Advisors or its affiliates is not permitted or appropriate, such as when there is an opportunity to invest in different securities of the same issuer or where the different investments could be expected to result in a conflict between our interests and those of other MCC Advisors clients, MCC Advisors will need to decide which client will proceed with the investment. MCC Advisors will make these determinations based on its policies and procedures, which generally require that such opportunities be offered to eligible accounts on an alternating basis that will be fair and equitable over time. Moreover, except in certain circumstances, we will be unable to invest in any issuer in which a fund managed by MCC Advisors or its affiliates has previously invested. Similar restrictions limit our ability to transact business with our officers or directors or their affiliates.

We will be exposed to risks associated with changes in interest rates.

Interest rate fluctuations may have a substantial negative impact on our investments, the value of our common stock and our rate of return on invested capital. A reduction in the interest rates on new investments relative to interest rates on current investments could also have an adverse impact on our net interest income. An increase in interest rates could decrease the value of any investments we hold which earn fixed interest rates and also could increase our interest expense, thereby decreasing our net income. Also, an increase in interest rates available to investors could make investment in our common stock less attractive if we are not able to increase our dividend rate, which could reduce the value of our common stock.


Changes relating to the LIBOR calculation process may adversely affect the value of the LIBOR-indexed, floating-rate debt securities in our portfolio.

portfolio

In July 2017, the recent past, concerns have been publicized that somehead of the member banks surveyed by British Bankers’ Association (“BBA”) in connection withUnited Kingdom Financial Conduct Authority announced the calculationdesire to phase out the use of LIBOR across a rangeby the end of maturities and currencies may have been under-reporting or otherwise manipulating2021. The announcement indicates that the inter-bank lending rate applicable to them in order to profit on their derivative positions or to avoid an appearance of capital insufficiency or adverse reputational or other consequences that may have resulted from reporting inter-bank lending rates higher than those they actually submitted. A number of BBA member banks entered into settlements with their regulators and law enforcement agencies with respect to alleged manipulationcontinuation of LIBOR on the current basis cannot and investigations by regulatorswill not be guaranteed after 2021. It is impossible to predict whether and governmental authoritiesto what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR or whether any additional reforms to LIBOR may be enacted in various jurisdictions are ongoing.


the United Kingdom or elsewhere. Actions by the ICE Benchmark Administration,British Bankers Association, the United Kingdom Financial Conduct Authority or other regulators or law enforcement agencies as a result of these or future events, may result in changes to the manner in which LIBOR is determined. Potential changes, or uncertainty related to such potential changes may adversely affect the market LIBOR-based securities, including our portfolio of LIBOR-indexed, floating-rate debt securities. In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based securities or the value of our portfolio of LIBOR-indexed, floating-rate debt securities, loans, derivatives and other financial obligationssecurities.

At this time, no consensus exists as to what rate or extensions of credit held by or due to us or on our overall financial condition or results of operations.


On July 27, 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. We have exposurewill become accepted alternatives to LIBOR, including in financial instruments that mature after 2021. Our exposure arises fromalthough on July 29, 2021, the value of our portfolio of LIBOR-indexed, floating-rate debt securities.

In the United States,Alternative Reference Rates Committee (“ARRC”), a U.S.-based group convened by the U.S. Federal Reserve Board and the Federal Reserve Bank of New York, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index calculated by short-term repurchase agreements, backed by Treasury securities calledformally recommended the Secured Overnight Financing Rate (“SOFR”). The Federal Reserve Bank of New York began publishing SOFR in April 2018. In addition, on March 25, 2020, the U.K. Financial Conduct Authority stated that, although the central assumption that firms cannot rely on LIBOR being published after the end of 2021 has not changed, the outbreak of COVID-19 has impacted the timing of many firms’ transition planning, and the U.K. Financial Conduct Authority will continue to assess the impact of the COVID-19 outbreak on transition timelines and update the marketplace as soon as possible. Although SOFR appears to be theits preferred replacement rate for U.S. dollarLIBOR. Given the inherent differences between LIBOR at this time, it is not possible to predict the effect ofand SOFR, or any such changes, any establishment ofother alternative reference rates or other reforms to LIBORbenchmark rate that may be enacted inestablished, there are many uncertainties regarding a transition from LIBOR, including but not limited to the United States, United Kingdom or elsewhereneed to amend all contracts with LIBOR as the referenced rate and how this will impact the cost of variable rate debt and certain derivative financial instruments, or whether the COVID-19 outbreakpandemic will have further effect on LIBOR transition plans. In addition, SOFR or other replacement rates may fail to gain market acceptance. The elimination of LIBOR or any other changes or reforms to the determination or supervision of LIBOR could have an adverse impact on the market for or value of and/or transferability of any LIBOR-indexed, floating-rate debtLIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us or on our overall financial condition or results of operations.


The Company intends to monitor the developments with respect to the scheduled phasing out of LIBOR after 2021 and work with its portfolio companies and lenders to ensure such transition away from LIBOR will have minimal impact on its financial condition, but can provide no assurances regarding the impact of the discontinuation of LIBOR.
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Because we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income.

Because we borrow money to make investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income in the event we use our existing debt to finance our investments. In periods of rising interest rates, our cost of funds will increase to the extent we access any credit facility with a floating interest rate, which could reduce our net investment income to the extent any debt investments have fixed interest rates. We expect that our long-term fixed-rate investments will be financed primarily with issuances of equity and long-term debt securities. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act.


You should also be aware that a rise in the general level of interest rates typically leads to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates may result in an increase of the amount of incentive fees payable to MCC Advisors.



If our investments are not managed effectively, we may be unable to achieve our investment objective.

Our ability to achieve our investment objective will depend on our ability to manage our business, which prior to the internalization of our management and investment functions that will become effective on January 1, 2021, depended, in turn, on the ability of MCC Advisors to identify, invest in and monitor companies that meet our investment criteria. MCC Advisors’ senior management team is comprised of members of the senior management team for Medley LLC, and they manage other investment funds.


Following the internalization, our ability to manage our business will depend on the new internalized management team. Accomplishing this result is largely will be a function of the internalized management team'steam’s ability to provide quality and efficient services to us. They may also be required to provide managerial assistance to our portfolio companies. These demands on their time may distract them or slow our rate of investment. Any failure to manage our business effectively could have a material adverse effect on our business, financial condition and results of operations.


We may experience fluctuations in our periodic operating results.

We could experience fluctuations in our periodic operating results due to a number of factors, including the interest rates payable on the debt securities we acquire, the default rate on such securities, the level of our expenses (including the interest rates payable on our borrowings), the dividend rates payable on preferred stock we issue, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.


Any failure on our part to maintain our status as a BDC would reduce our operating flexibility.

If we fail to maintain our status as a BDC, we might be regulated as a closed-end investment company under the 1940 Act, which would subject us to substantially more onerous regulatory restrictions under the 1940 Act and correspondingly decrease our operating flexibility.


We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.

For U.S. federal income tax purposes, we may include in income certain amounts that we have not yet received in cash, such as original issue discount, which may arise if we receive warrants in connection with the making of a loan or possibly in other circumstances, such as PIK interest, which represents contractual interest added to the loan balance and due at the end of the loan term. Such original issue discount, which could be significant relative to our overall investment activities, or increases in loan balances as a result of PIK arrangements are included in income before we receive any corresponding cash payments. We also may be required to include in income certain other amounts that we do not receive in cash.


Since in certain cases we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the tax requirement to distribute at least 90% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, to maintain our tax treatment as a RIC. Accordingly, we may have to sell some of our investments at times we would not consider advantageous, raise additional debt or equity capital or reduce new investment originations to meet these distribution requirements. If we are not able to raise cash from other sources, we may fail to qualify and maintain our tax treatment as a RIC and thus become subject to corporate-level U.S. federal income tax. See “Tax Matters - Taxation of the Company”.



We may be required to pay incentive fees on income accrued, but not yet received in cash.

That part of the incentive fee payable by us that relates to our net investment income is computed and paid on income that may include interest that has been accrued but not yet received in cash, such as market discount, debt instruments with PIK, interest, preferred stock with PIK dividends and zero coupon securities. If a portfolio company defaults on a loan, it is possible that accrued interest previously used in the calculation of the incentive fee will become uncollectible. Consequently, we may make incentive fee payments on income accruals that we may not collect in the future and with respect to which we do not have a clawback right against MCC Advisors.

We may not be able to pay you distributions and our distributions may not grow over time.

When possible, we intend tomay pay quarterly distributions to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to pay a specified level of cash distributions or year-to-year increases in cash distributions. Our ability to pay distributions might be adversely affected by, among other things, the impact of one or more of the risk factors described herein. In addition, the inability to satisfy the asset coverage test applicable to us as a BDC could limit our ability to pay distributions. As of September 30, 2020,2021, the Company’s asset coverage was 199.2%285.6% after giving effect to leverage and therefore the Company’s asset coverage is belowabove 200%, the

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minimum asset coverage requirement under the 1940 Act. As a result, the Company is prohibited from making distributions to stockholders. All distributions will be paid at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our RIC tax treatment, compliance with applicable BDC regulations, and such other factors as our board of directors may deem relevant from time to time. We cannot assure you that we will pay distributions to our stockholders in the future.


The highly competitive market in which we operate may limit our investment opportunities.

A number of entities compete with us to make the types of investments that we make. We compete with other BDCs and investment funds (including public and private funds, commercial and investment banks, commercial financing companies, other SBICs and, to the extent they provide an alternative form of financing, private equity funds). Additionally, because competition for investment opportunities generally has increased among alternative investment vehicles, such as hedge funds, those entities have begun to invest in areas in which they have not traditionally invested. As a result of these new entrants, competition for investment opportunities has intensified in recent years and may intensify further in the future. Some of our existing and potential competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions and valuation requirements that the 1940 Act imposes on us as a BDC and the tax consequences of qualifying as a RIC. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this existing and potentially increasing competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we can offer no assurance that we will be able to identify and make investments that are consistent with our investment objective.


We do not seek to compete primarily based on the interest rates we offer, and we believe that some of our competitors make loans with interest rates that are comparable to or lower than the rates we offer. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. If we match our competitors’ pricing, terms and structure, we may experience decreased net interest income and increased risk of credit loss. A significant part of our competitive advantage stems from the fact that the market for investments in mid-sized companies is underserved by traditional commercial banks and other financial institutions. A significant increase in the number and/or size of our competitors in this target market could force us to accept less attractive investment terms. Furthermore, many of our competitors have greater experience operating under the regulatory restrictions of the 1940 Act.

Act and under an internalized management structure.


Because we expect to distribute substantially all of our net investment income and net realized capital gains to our stockholders, we will need additional capital to finance our growth and such capital may not be available on favorable terms or at all.

We have elected and qualifiedintend to qualify annually to be taxed for U.S. federal income tax purposes as a RIC under Subchapter M of the Code. As a RIC, we must meet certain requirements, including source-of-income, asset diversification and distribution requirements in order to not have to pay corporate-level U.S. on income we distribute to our stockholders as distributions, which allows us to substantially reduce or eliminate our corporate-level U.S. federal income tax liability. As a BDC, we are generally required to meet a coverage ratio of total assets to total senior securities, which includes all of our borrowings and any preferred stock we may issue in the future, of at least 200% (or 150% if, pursuant to the 1940 Act, certain requirements are met) at the time we issue any debt or preferred stock. This requirement limits the amount of our leverage. Because we will continue to need capital to grow our investment portfolio, this limitation may prevent us from incurring debt or issuing preferred stock and require us to raise additional equity at a time when it may be disadvantageous to do so. We cannot assure you that debt and equity financing will be available to us on favorable terms, or at all, and debt financings may be restricted by the terms of any of our outstanding borrowings. In addition, as a BDC, we are generally not permitted to issue common stock priced below NAV without stockholder approval. If additional funds are not available to us, we could be forced to curtail or cease new lending and investment activities, and our NAV could decline.


Our board of directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.

Our board of directors has the authority to modify or waive certain of our operating policies and strategies without prior notice and without stockholder approval. However, absent stockholder approval, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results or value of our stock. Nevertheless, the effects could adversely affect our business and impact our ability to make distributions and cause you to lose all or part of your investment.

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There are significant potential conflicts of interest that could affect our investment returns.

There may be times when MCC Advisors, its seniorOur management and Investment Team, and members of its Investment Committee have interests that differ from those of our stockholders, giving rise to a conflict of interest. In particular, certain private investment funds managed by the senior members of MCC Advisors hold controlling or minority equity interests, or have the right to acquire such equity interests, in some of our portfolio companies. As a result, the senior members of MCC Advisors may face conflicts of interest in connection with making business decisions for these portfolio companies to the extent that such decisions affect the debt and equity holders in these portfolio companies differently. In addition, the senior members of MCC Advisors may face conflicts of interests in connection with making investment or other decisions, including granting loan waivers or concessions on our behalf with respect to these portfolio companies given that they also manage private investment funds that hold the equity interests in these portfolio companies.

There may be conflicts of interest related to obligations MCC Advisors’ senior management and Investment Team and members of its Investment Committee have to other clients.

Senior management, the Investment Team, and the Investment Committee of MCC Advisors serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do, or of investment funds managed by MCC Advisors or its affiliates. In serving in these multiple capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in our best
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interests or in the best interest of our stockholders. For example, members of the Investment Team have management responsibilities for other investment funds, accounts or other investment vehicles managed by affiliates of MCC Advisors, which gives rise to conflicts of interest.

Our investment objective may overlap with the investment objectives of such investment funds, accounts or other investment vehicles. For example, affiliates of MCC Advisors currently manage private funds and managed accounts that are seeking new capital commitments and will pursue an investment strategy similar to our strategy, and we may compete with these and other entities managed by affiliates of MCC Advisors for capital and investment opportunities. As a result, those individuals may face conflicts in the allocation of investment opportunities among us and other investment funds or accounts advised by principals of, or affiliated with, MCC Advisors.

We have received an order from the SEC which permits us to co-invest with certain other investment funds managed by MCC Advisors or its affiliates, subject to the conditions included therein. In situations where we cannot co-invest with other investment funds managed by MCC Advisors or its affiliates, the investment policies and procedures of MCC Advisors generally require that such opportunities be offered to us and such other investment funds on an alternating basis. However, there can be no assurance that we will be able to participate in all investment opportunities that are suitable to us.

MCC Advisorsteam may, from time to time, possess material non-public information, limiting our investment discretion.

MCC Advisors and members

Members of its seniorour management and the Investment Team and the Investment Committee may serve as directors of, or in a similar capacity with, companies in which we invest, the securities of which are purchased or sold on our behalf. In the event that material nonpublic information is obtained with respect to such companies, we could be prohibited for a period of time from purchasing or selling the securities of such companies by law or otherwise, and this prohibition may have an adverse effect on us.


Our incentive fee structure may create incentives for MCC Advisors that are not fully aligned with the interests of our stockholders.

In the course of our investing activities, we will pay management and incentive fees to MCC Advisors. These fees are based on our gross assets. As a result, investors in our common stock will invest on a “gross” basis and receive distributions on a “net” basis after expenses, resulting in a lower rate of return than one might achieve through direct investments. Because these fees are based on our gross assets, MCC Advisors will benefit when we incur debt or use leverage. Additionally, under the incentive fee structure, MCC Advisors may benefit when capital gains are recognized and, because MCC Advisors determines when a holding is sold, MCC Advisors controls the timing of the recognition of such capital gains. Our board of directors is charged with protecting our interests by monitoring how MCC Advisors addresses these and other conflicts of interests associated with its management services and compensation. While they are not expected to review or approve each borrowing or incurrence of leverage, our independent directors will periodically review MCC Advisors’ services and fees as well as its portfolio management decisions and portfolio performance. In connection with these reviews, our independent directors will consider whether our fees and expenses (including those related to leverage) remain appropriate. As a result of this arrangement, MCC Advisors or its affiliates may from time to time have interests that differ from those of our stockholders, giving rise to a conflict.

The part of the incentive fee payable to MCC Advisors that relates to our net investment income will be computed and paid on income that may include interest income that has been accrued but not yet received in cash. This fee structure may be considered to involve a conflict of interest for MCC Advisors to the extent that it may encourage MCC Advisors to favor debt financings that provide for deferred interest, rather than current cash payments of interest. MCC Advisors may have an incentive to invest in deferred interest securities in circumstances where it would not have done so but for the opportunity to continue to earn the incentive fee even when the issuers of the deferred interest securities would not be able to make actual cash payments to us on such securities. This risk could be increased because MCC Advisors is not obligated to reimburse us for any incentive fees received even if we subsequently incur losses or never receive in cash the deferred income that was previously accrued.

Because we borrow money, the potential for loss on amounts invested in us will be magnified and may increase the risk of investing in us.

Borrowings, also known as leverage, magnify the potential for loss on invested equity capital. If we use leverage to partially finance our investments, which we have done historically, you will experience increased risks of investing in our securities. We issued the Notes and may issue other debt securities or enter into other types of borrowing arrangements in the future. If the value of our assets decreases, leveraging would cause our NAV to decline more sharply than it otherwise would have had we not leveraged. Similarly, any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make common stock distributions or scheduled debt payments. Leverage is generally considered a speculative investment technique and we only intend to use leverage if expected returns will exceed the cost of borrowing.


As of September 30, 2020,2021, there was $151.9$77.8 million of outstanding Notes. The weighted average interest rate charged on our borrowings as of September 30, 20202021 was 6.4%7.03% (exclusive of debt issuance costs). We will need to generate sufficient cash flow to make these required interest payments. In order for us to cover our annual interest payments on indebtedness, we must achieve annual returns on total assets of at least 3.9% as of September 30, 2020. If we are unable to meet the financial obligations under the Notes, the holders thereof will have the right to declare the principal amount and accrued and unpaid interest on the outstanding Notes to be due and payable immediately. If we are unable to meet the financial obligations under any credit facility we enter into, the lenders thereunder would likely have a superior claim to our assets over our stockholders.



Illustration. The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing below.

Assumed Return on Our Portfolio(1)
(net of expenses)
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 (10)%(5)%0%5%10%
Corresponding net return to common stockholder(26.8)%(16.6)%(6.4)%3.7 %13.9 %
(1)Assumes $306.1 million in total assets, $151.9 million in debt outstanding, $150.6 million in net assets, and a weighted average interest rate of 6.4%. Actual interest payments may be different.

Our incentive fee may induce our investment adviser to make certain investments, including speculative investments.

The incentive fee payable by us to MCC Advisors may create an incentive for MCC Advisors to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The way in which the incentive fee payable to MCC Advisors is determined, which is calculated separately in two components as a percentage of the interest and other ordinary income in excess of a quarterly minimum hurdle rate and as a percentage of the realized gain on invested capital, may encourage MCC Advisors to use leverage or take additional risk to increase the return on our investments. The use of leverage may magnify the potential for gain or loss on amounts invested. The use of leverage is considered a speculative technique. If we borrow from banks or other lenders, we would expect that such lenders will seek recovery against our assets in the event of a default and these lenders likely will have claims on our assets that are superior to those of our equity holders. In addition, MCC Advisors receives the incentive fee based, in part, upon net capital gains realized on our investments. Unlike the portion of the incentive fee based on income, there is no minimum level of gain applicable to the portion of the incentive fee based on net capital gains. As a result, MCC Advisors may have an incentive to invest more in investments that are likely to result in capital gains as compared to income producing securities. This practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns.

We may invest, to the extent permitted by law, in the securities and instruments of other investment companies, including private funds, and, to the extent we so invest, we will bear our ratable share of any such investment company’s expenses, including management and performance fees. We will also remain obligated to pay management and incentive fees to MCC Advisors with respect to the assets invested in the securities and instruments of other investment companies. With respect to each of these investments, each of our common stockholders will bear his or her share of the management and incentive fee of MCC Advisors as well as indirectly bear the management and performance fees and other expenses of any investment companies in which we invest.

We may be obligated to pay our investment adviser incentive compensation even if we incur a loss and may pay more than 20% of our net capital gains because we cannot recover payments made in previous years.

MCC Advisors will be entitled to incentive compensation for each fiscal quarter in an amount equal to a percentage of the excess of our net investment income for that quarter above a threshold return for that quarter. Our pre-incentive fee net investment income for incentive compensation purposes excludes realized and unrealized capital losses that we may incur in the fiscal quarter, even if such capital losses result in a net loss on our statement of operations for that quarter. Thus, we may be required to pay MCC Advisors incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or we incur a net loss for that quarter. If we pay an incentive fee of 20% of our realized capital gains (net of all realized capital losses and unrealized capital depreciation on a cumulative basis) and thereafter experience additional realized capital losses or unrealized capital depreciation, we will not be able to recover any portion of the incentive fee previously paid.

The valuation process for certain of our portfolio holdings creates a conflict of interest.

A substantial portion of our portfolio investments are expected to be made in the form of securities that are not publicly traded. As a result, our board of directors will determine the fair value of these securities in good faith pursuant to our valuation policy. In connection with that determination, investment professionals from MCC Advisors prepare portfolio company valuations based upon the most recent financial statements available and projected financial results of each portfolio company. In addition, certain members of our board of directors, including Brook Taube and Seth Taube, have a pecuniary interest in MCC Advisors. The participation of MCC Advisors’ investment professionals in our valuation process, and the pecuniary interest in MCC Advisors by certain members of our board of directors, could result in a conflict of interest as the management fee that we will pay MCC Advisors is based on our gross assets.

Other arrangements with MCC Advisors may create conflicts of interest.

We utilize MCC Advisors’ office space and pay to MCC Advisors our allocable portion of overhead and other expenses incurred by MCC Advisors in performing its obligations under the administration agreement, such as our allocable portion of the cost of our Chief Financial Officer and Chief Compliance Officer and their respective staffs. This results in conflicts of interest that our board of directors must monitor.

The investment management agreement and administration agreement with MCC Advisors were not negotiated on an arm’s length basis and may not be as favorable to us as if they had been negotiated with an unaffiliated third party.

The investment management agreement and the administration agreement were negotiated between related parties. Consequently, their terms, including fees payable to MCC Advisors, may not be as favorable to us as if they had been negotiated with an unaffiliated third party.

Our ability to sell or otherwise exit investments in which affiliates of MCC Advisors also have an investment may be restricted.

We may be considered affiliates with respect to certain of our portfolio companies. Certain private funds advised by the senior members of MCC Advisors also hold interests in these portfolio companies and as such these interests may be considered a joint enterprise under applicable regulations. To the extent that our interests in these portfolio companies may need to be restructured in the future or to the extent that we choose to exit certain of these transactions, our ability to do so will be limited.

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We are highly dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay distributions.

Our business is highly dependent on our and third parties’ communications and information systems. Any failure or interruption of those systems, including as a result of the termination of an agreement with any third-party service providers, could cause delays or other problems in our activities. Our financial, accounting, data processing, backup or other operating systems and facilities may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control and adversely affect our business. There could be:


•sudden electrical or telecommunications outages;

•natural disasters such as earthquakes, tornadoes and hurricanes;

•disease pandemics (including the COVID-19 outbreak);

•events arising from local or larger scale political or social matters, including terrorist acts; and

•cyber-attacks.

●sudden electrical or telecommunications outages;

●natural disasters such as earthquakes, tornadoes and hurricanes;

●disease pandemics (including the COVID-19 outbreak);

●events arising from local or larger scale political or social matters, including terrorist acts; and

●cyber-attacks.

These events, in turn, could have a material adverse effect on our operating results and negatively affect the market price of our common stock and our ability to pay distributions to our stockholders.


A failure of cybersecurity systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning could impair our ability to conduct business effectively.

The occurrence of a disaster, such as a cyber-attack against us or against a third-party that has access to our data or networks, a natural catastrophe, an industrial accident, failure of our disaster recovery systems, or consequential employee error, could have an adverse effect on our ability to communicate or conduct business, negatively impacting our operations and financial condition. This adverse effect can become particularly acute if those events affect our electronic data processing, transmission, storage, and retrieval systems, or impact the availability, integrity, or confidentiality of our data.


We depend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of security measures, our computer systems, networks, and data, like those of other companies, could be subject to cyber-attacks and unauthorized access, use, alteration, or destruction, such as from physical and electronic break-ins or unauthorized tampering, malware and computer virus attacks, or system failures and disruptions. If one or more of these events occurs, it could potentially jeopardize the confidential, proprietary, and other information processed, stored in, and transmitted through our computer systems and networks. Such an attack could cause interruptions or malfunctions in our operations, which could result in financial losses, litigation, regulatory penalties, client dissatisfaction or loss, reputational damage, and increased costs associated with mitigation of damages and remediation.


Third parties with which we do business may also be sources of cybersecurity or other technological risks. We outsource certain functions and these relationships allow for the storage and processing of our information, as well as customer, counterparty, employee and borrower information. Cybersecurity failures or breaches by our investment adviser and other service providers (including, but not limited to, accountants, custodians, transfer agents and administrators), and the issuers of securities in which we invest, also have the ability to cause disruptions and impact business operations, potentially resulting in financial losses, interference with our ability to calculate its net asset value, impediments to trading, the inability of our stockholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputation damages, reimbursement of other compensation costs, or additional compliance costs. While we engage in actions to reduce our exposure resulting from outsourcing, ongoing threats may result in unauthorized access, loss, exposure or destruction of data, or other cybersecurity incidents, with increased costs and other consequences, including those described above. In addition, substantial costs may be incurred in order to prevent any cyber incidents in the future.


Privacy and information security laws and regulation changes, and compliance with those changes, may result in cost increases due to system changes and the development of new administrative processes. In addition, we may be required to expend significant additional resources to modify our protective measures and to investigate and remediate vulnerabilities or other exposures arising from operational and security risks. We currently do not maintain insurance coverage relating to cybersecurity risks, and we may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are not fully insured.


We and our service providers are currently impacted by quarantines and similar measures being enacted by governments in response to COVID-19, which are obstructing the regular functioning of business work forces (including requiring employees to work from external locations and their homes). Accordingly, the risks described above are heightened under current conditions.



Our business and operations could be negatively affected if we become subject to any securities class actions and derivative lawsuits, which could cause us to incur significant expense, hinder execution of investment strategy and impact our stock price.

In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been brought against that company. Stockholder activism, which could take many forms or arise in a variety of situations, has been increasing in the BDC space recently. Securities litigation and stockholder activism, including potential proxy contests, could result in substantial costs and divert management’s and our board of directors’ attention and resources from our business. Additionally, such securities litigation and stockholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant legal fees and other expenses related to any securities litigation and activist

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stockholder matters. Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and stockholder activism.


Risks Related to Our Investments


We may not realize gains from our equity investments.

When we make a debt investment, we may acquire warrants or other equity securities as well. In addition, we may invest directly in the equity securities of portfolio companies. Our goal is ultimately to dispose of such equity interests and realize gains upon our disposition of such interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.


Our investments are very risky and highly speculative.

We investhave invested primarily in senior secured first lien term loans and senior secured second lien term loans issued by private middle-market companies.


Senior Secured LoansThere is a risk that the collateral securing our loans may decrease in value over time, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital, and, in some circumstances, our lien could be subordinated to claims of other creditors. In addition, deterioration in a portfolio company’s financial condition and prospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the loan. Consequently, the fact that a loan is secured does not guarantee that we will receive principal and interest payments according to the loan’s terms, or at all, or that we will be able to collect on the loan should we be forced to enforce our remedies.


Equity InvestmentsWhen we invest in senior secured first lien term loans or senior secured second lien term loans, we may receive warrants or other equity securities as well. In addition, we may invest directly in the equity securities of portfolio companies. The warrants or equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our warrants or equity interests, and any gains that we do realize on the disposition of any warrants or equity interests may not be sufficient to offset any other losses we experience.

In addition, investing in private middle-market companies involves a number of significant risks. See “Our investments in private middle-market portfolio companies may be risky, and you could lose all or part of your investment” below.


Our investments in private middle-market portfolio companies may be risky, and you could lose all or part of your investment.

Investments in private middle-market companies involve a number of significant risks. Generally, little public information exists about these companies, and we are required to rely on the ability of the Investment Teamour investment professionals to obtain adequate information to evaluate the potential returns from investing in these companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investments. Private middle-market companies may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of our realizing any guarantees we may have obtained in connection with our investment. In addition, they typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns. Additionally, private middle-market companies are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us. Private middle-market companies also generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. In addition, our executive officers directors and MCC Advisorsdirectors may, in the ordinary course of business, be named as defendants in litigation arising from our investments in these types of companies.



We intend to investhave invested primarily in secured debt issued by our portfolio companies. In the case of our senior secured first lien term loans, the portfolio companies usually have, or may be permitted to incur, other debt that ranks equally with the debt securities in which we invest. With respect to our senior secured second lien term loans, the portfolio companies usually have, or may be permitted to incur, other debt that ranks above or equally with the debt securities in which we invest. In the case of debt ranking above the senior secured second lien term loans in which we invest, we would be subordinate to such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company and therefore the holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution. In the case of debt ranking equally with debt securities in which we invest, we would have to share any distributions on an equal and ratable basis with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.


Additionally, certain loans that we make to portfolio companies may be secured on a second priority basis by the same collateral securing senior secured debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the portfolio company under the agreements governing the loans. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of, and be entitled to receive proceeds from, any realization of the collateral to repay their obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the

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loan obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the portfolio company’s remaining assets, if any.

The rights we may have with respect to the collateral securing the loans we make to our portfolio companies with senior debt outstanding may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of senior debt. Under such an intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens: (1) the ability to cause the commencement of enforcement proceedings against the collateral; (2) the ability to control the conduct of such proceedings; (3) the approval of amendments to collateral documents; (4) releases of liens on the collateral; and (5) waivers of past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights are adversely affected.


Continuation of the current decline in oil and natural gas prices for a prolonged period of time could have a material adverse effect on the Company.

As of September 30, 2020, approximately 2.3% of our portfolio at fair value is invested in energy-related businesses. A decline in oil and natural gas prices would adversely affect the credit quality of these investments. A decrease in credit quality would, in turn, negatively affect the fair value of these investments, which would consequently negatively affect the Company's financial position and results of operations. Should the current decline in oil and natural gas prices persist, it is likely that the Company's energy-related portfolio companies' abilities to satisfy financial or operating covenants imposed by the Company or other lenders will be adversely affected, thereby negatively impacting the Company's financial condition and their ability to satisfy their debt service and other obligations to the Company. The COVID-19 outbreak has adversely impacted energy-related businesses and accordingly the foregoing risks are heightened under the current conditions.

Our portfolio companies may prepay loans, which prepayment may reduce stated yields if capital returned cannot be invested in transactions with equal or greater expected yields.

Our loans to portfolio companies are prepayable at any time, and most of them at no premium to par. It is uncertain as to when each loan may be prepaid. Whether a loan is prepaid will depend both on the continued positive performance of the portfolio company and the existence of favorable financing market conditions that allow such company the ability to replace existing financing with less expensive capital. As market conditions change frequently, it is unknown when, and if, this may be possible for each portfolio company. In the case of some of these loans, having the loan prepaid early may reduce the achievable yield for us below the stated yield to maturity contained herein if the capital returned cannot be invested in transactions with equal or greater expected yields.


We may acquire indirect interests in loans rather than direct interests, which would subject us to additional risk.

We may make or acquire loans or investments through participation agreements. A participation agreement typically results in a contractual relationship only with the counterparty to the participation agreement and not with the borrower. MCC Advisors has adopted best execution procedures and guidelines to mitigate credit and counterparty risk when we acquire a loan through a participation agreement. In investing through participations, we will generally not have a right to enforce compliance by the borrower with the terms of the loan agreement against the borrower, and we may not directly benefit from the collateral supporting the debt obligation in which it has purchased the participation. As a result, we will be exposed to the credit risk of both the borrower and the counterparty selling the participation. In the event of insolvency of the counterparty, we, by virtue of holding participation interests in the loan, may be treated as its general unsecured creditor. In addition, although we may have certain contractual rights under the loan participation that require the counterparty to obtain our consent prior to taking various actions relating to the loan, we cannot guarantee that the counterparty will seek such consent prior to taking various actions. Further, in investing through participation agreements, we may not be able to conduct the due diligence on the borrower or the quality of the loan with respect to which it is buying a participation that we would otherwise conduct if we were investing directly in the loan, which may result in us being exposed to greater credit or fraud risk with respect to the borrower or the loan than we expected when initially purchasing the participation. See “Risks Related to Our Business - There are significant potential conflicts of interest that could affect our investment returns” above.


Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio and our ability to make follow-on investments in certain portfolio companies may be restricted.

Following an initial investment in a portfolio company, provided that there are no restrictions imposed by the 1940 Act, we may make additional investments in that portfolio company as “follow-on” investments in order to: (1) increase or maintain in whole or in part our equity ownership percentage; (2) exercise warrants, options or convertible securities that were acquired in the original or subsequent financing; or (3) attempt to preserve or enhance the value of our initial investment.



We have the discretion to make any follow-on investments, subject to the availability of capital resources. We may elect not to make follow-on investments or otherwise lack sufficient funds to make those investments. Our failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make such follow-on investment because we may not want to increase our concentration of risk, because we prefer other opportunities, because we are inhibited by compliance with BDC requirements or because we desire to maintain our RIC tax treatment. We also may be restricted from making follow-on investments in certain portfolio companies to the extent that affiliates of ours hold interests in such companies.

Client borrowers, particularly with respect to asset-based lending activities, may lack the operating history, cash flows or balance sheet necessary to support other financing options and may expose us to additional risk.

A portion of our loan portfolio consists, through FlexFIN, of asset-based lending involving gemstones. Some of these products arise out of relationships with clients who lack the operating history, cash flows or balance sheet necessary to qualify for other financing options. This could increase our risk of loss.

Our affiliate’s asset-based lending activities are influenced by volatility in prices of gemstones and jewelry.

Our affiliate’s asset-based lending business is impacted by volatility in gemstone and jewelry prices. Among the factors that can impact the price of gemstones and jewelry are supply and demand of gemstones; political, economic, and global financial events; movement of the U.S. dollar versus other currencies; and the activity of large speculators and other participants. A significant decline in market prices of gemstones could result in reduced collateral value and losses, i.e., a lower balance of asset-based loans outstanding for the Company’s affiliate.

The gemstones and jewelry business is subject to the risk of fraud and counterfeiting.

The gemstones business is exposed to the risk of loss as a result of fraud in its various forms. We seek to minimize our exposure to fraud through a number of means, including third-party authentication and verification and the establishment of procedures designed to detect fraud. However, there can be no assurance that we will be successful in preventing or identifying fraud, or in obtaining redress in the event such fraud is detected.



We may be subject to risks associated with our investments in unitranche loans

Unitranche loans provide leverage levels comparable to a combination of first lien and second lien or subordinated loans, and may rank junior to other debt instruments issued by the portfolio company. Unitranche loans generally allow the borrower to make a large lump sum payment of principal at the end of the loan term, and there is a heightened risk of loss if the borrower is unable to pay the lump sum or refinance the amount owed at maturity. From the perspective of a lender, in addition to making a single loan, a unitranche loan may allow the lender to choose to participate in the “first out” tranche, which will generally receive priority with respect to payments of principal, interest and any other amounts due, or to choose to participate only in the “last out” tranche, which is generally paid only after the first out tranche is paid. We may participate in “first out” and “last out” tranches of unitranche loans and make single unitranche loans, and we may suffer losses on such loans if the borrower is unable to make required payments when due.

Covenant-Lite Loans may expose us to different risks, including with respect to liquidity, price volatility, ability to restructure loans, credit risks and less protective loan documentation, than is the case with loans that contain financial maintenance covenants.

A significant number of high yield loans in the market, may consist of covenant-lite loans, or “Covenant-Lite Loans.” A significant portion of the loans in which we may invest or get exposure to through our investments may be deemed to be Covenant-Lite Loans. Such loans do not require the borrower to maintain debt service or other financial ratios and do not include terms which allow the lender to monitor the performance of the borrower and declare a default if certain criteria are breached. Ownership of Covenant-Lite Loans may expose us to different risks, including with respect to liquidity, price volatility, ability to restructure loans, credit risks and less protective loan documentation, than is the case with loans that contain financial maintenance covenants.

Our ability to invest in public companies may be limited in certain circumstances.


To maintain our tax treatment as a BDC, we are not permitted to acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Subject to certain exceptions for follow-on investments and distressed companies, an investment in an issuer that has outstanding securities listed on a national securities exchange

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may be treated as qualifying assets only if such issuer has a market capitalization that is less than $250 million at the time of such investment. In addition, we may invest up to 30% of our portfolio in opportunistic investments which will be intended to diversify or complement the remainder of our portfolio and to enhance our returns to stockholders. These investments may include private equity investments, securities of public companies that are broadly traded and securities of non-U.S. companies. We expect that these public companies generally will have debt securities that are non-investment grade.


Our investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments.

Our investment strategy contemplates that a portion of our investments may be in securities of foreign companies. Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.


Although it is anticipated that most of our investments will be denominated in U.S. dollars, our investments that are denominated in a foreign currency will be subject to the risk that the value of a particular currency may change in relation to the U.S. dollar. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation and political developments. We may employ hedging techniques to minimize these risks, but we can offer no assurance that we will, in fact, hedge currency risk or, that if we do, such strategies will be effective. As a result, a change in currency exchange rates may adversely affect our profitability.



Hedging transactions may expose us to additional risks.

We may engage in currency or interest rate hedging transactions. If we engage in hedging transactions, we may expose ourselves to risks associated with such transactions. We may utilize instruments such as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates and market interest rates. Hedging against a decline in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline. However, such hedging can establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transaction may also limit the opportunity for gain if the values of the underlying portfolio positions should increase. Moreover, it may not be possible to hedge against an exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging transaction at an acceptable price.


While we may enter into transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes in currency exchange rates or interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged may vary. Moreover, for a variety of reasons, we may not seek or be able to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies because the value of those securities is likely to fluctuate as a result of factors not related to currency fluctuations.


The disposition of our investments may result in contingent liabilities.

We currently expect that a significant portion of our investments will involve lending directly to private companies. In connection with the disposition of an investment in private securities, we may be required to make representations about the business and financial affairs of the portfolio company typical of those made in connection with the sale of a business. We may also be required to indemnify the purchasers of such investment to the extent that any such representations turn out to be inaccurate or with respect to certain potential liabilities. These arrangements may result in contingent liabilities that ultimately yield funding obligations that must be satisfied through our return of certain distributions previously made to us.


If we invest in the securities and obligations of distressed and bankrupt issuers, we might not receive interest or other payments.

We may invest in the securities and obligations of distressed and bankrupt issuers, including debt obligations that are in covenant or payment default. Such investments generally are considered speculative. The repayment of defaulted obligations is subject to significant uncertainties. Defaulted obligations might be repaid only after lengthy workout or bankruptcy proceedings, during which the issuer of those obligations might not make any interest or other payments. We may not realize gains from our equity investments.

We may be subject to risks associated with significant investments in one or more economic sectors, including the construction and building sector.

At times, the Company may have a significant portion of its assets invested in securities of companies conducting business within one or more economic sectors, including the construction and building sector. Companies in the same sector may be similarly affected by economic, regulatory, political or market events or conditions, which may make the Company more vulnerable to unfavorable developments in that sector than companies that invest more broadly. Generally, the more broadly the Company invests, the more it spreads risk and potentially reduces the risks of loss and volatility.

The Company presently has significant exposure to the construction and building sector (its investments in such sector comprise 20.8% of gross assets as of September 30, 2021), which subjects the Company to the particular risks of such sector to a greater degree than others not similarly concentrated. These risks include that the construction and building sector is cyclical and is affected by a number of factors, including the general condition of the economy, market demand and changes in interest rates. Construction activity is affected by the ability to finance projects, which may be reduced due to a widespread outbreak of contagious disease, including an epidemic or pandemic such as the current COVID-19 pandemic. Residential, commercial and industrial construction could decline if companies and consumers are unable to finance construction projects or if the economy precipitously declines or stalls, which could result in delays or cancellations of capital projects. A downturn in the residential, commercial or industrial construction industries and general economic conditions may have an adverse effect on the portfolio companies in which the Company invests.



Risks Related to Our Operations as a BDC and a RIC


Regulations governing our operation as a BDC may limit our ability to, and the way in which we raise additional capital, which could have a material adverse impact on our liquidity, financial condition and results of operations.

Our business requires a substantial amount of capital to operate and grow. We may acquire additional capital from the issuance of senior securities (including debt and preferred stock), the issuance of additional shares of our common stock or from securitization transactions. However, we may not be able to raise additional capital in the future on favorable terms or at all. Additionally, we may only issue senior securities up to the maximum amount permitted by the 1940 Act. The 1940 Act permits us to issue senior securities only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% (or 150% if, pursuant to the 1940 Act, certain requirements are met) after such issuance or incurrence. If our assets decline in value and we fail to satisfy this test, we may be required to liquidate a portion of our investments and repay a portion of our indebtedness at a time when such sales or repayment may be disadvantageous, which could have a material adverse impact on our liquidity, financial condition and results of operations. As of September 30, 2020,2021, the Company’s asset coverage was 199.2%285.6% after giving effect to leverage and therefore the Company’s asset coverage is belowabove 200%, the minimum asset coverage requirement under the 1940 Act. As a result, the Company is prohibited from

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making distributions to stockholders, including the payment of any dividend, and may not employ further leverage until the Company’s asset coverage is at least 200% after giving effect to such leverage.

•Senior Securities. As a result of issuing senior securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss. If we issue preferred securities, such securities would rank “senior” to common stock in our capital structure, resulting in preferred stockholders having separate voting rights and possibly rights, preferences or privileges more favorable than those granted to holders of our common stock. Furthermore, the issuance of preferred securities could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for our common stockholders or otherwise be in your best interest.

•Additional Common Stock. Our board of directors may decide to issue common stock to finance our operations rather than issuing debt or other senior securities. As a BDC, we are generally not able to issue our common stock at a price below NAV without first obtaining required approvals from our stockholders and our independent directors. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our board of directors, closely approximates the market value of such securities at the relevant time. We may also make rights offerings to our stockholders at prices per share less than the NAV per share, subject to the requirements of the 1940 Act. If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, the percentage ownership of our stockholders at that time would decrease, and such stockholders may experience dilution.

Changes in the laws or regulations governing our business, or changes in the interpretations thereof, and any failure by us to comply with these laws or regulations, could have a material adverse effect on our business, results of operations or financial condition.

Changes in the laws or regulations or the interpretations of the laws and regulations that govern BDCs, RICs or non-depository commercial lenders could significantly affect our operations and our cost of doing business. We are subject to federal, state and local laws and regulations and are subject to judicial and administrative decisions that affect our operations, including our loan originations, maximum interest rates, fees and other charges, disclosures to portfolio companies, the terms of secured transactions, collection and foreclosure procedures and other trade practices. If these laws, regulations or decisions change, or if we expand our business into jurisdictions that have adopted more stringent requirements than those in which we currently conduct business, we may have to incur significant expenses in order to comply, or we might have to restrict our operations. In addition, if we do not comply with applicable laws, regulations and decisions, we may lose licenses needed for the conduct of our business and may be subject to civil fines and criminal penalties.

As an internally managed BDC, we are subject to certain restrictions that may adversely affect our ability to offer certain compensation structures.

As an internally managed BDC, our ability to offer more competitive and flexible compensation structures, such as offering both a profit-sharing plan and an equity incentive plan, is subject to the limitations imposed by the 1940 Act, which limits our ability to attract and retain talented investment management professionals. As such, these limitations could inhibit our ability to grow, pursue our business plan and attract and retain professional talent, any or all of which may have a negative impact on our business, financial condition and results of operations.

As an internally managed BDC, we are dependent upon our management team and investment professionals for their time availability and for our future success, and if we are not able to hire and retain qualified personnel, or if we lose key members of our senior management team, our ability to implement our business strategy could be significantly harmed.

As an internally managed BDC, our ability to achieve our investment objectives and to make distributions to our stockholders depends upon the performance of our management team and investment professionals. We depend upon the members of our management and our investment professionals for the identification, final selection, structuring, closing and monitoring of our investments. These employees have critical industry experience and relationships on which we rely to implement our business plan. If we lose the services of key members of our senior management team, we may not be able to operate the business as we expect, and our ability to compete could be harmed, which could cause our operating results to suffer. We believe our future success will depend, in part, on our ability to identify, attract and retain sufficient numbers of highly skilled employees. If we do not succeed in identifying, attracting and retaining such personnel, we may not be able to operate our business as we expect. As an internally managed BDC, our compensation structure is determined and set by our Board of Directors and its Compensation Committee. This structure currently includes salary, bonus and incentive compensation. We are not generally permitted by the 1940 Act to employ an incentive compensation structure that directly ties performance of our investment portfolio and results of operations to incentive compensation. Members of our senior management team may receive offers of more flexible and attractive compensation arrangements from other companies, particularly from investment advisers to externally managed BDCs that are not subject to the same limitations on incentive-based compensation that we are subject to as an internally managed BDC. A departure by one or more members of our senior management team could have a negative impact on our business, financial condition and results of operations.



We have internalized our operating structure, including our management and investment functions; as a result, we may incur significant costs and face significant risks associated with being self-managed, including adverse effects on our business and financial condition.

Effective January 1, 2021, we operate under an internalized operating structure, including our management and investment functions. There can be no assurances that internalizing our operating structure will be beneficial to us and our stockholders, as we may incur the costs and risks discussed below and may not be able to effectively replicate or improve upon the services previously provided to us by our former investment adviser and administrator, MCC Advisors.

While we will no longer bear the costs of the various fees and expenses we previously paid to MCC Advisors under the Investment Advisory Agreement, our direct expenses will generally include general and administrative costs, including legal, accounting, and other expenses related to corporate governance, SEC reporting and compliance, as well as costs and expenses related to making and managing our investments. We will also now incur the compensation and benefits costs of our officers and other employees and consultants, and, subject to adherence to applicable law, we may issue equity or other incentive-based awards to our officers, employees and consultants, which awards may decrease net income and funds from our operations and may dilute our stockholders. We may also be subject to potential liabilities commonly faced by employers, such as workers disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances.

In addition, if the expenses we assume as a result of our internalization are higher than the expenses we would have paid and/or reimbursed to MCC Advisors, our earnings per share may be lower as a result of our internalization than they otherwise would have been, potentially decreasing the amount of funds available to distribute to our stockholders and the value of our shares.

Further, in connection with internalizing our operating structure, we may experience difficulty integrating these functions as a stand-alone entity, and we could have difficulty retaining our personnel, including those performing management, investment and general and administrative functions. These personnel have a great deal of know-how and experience. We may also fail to properly identify the appropriate mix of personnel and capital needs to operate successfully as a stand-alone entity. An inability to effectively manage our internalization could result in our incurring excess costs and operating inefficiencies, and may divert our management’s attention from managing our investments.

Internalization transactions have also, in some cases, been the subject of litigation. Even if these claims are without merit, we could be forced to spend significant amounts of time and money defending claims, which would reduce the amount of funds available for us to make investments and to pay distributions, and may divert our management’s attention from managing our investments.

All of these factors could have a material adverse effect on our results of operations, financial condition, and ability to pay distributions.

The impact of financial reform legislation on us is uncertain.


The Dodd-Frank Reform Act became effective on July 21, 2010. Many provisions of the Dodd-Frank Reform Act have delayed effective dates or have required extensive rulemaking by regulatory authorities. The recent presidential and congressional elections may cause uncertainty regarding the implementation of the Dodd-Frank Reform Act and other financial reform rulemaking. Given the uncertainty associated with the manner in which and whether the provisions of the Dodd-Frank Act will be implemented, repealed, amended, or replaced, the full impact such requirements will have on our business, results of operations or financial condition is unclear. The changes resulting from the Dodd-Frank Act or any changes to the regulations already implemented thereunder may require us to invest significant management attention and resources to evaluate and make necessary changes in order to comply with new statutory and regulatory requirements. Failure to comply with any such laws, regulations or principles, or changes thereto, may negatively impact our business, results of operations or financial condition. While we cannot predict what effect any changes in the laws or regulations or their interpretations would have on us as a result of recent financial reform legislation, these changes could be materially adverse to us and our stockholders.


We cannot predict how tax reform legislation will affect the Company,us, our investments, or our stockholders, and any such legislation could adversely affect our business.

Legislative or other actions relating to taxes could have a negative effect on the Company.us, our investments or our stockholders. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Department of the Treasury. Congress passed tax reform legislation in December 2017, which the President signed into law. This legislation made many changes to the Code, including significant changes to the taxation of business entities, the deductibility of interest expense, and the tax treatment of capital investment. We cannot predict with certainty how any changes in the tax laws might affect us, our stockholders, or our portfolio investments. New legislation and any U.S. Treasury regulations, administrative interpretations or court decisions interpreting such legislation could significantly and negatively affect our ability to qualify for tax treatment as a RIC or the U.S. federal income tax consequences to us and our stockholders of such qualification, or could have other adverse consequences. Stockholders are urged to consult with their tax advisors regarding tax legislative, regulatory, or administrative developments and proposals and their potential effect on an investment in our securities.



Legislation that became effective in 2018 may allow the Company to incur additional leverage, which could increase the risk of investing in the Company.

The 1940 Act generally prohibits the Company from incurring indebtedness unless immediately after such borrowing we have an asset coverage for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of MCC’sour assets). However, in March 2018, the SBCA was signed into law, which included various changes to regulations under the federal securities laws that impact BDCs. The SBCA included changes to the 1940 Act to allow BDCs to decrease their asset coverage requirement from 200% to 150%, if certain requirements are met. Under the 1940 Act, the Company is allowed to increase its leverage capacity if our 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 Acts 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 proposal. In either case, we would be required to make certain disclosures on

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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.

Leverage is generally considered a speculative investment technique and increases the risk of investing in our securities. Leverage magnifies the potential for loss on investments in our indebtedness and on invested equity capital. As we use leverage to partially finance our investments, our stockholders will experience increased risks of investing in our securities. If the value of our assets increases, then leveraging would cause the NAV attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause NAV to decline more sharply than it otherwise would have had we not leveraged our business. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net investment income to increase more than it would without the leverage, while any decrease in our income would cause net investment income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect the Company’s ability to pay common stock dividends, scheduled debt payments or other payments related to our securities.


If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC, which would have a material adverse effect on our business, financial condition and results of operations.

As a BDC, we may not acquire any assets other than “qualifying assets” unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets. See “Regulation”. Our intent is that a substantial portion of the investments that we acquire will constitute qualifying assets. However, we may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we could be found to be in violation of the 1940 Act provisions applicable to BDCs and possibly lose our tax treatment as a BDC, which would have a material adverse effect on our business, financial condition and results of operations.


We will become subject to corporate-level U.S. federal income tax if we are unable to maintain our qualification as a regulated investment company under Subchapter M of the Code or satisfy regulated investment company distribution requirements.

We have elected, and intend to qualify annually, thereafter, to be treated as a RIC under Subchapter M of the Code. No assurance can be given that we will be able to maintain our qualification as a RIC. To maintain RIC tax treatment under the Code, we must meet the following annual distribution, income source and asset diversification requirements.

●The annual distribution requirement for a RIC is satisfied if we timely distribute to our stockholders on an annual basis at least 90% of our net ordinary income and realized short-term capital gains in excess of realized net long-term capital losses. Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year distributions into the next year and pay a 4% U.S. federal excise tax on such income. Any such carryover taxable income must be distributed through a dividend declared prior to filing the final tax return related to the year that generated such taxable income.

●The source of income requirement is satisfied if we obtain at least 90% of our gross income for each taxable year from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock or other securities or foreign currencies or other income derived with respect to our business of investing in such stock, securities or currencies and net income derived from an interest in a “qualified publicly traded partnership” (as defined in the Code).

●The asset diversification requirement is satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year. To satisfy this requirement, at least 50% of the value of our assets must consist of cash, cash equivalents, U.S Government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer (which for these purposes includes the equity securities of a “qualified publicly traded partnership”). In addition, no more than 25% of the value of our assets can be invested in the securities, other than U.S Government securities or securities of other RICs, (1) of one issuer (2) of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or (3) of one or more “qualified publicly traded partnerships”.



•The annual distribution requirement for a RIC is satisfied if we timely distribute to our stockholders on an annual basis at least 90% of our net ordinary income and realized short-term capital gains in excess of realized net long-term capital losses. Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year distributions into the next year and pay a 4% U.S. federal excise tax on such income. Any such carryover taxable income must be distributed through a dividend declared prior to filing the final tax return related to the year that generated such taxable income.

•The source of income requirement is satisfied if we obtain at least 90% of our gross income for each taxable year from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock or other securities or foreign currencies or other income derived with respect to our business of investing in such stock, securities or currencies and net income derived from an interest in a “qualified publicly traded partnership” (as defined in the Code), or the 90% Income Test.

•The asset diversification requirement is satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year. To satisfy this requirement, at least 50% of the value of our assets must consist of cash, cash equivalents, U.S Government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer (which for these purposes includes the equity securities of a “qualified publicly traded partnership”). In addition, no more than 25% of the value of our assets can be invested in the securities, other than U.S Government securities or securities of other RICs, (1) of one issuer (2) of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or (3) of one or more “qualified publicly traded partnerships,” or the Diversification Tests.

If we fail to qualify for RIC tax treatment for any reason or are subject to corporate-level U.S. federal income tax, the resulting corporate-level taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. In addition, to the extent we had unrealized gains, we would have to establish deferred tax liabilities for taxes, which would reduce our NAV accordingly. In addition, our stockholders would lose the tax credit realized whenif we, as a RIC, decide to retain the net realized capital gain and make deemed distributions of net realized capital gains, and pay taxes on behalf of our stockholders at the end of the tax year. The loss of this pass-through tax treatment could have a material adverse effect on the total return of an investment in our common stock

stock.


Risks Relating to an Investment in Our Securities


Investing in our securities may involve an above average degree of risk.

The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options and a higher risk of volatility or loss of principal. Our investments in portfolio companies involve higher levels of risk and, therefore, an investment in our securities may not be suitable for someone with lower risk tolerance.


Shares of closed-end investment companies, including business development companies, may, at times, trade at a discount to their NAV.

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Shares of closed-end investment companies, including business development companies, may, at times, trade at a discount from NAV. This characteristic of closed-end investment companies and business development companies is separate and distinct from the risk that our NAV per share may decline. WeOur common stock has recently traded and currently trades at a discount to NAV, and we cannot predict whether our common stock will trade at, above or below NAV.

NAV in the future.


The market price of our common stock may fluctuate significantly.

The market price and liquidity of the market for shares of our common stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance.

These factors include:

●significant volatility in the market price and trading volume of securities of business development companies or other companies in our sector, which are not necessarily related to the operating performance of the companies;

●changes in regulatory policies, accounting pronouncements or tax guidelines, particularly with respect to BDCs or RICs;

●loss of our qualification as a RIC or BDC;

●changes in earnings or variations in operating results;

●changes in the value of our portfolio of investments;

●changes in accounting guidelines governing valuation of our investments;

●any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;

●departure of our key personnel;

●operating performance of companies comparable to us;

●general economic trends and other external factors;

●loss of a major funding source; and

●the length and duration of the COVID-19 outbreak in the U.S. as well as worldwide and the magnitude of the economic impact of that outbreak.


•significant volatility in the market price and trading volume of securities of business development companies or other companies in our sector, which are not necessarily related to the operating performance of the companies;

•changes in regulatory policies, accounting pronouncements or tax guidelines, particularly with respect to BDCs or RICs;

•loss of our qualification as a RIC or BDC;

•changes in earnings or variations in operating results;

•changes in the value of our portfolio of investments;

•changes in accounting guidelines governing valuation of our investments;

•any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;

•departure of MCC Advisors’ or any of its affiliates’ key personnel;

•operating performance of companies comparable to us;

•general economic trends and other external factors;

•loss of a major funding source; and

•the length and duration of the COVID-19 outbreak in the U.S. as well as worldwide and the magnitude of the economic impact of that outbreak.

Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.

Sales of substantial amounts of our common stock, or the availability of such common stock for sale, could adversely affect the prevailing market prices for our common stock. If this occurs and continues, it could impair our ability to raise additional capital through the sale of securities should we desire to do so.



Certain provisions of the Delaware General Corporation Law and our certificate of incorporation and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock.

The Delaware General Corporation Law, our certificate of incorporation and our bylaws contain provisions that may have the effect of discouraging a third party from making an acquisition proposal for us. These anti-takeover provisions may inhibit a change in control in circumstances that could give the holders of our common stock the opportunity to realize a premium over the market price of our common stock.


The NAV per share of our common stock may be diluted if we sell shares of our common stock in one or more offerings at prices below the then current NAV per share of our common stock or securities to subscribe for or convertible into shares of our common stock.

While we currently do not have the requisite stockholder approval to sell shares of our common stock at a price or prices below our then current NAV per share, we may seek such approval in the future. In addition, at our 2012 Annual Meeting of Stockholders, we received approval from our stockholders to authorize the Company, with the approval of our board of directors, to issue securities to, subscribe to, convert to, or purchase shares of the Company’s common stock in one or more offerings, subject to certain conditions as set forth in the proxy statement. Such authorization has no expiration.


Any decision to sell shares of our common stock below its then current NAV per share or issue securities to subscribe for or convertible into shares of our common stock would be subject to the determination by our board of directors that such issuance is in our and our stockholders’ best interests.


If we were to sell shares of our common stock below its then current NAV per share, such sales would result in an immediate dilution to the NAV per share of our common stock. This dilution would occur as a result of the sale of shares at a price below the then current NAV per share of our common stock and a proportionately greater decrease in the stockholders’ interest in our earnings and assets and their voting interest in us than the increase in our assets resulting from such issuance. Because the number of shares of common stock that could be so issued and the timing of any issuance is not currently known, the actual dilutive effect cannot be predicted.


If we issue warrants or securities to subscribe for or convertible into shares of our common stock, subject to certain limitations, the exercise or conversion price per share could be less than NAV per share at the time of exercise or conversion (including through the operation of anti-dilution protections). Because we would incur expenses in connection with any issuance of such securities, such issuance could result in a dilution of the NAV

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per share at the time of exercise or conversion. This dilution would include reduction in NAV per share as a result of the proportionately greater decrease in the stockholders’ interest in our earnings and assets and their voting interest than the increase in our assets resulting from such issuance.

Further, if our current stockholders do not purchase any shares to maintain their percentage interest, regardless of whether such offering is above or below the then current NAV per share, their voting power will be diluted. For example, if we sell an additional 10% of our shares of common stock at a 5% discount from NAV, a stockholder who does not participate in that offering for its proportionate interest will suffer NAV dilution of up to 0.5% or $5 per $1,000 of NAV.



The Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future.

The Notes are not secured by any of our assets or any of the assets of our subsidiaries. As a result, the Notes are effectively subordinated to any secured indebtedness we or our subsidiaries have currently incurred and may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security) to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the Notes.


The Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.

The Notes are obligations exclusively of the Company and not of any of our subsidiaries. None of our subsidiaries is a guarantor of the Notes and the Notes are not required to be guaranteed by any subsidiary we may acquire or create in the future. Any assets of our subsidiaries will not be directly available to satisfy the claims of our creditors, including holders of the Notes. Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors of our subsidiaries will have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of the Notes) with respect to the assets of such subsidiaries. Even if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our claims. Consequently, the Notes will be structurally subordinated to all indebtedness and other liabilities of any of our subsidiaries and any subsidiaries that we may in the future acquire or establish. Although our subsidiaries currently do not have any indebtedness outstanding, they may incur substantial indebtedness in the future, all of which would be structurally senior to the Notes.


The indenture under which the Notes were issued contains limited protection for holders of the Notes.

The indenture under which the Notes were issued offers limited protection to holders of the Notes. The terms of the indenture and the Notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on your investment in the Notes. In particular, the terms of the indenture and the Notes place no restrictions on our or our subsidiaries’ ability to:

●issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) of the 1940 Act, as modified by Section 61(a)(1) of the 1940 Act, or any successor provisions. These provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 200% after such borrowings. As of September 30, 2021 the Company’s asset coverage was 285.6% after giving effect to leverage;

●pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes, in each case other than dividends, purchases, redemptions or payments that would cause a violation of Section 18(a)(1)(B) of the 1940 Act, as modified by Section 61(a)(1) of the 1940 Act, or any successor provisions. These provisions generally prohibit us from declaring any cash dividend or distribution upon any class of our capital stock, or purchasing any such capital stock if our asset coverage, as defined in the 1940 Act, is below 200% at the time of the declaration of the dividend or distribution or the purchase and after deducting the amount of such dividend, distribution or purchase. As of September 30, 2021, the Company’s asset coverage was 285.6% after giving effect to leverage;

●sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets);

●enter into transactions with affiliates;

●create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;

●make investments; or

●create restrictions on the payment of dividends or other amounts to us from our subsidiaries.



•issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) of the 1940 Act, as modified by Section 61(a)(1) of the 1940 Act, or any successor provisions. These provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 200% after such borrowings. As of September 30, 2020 the Company’s asset coverage was 199.2% after giving effect to leverage and therefore the Company is prohibited from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities;

•pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes, in each case other than dividends, purchases, redemptions or payments that would cause a violation of Section 18(a)(1)(B) of the 1940 Act, as modified by Section 61(a)(1) of the 1940 Act, or any successor provisions. These provisions generally prohibit us from declaring any cash dividend or distribution upon any class of our capital stock, or purchasing any such capital stock if our asset coverage, as defined in the 1940 Act, is below 200% at the time of the declaration of the dividend or distribution or the purchase and after deducting the amount of such dividend, distribution or purchase. As of September 30, 2020, the Company’s asset coverage was 199.2% after giving effect to leverage and therefore the Company is prohibited from declaring any cash dividend or distribution upon any class of our capital stock, or purchasing any such capital stock;

•sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets);

•enter into transactions with affiliates;

•create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;

•make investments; or

•create restrictions on the payment of dividends or other amounts to us from our subsidiaries.
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In addition, the indenture does not require us to offer to purchase the Notes in connection with a change of control or any other event.


Furthermore, the terms of the indenture and the Notes generally do not protect holders of the Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow, or liquidity other than as described under the indenture. Any changes, while unlikely, to the financial tests in the 1940 Act could affect the terms of the Notes.


Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the Notes may have important consequences for you as a holder of the Notes, including making it more difficult for us to satisfy our obligations with respect to the Notes or negatively affecting the trading value of the Notes. Other debt we issue or incur in the future could contain more protections for its holders than the indenture and the Notes, including additional covenants and events of default. The issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of the Notes.


An active trading market for the Notes may not develop or be sustained, which could limit the market price of the Notes or your ability to sell them.

Although the Notes are listed on the New York Stock Exchange ("NYSE"NASDAQ Global Market (“NASDAQ”) under the symbols “MCV,“PFXNL,” in the case of the 2023 Notes, and “MCX,” in the case of the 2021 Notes,, we cannot provide any assurances that an active trading market will develop or be sustained for the Notes or that you will be able to sell your Notes. At various times, the Notes may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, general economic conditions, our financial condition, performance and prospects and other factors. To the extent an active trading market is not sustained, the liquidity and trading price for the Notes may be harmed.


If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.

Any default under the agreements governing our indebtedness that we may incur in the future that is not waived by the required lenders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on the Notes and substantially decrease the market value of the Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to seek to obtain waivers from the required lenders under the debt that we may incur in the future to avoid being in default. If we breach our covenants under our debt and seek a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under such debt, the lenders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations could proceed against the collateral securing the debt. Because any future credit facility will likely have customary cross-default provisions, if the indebtedness under the Notes or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due.


We may choose to redeem the Notes when prevailing interest rates are relatively low.

We may choose to redeem the Notes from time to time, especially if prevailing interest rates are lower than the rate borne by the Notes. If prevailing rates are lower at the time of redemption, and we redeem the Notes, you likely would not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the interest rate on the Notes being redeemed. Our redemption right also may adversely impact your ability to sell the Notes as the optional redemption date or period approaches.

If we issue preferred stock, the NAV and market value of our common stock may become more volatile.


If we issue preferred stock, we cannot assure you that such issuance would result in a higher yield or return to the holders of our common stock. The issuance of preferred stock would likely cause the NAV and market value of our common stock to become more volatile. If the dividend rate on the preferred stock were to approach the net rate of return on our investment portfolio, the benefit of leverage to the holders of our common stock would be reduced. If the dividend rate on the preferred stock were to exceed the net rate of return on our portfolio, the leverage would result in a lower rate of return to the holders of our common stock than if we had not issued preferred stock. Any decline in the NAV of our investments would be borne entirely by the holders of our common stock. Therefore, if the market value of our portfolio were to decline, the leverage would result in a greater decrease in NAV to the holders of our common stock than if we were not leveraged through the issuance of preferred stock. This greater NAV decrease would also tend to cause a greater decline in the market price for our common stock. We might be in danger of failing to maintain the required asset coverage of the preferred stock or of losing our ratings on the preferred stock or, in an extreme case, our current investment income might not be sufficient to meet the dividend requirements on the preferred stock. In order to counteract such an event, we might need to liquidate investments in order to fund a redemption of some or all of the preferred stock. In addition, we would pay (and the holders of our common stock would bear) all costs and expenses relating to the issuance and ongoing maintenance of the preferred stock, including higher advisory fees if our total return exceeds the dividend rate on the preferred stock. Holders of preferred stock may have different interests than holders of our common stock and may at times have disproportionate influence over our affairs.



Holders of any preferred stock we might issue would have the right to elect members of the board of directors and class voting rights on certain matters.

Holders of any preferred stock we might issue, voting separately as a single class, would have the right to elect two members of the board of directors at all times and in the event dividends become two full years in arrears, would have the right to elect a majority of our directors until such arrearage is completely eliminated. In addition, preferred stockholders would have class voting rights on certain matters, including changes in fundamental investment restrictions and conversion to open-end status, and accordingly would be able to veto any such changes. Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of our common stock and preferred stock, both by the 1940 Act and by requirements imposed by rating agencies or the terms of any credit facility to which MCC is a party, might impair our ability to maintain our qualification as a RIC for U.S. federal income tax purposes. While we would intend to redeem our preferred stock to the extent necessary to enable us to distribute our income as required to maintain our qualification as a RIC, there can be no assurance that such actions could be effected in time to meet the tax requirements.


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GENERAL RISK FACTORS

We are currently operating in a period of capital markets disruptions and economic uncertainty. Such market conditions may materially and adversely affect debt and equity capital markets, which may have a negative impact on our business, financial condition and operations.

From time to time, capital markets may experience periods of disruption and instability. The U.S. capital markets have experienced extreme volatility and disruption following the global outbreak of coronavirus (“COVID-19”) that began in December 2019. Some economists and major investment banks have expressed concern that the continued spread of the COVID-19 globally could lead to a world-wide economic downturn. Even after the COVID-19 pandemic subsides, the U.S. economy, as well as most other major economies, may continue to experience a recession, and we anticipate our businesses would be materially and adversely affected by a prolonged recession in the United States and other major markets. Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. The COVID-19 outbreak continues to have, and any future outbreaks could have, an adverse impact on the ability of lenders to originate loans, the volume and type of loans originated, the ability of borrowers to make payments and the volume and type of amendments and waivers granted to borrowers and remedial actions taken in the event of a borrower default, each of which could negatively impact the amount and quality of loans available for investment by the Company and returns to the Company, among other things. With respect to the U.S. credit markets (in particular for middle market loans), the COVID-19 outbreak has resulted in, and until fully resolved is likely to continue to result in, the following among other things: (i) increased draws by borrowers on revolving lines of credit and other financing instruments; (ii) increased requests by borrowers for amendments and waivers of their credit agreements to avoid default, increased defaults by such borrowers and/or increased difficulty in obtaining refinancing at the maturity dates of their loans; (iii) greater volatility in pricing and spreads and difficulty in valuing loans during periods of increased volatility; and (iv) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general which will not necessarily adequately address the problems facing the loan market and middle-market businesses. These and future market disruptions and/or illiquidity could have an adverse effect on our business, financial condition, results of operations and cash flows. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could limit our investment originations, limit our ability to grow and have a material negative impact on our operating results and the fair values of our debt and equity investments. We may have to access, if available, alternative markets for debt and equity capital, and a severe disruption in the global financial markets, deterioration in credit and financing conditions or uncertainty regarding U.S. government spending and deficit levels or other global economic conditions could have a material adverse effect on our business, financial condition and results of operations.

For example, between 2008 and 2009, the U.S. and global capital markets were unstable as evidenced by periodic disruptions in liquidity in the debt capital markets, significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of major financial institutions. Despite actions of the U.S. federal government and foreign governments, these events contributed to worsening general economic conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular.

Equity capital may be difficult to raise during periods of adverse or volatile market conditions because, subject to some limited exceptions, as a BDC, we are generally not able to issue additional shares of our common stock at a price less than NAV without first obtaining approval for such issuance from our stockholders and our independent directors. Volatility and dislocation in the capital markets can also create a challenging environment in which to raise or access debt capital. The current market and future market conditions similar to those experienced from 2008 through 2009 for any substantial length of time could make it difficult to extend the maturity of or refinance our existing indebtedness or obtain new indebtedness with similar terms and any failure to do so could have a material adverse effect on our business. The debt capital that will be available to us in the future, if at all, may be at a higher cost and on less favorable terms and conditions than what we currently experience, including being at a higher cost in a rising interest rate environment. If any of these conditions appear, they may have an adverse effect on our business, financial condition, and results of operations. These events could limit our investment originations, limit our ability to increase returns to equity holders through the effective use of leverage, and negatively impact our operating results.

In addition, significant changes or volatility in the capital markets may also have a negative effect on the valuations of our investments. While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan on holding an investment through its maturity). Significant changes in the capital markets may also affect the pace of our investment activity and the potential for liquidity events involving our investments. Thus, the illiquidity of our investments may make it difficult for us to sell our investments to access capital if required, and as a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them for liquidity purposes. An inability to raise or access capital could have a material adverse effect on our business, financial condition or results of operations.

Governmental authorities worldwide have taken increased measures to stabilize the markets and support economic growth. The success of these measures is unknown and they may not be sufficient to address the market dislocations or avert severe and prolonged reductions in economic activity.

We also face an increased risk of investor, creditor or portfolio company disputes, litigation and governmental and regulatory scrutiny as a result of the effects of COVID-19 on economic and market conditions.

Events outside of our control, including public health crises, could negatively affect our portfolio companies and our results of our operations.

Periods of market volatility have occurred and could continue to occur in response to pandemics or other events outside of our control. These types of events have adversely affected and could continue to adversely affect operating results for us and for our portfolio companies. In December 2019, COVID-19 surfaced in China and has since spread and continues to spread to other countries, including the United States. COVID-19 spread quickly and has been identified as a global pandemic by the World Health Organization. The COVID-19 pandemic continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. In response, beginning in March 2020, in affected jurisdiction including the United States, unprecedented actions were and continue to be taken by governmental authorities and businesses, including quarantines, “stay at home” orders, travel and hospitality restrictions and bans, and the temporary closures and limited operations of many businesses (including
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corporate offices, retail stores, restaurants, fitness clubs, manufacturing facilities and factories, and other businesses). The actions to contain the COVID-19 pandemic vary by country and by state in the United States. COVID-19 has caused the effective cessation of all business activity deemed non-essential by such governmental authorities. While certain state and local governments across the United States have taken steps to re-open their economies by lifting “stay at home” orders and re-opening businesses, a number of states and local governments have needed to pause or slow the re-opening or impose new shut-down orders as the number of cases of COVID-19 has continued to rise. COVID-19 and the resulting economic dislocations have had and continue to have adverse consequences for the business operations and financial performance of some of our portfolio companies, which may, in turn impact the valuation of our investments and have adversely affected, and threaten to continue to adversely affect, our operations. Local, state and federal and numerous non-U.S. governmental authorities have imposed travel and hospitality restrictions and bans, business closures or limited business operations and other quarantine measures on businesses and individuals that remain in effect on the date of this Annual Report on Form 10-K. We cannot predict the full impact of COVID-19, including the duration and the impact of the closures and restrictions described above. As a result, we are unable to predict the duration of these business and supply-chain disruptions, the extent to which COVID-19 will negatively affect our portfolio companies’ operating results or the impact that such disruptions may have on our results of operations and financial condition. With respect to loans to portfolio companies, the Company will be impacted if, among other things, (i) amendments and waivers are granted (or are required to be granted) to borrowers permitting deferral of loan payments or allowing for PIK interest payments, (ii) borrowers default on their loans, are unable to refinance their loans at maturity, or go out of business, or (iii) the value of loans held by the Company decreases as a result of such events and the uncertainty they cause. Portfolio companies may also be more likely to seek to draw on unfunded commitments we have made, and the risk of being unable to fund such commitments is heightened during such periods. Depending on the duration and extent of the disruption to the business operations of our portfolio companies, we expect some portfolio companies, particularly those in vulnerable industries, such as travel and hospitality, to experience financial distress and possibly to default on their financial obligations to us and/or their other capital providers. In addition, if such portfolio companies are subjected to prolonged and severe financial distress, we expect some of them to substantially curtail their operations, defer capital expenditures and lay off workers. These developments would be likely to permanently impair their businesses and result in a reduction in the value of our investments in them.

The Company will also be negatively affected if the operations and effectiveness of MCC Advisors or our portfolio companies (or any of the key personnel or service providers of the foregoing) are compromised or if necessary or beneficial systems and processes are disrupted as a result of stay-at-home orders or other related interruptions to business operations.

Political, social and economic uncertainty, including uncertainty related to the COVID-19 pandemic, creates and exacerbates risks.

Social, political, economic and other conditions and events (such as natural disasters, epidemics and pandemics, terrorism, conflicts and social unrest) will occur that create uncertainty and have significant impacts on issuers, industries, governments and other systems, including the financial markets, to which companies and their investments are exposed. As global systems, economies and financial markets are increasingly interconnected, events that once had only local impact are now more likely to have regional or even global effects. Events that occur in one country, region or financial market will, more frequently, adversely impact issuers in other countries, regions or markets, including in established markets such as the U.S. These impacts can be exacerbated by failures of governments and societies to adequately respond to an emerging event or threat.

Uncertainty can result in or coincide with, among other things: increased volatility in the financial markets for securities, derivatives, loans, credit and currency; a decrease in the reliability of market prices and difficulty in valuing assets (including portfolio company assets); greater fluctuations in spreads on debt investments and currency exchange rates; increased risk of default (by both government and private obligors and issuers); further social, economic, and political instability; nationalization of private enterprise; greater governmental involvement in the economy or in social factors that impact the economy; changes to governmental regulation and supervision of the loan, securities, derivatives and currency markets and market participants and decreased or revised monitoring of such markets by governments or self-regulatory organizations and reduced enforcement of regulations; limitations on the activities of investors in such markets; controls or restrictions on foreign investment, capital controls and limitations on repatriation of invested capital; the significant loss of liquidity and the inability to purchase, sell and otherwise fund investments or settle transactions (including, but not limited to, a market freeze); unavailability of currency hedging techniques; substantial, and in some periods extremely high, rates of inflation, which can last many years and have substantial negative effects on credit and securities markets as well as the economy as a whole; recessions; and difficulties in obtaining and/or enforcing legal judgments.

Following the 2020 U.S. Presidential election, the executive branch of the federal government is under transition until and following President-elect Biden’s inauguration in January 2021. There is some uncertainty regarding the impact on federal legislative efforts remains at the time of this Annual Report on Form 10-K as the Senate majority will not be decided until January 2021 and the House of Representatives lost several Democratic members.

For example, the COVID-19 pandemic outbreak has led and for an unknown period of time will continue to lead to disruptions in local, regional, national and global markets and economies affected thereby. The COVID-19 pandemic has impacted the U.S. credit markets (in particular for middle market loans). See “We are currently operating in a period of capital markets disruptions and economic uncertainty. Such market conditions may materially and adversely affect debt and equity capital markets, which may have a negative impact on our business, financial condition and operations” and “Events outside of our control, including public health crises, could negatively affect our portfolio companies and our results of our operations.”

Although it is impossible to predict the precise nature and consequences of these events, or of any political or policy decisions and regulatory changes occasioned by emerging events or uncertainty on applicable laws or regulations that impact us, our portfolio companies and our investments, it is clear that these types of events are impacting and will, for at least some time, continue to impact us and our portfolio companies and, in many instances, the impact will be adverse and profound. The effects of the COVID-19 pandemic may materially and adversely impact (i) the value and performance of us and our portfolio companies, (ii) the ability of our borrowers to continue to meet loan covenants or repay loans provided by us on a timely basis or at all, which may require us to restructure our investments or write down the value of our investments, (iii) our ability to repay debt obligations, on a timely basis or at all, or (iv) our ability to source, manage and divest investments and achieve our investment objectives, all of which could result in significant losses to us.

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Further downgrades of the U.S. credit rating, automatic spending cuts, or another government shutdown could negatively impact our liquidity, financial condition and earnings.

U.S. debt ceiling and budget deficit concerns have increased the possibility of additional credit-rating downgrades and economic slowdowns, or a recession in the United States. Although U.S. lawmakers passed legislation to raise the federal debt ceiling on multiple occasions, ratings agencies have lowered or threatened to lower the long-term sovereign credit rating on the United States. The impact of this or any further downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness could adversely affect the U.S. and global financial markets and economic conditions. Absent further quantitative easing by the Federal Reserve, these developments could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms. In addition, disagreement over the federal budget has caused the U.S. federal government to shut down for periods of time. Continued adverse political and economic conditions could have a material adverse effect on our business, financial condition and results of operations.

Economic recessions or downturns could impair our portfolio companies and harm our operating results.

Many of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our debt investments during these periods. The recent global outbreak of COVID-19 has disrupted economic markets, and the prolonged economic impact is uncertain. Many manufacturers of goods in China and other countries in Asia have seen a downturn in production due to the suspension of business and temporary closure of factories in an attempt to curb the spread of the illness. As the impact of COVID-19 spreads to other parts of the world, similar impacts may occur with respect to affected countries. In the past, instability in the global capital markets resulted in disruptions in liquidity in the debt capital markets, significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of major domestic and international financial institutions. In particular, in past periods of instability, the financial services sector was negatively impacted by significant write-offs as the value of the assets held by financial firms declined, impairing their capital positions and abilities to lend and invest. In addition, continued uncertainty surrounding the negotiation of trade deals between Britain and the European Union following the United Kingdom’s exit from the European Union and uncertainty between the United States and other countries, including China, with respect to trade policies, treaties, and tariffs, among other factors, have caused disruption in the global markets. There can be no assurance that market conditions will not worsen in the future.

In an economic downturn, we may have non-performing assets or non-performing assets may increase, and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions may also decrease the value of any collateral securing our loans. A severe recession may further decrease the value of such collateral and result in losses of value in our portfolio and a decrease in our revenues, net income, assets and net worth. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us on terms we deem acceptable. These events could prevent us from increasing investments and harm our operating results.

The occurrence of recessionary conditions and/or negative developments in the domestic and international credit markets may significantly affect the markets in which we do business, the value of our investments, and our ongoing operations, costs and profitability. Any such unfavorable economic conditions, including rising interest rates, may also increase our funding costs, limit our access to capital markets or negatively impact our ability to obtain financing, particularly from the debt markets. In addition, any future financial market uncertainty could lead to financial market disruptions and could further impact our ability to obtain financing. These events could limit our investment originations, limit our ability to grow and negatively impact our operating results and financial condition.

Item 1B.Unresolved Staff Comments

None.

Item 2. Properties

Properties


Properties

We do not own any real estate or other physical properties materially important to our operation. OurWe have entered into a 5-year operating lease for our headquarters are currently located at 280445 Park Avenue, 6th10th Floor, East, New York, NY 10017. Our administrator furnishes us office space and we reimburse it for such costs on an allocated basis.


10022.

Item 3.Legal Proceedings

From time to time, we are involved in various legal proceedings, lawsuits and claims incidental to the conduct of our business. Our businesses are also subject to extensive regulation, which may result in regulatory proceedings against us. Except as described below, we are not currently party to any material legal proceedings.


The Company entered into a settlement agreement with respect to (i) the lawsuit filed on May 29, 2015 in the California Superior Court, Los Angeles County, Central District, as Case No. BC 583437 (the “Direct Action”), by Moshe Barkat and Modern VideoFilm Holdings,

Medley LLC, (“MVF Holdings”) against the Company, MOF II, MCC Advisors LLC, Deloitte Transactions and Business Analytics LLP A/K/A Deloitte ERG (“Deloitte”), Scott Avila (“Avila”), Charles Sweet, and Modern VideoFilm, Inc. (“MVF”), and (ii) the lawsuit filed on August 29, 2016, by MVF Holdings in the California Superior Court, Los Angeles County, Central District, as Case No. BC 631888 (the “Derivative Action”), naming MCC Advisors LLC and certain of Medley’s employees as defendants, among others. The Direct Action was filed after the Company, as agent for the lender group, exercised remedies following a series of defaults by MVF and MVF Holdings on a secured loan with an outstanding balance at the time in excess of $65 million. The Direct Action sought damages in excess of $100 million. The plaintiff in the Derivative Action asserted claims against the defendants for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unfair competition, breach of the implied covenant of good faith and fair dealing, interference with prospective economic advantage, fraud, and declaratory relief. One of the plaintiffs, MVF, is the subject of a Chapter 11 bankruptcy proceeding pending in the United States Bankruptcy Court for the Central District of California (the “Bankruptcy Court”), under the caption, In re Modern VideoFilm, Inc., Case No. 8:18-bk-11792-MW. The settlement was approved by the Bankruptcy Court on November 30, 2020. Absent

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appeals, the settlement and mutual releases will become effective on December 15, 2020. In accordance with the settlement agreement, the parties agreed that the terms of the settlement will remain confidential. Pursuant to the settlement agreement, the defendants are paying to the plaintiffs in the Direct Action and the Derivative Action an undisclosed amount. The Company’s contribution to the settlement payment is being funded entirely by insurance and the Company is not expected to fund any portion of the settlement.

Medley LLC, Medley Capital Corporation, Medley Opportunity Fund II LP, Medley Management, Inc., Medley Group, LLC, Brook Taube, and Seth Taube (the “Medley Defendants”) were named as defendants, along with other various parties, in a putative class action lawsuit captioned as Royce Solomon, Jodi Belleci, Michael Littlejohn, and Giulianna Lomaglio v. American Web Loan, Inc., AWL, Inc., Mark Curry, MacFarlane Group, Inc., Sol Partners, Medley Opportunity Fund, II, LP, Medley LLC, Medley Capital Corporation, Medley Management, Inc., Medley Group, LLC, Brook Taube, Seth Taube, DHI Computing Service, Inc., Middlemarch Partners, and John Does 1-100, filed on December 15, 2017, amended on March 9, 2018, and amended a second time on February 15, 2019, in the United States District Court for the Eastern District of Virginia, Newport News Division, as Case No. 4:17-cv-145 (hereinafter, “Class Action 1”). Medley Opportunity Fund II LP and Medley Capital Corporationthe Company were also named as defendants, along with various other parties, in a putative class action lawsuit captioned George Hengle and Lula Williams v. Mark Curry, American Web Loan, Inc., AWL, Inc., Red Stone, Inc., Medley Opportunity Fund II LP, and Medley Capital Corporation, filed February 13, 2018, in the United States District Court, Eastern District of Virginia, Richmond Division, as Case No. 3:18-cv-100 (“Class Action 2”). Medley Opportunity Fund II LP and Medley Capital Corporationthe Company were also named as defendants, along with various other parties, in a putative class action lawsuit captioned John Glatt, Sonji Grandy, Heather Ball, Dashawn Hunter, and Michael Corona v. Mark Curry, American Web Loan, Inc., AWL, Inc., Red Stone, Inc., Medley Opportunity Fund II LP, and Medley Capital Corporation, filed August 9, 2018 in the United States District Court, Eastern District of Virginia, Newport News Division, as Case No. 4:18-cv-101 (“Class Action 3”) (together with Class Action 1 and Class Action 2, the “Virginia Class Actions”). Medley Opportunity Fund II LP was also named as a defendant, along with various other parties, in a putative class action lawsuit captioned Christina Williams and Michael Stermel v. Red Stone, Inc. (as successor in interest to MacFarlane Group, Inc.), Medley Opportunity Fund II LP, Mark Curry, Brian McGowan, Vincent Ney, and John Doe entities and individuals, filed June 29, 2018 and amended July 26, 2018, in the United States District Court for the Eastern District of Pennsylvania, as Case No. 2:18-cv-2747 (the “Pennsylvania Class Action”) (together. The Company and Medley Opportunity Fund II, LP were also named as defendants, along with various other parties, in a putative class action lawsuit captioned Charles McDaniel v. American Web Loan, Inc., AWL, Inc., Mark Curry, Medley Capital Corporation, Medley Opportunity Fund II, LP, and Red Stone, Inc., filed on August 7, 2020 and amended on October 22, 2020 in the First Judicial Circuit of Ohio County, West Virginia, Case No. 20-C-169, which case was then removed to the United States District Court for the Northern District of West Virginia on December 15, 2020 (the “West Virginia Class Action” and together with the Virginia Class Actions and the Pennsylvania Class Action, the “Class Action Complaints”). The plaintiffs in the Class Action Complaints filed their putative class actions alleging claims under the Racketeer Influenced and Corrupt Organizations Act, and various other claims arising out of the alleged payday lending activities of American Web Loan. The claims against Medley Opportunity Fund II LP, Medley LLC, Medley Capital Corporation,the Company, Medley Management, Inc., Medley Group, LLC, Brook Taube, and Seth Taube (in Class Action 1, as amended); Medley Opportunity Fund II LP and Medley Capital Corporation (in Class Action 2 and Class Action 3); and Medley Opportunity Fund II LP (in the Pennsylvania Class Action); and Medley Opportunity Fund II LP and the Company (in the West Virginia Class Action), allege that those defendants in each respective action exercised control over, or improperly derived income from, and/or obtained an improper interest in, American Web Loan’s payday lending activities as a result of a loan to American Web Loan. The loan was made by Medley Opportunity Fund II LP in 2011. American Web Loan repaid the loan from Medley Opportunity Fund II LP in full in February of 2015, more than 1 year and 10 months prior to any of the loans allegedly made by American Web Loan to the alleged class plaintiff representatives in Class Action 1. In Class Action 2, the alleged class plaintiff representatives had not alleged when they received any loans from American Web Loan. In Class Action 3, the alleged class plaintiff representatives claim to have received loans from American Web Loan at various times from February 2015 through April 2018. In the Pennsylvania Class Action, the alleged class plaintiff representatives claim to have received loans from American Web Loan in 2017.



On October 26, 2020, Medley Opportunity Fund II LP and Medley Capital Corporation were served with a new complaint in a putative class action lawsuit captioned Charles P. McDaniel v. Mark Curry, American Web Loan, Inc., Red Stone, Inc., Medley Opportunity Fund II LP, and Medley Capital Corporation, filed October 22, 2020, in the Circuit Court of Ohio County, West Virginia, as Case No. 20-C-169 (the “West Virginia Class Action”). (together with the Virginia Class Actions and the Pennsylvania Class Action, the “Class Action Complaints”). The plaintiff in the West Virginia Class Action Complaint filed his putative class action alleging claims arising West Virginia state law’s regulating interest rates and other fees in connection with consumer lending activities.

By orders dated August 7, 2018 and September 17, 2018, the Court presiding over the Virginia Class Actions consolidated those cases for all purposes. On October 12, 2018, Plaintiffs in Class Action 3 filed a notice of voluntary dismissal of all claims, and on October 29, 2018, Plaintiffs in Class Action 2 filed a notice of voluntary dismissal of all claims.


On October 30, 2020, Plaintiffs in the Pennsylvania Class Action filed a Stipulation of Dismissal of all claims against all defendants with prejudice, and on November 2, 2020, the Court presiding over the Pennsylvania Class Action ordered Plaintiffs’ claims dismissed with prejudice. On January 29, 2021, Plaintiff in the West Virginia Class Action filed a motion to stay proceedings to permit revision and final approval of a revised settlement agreement in Class Action 1, and also on January 29, 2021, the Court presiding over the West Virginia Class Action granted that motion and stayed the West Virginia Class Action.

On April 16, 2020, the parties to Class Action 1 reached a settlement reflected in a Settlement Agreement (the “Settlement Agreement”) that has been publicly filed in Class Action 1 (ECF No. 414-1). TheAmong other things, upon satisfaction of the conditions specified in the Settlement Agreement was subjectand upon the Effective Date, the Settlement Agreement (capitalized terms not otherwise defined have the meaning set forth in the Settlement Agreement): (1) requires Plaintiffs to court approval. Atseek certification of a nationwide settlement class of all persons in the United States to whom American Web Loan lent money from February 10, 2010 through a future date on which the Court may enter a Preliminary Approval Order as to the Settlement Agreement (which certification Defendants have agreed not to oppose); (2) requires American Web Loan, and only American Web Loan, to pay Monetary Consideration of $65,000,000 (none of Medley Opportunity Fund II LP, Medley LLC, Medley Capital Corporation, Medley Management, Inc., Medley Group, LLC, Brook Taube, or Seth Taube are paying any Monetary Consideration pursuant to the Settlement Agreement); (3) requires American Web Loan, and only American Web Loan, to cancel (as a disputed debt) and release all claims that relate to or arise out of the loans in its Collection Portfolio, which is valued at Seventy-Six Million Dollars ($76,000,000) and comprised of loans to more than 39,000 borrowers (none of Medley Opportunity Fund II LP, Medley LLC, Medley Capital Corporation, Medley Management, Inc., Medley Group, LLC, Brook Taube, or Seth Taube have any interest in any of the loans that are being cancelled); (4) requires American Web Loan and Curry to provide certain Non-Monetary Benefits (none of Medley Opportunity Fund II LP, Medley LLC, Medley Capital Corporation, Medley Management, Inc., Medley Group, LLC, Brook Taube, or Seth Taube are conferring any Non-Monetary Benefits pursuant to the Settlement Agreement); (5) fully, finally, and forever releases Medley Opportunity Fund II LP, Medley LLC, Medley Capital Corporation, Medley Management, Inc., Medley Group, LLC, Brook Taube, and Seth Taube from any and all claims, causes of action, suits, obligations, debts, demands, agreements, promises, liabilities, damages, losses, controversies, costs, expenses and attorneys’ fees of any nature whatsoever, whether arising under federal law, state law, common law or equity, tribal law, foreign law, territorial law, contract, rule, regulation, any regulatory promulgation (including, but not limited to, any opinion or declaratory ruling), or any other law, including Unknown Claims, whether suspected or unsuspected, asserted or unasserted, foreseen or unforeseen, actual or contingent, liquidated or unliquidated, punitive or compensatory, as of the date of the Final Fairness Approval Order and Judgment, that relate to or arise out of loans made by and/or in the name of AWL (including loans issued in the name of American Web Loan, Inc. or Clear Creek Lending) as of the date of entry of the Preliminary Approval Order (with the exception of claims to enforce the Settlement or the Judgment); (6) provides for a mutual general release between Medley Opportunity Fund II LP, Medley LLC, Medley Capital Corporation, Medley Management, Inc., Medley Group, LLC, Brook Taube, and Seth Taube on the one hand, and American Web Loan and Curry on the other hand; and (7) provides that, as of the future Effective Date, none of Medley Opportunity Fund II LP, Medley LLC, Medley Capital Corporation, Medley Management, Inc., Medley Group, LLC, Brook Taube, and Seth Taube shall (i) be entitled to indemnification from AWL Defendants (as defined in the Settlement Agreement) or (ii) bring any claim against any Released Parties, including American Web Loan and Curry, that relate to or arise out of loans made by and/or in the name of AWL (including loans issued in the name of American Web Loan, Inc. or Clear Creek Lending) as of the date of entry of the Preliminary Approval Order (with the exception of claims to enforce the Settlement or the Judgment).

On March 31, 2021, the parties to Class Action 1 and the Objectors filed a revised settlement agreement publicly in Class Action 1 (ECF No. 483-1) (the “Revised Settlement Agreement”). As relevant to Medley LLC, the Company, Medley Opportunity Fund II LP, Medley Management, Inc., Medley Group, LLC, Brook Taube, and Seth Taube, the terms of the Revised Settlement Agreement do not differ from the terms of the original Settlement Agreement. On April 7, 2021, the Court presiding over Class Action 1 held a hearing on November 4, 2020, the court denied the plaintiffs’Plaintiffs’ motion to approve the settlement and ordered the parties to mediation in front of Judge Novakfor preliminary approval of the Eastern DistrictRevised Settlement Agreement, and entered an order granting preliminary approval of Virginiathe revised settlement (the “Preliminary Approval Order”). Pursuant to the Preliminary Approval Order, the Court held a Final Approval Hearing relating to the Revised Settlement Agreement on July 9, 2021, and following the hearing, granted Final Approval of the Revised Settlement Agreement and entered the Final Judgment. The effective date of the Revised Settlement Agreement occurred on August 26, 2021.

On or about January 28, 2021, a purported class action lawsuit, captioned Kahn v. PhenixFIN Corporation, et al., was filed against the Company and its directors in Decemberthe Court of 2020.


Chancery of the State of Delaware. Plaintiffs allege that a provision in the Company’s bylaws, which provides that directors may be removed from office for cause by the affirmative vote of 75% of capital stock entitled to vote, is inconsistent with provisions of the Delaware General Corporate Law, which plaintiffs allege would permit removal for cause by a simple majority of capital stock entitled to vote. The plaintiffs seek a declaration that the bylaw provision is invalid and to enjoin the defendants from enforcing it, as well as a reasonable allowance of attorneys’ fee. On October 29, 2020,February 10, 2021, the Board of the Company approved an amendment to the Company’s Bylaws, which, among other things, allows for the removal of directors for cause by affirmative vote of the holders of a majority of the capital stock entitled to vote at an election of directors.

On May 5, 2021, plaintiffs filed a notice and proposed order voluntarily dismissing the Action as moot and providing that jurisdiction would be retained solely to resolve an anticipated application for attorneys’ fees and expenses, which proposed order was granted by the Court of Chancery on May 5, 2021. The parties to the Pennsylvania Class Action reached a settlement pursuant to which AWLsubsequently agreed to paya payment by PhenixFIN to plaintiffs’ counsel of $25,000, in full satisfaction of their claim for attorneys’ fees, expenses and costs in connection with the plaintiffs $200,000Action. The Court of Chancery has not been asked to review or approve, and to forgive loans that they owed AWL.will pass no judgment on, this payment. The Medley Defendants obtained a full release and bore noneCourt of Chancery granted the settlement amount. The Pennsylvania Class Action was dismissed with prejudiceproposed order on November 2, 2020.


The Medley Defendants and the other defendants believe the alleged claims asserted in the Virginia Class Action and the West Virginia putative class action are without merit and they are defending these lawsuits vigorously.

July 28, 2021.

Item 4.Mine Safety Disclosures

None.


None.
47







PART II

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities


Our

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 is currently tradedto the NASDAQ Global Market. The listing and trading of the common stock on the New York Stock Exchange (“NYSE”) “MCC”.


NYSE ceased at the close of trading on December 31, 2020. Since January 4, 2021, the common stock trades on the NASDAQ Global Market under the trading symbol “PFX.”

As of September 30, 2020,2021, we had 3 stockholders11stockholders of record of our common stock, which did not include stockholders for whom shares are held in "nominee"“nominee” or "street“street name."”

The following table sets forth, for the periods indicated, the range of high and low closing prices of our common stock and the sales price as a percentage of the net asset value per share of our common stock.

    Premium/  Premium/ 
     Closing
Market Price		  (Discount) of
High Market		  (Discount) of
Low Market		 
  NAV(1)  High  Low  Price to NAV (2)  Price to NAV (2) 
Fiscal year ending September 30, 2021               
Fourth Quarter $57.08  $43.35  $40.10   (24.05)%  (29.75)%
Third Quarter  58.49   42.76   32.80   (26.89)%  (43.92)%
Second Quarter  55.91   33.99   27.70   (39.21)%  (50.46)%
First Quarter  52.94   29.88   18.14   (43.56)%  (65.73)%
Fiscal year ending September 30, 2020                    
Fourth Quarter $55.30  $18.19  $12.40   (67.11)%  (77.58)%
Third Quarter  54.83   18.70   9.00   (65.89)%  (83.59)%
Second Quarter  52.04   45.00   7.00   (13.53)%  (86.55)%
First Quarter  80.99   52.60   38.60   (35.05)%  (52.34)%
Fiscal year ending September 30, 2019                    
Fourth Quarter $79.40  $56.20  $44.80   (29.22)%  (43.58)%
Third Quarter  91.00   69.00   44.00   (24.18)%  (51.65)%
Second Quarter  102.20   72.00   52.40   (29.55)%  (48.73)%
First Quarter  112.20   79.00   53.20   (29.59)%  (52.58)%

(1)Net asset value per share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low market prices. The net asset value per share shown is based on outstanding shares at the end of the period.

(2)Calculated as of the respective high or low closing market price divided by the quarter end net asset value.

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

Shares of business development companies may trade at a market price that is less than the value of the net assets attributable to those shares. The possibility that our shares of common stock will trade at a discount or premium to net asset value is separate and distinct from the risk that our net asset value will decrease.

The last reported closing price of our common stock on December 15, 2021 was $42.38 per share, approximately 74.25% of the Company’s then-current NAV. As of December 15, 2021 we had 11 stockholders of record of our common stock, including stockholders for whom shares are held in “nominee” or “street name.”



Sales of Unregistered Securities

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


Stock Performance Graph

This graph compares the stockholder return on our common stock from January 20, 2011 (IPO)September 30, 2016 to September 30, 20202021 with that of the Standard & Poor’s 500 Stock Index and the Russell 2000 Financial Services Index. This graph assumes that on January 20, 2011,September 30, 2016, $100 was invested in our common stock, the S&P 500 Index, and the Russell 2000 Financial Services Index. The graph also assumes the reinvestment of all cash dividends prior to any tax effect.


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

The graph and other information furnished under this Part II Item 5 of this annual report on Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act. The stock price performance included in the below graph is not necessarily indicative of future stock performance.

 

Issuer Purchases of Securities

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

Month Ended Shares
Repurchased		  Repurchase
Price Per
Share		  Aggregate
Consideration for
Repurchased
Shares		 
February 2021  13,082    $30.25 -  $30.96  $397,384 
March 2021  12,241    $30.25 - $34.42   393,938 
April 2021  14,390    $33.11 - $34.89   491,469 
May 2021  25,075    $34.56 - $39.93   976,440 
August 2021  141,700    $41.03 - $42.28   5,944,213 
Total  206,488      $8,203,444 

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48






Item 6. Selected Financial Data


The following selected consolidated financial data should be read in conjunction with Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. The following selected financial and other data for the years ended September 30, 2021, 2020, 2019, 2018, 2017, and 20162017 (dollars in thousands, except per share amounts) is derived from the audited consolidated financial statements for such years, and included in Part II, Item 8, Consolidated Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

  For the years ended September 30 
  2021  2020  2019  2018  2017 
Statement of Operations data:               
Total investment income $32,307  $21,522  $46,299  $66,820  $96,256 
Base management fees  1,146   6,359   11,190   14,724   17,773 
Incentive fees  -   -   -   -   896 
All other expenses  12,638   17,883   55,976   40,072   41,309 
Management fee waiver  -   -   -   (380)  (48)
Incentive fee waiver  -   -   -   -   (44)
Net investment income/(loss)  18,523   (2,720)  (20,867)  12,404   36,370 
Net realized gains/(losses) on investments  (42,486)  (49,979)  (112,173)  (89,221)  (73,086)
Net unrealized appreciation/(depreciation) on investments  25,363   (10,633)  38,498   (32,194)  21,644 
Change in provision for deferred taxes on unrealized (appreciation)/depreciation on investments  -   -   -   474   1,092 
Loss on extinguishment of debt  (122)  (2,481)  (2,033)  (2,387)  (1,097)
Net increase/(decrease) in net assets resulting from operations  1,278   (65,813)  (96,575)  (110,924)  (15,077)
Per share data:                    
Net asset value per common share at year end $57.08  $55.30  $79.46  $117.92  $169.04 
Market price at year end  42.90   17.83   51.80   76.40   119.40 
Net investment income/(loss)  6.92   (1.00)  (7.66)  4.55   13.35 
Net realized and unrealized gains/(losses) on investments  (6.39)  (22.25)  (27.04)  (44.58)  (18.88)
Change in provision for deferred taxes on unrealized (appreciation)/depreciation on investments  -   -   -   0.17   0.40 
Loss on extinguishment of debt  (0.05)  (0.91)  (0.75)  (0.88)  (0.40)
Net increase/(decrease) in net assets resulting from operations  0.48   (24.16)  (35.45)  (40.74)  (5.53)
Dividends paid  -   -   3.00   10.40   15.20 
Statement of Assets and Liabilities data:                    
Total investments at fair value $151,640  $246,744  $396,889  $655,430  $836,991 
Cash and cash equivalents  69,433   56,522   68,245   75,666   108,572 
Other assets  4,019   2,837   21,133   10,500   13,997 
Total assets  225,092   306,103   486,267   741,596   959,560 
Total liabilities  81,398   155,483   269,834   420,417   499,131 
Total net assets  143,694   150,620   216,433   321,179   460,429 
Other data:                    
Weighted average annual yield on debt investments(1)  6.75%  8.50%  9.50%  9.90%  10.80%
Total return based on market value(2)  140.61%  (65.58)%  (29.91)%  (27.82)%  (12.73)%
Total return based on net asset value(3)  (4.60)%  (30.41)%  (29.47)%  (21.29)%  (0.68)%
Number of portfolio companies  42   42   51   67   64 

(1)The weighted average yield is based upon original cost on our income bearing debt investments.

(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.


 
 For the years ended September 30
 20202019201820172016
Statement of Operations data:
Total investment income$21,522 46,299 66,820 96,256 120,749 
Base management fees6,359 11,190 14,724 17,773 19,470 
Incentive fees— — — 896 11,492 
All other expenses17,883 55,976 40,072 41,309 39,843 
Management fee waiver— — (380)(48)(143)
Incentive fee waiver— — — (44)(3,504)
Net investment income/(loss)(2,720)(20,867)12,404 36,370 53,591 
Net realized gain/(loss) on investments(49,979)(112,173)(89,221)(73,086)(39,383)
Net unrealized appreciation/(depreciation) on investments(10,633)38,498 (32,194)21,644 (42,257)
Change in provision for deferred taxes on unrealized (appreciation)/depreciation on investments— — 474 1,092 87 
Loss on extinguishment of debt(2,481)(2,033)(2,387)(1,097)— 
Net increase/(decrease) in net assets resulting from operations(65,813)(96,575)(110,924)(15,077)(27,962)
Per share data:
Net asset value per common share at year end$55.30 79.46 117.92 169.04 189.78 
Market price at year end17.83 51.80 76.40 119.40 152.60 
Net investment income/(loss)(1.00)(7.66)4.55 13.35 19.35 
Net realized and unrealized gain/(loss) on investments(22.25)(27.04)(44.58)(18.88)(29.48)
Change in provision for deferred taxes on unrealized (appreciation)/depreciation on investments— — 0.17 0.40 0.03 
Loss on extinguishment of debt(0.91)(0.75)(0.88)(0.40)— 
Net increase/(decrease) in net assets resulting from operations(24.16)(35.45)(40.74)(5.53)(10.10)
Dividends paid— 3.00 10.40 15.20 22.40 
Statement of Assets and Liabilities data:
Total investments at fair value$246,744 396,889 655,430 836,991 914,184 
Cash and cash equivalents56,522 68,245 75,666 108,572 104,485 
Other assets(2)
2,837 21,133 10,500 13,997 12,211 
Total assets306,103 486,267 741,596 959,560 1,030,880 
Total liabilities155,483 269,834 420,417 499,131 513,961 
Total net assets150,620 216,433 321,179 460,429 516,919 
Other data:
Weighted average annual yield on debt investments(1)
8.5 %9.5 %9.9 %10.8 %11.8 %
Total return based on market value(3)
(65.58)%(29.91)%(27.82)%(12.73)%19.37 %
Total return based on net asset value(4)
(30.41)%(29.47)%(21.29)%(0.68)%0.42 %
Number of investments at year end42 51 67 64 58 

(1)The weighted average yield is based upon original cost on our income bearing debt investments.
(2)On January 1, 2016, we adopted Accounting Standards Update (“ASU”) 2015-03 which requires that debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the carrying amount of the debt liability rather than as an asset. Adoption of ASU 2015-03 requires the changes to be applied retrospectively.
(3)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.
(4)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.
(5)Per share data has been adjusted for the periods shown to reflect the one-for-twenty reverse stock split effected on July 24, 2020 on a retroactive basis.
49






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


The following discussion and analysis should be read in conjunction with our financial statements and related notes and other financial information appearing elsewhere in this annual report on Form 10-K.


Except as otherwise specified, references to “we,” “us,” “our,” or the “Company,” refer to Medley CapitalPhenixFIN Corporation.


Forward-Looking Statements

Some of the statements in this annual report on Form 10-K constitute forward-looking statements, which relate to future events or our performance or financial condition. The forward-looking statements contained in this annual report on Form 10-K involve risks and uncertainties, including statements as to:


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

•changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, which could result in changes in the value of our assets;

•the relative and absolute investment performance and operations of MCC Advisors;

•the impact of increased competition;

•the impact of future acquisitions and divestitures;

•our business prospects and the prospects of our portfolio companies;

•the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to us or MCC Advisors;

•our contractual arrangements and relationships with third parties;

•any future financings by us;

•the ability of MCC Advisors to attract and retain highly talented professionals;

•fluctuations in foreign currency exchange rates;

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

•the unfavorable resolution of legal proceedings;

•uncertainties associated with the impact from the COVID-19 pandemic: including its impact on the global and U.S. capital markets and the global and U.S. economy; the length and duration of the COVID-19 outbreak in the United States as well as worldwide and the magnitude of the economic impact of that outbreak; the effect of the COVID-19 pandemic on our business prospects and the operational and financial performance of our portfolio companies, including our and their ability to achieve their respective objectives; and the effect of the disruptions caused by the COVID-19 pandemic on our ability to continue to effectively manage our business;

•the ongoing obligations under the Membership Interest Purchase Agreement entered into by the Company, Great American Life Insurance Company, MCC Senior Loan Strategy JV I LLC (“MCC JV”), and an affiliate of Golub Capital LLC, including the indemnities contained therein, and assumptions with respect to estimates of transaction expenses incurred by the Company and the resulting net proceeds received by the Company in connection with the disposition of MCC JV; and

•risks and uncertainties relating to the ability of the Company to assemble the new internalized management team as contemplated and the ability of the new internalized management team to execute on its financial and investment strategies and the ability of the Company to realize savings and other efficiencies from the replacement of the current external management team with the new internal management structure.

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

●changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, which could result in changes in the value of our assets;

●the impact of increased competition;

●the impact of future acquisitions and divestitures;

●our business prospects and the prospects of our portfolio companies;

●the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to us;

●our contractual arrangements and relationships with third parties;

●any future financings by us;

●fluctuations in foreign currency exchange rates;

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

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

●our ability to attract and retain highly talented professionals;

●market conditions and our ability to access alternative debt markets and additional debt and equity capital;

●the unfavorable resolution of legal proceedings;

●uncertainties associated with the impact from the COVID-19 pandemic: including its impact on the global and U.S. capital markets and the global and U.S. economy; the length and duration of the COVID-19 outbreak in the United States as well as worldwide and the magnitude of the economic impact of that outbreak; the effect of the COVID-19 pandemic on our business prospects and the operational and financial performance of our portfolio companies, including our and their ability to achieve their respective objectives; and the effect of the disruptions caused by the COVID-19 pandemic on our ability to continue to effectively manage our business; and

●risks and uncertainties relating to the possibility that the Company may explore strategic alternatives, including, but are not limited to: the timing, benefits and outcome of any exploration of strategic alternatives by the Company; potential disruptions in the Company’s business and stock price as a result of our exploration of any strategic alternatives; the ability to realize anticipated efficiencies, or strategic or financial benefits; potential transaction costs and risks; and the risk that any exploration of strategic alternatives may have an adverse effect on our existing business arrangements or relationships, including our ability to retain or hire key personnel. There is no assurance that any exploration of strategic alternatives will result in a transaction or other strategic change or outcome.

Such forward-looking statements may include statements preceded by, followed by or that otherwise include the words “trend,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “potential,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may,” or similar expressions. The forward looking statements contained in this annual report involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth as “Risk Factors” and elsewhere in this annual report on Form 10-K.



We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking statements. Actual results could differ materially from those anticipated in our forward-looking statements, and future results could differ materially from historical performance. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the Securities and Exchange Commission

50






(“SEC”), including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K.


COVID-19 Developments

On March 11, 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) as a pandemic, and, on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The outbreak of

COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolvingCOVID-19 continues to evolve and many countries, including the United States, have reacted at various stages of the pandemic by instituting quarantines, restricting travel, and hospitality, and temporarily closing or limiting operationscapacity at many corporate offices, retail stores, restaurants, fitness clubs and manufacturing facilities and factories in affected jurisdictions. Such actions are creatinghave created disruption in global supply chains and adversely impactingimpacted a number of industries. The outbreak has had and could continue to have a continuedan adverse impact on economic and market conditions and trigger a period of global economic slowdown.


We are closely monitoring the impact of the outbreak of COVID-19 on all aspects of our business, including how it will impact our portfolio companies, employees, due diligence and underwriting processes, and financial markets. Given the rapidcontinuing development and fluidity of this situation, we cannot estimate the long-term impact of COVID-19 on our business, future results of operations, financial position or cash flows at this time. Further, the operational and financial performance of the portfolio companies in which we make investments may be significantly impacted by COVID-19, which may in turn impact the valuation of our investments. We believe our portfolio companies have taken immediate actions to effectively and efficiently respond to the challenges posed by COVID-19 and related orders imposed by state and local governments, including developing liquidity plans supported by internal cash reserves, shareholder support, and, as appropriate, accessing their ability to participate in the government Paycheck Protection Program (which closedProgram. The Company’s performance was negatively impacted during the pandemic. The longer-term impact of COVID-19 on the operations and the performance of the Company (including certain portfolio companies) is difficult to new applicationspredict, but may also be adverse. The longer-term potential impact on August 8, 2020). Thesuch operations and performance could depend to a large extent to which our operations may be impacted by the COVID-19 pandemic will depend largely on future developments which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerningactions taken by authorities and other entities to mitigate COVID-19 and its economic impact. The impacts, as well as the severityuncertainty over impacts to come, of COVID-19 have adversely affected the performance of the outbreakCompany (including certain portfolio companies) and actions by government authoritiesmay continue to containdo so in the outbreak or treat its impact.future. Furthermore, the impacts of a potential worsening of global economic conditions and the continued disruptions to and volatility in the financial markets remain unknown. COVID-19 presents material uncertainty and risks with respect to the underlying value of the Company’s portfolio companies, the Company’s business, financial condition, results of operations and cash flows, such as the potential negative impact to financing arrangements, increased costs of operations, changes in law and/or regulation, and uncertainty regarding government and regulatory policy.


We have evaluated subsequent events from September 30, 20202021 through the filing date of this annual report on Form 10-K. However, as the discussion in this Item 7.2. Management’s Discussion and Analysis of Financial Condition and Results of Operations relates to the Company’s financial statements for the fiscal yearquarterly period ended SeptemberJune 30, 2020,2021, the analysis contained herein may not fully account for impacts relating to the COVID-19 pandemic. In that regard, for example, as of September 30, 2020,2021, the Company valued its portfolio investments in conformity with U.S. GAAPgenerally accepted accounting principles (“GAAP”) based on the facts and circumstances known by the Company at that time, or reasonably expected to be known at that time. Due to the overall volatility that the COVID-19 pandemic hasmay have caused during the months that followedfollowing our most recent valuation (as of September 30, 2020 valuation,2021), any valuations conducted now or in the future in conformity with U.S. GAAP could result in a lower fair value of our portfolio. The longer-term impact of COVID-19 on the operations and the performance of the Company (including certain portfolio companies) is difficult to our results going forward willpredict, but may also be adverse. The longer-term potential impact on such operations and performance could depend to a large extent on future developments and new information that may emerge regarding the duration and severity of COVID-19 and the actions taken by authorities and other entities to contain COVID-19 and its economic impact. The impacts, as well as the coronavirus or treat its impact, alluncertainty over impacts to come, of which are beyond our control. Accordingly,COVID-19 (including the Delta variant) have adversely affected the performance of the Company cannot predictand may continue to do so in the extentfuture. Further, the potential exists for additional variants of COVID-19, including the Omicron variant, to which its financial conditionimpede the global economic recovery and resultsexacerbate geographic differences in the spread of, operations will be affected at this time.and response to, COVID-19.



Overview

Overview

We are an externally-managed,internally-managed non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. In addition, we have elected, and intend to qualify annually, to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code.


Through December 31, 2020, we were an externally managed company. On November 18, 2020, the board of directors of the Company approved the adoption of an internalized management structure, effective January 1, 2021. Since January 1, 2021, we have operated under such internalized management structure.

We commenced operations and completed our initial public offering on January 20, 2011. Our investmentUnder our internalized management structure, our activities are managed by MCC Advisorsour senior professionals and are supervised by our board of directors, of which a majority of the members are independent of us.


Our

The Company’s investment objective is to generate current income and capital appreciation by lendingappreciation. The management team seeks to privately-held middle market companies,achieve this objective primarily through directly originated transactions,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 help these companies fund acquisitions, growth or refinancing. Ourachieve our investment objective. The portfolio generally consists of senior secured first lien term loans, and senior secured second lien term loans.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 the total investment returns.


Our loan and other debt investments are primarily rated below investment grade or are unrated. Investments in below investment grade securities are considered predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal when due.

As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities of private or thinly traded public U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. In addition, we are only allowed to borrow money such that our asset coverage, as defined in the 1940 Act, equals at least 200% (or 150% if, pursuant to the 1940 Act, certain requirements are met) after such borrowing, with certain limited exceptions. To maintain our RIC tax treatment, we must meet specified source-of-income and asset diversification requirements. In addition, to maintain our RIC tax treatment, we must timely distribute at least 90% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, for the taxable year.


Reverse Stock Split; Authorized Share Reduction

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”).

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Following the Annual Meeting, on July 7, 2020, the board of directors determined that it was in the best interests of the Company and its stockholders to implement the Reverse Stock Split and the Authorized Share Reduction. Accordingly, on July 13, 2020, the Company filed a Certificate of Amendment (the “Certificate of Amendment”) to the Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the Reverse Stock Split and the Authorized Share Reduction.


Pursuant to the Certificate of Amendment, effective as of 5:00 p.m., Eastern Time, on July 24, 2020 (the “Effective Time”), each twenty (20) shares of common stock issued and outstanding, immediately prior to the Effective Time, automatically and without any action on the part of the respective holders thereof, were combined and converted into one (1) share of common stock. In connection with the Reverse Stock Split, the Certificate of Amendment provided for a reduction in the number of authorized shares of common stock from 100,000,000 to 5,000,000 shares of common stock. No fractional shares were issued as a result of the Reverse Stock Split. Instead, any stockholder who would have been entitled to receive a fractional share as a result of the Reverse Stock Split received cash payments in lieu of such fractional shares (without interest and subject to backup withholding and applicable withholding taxes).



The

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 beganto the NASDAQ Global Market. The listing and trading on a split-adjusted basisof the common stock on the NYSE ceased at the market openclose of trading on July 27,December 31, 2020. The trading symbol forSince January 4, 2021, the common stock remains “MCC.”


The Reverse Stock Split was intended to bring the Company into compliance with the $1.00 minimum average closing share price requirement (the “Minimum Share Price Requirement”) for continued listingtrades on the NYSE. On August 3, 2020,NASDAQ Global Market under the Company received written notice from the NYSE that the Company has regained compliance with the Minimum Share Price Requirement after the Company’s average closing price over the 30 consecutive trading day period ending on July 31, 2020 was above $1.00 per share as required under Section 802.01C of the NYSE Listed Company Manual.
symbol “PFX.”


Revenues

Revenues

We generate revenue in the form of interest income on the debt that we hold and capital gains, if any, on warrants or other equity interests that we may acquire in portfolio companies. We invest our assets primarily in privately held companies with enterprise or asset values between $25 million and $250 million and generally focus on investment sizes of $10 million to $50 million. We believe that pursuing opportunities of this size offers several benefits including reduced competition, a larger investment opportunity set and the ability to minimize the impact of financial intermediaries. We expect our debt investments to bear interest at either a fixed or floating rate. Interest on debt will be payable generally either monthly or quarterly. In some cases our debt investments may provide for a portion of the interest to be PIK. To the extent interest is PIK, it will be payable through the increase of the principal amount of the obligation by the amount of interest due on the then-outstanding aggregate principal amount of such obligation. The principal amount of the debt and any accrued but unpaid interest will generally become due at the maturity date. In addition, we may generate revenue in the form of commitment, origination, structuring or diligence fees, fees for providing managerial assistance or investment management services and possibly consulting fees. Any such fees will be generated in connection with our investments and recognized as earned.


Expenses

Expenses

Our

In periods prior to December 31, 2020, our primary operating expenses include the payment ofincluded management and incentive fees pursuant to the investment management agreement we havehad with MCC Advisors and overhead expenses, including our allocable portion of our administrator’s overhead under the administration agreement.agreement, which were paid during the quarter ended March 31, 2021. Our management and incentive fees compensatecompensated MCC Advisors for its work in identifying, evaluating, negotiating, closing and monitoring our investments. WeOn November 18, 2020, the board of directors adopted an internally managed structure, effective January 1, 2021, under which we bear all other costs and expenses of our operations and transactions, including those relating to:

●our organization and continued corporate existence;

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

●expenses incurred in monitoring our financial and legal affairs and in monitoring our investments and performing due diligence on our prospective portfolio companies;

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

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

●operating costs associated with employing investment professionals and other staff;

●distributions on our shares;

●administration fees payable under our administration agreement;

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

●transfer agent and custodial fees;

●registration fees and listing fees;

●U.S. federal, state and local taxes;


●independent director fees and expenses;

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

●the costs of any reports, proxy statements or other notices to our stockholders, including printing costs;

●our fidelity bond;

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

●the operating lease of our office space;

●indemnification payments; and

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


•our organization and continued corporate existence;

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

•expenses incurred by MCC Advisors payable to third parties, including agents, consultants or other advisers, in monitoring our financial and legal affairs and in monitoring our investments and performing due diligence on our prospective portfolio companies;

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

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

•the base management fee and any incentive fee;

•distributions on our shares;

•administration fees payable under our administration agreement;

•the allocated costs incurred by MCC Advisors in providing managerial assistance to those portfolio companies that request it;

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

•transfer agent and custodial fees;

•registration fees and listing fees;

•U.S. federal, state and local taxes;
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•independent director fees and expenses;

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

•the costs of any reports, proxy statements or other notices to our stockholders, including printing costs;

•our fidelity bond;

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

•indemnification payments;

•direct costs and expenses of administration, including audit and legal costs; and

•all other expenses reasonably incurred by us or MCC Advisors in connection with administering our business, such as the allocable portion of overhead under our administration agreement, including rent and other allocable portions of the cost of our Chief Financial Officer and Chief Compliance Officer and their respective staffs (including travel expenses).

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 committeeSpecial Committee of the Board comprised solely of directors who are not “interested persons” of the Company as such term is defined in Section 2(a)(19) of the 1940 Act (the “Special Committee”) (as described in Note 10)), at $667,000 per month (the “Cap”). Under the Expense Support Agreement, the Cap became effective on June 1, 2020 and expiredwas to expire on September 30, 2020. On September 29, 2020, the board of directors, including all of the independent directors, extended the term of the Expense Support Agreement through the end of quarter ending December 31, 2020. The Expense Support Agreement expired by its terms at the close of business on December 31, 2020, in connection with the adoption of the internalized management structure by the board of directors.

For the fourthree months ended September 30,December 31, 2020, the total management fee and the other operating expenses subject to the Cap (as described above) were $3.1$2.5 million, which resulted in $0.7$0.3 million of expense support incurred during the quarter ended December 31, 2020 and due from MCC Advisors. The $0.3 million of expense support due from MCC Advisors. The $0.7 million of expense support due has beenwas netted against Administrator expenses payable in the accompanying Consolidated Statements of Assets and Liabilities.Liabilities and paid during the quarter ended March 31, 2021. See "Recent Developments" and "Note 15" to the financial statements“Note 6” for more information.


Portfolio and Investment Activity

As of September 30, 20202021 and 2019,2020, our portfolio had a fair market value of approximately $151.6 million and $246.7 million, respectively.

During the year ended September 30, 2021, we received proceeds from sale and $655.4settlements of investments of $124.3 million, respectively. The following table summarizes ourincluding principal and dividend proceeds, realized net losses on investments of $42.5 million, and invested $45.3 million, of which $6.5 million was invested in two new portfolio companies and investment activitytwo new securities in an existing portfolio company during the fiscal yearsyear.

During the year ended September 30, 2020, we received proceeds from sale and 2019 (dollars in thousands):

 For the years ended September 30
 20202019
Investments made in new portfolio companies$5,101 $6,326 
Investments made in existing portfolio companies11,769 60,101 
Aggregate amount in exits and repayments(109,678)(259,940)
Net investment activity$(92,808)$(193,513)
Portfolio Companies, at beginning of year51 64 
Number of new portfolio companies2 15 
Number of exited portfolio companies(11)(12)
Portfolio companies, at end of year42 67 
Number of investments in existing portfolio companies23 22 

settlements of investments of $110.6 million, including principal and dividend proceeds, realized net losses on investments of $50.0 million, and invested $16.8 million.

The following table summarizes the amortized cost and the fair value of our average portfolio company, investment, including until its sale on October 8, 2020, the equity investment in the MCC Senior Loan Strategy JV I LLC (“MCC JV”), andwhich had been our largest portfolio company investment, excludingcompany:

  September 30,
2021		  September 30,
2020		 
  Amortized Cost  Fair Value  Amortized Cost  Fair Value 
Average portfolio company $3,100  $2,263  $7,813  $5,875 
Largest portfolio company  19,469   26,863   37,987   40,807 

The following table summarizes the equity investment inamortized cost and the MCC JV,fair value of investments as of September 30, 2020 and 20192021 (dollars in thousands):

  Amortized
Cost		  Percentage  Fair Value  Percentage 
Senior Secured First Lien Term Loans $136,740   65.7% $61,934   40.9%
Senior Secured Second Lien Term Loans  2,600   1.3   2,490   1.6 
Senior Secured Notes  9,306   4.5   9,270   6.1 
Secured Debt  2,500   1.2   2,500   1.6 
Unsecured Debt  1,561   0.8   -   - 
Equity/Warrants  54,961   26.5   75,446   49.8 
Total Investments $207,668   100.0% $151,640   100.0%

September 30, 2020
September 30, 2019(1)
 Amortized CostFair ValueAmortized CostFair Value
Average portfolio company investment$7,813 $5,875 $9,170 $7,782 
Largest portfolio company investment37,987 40,807 38,395 41,855 

(1) The September 30, 2019 presentation has been revised to conform to the current year presentation.

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

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  Amortized Cost  Percentage  Fair Value  Percentage 
Senior Secured First Lien Term Loans $178,843   54.5% $106,463   43.2%
Senior Secured Second Lien Term Loans  15,476   4.7   13,927   5.6 
Unsecured Debt  4,601   1.4   2,669   1.1 
MCC Senior Loan Strategy JV I LLC  79,888   24.4   41,019   16.6 
Equity/Warrants  49,327   15.0   82,666   33.5 
Total $328,135   100.0% $246,744   100.0%

The following table summarizes the amortized cost and the fair value of investments as of September 30, 2019 (dollars in thousands):
 Amortized CostPercentageFair ValuePercentage
Senior Secured First Lien Term Loans$243,342 52.0 %$192,770 48.6 %
Senior Secured Second Lien Term Loans39,089 8.4 36,508 9.2 
Unsecured Debt2,653 0.6 2,653 0.7 
MCC Senior Loan Strategy JV I LLC78,575 16.8 69,949 17.6 
Equity/Warrants103,989 22.2 95,009 23.9 
Total$467,648 100.0 %$396,889 100.0 %

As of September 30, 2020,2021, our income-bearing investment portfolio whichbased upon cost represented 61.2%86.6% of our total portfolio had a weighted average yield based upon cost of our portfolio investments of approximately 8.5%, and 87.4% of our income-bearing investment portfoliowhich 74.6% bore interest based on floating rates, such as the London Interbank Offering Rate (“LIBOR”), while 12.6% of our income-bearing investment portfolio25.4% bore interest at fixed rates. As of September 30, 2019,2021, the weighted average yield based upon cost of our total portfolio was approximately 9.5%6.75%. As of September 30, 2020, the weighted average yield based upon cost of our total portfolio was approximately 8.5%. The weighted average yield of our total portfolio does not represent the total return to our stockholders.


MCC Advisors regularly assesses

We rate the risk profile of each of our investments and rates each of them based on the following categories, which we refer to as MCC Advisors’ investment credit rating:

categories:

Credit
Rating		 
RatingDefinition
   
1 Investments that are performing above expectations.
2 
2 Investments that are performing within expectations, with risks that are neutral or favorable compared to risks at the time of origination.
All new loans are rated ‘2’.
3 
3 Investments that are performing below expectations and that require closer monitoring, but where no loss of interest, dividend or principal is expected.
Companies rated ‘3’ may be out of compliance with financial covenants, however, loan payments are generally not past due.
4 Investments that are performing below expectations and for which risk has increased materially since origination.
Some loss of interest or dividend is expected but no loss of principal.
In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due (but generally not more than 180 days past due).
5 Investments that are performing substantially below expectations and whose risks have increased substantially since origination.
Most or all of the debt covenants are out of compliance and payments are substantially delinquent.
Some loss of principal is expected.

The COVID-19 pandemic has impacted our investment ratings, as of September 30, 2020, causing downgrades of certain portfolio companies. As the COVID-19 situation continues to evolve, we are maintainingcontinue to maintain close communications with our portfolio companies to proactively assess and manage potential risks across our investment portfolio. We have also increased oversight and analysis of credits in vulnerable industries in an attempt to improve loan performance and reduce credit risk.risk



The following table shows the distribution of our investments on the 1 to 5 investment performance rating scale at fair value as of September 30, 20202021 and 20192020 (dollars in thousands):

 September 30, 2020September 30, 2019
Investment Performance RatingFair ValuePercentageFair ValuePercentage
1$54,256 22.0 %$105,231 26.5 %
2130,742 53.0 146,053 36.8 
340,645 16.5 123,253 31.1 
411,325 4.6 4,915 1.2 
59,776 3.9 17,437 4.4 
Total$246,744 100.0 %$396,889 100.0 %

  September 30, 2021  September 30, 2020 
  Fair Value  Percentage  Fair Value  Percentage 
1 $-   0.0% $54,256   22.0%
2  121,508   80.1%  130,742   53.0%
3  13,416   8.8%  40,645   16.5%
4  9,925   6.6%  11,325   4.6%
5  6,791   4.5%  9,776   3.9%
Total $151,640   100.0% $246,744   100.0%


Results of Operations
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Operating results for the years ended September 30, 2021, 2020, 2019, and 20182019 are as follows (dollars in thousands):

For the years ended September 30
202020192018
Total investment income/(loss)$21,522 $46,299 $66,820 
Total expenses, net24,242 67,166 54,258 
Net investment income/(loss) before excise taxes(2,720)(20,867)12,562 
Excise tax expense— — (158)
Net investment income/(loss)(2,720)(20,867)12,404 
Net realized gains/(losses) from investments(49,979)(112,173)(89,221)
Net unrealized appreciation/(depreciation) on investments(10,633)38,498 (32,194)
Change in provision for deferred taxes on unrealized (appreciation)/depreciation on investments— — 474 
Loss on extinguishment of debt(2,481)(2,033)(2,387)
Net increase in net assets resulting from operations$(65,813)$(96,575)$(110,924)

  For the years ended September 30 
  2021  2020  2019 
Total investment income $32,307  $21,522  $46,299 
Less: Net expenses  13,784   24,242   67,166 
Net investment income/(loss)  18,523   (2,720)  (20,867)
Net realized gains (losses) on investments  (42,486)  (49,979)  (112,173)
Net change in unrealized gains (losses) on investments  25,363   (10,633)  38,498 
Loss on extinguishment of debt  (122)  (2,481)  (2,033)

Net increase (decrease) in net assets resulting from operations

 $1,278  $(65,813) $(96,575)


Investment Income

For the year ended September 30, 2021, investment income totaled $32.3 million, of which $29.6 million was attributable to portfolio interest and dividend income, $2.6 million was attributable to fee income, and $0.1 million was attributable to other income.

For the year ended September 30, 2020, investment income totaled $21.5 million, of which $20.8 million was attributable to portfolio interest and dividend income, and $0.7 million to fee income.


For the year ended September 30, 2019, investment income totaled $46.3 million, of which $44.0 million was attributable to portfolio interest and dividend income, and $2.3 million to fee income.



For the year ended September 30, 2018, investment income totaled $66.8 million, of which $62.3 million was attributable to portfolio interest and dividend income, and $4.5 million to fee income.

Operating Expenses

Operating expenses for the years ended September 30, 2021, 2020, 2019, and 20182019 are as follows (dollars in thousands):

 For the years ended September 30
 202020192018
Base management fees$6,359 $11,190 $14,724 
Interest and financing expenses14,935 24,049 27,918 
Professional fees(4,768)19,323 4,430 
General and administrative3,285 7,399 2,171 
Administrator expenses2,227 3,324 3,582 
Directors fees1,451 1,258 1,271 
Insurance1,463 623 542 
Expenses before waivers and reimbursements24,952 67,166 54,638 
Expense support reimbursement(710)— — 
Management fee waiver— — (380)
Expenses, net of waivers and reimbursements$24,242 $67,166 $54,258 

  For the years ended September 30 
  2021  2020  2019 
Base management fees $1,146  $6,359  $11,190 
Interest and financing expenses  5,800   14,935   24,049 
General and administrative  1,012   3,285   7,399 
Salaries and benefits  1,993   -   - 
Administrator expenses  613   2,227   3,324 
Insurance  1,620   1,463   623 
Directors fees  1,040   1,451   1,258 
Professional fees, net  560   (4,768)  19,323 
Expenses before waivers and reimbursements  13,784   24,952   67,166 
Expense support reimbursement  -   (710)  - 
Expenses, net of waivers and reimbursements $13,784  $24,242  $67,166 

For the year ended September 30, 2021, total operating expenses before management and incentive fee waivers decreased by $11.2 million, or 44.8%, compared to the year ended September 30, 2020.

For the year ended September 30, 2020, total operating expenses before management and incentive fee waivers decreased by $42.2 million, or 62.9%, compared to the year ended September 30, 2019.

Effective beginning January 1, 2021, the Company did not incur any management or incentive fees, nor was it subject to expense support arrangements due to its transition to an internal management structure. As a result, there were no management or incentive fee waivers or expense support reimbursements for such period.


Interest and Financing Expenses

For

Interest and financing expenses for the year ended September 30, 2019, total operating expenses before management and incentive fee waivers increased2021 decreased by $12.5$9.1 million, or 22.9%61.2%, compared to the year ended September 30, 2018.


Interest2020. The decrease in interest and Financing Expenses

financing expenses was primarily due to the full repayment of the 2021 Notes on November 20, 2020 and the completion of the repayment of the Israeli Notes (as defined below) on April 14, 2020.

Interest and financing expenses for the year ended September 30, 2020 decreased by $9.1 million, or 37.9%, compared to the year ended September 30, 2019. The decrease in interest and financing expenses was primarily due to the voluntary repayment of $135.0 million SBA-guaranteed debentures (the “SBA Debentures”), which the Company repaid between March 28, 2019 and May 10, 2019, as well as the full repayment of $120.2 million Series A Notes (the “Israeli Notes”) between August 12, 2019 and April 14, 2020.



InterestBase Management Fees and financing expensesIncentive Fees

Base management fees for the year ended September 30, 20192021 decreased by $3.9$5.2 million, or 13.9%82.0%, compared to the year ended September 30, 2018. The decrease in interest and financing expenses was primarily due to the $102.0 million repayment of the Senior Secured Term Loan Credit Facility (the “Term Loan Facility”) on2020 as, since January 31, 2018, the voluntary satisfaction and termination of the Senior Secured Revolving Credit Facility (the “Revolving Credit Facility”) on September 28, 2018, the redemption of $12.0 million of 6.125% unsecured notes that mature on March 30, 2023 (the “2023 Notes”), and the voluntary repayment of $135.0 million the SBA Debentures, which1, 2021, the Company repaid between March 28, 2019 and May 10, 2019, partially offset by interest payments on the Israeli Notes.

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Base Management Fees and Incentive Fees

no longer incurs management fees under its current internalized structure.

Base management fees for the year ended September 30, 2020 decreased by $4.8 million, or 43.2%, compared to the year ended September 30, 2019 principally due to the decline in our gross assets during the period.


Base management

No incentive fees were paid for the year ended September 30, 2019 decreased2021 or the year ended September 30, 2020. Since January 1, 2021, the Company no longer incurs incentive fees under its current internalized structure.

Professional Fees and Other General and Administrative Expenses

Professional fees and general and administrative expenses for the year ended September 30, 2021 increased by $3.5$3.1 million, or 24.0%206.0%, compared to the year ended September 30, 20182020 primarily due to a decrease in the declineinsurance proceeds received in our gross assets during the period.


Professional Fees and Other General and Administrative Expenses

year ended September 30, 2021 which offset legal expenses.

Professional fees and general and administrative expenses for the year ended September 30, 2020 decreased by $28.3 million, or 88.5%, compared to the year ended September 30, 2019 primarily due to insurance proceeds received related to legal expenses relating to the dismissed stockholder class action, captioned as FrontFour Capital Group LLC, et al. v Brook Taube et al, as well as a decrease in legal expenses, general and administrative expenses, administrator expenses, valuation expenses, and audit expenses, offset by an increase in independent directors expenses and insurance expenses.


Professional fees and general and administrative expenses for the year ended September 30, 2019 increased by $19.9 million, or 166.1%, compared to the year ended September 30, 2018 primarily due to an increase in legal expenses, general and administrative expenses, insurance expenses, and audit expenses in connection with the previously contemplated merger with Sierra Income Corporation ("Sierra"), offset by a decrease in administrator expenses and valuation expenses.

Net Realized Gains/Losses from Investments

We measure realized gains or losses by the difference between the net proceeds from the disposition and the amortized cost basis of an investment, without regard to unrealized gains or losses previously recognized.


During the year ended September 30, 2021, we recognized $42.5 million of realized losses on our portfolio investments. The realized losses were primarily due to the sale of the MCC JV in the first fiscal quarter of 2021.  

During the year ended September 30, 2020, we recognized $50.0 million of realized losses on our portfolio investments. The realized losses were primarily due to the sale of three investments and the write-off of two investments.


During the year ended September 30, 2019, we recognized $112.2 million of realized losses on our portfolio investments. The realized losses were primarily due to the non-cash restructuring transactions of two investments, the sale of two investments and the write-off of two investments, partially offset by a realized gain resulting from exercising warrants and converting junior preferred equity in one portfolio company into common shares of a new portfolio company.


During the year ended September 30, 2018, we recognized $89.2 million of realized losses on our portfolio investments. The realized losses were primarily due to the non-cash restructuring transactions of three investments, as well as the sale of one investment.

Realized loss on extinguishment of debt

In the event that we modify or extinguish our debt prior to maturity, we account for it in accordance with ASC 470-50, Modifications and Extinguishments, in which we measure the difference between the reacquisition price of the debt and the net carrying amount of the debt, which includes any unamortized debt issuance costs.

During the year ended September 30, 2021, the Company recognized a net loss on extinguishment of debt of $0.1 million, which was due to the Company’s $74.0 million repayment of the 2021 Notes on November 20, 2020.



During the year ended September 30, 2020, the Company recognized a net loss on extinguishment of debt of $2.5 million, which was due to the Company'sCompany’s $34.1 million repayment of the Israeli Notes on December 31, 2019, $34.9 million repayment of the Israeli Notes on March 31, 2020 and $21.1 million repayment of the Israeli Notes on April 14, 2020.


During the year ended September 30, 2019, the Company recognized a net loss on extinguishment of debt of $2.0 million, which was primarily due to a loss on extinguishment of debt of $1.8 million from the pre-payment of $135.0 million of SBA Debentures in connection with SBIC LP'sLP’s surrender of its SBIC license and a $0.2 million loss on extinguishment of debt from the $12.0 million partial redemption of the 2023 Notes.


During the year ended September 30, 2018, we recognized a loss on extinguishment of debt of $2.4 million from the payment of the remaining $102.0 million outstanding under the Term Loan Facility, the $13.0 million partial redemption of the 2023 Notes, the $15.0 million repayment of the SBA Debentures, and the voluntary satisfaction and termination of our Revolving Credit Facility in accordance with its terms.

Net Unrealized Appreciation/Depreciation on Investments

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


For the year ended September 30, 2021, we had $25.3 million of net unrealized appreciation on investments. The net unrealized appreciation was comprised of $54.8 million of net unrealized depreciation on investments and $80.1 million of net unrealized appreciation that resulted from the reversal of previously recorded unrealized depreciation on investments that were realized, partially sold, or written-off during the year.

For the year ended September 30, 2020, we had $10.6 million of net unrealized depreciation on investments. The net unrealized depreciation comprised of $37.1 million of net unrealized depreciation on investments, offset by $26.5 million of net unrealized appreciation that resulted from the reversal of previously recorded unrealized depreciation on investments that were realized, partially sold or written-off during the year.


For the year ended September 30, 2019, we had $38.5 million of net unrealized appreciation on investments. The net unrealized appreciation comprised of $59.6 million of net unrealized depreciation on investments, offset by $98.1 million of net unrealized appreciation that resulted from the reversal of previously recorded unrealized depreciation on investments that were realized or written-off during the year.


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For the year ended September 30, 2018, we had $32.2 million of net unrealized depreciation on investments. The net unrealized depreciation comprised of $72.1 million of net unrealized depreciation on investments, offset by $39.9 million of net unrealized appreciation that resulted from the reversal of previously recorded unrealized depreciation on investments that were realized or written-off during the year.
Provision for Deferred Taxes on Unrealized Depreciation on Investments

Certain consolidated subsidiaries of ours are subject to U.S. federal and state income taxes. These taxable subsidiaries are not consolidated with the Company for income tax purposes, but are consolidated for GAAP purposes, and may generate income tax liabilities or assets from temporary differences in the recognition of items for financial reporting and income tax purposes at the subsidiaries. For the years ended September 30, 2021, 2020 and 2019, the Company did not record a change in provision for deferred taxes on the unrealized (appreciation)/depreciation on investments.


Changes in Net Assets from Operations

For the year ended September 30, 2018, the change2021, we recorded a net increase in provision for deferred taxes on the unrealized depreciation on investments was $0.5 million.

Changes in Net Assetsnet assets resulting from Operations(1)

For the year ended September 30, 2020, we recordedoperations of $1.2 million compared to a net decrease in net assets resulting from operations of $65.8 million compared tofor the year ended September 30, 2020, and a net decrease in net assets resulting from operations of $96.6 million for the year ended September 30, 2019 and a net decrease in net assets resulting from operations of $110.9 million for the year ended September 30, 2018 as a result of the factors discussed above. Based on 2,677,891, 2,723,709, and 2,723,709 weighted average common shares outstanding for the years ended September 30, 2021, 2020, and 2019, and 2018,respectively, our per share net decreaseincrease (decrease) in net assets resulting from operations was $24.16, $35.46$0.46, $(24.16) and $40.73$(35.46) for the years ended September 30, 2021, 2020, and 2019, and 2018, respectively.


(1) Per share data has been adjusted for the periods shown to reflect the one-for-twenty reverse stock split effected on July 24, 2020 on a retroactive basis.

Financial Condition, Liquidity and Capital Resources

As a RIC, we distribute substantially all of our net income to our stockholders and have an ongoing need to raise additional capital for investment purposes. To fund growth, we have a number of alternatives available to increase capital, including raising equity, increasing debt, and funding from operational cash flow.


Our liquidity and capital resources historically have been generated primarily from the net proceeds of public offerings of common stock, advances from the Revolving Credit Facility (which the Company voluntarily satisfied and terminated) and net proceeds from the issuance of notes as well as cash flows from operations. In the future, we may generate cash from future offerings of securities, future borrowings and cash flows from operations, including interest earned from the temporary investment of cash in U.S. government securities and other high-quality debt investments that mature in one year or less. Our primary use of funds is investments in our targeted asset classes, cash distributions to our stockholders, and other general corporate purposes.


As of September 30, 2020,2021, we had $56.5$69.4 million in cash and cash equivalents.


In order to maintain our RIC tax treatment under the Code, we intend to distribute to our stockholders substantially all of our taxable income, but we may also elect to periodically spill over certain excess undistributed taxable income from one tax year into the next tax year. In addition, as a BDC, for each taxable year we generally are required to meet a coverage ratio of total assets to total senior securities, which include borrowings and any preferred stock we may issue in the future, of at least 200% (or 150% if, pursuant to the 1940 Act, certain requirements are met). This requirement limits the amount that we may borrow. As of September 30, 2020, the Company’s asset coverage was 199.2% after giving effect to leverage and therefore the Company’s asset coverage is below 200%, the minimum asset coverage requirement under the 1940 Act. As a result, the Company is prohibited from making distributions to stockholders, including the payment of any dividend, and may not employ further leverage until the Company’s asset coverage is at least 200% after giving effect to such leverage.


Credit Facility

Term Loan Facility

The Company had a Term Loan Facility which was scheduled to mature on July 28, 2020.

On September 1, 2017, the Company reduced the Term Loan Facility commitment to $102.0 million from $174.0 million. The reduction was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.6 million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment of debt.

On January 31, 2018, the Company voluntarily prepaid the remaining $102.0 million outstanding on the Term Loan Facility in accordance with its terms. The 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.

Revolving Credit Facility

The Company had a Revolving Credit Facility with ING Capital LLC, as Administrative Agent, in order to borrow funds to make additional investments.

The Revolving Credit Facility had a revolving period that was to end July 28, 2019, followed by a one year amortization period and a final maturity on July 28, 2020.

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On February 14, 2017, the Company elected to reduce the total commitment of the Revolving Credit Facility to $200.0 million from $343.5 million. The reduction was accounted for as a debt modification to a line-of credit or revolving-debt arrangement in accordance with ASC 470-50, Modifications and Extinguishments, which attributed to an acceleration of debt issuance costs in the amount of $1.3 million and recorded on the Consolidated Statements of Operations as a component of interest and financing expenses.

On February 12, 2018, the Company elected to reduce the total commitment of the Revolving Credit Facility to $150.0 million from $200.0 million. The reduction was accounted for as a debt modification to a line-of credit or revolving-debt arrangement in accordance with ASC 470-50, Modifications and Extinguishments, which attributed to an acceleration of debt issuance costs in the amount of $0.4 million and recorded on the Consolidated Statements of Operations as a component of interest and financing expenses.

On September 28, 2018, the Company voluntarily satisfied and terminated the commitments under the Revolving Credit Facility in accordance with its terms. The termination was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $1.0 million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment of debt.

Unsecured Notes

2019 Notes

On March 21, 2012, the Company issued $40.0 million in aggregate principal amount of the 2019 Notes. The 2019 Notes bore interest at a rate of 7.125% per year, and were payable quarterly on March 30, June 30, September 30 and December 30 of each year, beginning June 30, 2012. The 2019 Notes were listed on the NYSE and traded thereon under the trading symbol “MCQ”. On February 22, 2017, the 2019 Notes were redeemed at par plus accrued and unpaid interest. 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 $0.5 million.

2021 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 and together with the 2023 Notes, the "U.S. Notes"“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 became redeemable in whole or in part at any time or from time to time at the Company’s option on or after January 30, 2019. 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. The 2021 Notes were listed on the NYSE and traded thereon under the trading symbol ‘‘MCX’’.


Subsequent to fiscal year ended September 30,

On October 21, 2020, the Company redeemedcaused 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. See “Recent Developments” for more information.


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.

2023 Notes


On March 18, 2013, the Company issued $60.0 million in aggregate principal amount of 2023 Notes. As of March 30, 2016, the 2023 Notes may be redeemed in whole or in part at any time or from time to time at the Company'sCompany’s option. On March 26, 2013, the Company closed an additional $3.5 million in aggregate principal amount of 2023 Notes, pursuant to the partial exercise of the underwriters’ option to purchase additional notes. The 2023 Notes bear interest at a rate of 6.125% per year, payable quarterly on March 30, June 30, September 30 and December 30 of each year, beginning June 30, 2013. The 2023 Notes are listed on the NYSE and trade thereon under the trading symbol “MCV”.



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 agreement.


On March 10, 2018, the Company redeemed $13.0 million in aggregate principal amount of the 2023 Notes. The redemption was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.4$0.3 million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment of debt.


On December 31, 2018, the Company redeemed $12.0 million in aggregate principal amount of the 2023 Notes. The redemption was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.2 million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment of debt.


Secured Notes

Israeli Notes

Effective as of April 14,

On December 21, 2020, the Company had repaid all of its outstanding Israeli Notes. Below is a descriptionannounced that it completed the application process for and was authorized to transfer the listing of the terms2023 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 31, 2020. Effective January 4, 2021, the 2023 Notes trade on the NASDAQ Global Market under the trading symbol “PFXNL.”

Secured Notes

Israeli Notes including covenants related thereto, that the Company was subject to during the years ended September 30, 2020 and 2019 prior to the full repayment of the Israeli Notes.


On January 26, 2018, the Company priced a debt offering in Israel of $121.3 million of Israeli Notes. The Israeli Notes were listed on the Tel Aviv Stock Exchange (the "TASE")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. The Israeli were not registered under the Securities Act of 1933, and could not be offered or sold in the United

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States absent registration under the Securities Act or in transactions exempt from, or not subject to, such registration requirements. In connection with this offering, we were dually listed our common stock on the TASE.

On August 12, 2019, the Company and its wholly owned subsidiaries, Medley Small Business Fund, LP (formerly known as Medley SBIC, LP) and Medley SLF, on the one hand, and the Trustee, on the other hand, entered into an amendment to the deed of trust (the “Deed”) governing the Israeli Notes (the “Amendment” together with the Deed, the "Deed of Trust"). The Amendment amended the Deed by, among other things: (a) modifying Section 2.2 of the Deed to provide for full repayment of the Israeli Notes in eight (8) equal installments, each comprising twelve and one-half percent (12.5%) of the principal amount of the Israeli Notes, beginning on August 12, 2019 (the “Effective Date”) and ending on January 31, 2021, rather than four (4) equal annual installments, each comprising twenty five percent (25%) of the principal amount of the Israeli Notes, that were payable on February 27 of each of the years 2021-2024 (inclusive); (b) changing the interest payment dates for the Israeli Notes from semi-annual to quarterly except for the initial interest payment, which was paid on the Effective Date, and the final interest payment, which will be paid on January 31, 2021; (c) decreasing the annual interest rate on the Israeli Notes by 0.25% per annum on the Effective Date and further decreasing the annual interest rate on the Israeli Notes by 0.50% per annum if  the mergers of the Company, Sierra Income Corporation (“Sierra”), and MDLY (the “Mergers”) close, which further decrease will be effective upon the closing of the Mergers; (d) decreasing the minimum Total Net Asset covenant in Section 6.1.1 of the Deed from $275 million to $215 million; (e) modifying the acceleration event in Section 10.1.25 of the Deed to provide that it will occur if the credit rating on the Israeli Notes drops below (i) il/B of Maalot before November 30, 2019, (ii) il/BB- of Maalot during the period between December 1, 2019 and April 1, 2020, and (iii) il/BBB- of Maalot on or after April 1, 2020; (f) waiving the make-whole and market value payment requirements of Section 9.1.7 of the Deed for all early redemption payments on the Israeli Notes within eighteen (18) months following the Effective Date; (g) requiring each of Medley Small Business Fund and Medley SLF to guarantee all of the Company’s obligations under the Deed (including the Amendment) and the Israeli Notes and to grant security interests on all of their assets (the “Collateral”) to secure such guaranties and providing for the termination of the Medley SLF guaranty and release of the security interests in Medley SLF’s assets upon the closing of the Mergers, subject to certain limitations; (h) that the Company use principal collections from the Collateral to make early redemption payments on the Israeli Notes, which payments will be applied in inverse order of the maturity of the required principal installment payments on the Israeli Notes; (i) providing for a waiver by the Trustee and the holders of the Israeli Notes of any right to accelerate the full balance of the amount due to the holders of the Israeli Notes based on any claims, allegations, actions, and/or rights that were raised, and/or resulting or deriving from certain claims or allegations as set forth in Section 19.1 of the Amendment; (j) providing for a waiver by the Trustee and the holders of the Israeli Notes of certain claims, demands, rights, and/or actions against and/or relating to the Company, its subsidiaries and/or affiliates and their respective employees (including their respective directors, officers, members of the Company’s board of directors, employees, stockholders, stakeholders and advisors); and (k) adding other definitions, representations and covenants to the Deed and making related conforming changes to the Deed. Pursuant to the Amendment, no prepayment penalties were due or payable in connection with the payment of principal made by the Company on the Effective Date.

The Deed (including the Amendment) includes certain customary covenants, including minimum net assets of $215 million and a maximum debt to total assets ratio of 70%. The date for determining compliance with these financial covenants is the date that the Company publishes its financial statements (i.e., in a quarterly report on Form 10-Q or an annual report on Form 10-K) with the SEC. If the Company did not satisfy these financial covenants for two consecutive quarters, it would be an event of default under the Deed. If this event of default would have occurred, the Company had the right to request the trustee for the Israeli Notes (the “Trustee”) to appoint an emergency committee of the three largest noteholders for the purpose of obtaining a one-quarter extension of time to satisfy the financial covenants. If the Company did not make this request and the breach occurred, or if the emergency committee did not grant the extension, then the Trustee would be required to convene a meeting of the noteholders as described below.

In addition to not complying with the financial covenants as described above, the events of default include: (i) a change of control of the Company (defined in the Deed as MCC Advisors’ ceasing to provide investment management or advisory services to the Company); (ii) the Company not publishing a tender offer for the purchase of all of the Israeli Notes within 45 days; (iii) the Company not paying any amount due and payable to the holders of the Israeli Notes within seven business days after the payment due date; (iv) certain insolvency and receivership events with respect to the Company or with respect to all or substantially all of its assets, and (v) the Israeli Notes being delisted from the TASE or the TASE’s suspension of trading of the Israeli Notes for more than 60 days.

If an event of default occurs under the Deed, there is no automatic acceleration or mandatory redemption of the Israeli Notes. Rather, the Trustee is required to convene a meeting of the noteholders for a vote on whether to accelerate the Israeli Notes. Noteholders holding at least 50% of the principal amount of the Israeli Notes must be present at the meeting for a quorum to exist, and if a quorum exists, then the vote of a majority of the noteholders present at the meeting controls.

The foregoing description of the terms of Israeli Notes, the Deed, and the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of each of the Deed and the Amendment incorporated by reference as an exhibit to this annual report on Form 10-K.

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. Execution of the repurchase plan was subject to an open trading window for the Company and continued liquidity at that time and was expected to continue until the full authorized amount was purchased or market conditions changed. The repurchase of the Israeli Notes was not expected to result in any material tax consequences to the Company or the holders of the Israeli Notes.


During the quarter ended December 31, 2018, the Company exchanged $1.0 million United States Dollars to New Israeli Shekels at a rate of 3.73 USD/NIS in order to repurchase the Israeli Notes on the TASE. As the Israeli Notes were trading below par at the time of the repurchase, and the USD/NIS (foreign currency) spot rate was higher than the fixed exchange rate agreed upon in the deed of trust, the Company was able to repurchase and retire 3,812,000 units, which resulted in $1,119,201 aggregate principal amount of the Israeli Notes being retired. The redemption was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized gain of $0.1 million and was recorded on the Consolidated Statements of Operations as a gain on extinguishment of debt.


On December 31, 2019 in addition to the scheduled 12.5% quarterly amortization payment, the Company used proceeds from its principal collections in MedleyPhenixFIN SLF and MedleyPhenixFIN Small Business Fund to pre-pay an additional $19.1 million of the Israeli Notes. The pre-payment was accounted for as a

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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 MedleyPhenixFIN SLF and MedleyPhenixFIN Small Business Fund to pre-pay an additional $19.8 million of the Israeli Notes. The pre-payment was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.9 million and was recorded on the Consolidated Statements of Operations as a net loss on extinguishment of debt.


On April 14, 2020, the Company repaid the remaining $21.1 million of Israeli Notes outstanding, and as such is no longer subject to any covenants relating thereto. The Israeli Notes were redeemed at 100% of their principal amount, plus the accrued interest thereon, through April 14, 2020.


On September 13, 2020, in connection with the redemption of the Israeli Notes, the Company delisted its common stock from the TASE.

SBA Debentures

On March 26, 2013, SBIC LP received a SBIC license from the SBA. The SBIC license allowed SBIC LP to obtain leverage by issuing SBA-guaranteed debentures (“SBA Debentures”), subject to the issuance of a capital commitment by the SBA and other customary procedures. SBA Debentures were non-recourse, interest only debentures with interest payable semi-annually and had a ten year maturity. The principal amount of SBA Debentures were not required to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate of SBA Debentures were fixed on a semi-annual basis at a market-driven spread over U.S. Treasury Notes with 10-year maturities. The SBA, as a creditor, had a superior claim to the SBIC LP’s assets over our stockholders in the event we liquidated the SBIC LP or the SBA exercised its remedies under the SBA Debentures issued by the SBIC LP upon an event of default.

On September 1, 2018, the Company repaid $15.0 million in aggregate principal amount of the SBA Debentures. The repayment 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.

SBIC LP received a letter from the SBA (the “SBA Letter”), dated March 14, 2019, informing SBIC LP of certain alleged regulatory issues constituting a default under the terms of the SBIC LP’s outstanding SBA Debentures. The SBA Letter stated that SBIC LP had until March 29, 2019, fifteen (15) days from the date of the SBA Letter, to provide the SBA with certain additional information regarding the alleged regulatory issues, unless extended by the SBA. SBIC LP’s management submitted an orderly wind-down plan to the SBA to prepay the remaining $135.0 million of outstanding SBA Debentures using available cash at SBIC LP as well as the sale of assets to third parties or affiliates of SBIC LP. On March 28, 2019, SBIC LP agreed and made a repayment of $50.0 million of outstanding SBA Debentures by April 3, 2019 using available cash at SBIC LP and the cure period was extended to April 19, 2019. On April 18, 2019, SBIC LP agreed and made a repayment of $20.0 million of outstanding SBA Debentures on April 23, 2019 and an additional $30.0 million of outstanding SBA Debentures on April 30, 2019 using proceeds from the sale of certain assets and the cure period was extended to May 10, 2019. On May 10, 2019, SBIC LP made the final repayment of the remaining $35.0 million of outstanding SBA Debentures using proceeds from the sale of certain assets. In connection therewith, effective July 1, 2019, SBIC LP surrendered its SBIC license and operates as Medley Small Business Fund.

The $135.0 million in aggregate repayments made in connection with the orderly wind-down plan was accounted for as debt extinguishments in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a cumulative realized loss of $1.8 million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment of debt.

Contractual Obligations and Off-Balance Sheet Arrangements

The Company has a guarantee to issue up to $5.7 million in standby letters of credit through a financial intermediary on behalf of a certain portfolio company. Under this arrangement, if the standby letters of credit were to be issued, the Company would be required to make payments to third parties if the portfolio company was to default on its related payment obligations. The guarantee will renew annually until cancellation.

As of September 30, 20202021 and 2019, the Company had not issued any standby letters of credit under the commitment on behalf of the portfolio company.


As of September 30, 2020, and 2019, we had commitments under loan and financing agreements to fund up to $4.9 million to six portfolio companies and $3.9 million to five portfolio companies and $8.9 million to seven 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, 20202021 and 20192020 is shown in the table below (dollars in thousands):

  September 30,
2021		  September 30,
2020		 
Redwood Services Group, LLC - Revolver $1,575  $1,050 
1888 Industrial Services, LLC - Revolver  1,078   1,078 
Alpine SG - Revolver  1,000   - 
Kemmerer Operations, LLC - Delayed Draw Term Loan  908   908 
NVTN LLC - DDTL  220   220 
Black Angus Steakhouses, LLC - Super Priority DDTL  167   - 
DataOnline Corp. - Revolver  -   179 
NVTN LLC - Super Priority DDTL  -   500 
Total unfunded commitments $4,948  $3,935 

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 September 30, 2020September 30, 2019
1888 Industrial Services, LLC - Revolver$1,078 $— 
Kemmerer Operations, LLC - Delayed Draw Term Loan908 908 
NVTN LLC - DDTL220 — 
NVTN LLC - Super Priority DDTL500 — 
Redwood Services Group, LLC - Revolver1,050 875 
DataOnline Corp. - Revolver179 1,890 
Access Media Holdings, LLC - Series AAA Preferred Equity— 101 
Dynamic Energy Services International LLC - Revolver— 3,255 
Alpine SG, LLC - Revolver— 1,000 
Black Angus Steakhouses, LLC - Delayed Draw Term Loan— 893 
Total$3,935 $8,922 

We have certain contracts under which we have material future commitments. We have entered into an investment management agreement with MCC Advisors on January 11, 2011 (the “Investment Management Agreement”) in accordance with the 1940 Act. The investment management agreementInvestment Management Agreement became effective upon the pricing of our initial public offering. Under the investment management agreement,Investment Management Agreement, MCC Advisors has agreed to provide us with investment advisory and management services. For these services, we have agreed to pay a base management fee equal to a percentage of our gross assets and an incentive fee based on our performance.


We have also entered into an administration agreement with MCC Advisors as our administrator. The administration agreement became effective upon the pricing of our initial public offering. Under the administration agreement, MCC Advisors has agreed to furnish us with office facilities and equipment, provide us clerical, bookkeeping and record keeping services at such facilities and provide us with other administrative services necessary to conduct our day-to-day operations. MCC Advisors will also provideprovided on our behalf significant managerial assistance to those portfolio companies to which we are required to provide such assistance.


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

The following table shows our payment obligations for repaymentInvestment Management Agreement and administration agreement expired at the close of debt and other contractual obligations atbusiness on December 31, 2020, in connection with the Company’s adoption of an internalized management structure.

As of September 30, 2020 (dollars2021, the future fixed commitments for cash payments in thousands):

 Payment Due by Period
 TotalLess than 1 year1 - 3 years3 - 5 yearsMore than 5
years
2021 Notes$74,013 $74,013 $— $— $— 
2023 Notes77,847 — 77,847 — — 
Total contractual obligations$151,860 $74,013 $77,847 $— $— 

If anyconnection with our Notes due 2023 and rent obligations under our office lease for each of the contractual obligations discussed abovenext five years and thereafter are terminated, our costs under any new agreements that we enter into may increase. In addition, we would likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under our investment management agreement and our administration agreement. Any new investment management agreement would also be subject to approval by our stockholders.

as follows:

  2022  2023  2024  2025  2026  Thereafter  Total 
2023 Notes $-  $(77,846,800) $-  $-  $-  $             -  $(77,846,800)
Operating Lease Obligation (1) (84,000) (144,000) (144,000) (144,000)  (144,000) (24,000) (684,000)
Total contractual obligations $(84,000) $ (77,990,800) $(144,000) $(144,000) $(144,000) $(24,000) $ (78,530,800)

(1)Operating Lease Obligation means a rent payment obligation under a lease classified as an operating lease and disclosed pursuant to ASC 842, as may be modified or supplemented.

On March 27, 2015, the Company and Great American Life Insurance Company (“GALIC”) entered into a limited liability company operating agreement to co-manage MCC Senior Loan Strategy JV I LLC (“MCC JV”). The Company and GALIC havehad committed to provide $100 million of equity to MCC JV, with the Company providing $87.5 million and GALIC providing $12.5 million. Approximately $89.8 million was funded as of September 30, 2020 relating to these commitments, of which $78.6 million was from the Company. As of September 30, 2020, MCC JV’s board of managers had approved advances of capital of up to $0.3 million of the remaining capital commitments, of which $0.2 million is from the Company.


MCC JV commenced operations on July 15, 2015. On August 4, 2015, MCC JV entered into a senior secured revolving credit facility (the “JV Facility”) led by Credit Suisse, AG with commitments of $100 million. On March 30, 2017, the Company amended the JV Facility previously administered by CS and facilitated the assignment of all rights and obligations of CS under the JV Facility to Deutsche Bank AG, New York Branch, (“DB”), and increased the total loan commitments to $200 million. The JV Facility bears interest at a rate of LIBOR (with no minimum + 2.75% per annum. On March 29, 2019, the JV Facility reinvestment period was extended to June 28, 2019 from March 30, 2019. On June 28, 2019, the JV Facility reinvestment period was extended to October 28, 2019. On October 28, 2019, the JV Facility reinvestment period was further extended from October 28, 2019 to March 31, 2020, the maturity date was extended to March 31, 2023 and the interest rate was modified from bearing an interest rate of LIBOR (with no minimum) + 2.50% per annum to LIBOR (with no minimum) + 2.75% per annum. As of September 30, 2020, there was approximately $111.3 million outstanding under the JV Facility.


As of September 30, 2020, MCC JV had total investments at fair value of $163.1 million. As of September 30, 2020, MCC JV’s portfolio was comprised of senior secured first lien term loans to 45 different borrowers. As of September 30, 2020, certain investments in one portfolio company were on non-accrual status. Subsequent to the year ended September 30, 2020, the Company, MCC JV, GALIC, and an affiliate of Golub Capital LLC entered into a Membership Interest Purchase Agreement pursuant to which a private 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 the MCC JV. In connection therewith, MCC JV repaid in full all outstanding borrowings under, and terminated, the JV Facility. See “Recent Developments” for more information.

The Company has determined that MCC JV is an investment company under ASC 946, however in accordance with such guidance, the Company will generally not consolidate its investment in a company other than a wholly owned investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company does not consolidate its interest in MCC JV.

On October 8, 2020, the Company, GALIC, MCC JV, and an affiliate of Golub entered into a Membership Interest Purchase Agreement pursuant to which a fund affiliated with and managed by Golub concurrently purchased all of the Company’s interest in the MCC JV and all of GALIC’s interest in the MCC JV for a pre-adjusted gross purchase price of $156.4 million and an adjusted gross purchase price (which constitutes the aggregate consideration for the membership interests) of $145.3 million (giving effect to adjustments primarily for principal and interest payments from portfolio companies of MCC JV from July 1, 2020 through October 7, 2020), resulting in net proceeds (before transaction expenses) of $41.0 million and $6.6 million for MCC and GALIC, respectively, on the terms and subject to the conditions set forth in the Membership Interest Purchase Agreement, including the representations, warranties, covenants and indemnities contained therein. In connection with the closing of the transaction on October 8, 2020, MCC JV repaid in full all outstanding borrowings under, and terminated, its senior secured revolving credit facility, dated as of August 4, 2015, as amended, administered by Deutsche Bank AG, New York Branch.


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Distributions






Distributions

We have elected, and intend to qualify annually, to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code. As a RIC, in any taxable year with respect to which we timely distribute at least 90 percent of the sum of our (i) investment company taxable income (which is generally our net ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses) determined without regard to the deduction for dividends paid and (ii) net tax exempt interest income (which is the excess of our gross tax exempt interest income over certain disallowed deductions), we (but not our stockholders) generally will not be subject to U.S. federal income tax on investment company taxable income and net capital gains that we distribute to our stockholders. We intend to distribute annually all or substantially all of such income, but we may also elect to periodically spill over certain excess undistributed taxable income from one tax year to the next tax year. To the extent that we retain our net capital gains or any investment company taxable income, we will be subject to U.S. federal income tax. We may choose to retain our net capital gains or any investment company taxable income, and pay the associated federal corporate income tax including the federalor excise tax, described below.


Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4% U.S. federal excise tax payable by us. To avoid this tax, we must distribute (or be deemed to have distributed) during each calendar year an amount equal to the sum of:


1)at least 98.0% of our ordinary income (not taking into account any capital gains or losses) for the calendar year;

2)at least 98.2% of the amount by which our capital gains exceed our capital losses (adjusted for certain ordinary losses) for a one-year period ending  on October 31st of the calendar year; and

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

1)at least 98.0% of our ordinary income (not taking into account any capital gains or losses) for the calendar year;

2)at least 98.2% of the amount by which our capital gains exceed our capital losses (adjusted for certain ordinary losses) for a one-year period ending on October 31st of the calendar year; and

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

While we intend to distribute any income and capital gains in the manner necessary to minimize imposition of the 4% U.S. federal excise tax, sufficient amounts of our taxable income and capital gains may not be distributed to avoid entirely the imposition of the tax. In that event, we will be liable for the tax only on the amount by which we do not meet the foregoing distribution requirement.


We intend to pay quarterly dividends to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to pay a specified level of dividends or year-to-year increases in dividends. In addition, the inability to satisfy the asset coverage test applicable to us as a BDC could limit our ability to pay dividends. All dividends will be paid at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our RIC tax treatment, compliance with applicable BDC regulations and such other factors as our board of directors may deem relevant from time to time. We cannot assure you that we will pay dividends to our stockholders in the future.

To the extent our taxable earnings fall below the total amount of our distributions for a taxable year, a portion of those distributions may be deemed a return of capital to our stockholders for U.S. federal income tax purposes.

Stockholders should read any written disclosure accompanying a distribution carefully and should not assume that the source of any distribution is our ordinary income or gains.

We have adopted an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a cash dividend or other distribution, each stockholder that has not “opted out” of our dividend reinvestment plan will have their dividends automatically reinvested in additional shares of our common stock rather than receiving cash dividends. Stockholders who receive distributions in the form of shares of common stock will be subject to the same federal, state and local tax consequences as if they received cash distributions.

There were no dividend distributions during the year ended September 30, 2020:

2021.


Related Party Transactions

Concurrent with the pricing of our IPO, we entered into a number of business relationships with affiliated or related parties, including the following:

●We entered into the Investment Management Agreement with MCC Advisors on January 11, 2011, which expired December 31, 2020. Mr. Brook Taube, Chairman and Chief Executive Officer through December 31, 2020 and director through January 21, 2021 and Mr. Seth Taube, director through January 21, 2021, are both affiliated with MCC Advisors and Medley.

●Through December 31, 2020, MCC Advisors provided us with the office facilities and administrative services necessary to conduct day-to-day operations pursuant to our administration agreement. We reimbursed MCC Advisors for the allocable portion (subject to the review and approval of our board of directors) of overhead and other expenses incurred by it in performing its obligations under the administration agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the cost of our Chief Financial Officer and Chief Compliance Officer and their respective staffs.


•We entered into the Investment Management Agreement with MCC Advisors. Mr. Brook Taube, our Chairman and Chief Executive Officer, is a managing partner and senior portfolio manager of MCC Advisors, and Mr. Seth Taube, one of our directors, is a managing partner of MCC Advisors.

•MCC Advisors provides us with the office facilities and administrative services necessary to conduct day-to-day operations pursuant to our administration agreement. We reimburse MCC Advisors for the allocable portion (subject to the review and approval of our board of directors) of overhead and other expenses incurred by it in performing its obligations under the administration agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the cost of our Chief Financial Officer and Chief Compliance Officer and their respective staffs.

•We have entered into a license agreement with Medley Capital LLC, pursuant to which Medley Capital LLC has granted us a non-exclusive, royalty-free license to use the name “Medley.”

•Certain affiliates of MCC Advisors, Medley Capital LLC, their respective affiliates and some of their employees purchased in the IPO an aggregate of 833,333 shares of common stock at the IPO price per share of $12.00. We received the full proceeds from the sale of these shares, and no underwriting discounts or commissions were paid in respect of these shares.

On June 12, 2020, the Company entered into the Expense Support Agreement with MCC Advisors and Medley LLC, pursuant to which MCC Advisors and Medley LLC agreed (jointly and severally) to cap the management fee and all of the Company’s other operating expenses (except

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interest expenses, certain extraordinary strategic transaction and expenses, and other expenses approved by the Special Committee) at $667,000 per month (the “Cap”). Under the Expense Support Agreement, the Cap became effective on June 1, 2020 and expiredwas to expire on September 30, 2020. On September 29, 2020, the board of directors, including all of the independent directors, extended the term of the Expense Support Agreement through the end of quarter ending December 31, 2020.

MCC Advisors and The Expense Support Agreement expired by its affiliates mayterms at the close of business on December 31, 2020, in connection with the future manage other accounts that have investment mandates that are similar, in whole and in part, with ours. MCC Advisors and its affiliates may determine that an investment is appropriate for us and for one or more of those other accounts. In such event, depending on the availability of such investment and other appropriate factors, and pursuant to MCC Advisors’ allocation policy, MCC Advisors or its affiliates may determine that we should invest side-by-side with one or more other accounts. We will not make any investments if they are not permitted by applicable law and interpretive positionsadoption of the SEC and its staff, the exemptive order grantedinternalized management structure by the SEC, or if they are inconsistent with MCC Advisors’ allocation procedures. Further, any investments made by related parties will be made in accordance with MCC Advisors’ related party transaction procedures.

On November 25, 2013, the Company obtained an exemptive order from the SEC that permits us to participate in negotiated co-investment transactions with certain affiliates, eachboard of whose investment adviser is Medley, LLC or an investment adviser controlled by Medley, LLC in a manner consistent with our investment objective, strategies and restrictions, as well as regulatory requirements and other pertinent factors (the “Prior Exemptive Order”). On March 29, 2017, the Company, MCC Advisors and certain other affiliated funds and investment advisers received an exemptive order (the “Exemptive Order”) that supersedes the Prior Exemptive Order and allows affiliated registered investment companies to participate in co-investment transactions with us that would otherwise have been prohibited under Section 17(d) and 57(a)(4) of the 1940 Act and Rule 17d-1 thereunder. On October 4, 2017, the Company, MCC Advisors and certain of our affiliates received an exemptive order that supersedes the Exemptive Order (the “Current Exemptive Order”) and allows, in addition to the entities already covered by the Exemptive Order, Medley LLC and its subsidiary, Medley Capital LLC, to the extent they hold financial assets in a principal capacity, and any direct or indirect, wholly or majority owned subsidiary of Medley LLC that is formed in the future, to participate in co-investment transactions with us that would otherwise be prohibited by either or both of Sections 17(d) and 57(a)(4) of the 1940 Act. However, neither we nor the affiliated funds are obligated to invest or co-invest when investment opportunities are referred to us or them.

directors.

In addition, we have adopted a formal business code of conduct and ethics that governs the conduct of our CEO, CFO, chief accounting officer (which role is currently fulfilled by our CFO) and MCC Advisors’ officers, directors and employees.controller (Covered Officers). Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Delaware General Corporation Law.

Our Code of Business Conduct and Ethics requires that all Covered Officers promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between an individual’s personal and professional relationships. Pursuant to our Code of Business Conduct and Ethics, each Covered Officer must disclose to the Company’s CCO any conflicts of interest, or actions or relationships that might give rise to a conflict. Any approvals or waivers under our Code of Business Conduct and Ethics must be considered by the disinterested directors.


Investment Management Agreement

We entered into an investment management agreement with MCC Advisors on January 11, 2011 (the “Investment Management Agreement”), which expired December 31, 2020.

Under the terms of the Investment Management Agreement, MCC Advisors:


•determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes;

•identifies, evaluates and negotiates the structure of the investments we make (including performing due diligence on our prospective portfolio companies); and

•executes, closes, monitors and administers the investments we make, including the exercise of any voting or consent rights.

●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); and

●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 arewere not exclusive, and it iswas free to furnish similar services to other entities so long as its services to us arewere not impaired.


Pursuant to the Investment Management Agreement, we paypaid MCC Advisors a fee for investment advisory and management services consisting of a base management fee and a two-part incentive fee.


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. Moreover, the revised incentive fee includes a netting mechanism and is subject to a rolling three-year look back from January 1, 2016 forward. Under no circumstances willwould the new fee structure result in higher fees to MCC Advisors than fees under the prior investment management agreement.


The following discussion of our base management fee and two-part incentive fee reflectsreflect 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 arewere effective as of January 1, 2016, and arewere 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 providesprovided under the Investment Management Agreement. The Fee Waiver Agreement doesdid not change the second component of the incentive fee, which iswas 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 were to beis 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 such termination to the Company. In that regard, onOn 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, without further action by our board of directors.2020. On May 21, 2020, the board of directors,

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Board, including all of the independent directors, extended the term of the Investment Management Agreement through the end of the then-current quarter, ended June 30, 2020. On June 15,12, 2020, the board of directors,Board, including all of the independent directors, extended the term of the Investment Management Agreement through the end of the quarter ended September 30, 2020. On September 29, 2020, the board of directors,Board, including all of the independent directors, extended the term of the Investment Management Agreement through the end of quarter ending December 31, 2020. See "Recent Developments"Mr. Brook Taube, Chairman and "Note 15" toChief Executive Officer through December 31, 2020 and director through January 21, 2021 and Mr. Seth Taube, director through January 21, 2021 are affiliated with MCC Advisors and Medley.


On November 18, 2020, the financial statements for more information.

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 has served as an independent director of the Company since April 2019, as interim Chief Executive Officer, and Ellida McMillan as Chief Financial Officer of the Company, each effective January 1, 2021. In connection with his appointment, Mr. Lorber stepped down from the Compensation Committee of the Board, the Nominating and Corporate Governance Committee of the Board, and the Special Committee of the Board.


Base Management Fee

For

Through December 31, 2020, for providing investment advisory and management services to us, MCC Advisors receivesreceived a base management fee. The base management fee iswas 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 iswas payable quarterly in arrears. The base management fee willwas 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 willwas to be appropriately pro-rated for any partial quarter.


Incentive Fee

The

Through December 31, 2020, the incentive fee hashad two components, as follows:


Incentive Fee Based on Income

The first component of the incentive fee iswas payable quarterly in arrears and iswas based on our pre-incentive fee net investment income earned during the calendar quarter for which the incentive fee iswas being calculated. MCC Advisors iswas entitled to receive the incentive fee on net investment income from us if our Ordinary Income (as defined below) exceedsexceeded a quarterly “hurdle rate” of 1.5%. The hurdle amount iswas 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.


Beginning with the calendar quarter that commenced on January 1, 2016, the incentive fee on net investment income is determined and paid quarterly in arrears at the end of each calendar quarter by reference to our aggregate net investment income, as adjusted as described below, from the calendar quarter then ending and the eleven preceding calendar quarters (or if shorter, the number of quarters that have occurred since January 1, 2016). We refer to such period as the “Trailing Twelve Quarters.”

The hurdle amount for the incentive fee on net investment income is determined on a quarterly basis, and is equal to 1.5% multiplied by the Company’s net asset value at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. The hurdle amount is 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 incentive fee for any partial period will be appropriately prorated. Any incentive fee on net investment income will be paid to MCC Advisors on a quarterly basis, and will be based on the amount by which (A) aggregate net investment income (“Ordinary Income”) in respect of the relevant Trailing Twelve Quarters exceeds (B) the hurdle amount for such Trailing Twelve Quarters. The amount of the excess of (A) over (B) described in this paragraph for such Trailing Twelve Quarters is referred to as the “Excess Income Amount.” For the avoidance of doubt, Ordinary Income is net of all fees and expenses, including the reduced base management fee but excluding any incentive fee on Pre-Incentive Fee net investment income or on the Company’s capital gains.

Quarterly Incentive Fee Based on Income

The incentive fee on net investment income for each quarter is determined as follows:

•No incentive fee on net investment income is payable to MCC Advisors for any calendar quarter for which there is no Excess Income Amount;

•100% of the Ordinary Income, if any, that exceeds the hurdle amount, but is less than or equal to an amount, which we refer to as the “Catch-up Amount,” determined as the sum of 1.8182% multiplied by the Company’s net assets at the beginning of each applicable calendar quarter, as adjusted as noted above, comprising the relevant Trailing Twelve Quarters is included in the calculation of the incentive fee on net investment income; and

•17.5% of the Ordinary Income that exceeds the Catch-up Amount is included in the calculation of the incentive fee on net investment income.

The amount of the incentive fee on net investment income that will be paid to MCC Advisors for a particular quarter will equal the excess of the incentive fee so calculated minus the aggregate incentive fees on net investment income that were paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant Trailing Twelve Quarters but not in excess of the Incentive Fee Cap (as described below).

The incentive fee on net investment income that is paid to MCC Advisors for a particular quarter is subject to a cap (the “Incentive Fee Cap”). The Incentive Fee Cap for any quarter is an amount equal to (a) 17.5% of the Cumulative Net Return (as defined below) during the relevant Trailing Twelve Quarters minus (b) the aggregate incentive fees on net investment income that were paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant Trailing Twelve Quarters.

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“Cumulative Net Return” means (x) the Ordinary Income in respect of the relevant Trailing Twelve Quarters minus (y) any Net Capital Loss (as described below), if any, in respect of the relevant Trailing Twelve Quarters. If, in any quarter, the Incentive Fee Cap is zero or a negative value, the Company will pay no incentive fee on net investment income to MCC Advisors for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is a positive value but is less than the incentive fee on net investment income that is payable to MCC Advisors for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company will pay an incentive fee on net investment income to MCC Advisors equal to the Incentive Fee Cap for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is equal to or greater than the incentive fee on net investment income that is payable to MCC Advisors for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company will pay an incentive fee on net investment income to MCC Advisors, calculated as described above, for such quarter without regard to the Incentive Fee Cap.

“Net Capital Loss” in respect of a particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or unrealized, and dilution to the Company’s net assets due to capital raising or capital actions, in such period and (ii) aggregate capital gains, whether realized or unrealized and accretion to the Company’s net assets due to capital raising or capital action, in such period.

Dilution to the Company’s net assets due to capital raising is calculated, in the case of issuances of common stock, as the amount by which the net asset value per share was adjusted over the transaction price per share, multiplied by the number of shares issued. Accretion to the Company’s net assets due to capital raising is calculated, in the case of issuances of common stock (including issuances pursuant to our dividend reinvestment plan), as the excess of the transaction price per share over the amount by which the net asset value per share was adjusted, multiplied by the number of shares issued. Accretion to the Company’s net assets due to other capital action is calculated, in the case of repurchases by the Company of its own common stock, as the excess of the amount by which the net asset value per share was adjusted over the transaction price per share multiplied by the number of shares repurchased by the Company.

For the avoidance of doubt, the purpose of the new incentive fee calculation under the Fee Waiver Agreement is to permanently reduce aggregate fees payable to MCC Advisors by the Company, effective as of January 1, 2016. In order to ensure that the Company will pay MCC Advisors lesser aggregate fees on a cumulative basis, as calculated beginning January 1, 2016, we will, at the end of each quarter, also calculate the base management fee and incentive fee on net investment income owed by the Company to MCC Advisors based on the formula in place prior to January 1, 2016. If, at any time beginning January 1, 2016, the aggregate fees on a cumulative basis, as calculated based on the formula in place after January 1, 2016, would be greater than the aggregate fees on a cumulative basis, as calculated based on the formula in place prior to January 1, 2016, MCC Advisors shall only be entitled to the lesser of those two amounts.

The second component of the incentive fee iswas determined and payable in arrears as of the end of each calendar year (or upon termination of the investment management agreementInvestment Management Agreement as of the termination date) and equalsequaled 20.0% of our cumulative aggregate realized capital gains less cumulative realized capital losses, unrealized capital depreciation (unrealized depreciation on a gross investment-by-investment basis at the end of each calendar year) and all capital gains upon which prior performance-based capital gains incentive fee payments were previously made to the investment adviser.


Under GAAP, the Company calculates the second component of the incentive fee as if the Company had realized all assets at their fair values as of the reporting date. Accordingly, when applicable, the Company accrues a provisional capital gains incentive fee taking into account any unrealized gains or losses. As the provisional capital gains incentive fee is subject to the performance of investments until there is a realization event, the amount of the provisional capital gains incentive fee accrued at a reporting date may vary from the capital gains incentive that is ultimately realized and the differences could be material.
Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies.

Valuation of Portfolio Investments

The Company follows ASC 820 for measuring the fair value of portfolio investments. Fair value is the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters, or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models 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:

●Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities at the measurement date.

●Level 2 - Valuations based on inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable at the measurement date. This category includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in non-active markets including actionable bids from third parties for privately held assets or liabilities, and observable inputs other than quoted prices such as yield curves and forward currency rates that are entered directly into valuation models to determine the value of derivatives or other assets or liabilities.



●Level 3 - Valuations based on inputs that are unobservable and where there is little, if any, market activity at the measurement date. The inputs for the determination of fair value may require significant management judgment or estimation and are based upon management’s assessment of the assumptions that market participants would use in pricing the assets or liabilities. These investments include debt and equity investments in private companies or assets valued using the Market or Income Approach and may involve pricing models whose inputs require significant judgment or estimation because of the absence of any meaningful current market data for identical or similar investments. The inputs in these valuations may include, but are not limited to, capitalization and discount rates, beta and EBITDA multiples. The information may also include pricing information or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence.

We value investments for which market quotations are readily available at their market quotations, which are generally obtained from an independent pricing service or multiple broker-dealers or market makers. We weight the use of third-party broker quotes, if any, in determining fair value based on our understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer. However, a readily available market value is not expected to exist for many of the investments in our portfolio, and we value these portfolio investments at fair value as determined in good faith by our board of directors under our valuation policy and process. We may seek pricing information with respect to certain of our investments from pricing services or brokers or dealers in order to value such investments.


Valuation methods may include comparisons of financial ratios of the portfolio companies that issued such private equity securities to peer companies that are public, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flows, the markets in which the portfolio company does business, and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we will consider the pricing indicated by the external event to corroborate the private equity valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.


Our board of directors is ultimately and solely responsible for determining the fair value of the investments in our portfolio that are not publicly traded, whose market prices are not readily available on a quarterly basis or any other situation where portfolio investments require a fair value determination.


65






With respect to investments for which market quotations are not readily available, our board of directors will undertake a multi-step valuation process each quarter, as described below:


•Our quarterly valuation process begins with each investment being initially valued by the valuation professionals responsible for monitoring the portfolio investment.

•Preliminary valuation conclusions are then documented and discussed with senior management.

•Independent third-party valuation firms are also employed for all of our investments for which there is not a readily available market value. At least twice annually, including at year end, the valuation for each portfolio investment is reviewed by an independent valuation firm.

•The audit committee of our board of directors reviews the preliminary valuations of the valuation professionals, senior management and independent valuation firms.

•Our audit committee reviews and the board of directors approves the valuations and determines the fair value of each investment in our portfolio in good faith based on the input of MCC Advisors, the respective independent valuation firms and the audit committee.

●Our quarterly valuation process generally begins with each investment being initially valued by a Valuation Firm.

●Preliminary valuation conclusions will then be documented and discussed with senior management.

●The audit committee of the board of directors reviews the preliminary valuations with management and the Valuation Firms.

●The board of directors discusses the valuations and determines the fair value of each investment in the Company’s portfolio in good faith based on the input of management, the respective Valuation Firms and the audit committee.

In following these approaches, the types of factors that are taken into account in fair value pricing investments include available current market data, including relevant and applicable market trading and transaction comparables; applicable market yields and multiples; security covenants; call protection provisions; information rights; the nature and realizable value of any collateral; the portfolio company’s ability to make payments; the portfolio company’s earnings and discounted cash flows; the markets in which the portfolio company does business; comparisons of financial ratios of peer companies that are public; comparable merger and acquisition transactions; and the principal market and enterprise values.


Determination of fair values involves subjective judgments and estimates made by management. The notes to our financial statements refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our consolidated financial statements.


Revenue Recognition

Our revenue recognition policies are as follows:

Investments and Related Investment IncomeWe account for investment transactions on a trade-date basis and interest income, adjusted for amortization of premiums and accretion of discounts, is recorded on an accrual basis. For investments with contractual PIK interest, which represents contractual interest accrued and added to the principal balance that generally becomes due at maturity, we will not accrue PIK interest if the portfolio company valuation indicates that the PIK interest is not collectible. Origination, closing and/or commitment fees associated with investments in portfolio companies are recognized as income when the investment transaction closes. Other fees are capitalized as deferred revenue and recorded into income over the respective period. Prepayment penalties received by the Company for debt instruments paid back to the Company prior to the maturity date are recorded as income upon receipt. Realized gains or losses on investments are measured by the difference between the net proceeds from the disposition and the amortized cost basis of investment, without regard to unrealized gains or losses previously recognized. We report changes in the fair value of investments that are measured at fair value as a component of the net change in unrealized appreciation/(depreciation) on investments in our Consolidated Statements of Operations.


Non-accrualWe place loans on non-accrual status when principal and interest payments are past due by 90 days or more, or when there is reasonable doubt that we will collect principal or interest. Accrued interest is generally reversed when a loan is placed on non-accrual. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in our management’s judgment, are likely to remain current. At September 30, 2021, certain investments in 9 portfolio companies held by the Company were on non-accrual status with a combined fair value of approximately $13.9 million, or 9.2% of the fair value of our portfolio. At September 30, 2020, certain investments in eight portfolio companies held by the Company were on non-accrual status with a combined fair value of approximately $21.7 million, or 8.8% of the fair value of our portfolio. At September 30, 2019, certain investments in seven portfolio companies held by the Company were on non-accrual status with a combined fair value of approximately $22.3 million, or 5.6% of the fair value of our portfolio. At September 30, 2018, certain investments in nine portfolio companies held by the Company were on non-accrual status with a combined fair value of approximately $48.1 million, or 7% of the fair value of our portfolio.


Federal Income Taxes

The Company has elected, and intends to qualify annually, to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code commencing with its first taxable year as a corporation, and it intends to operate in a manner so as to maintain its RIC tax treatment. As a RIC,To do so, among other things, the Company is required to meet certain source of income and asset diversification requirements. Once qualified as a RIC, the Companyrequirements and must timely distribute to its stockholders at least 90% of the sum of investment company taxable income (“ICTI”) including PIK, as defined by the Code, and net tax exempt interest income (which is the excess of our gross tax exempt interest income over certain disallowed deductions) for each taxable year in order to be eligible for tax treatment under Subchapter M of the Code.year. The Company will be subject to a nondeductible U.S. federal excise tax of 4% on undistributed income if it does not distribute at least 98% of its net ordinary income for any calendar year and 98.2% of its capital gain net income for each one-year period ending on October 31 of such calendar year and any income realized, but not distributed, in preceding years and on which weit did not pay federal income tax. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year dividend distributions into the next tax year and pay a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions for excise tax purposes, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.


66






Because federal income tax regulationsrequirements differ from GAAP, distributions in accordance with tax regulationsrequirements may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the consolidated financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.


Recent Developments

On November 9, 2021, the Company entered into an underwriting agreement, by and between the Company and Oppenheimer & Co. Inc., as representative of the several underwriters named in Exhibit A thereto, in connection with the issuance and sale (the “Offering”) of $57,500,000 (including the underwriters’ option to purchase up to $7,500,000 aggregate principal amount) in aggregate principal amount of its 5.25% Notes due 2028 (the “2028 Notes”). The Offering occurred on November 15, 2021, pursuant to the Company’s effective shelf registration statement on Form N-2 previously filed with the SEC, as supplemented by a preliminary prospectus supplement dated November 8, 2021, the pricing term sheet dated November 9, 2021 and a final prospectus supplement dated November 9, 2021. Effective November 16, 2021, the 2028 Notes began trading on the NASDAQ Global Market under the trading symbol “PFXNZ.”

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

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.

Subsequent to fiscal year ended September 30, 2020, the global outbreak of2021, the COVID-19 pandemic has adversely affected some of the Company’s investmentscontinues and continuesmay further continue to have adverse consequences on the U.S. and global economies. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual portfolio companies, remains uncertain. At the time of this filing, there is no indication of a reportable subsequent event impacting the Company’s financial statements adversely for the year ended September 30, 2020. The Company cannot predict the extent to which its financial condition and results of operations will be adversely affected at this time.affected. The potential impact to our results will depend to a largean extent on future developments and new information that may emerge regarding the duration and lasting severity of COVID-19. The Company continues to observe and respond to the evolving COVID-19 environment and its potential impact on areas across its business.


On October 8, 2020, Further, the Company, GALIC, MCC JV,potential exists for additional variants of COVID-19, including the Omicron variant, to impede the global economic recovery and an affiliate of Golub Capital LLC (“Golub”) entered into a Membership Interest Purchase Agreement (the “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, on the terms and subject to the conditions set forthexacerbate geographic differences in the Agreement, including the representations, warranties, covenantsspread of, and indemnities contained therein. The Company estimates that transaction expenses will be approximately $1.6 million resulting in net proceeds (including estimated transaction expenses) of $39.5 million. The Company is expectedresponse to, record a realized loss for the quarter ending December 31, 2020 of approximately $40.3 million on its investment in MCC JV and a corresponding change in unrealized appreciation/depreciation of $38.9 million in order to reverse the previously recorded unrealized depreciation with respect to the investment. In connection with the closing of the transaction on October 8, 2020, MCC JV repaid in full all outstanding borrowings under, and terminated, the JV Facility.COVID-19.



On November 18, 2020, the board of directors approved adoption of an internalized management structure effective January 1, 2021. The new management structure will replace the current Investment Management Agreement and the Administration Agreement, each of which expire on December 31, 2020. In further connection with the adoption by the board of directors of an internalized management structure, the board of directors appointed David Lorber as interim Chief Executive Officer of the Company, effective January 1, 2021, and Ellida McMillan as Chief Financial Officer of the Company, effective January 1, 2021. David Lorber’s base annual salary will be $425,000, with a discretionary annual bonus of up to 100% of the base annual salary. Ellida McMillan’s base annual salary will be $300,000, with a discretionary annual bonus of up to $200,000.

Also, in connection with the adoption of an internalized management structure, 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. In addition, effective January 1, 2021, the name of the Company will be changed to PhenixFIN Corporation.

On November 20, 2020 (the “Redemption Date”), the Company redeemed $74,012,825 in aggregate principal amount of the issued and outstanding 2021 Notes. The 2021 Notes were redeemed at 100% of their principal amount ($25 per 2021 Note), plus accrued and unpaid interest thereon from October 31, 2020, through, but excluding, the Redemption Date. The redemption will be accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments.



67






Item 7A. Quantitative and Qualitative Disclosures About Market Risk


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, 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 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, 2020,2021, we did not engage in hedging activities.


As of September 30, 2020, 87.4%2021, 58.1% of our income-bearing investment portfolio bore interest based on floating rates.rates based upon fair value. In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased. 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 are not offset by a corresponding increase in the spread over LIBOR 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. 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. The composition of our floating rate debt investments by cash interest rate LIBOR floor as of September 30, 20202021 was as follows (dollars in thousands):

 September 30, 2020
LIBOR FloorFair Value% of Floating
Rate Portfolio
Under 1%$— — %
1% to under 2%90,958 100.0 
2% to under 3%— — 
Total$90,958 100.0 %

  September 30, 2021 
LIBOR Floor Fair Value  % of Floating Rate Portfolio 
Under 1% $-   -%
1% to under 2%  59,323   100.0 
2% to under 3%  -   - 
No Floor  -   - 
Total $59,323   100.0%

Based on our Consolidated Statements of Assets and Liabilities as of September 30, 2020,2021, the following table (dollars in thousands) shows the approximate increase/(decrease) in components of net assets resulting from operations of hypothetical LIBOR 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)		 
Up 300 basis points $6,500  $(2,300) $4,200 
Up 200 basis points  4,300   (1,600)  2,700 
Up 100 basis points  2,200   (800)  1,400 
Down 100 basis points  (2,200)  800   (1,400)
Down 200 basis points  (4,300)  1,600   (2,700)
Down 300 basis points  (6,500)  2,300   (4,200)

(1)Assumes no defaults or prepayments by portfolio companies over the next twelve months.


Basis point increase/(decrease)
Interest Income(1)
Interest ExpenseNet Increase/
(Decrease)
300$2,200 $— $2,200 
2001,300 — 1,300 
100300 — 300 
(100)— — — 
(200)— — — 
(300)— — — 

(1)Assumes no defaults or prepayments by portfolio companies over the next twelve months.
68






Item 8. Consolidated Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
  Page
Page
Report of Independent Registered Public Accounting Firm 
F-1
F-1
Consolidated Statements of Assets and Liabilities as of September 30, 20202021 and 20192020 
F-2
F-3
Consolidated Statements of Operations for the years ended September 30, 2021, 2020 2019 and 20182019 
F-3
F-4
Consolidated Statements of Changes in Net Assets for the years ended September 30, 2021, 2020 2019 and 20182019 
F-5
F-5
Consolidated Statements of Cash Flows for the years ended September 30, 2021, 2020 2019 and 20182019 
F-6
F-6
Consolidated Schedules of Investments as of September 30, 20202021 and 20192020 
F-7
F-7
Notes to Consolidated Financial Statements 
F-18
F-18



69







Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Medley CapitalPhenixFIN Corporation


Opinion on the Financial Statements

We have audited the accompanying consolidated statements of assets and liabilities of Medley CapitalPhenixFIN Corporation (the Company), including the consolidated schedules of investments, as of September 30, 20202021 and 2019,2020, 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, 2020,2021, 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, 20202021 and 2019,2020, 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, 20202021 in conformity with U.S. generally accepted accounting principles.


Basis for Opinion

These 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 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 its 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, 20202021 and 2019,2020, by correspondence with the custodians, directly with designees of the portfolio companies, debt agents and brokers, as applicable, or by other appropriate auditing procedures where replies were not received. 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.

Critical Audit Matter

The 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.

F-1


Valuation of investments using significant unobservable inputs and assumptions

Description of the Matter

At September 30, 2021, the fair value of the Company’s investments categorized as Level 3 within the fair value hierarchy (Level 3 investments) totaled $115.8 million.

As 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.

Auditing 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.

How We Addressed the Matter in Our Audit

Our 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 fair value.

For 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.

We 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 valuations.

/s/ Ernst & Young LLP


We have served as the Company’s auditor since 2010


2010.

New York, New York

December 11, 202020, 2021


F-1


PHENIXFIN CORPORATION






Medley Capital Corporation

Consolidated Statements of Assets and Liabilities

 September 30, 2020September 30, 2019
ASSETS  
Investments at fair value  
Non-controlled/non-affiliated investments (amortized cost of $117,360,954 and $204,736,370, respectively)$114,321,948 $189,895,466 
Affiliated investments (amortized cost of $92,898,755 and $108,310,029, respectively)84,873,023 99,539,605 
Controlled investments (amortized cost of $117,874,821 and $154,601,177, respectively)47,548,578 107,453,927 
Total investments at fair value246,743,549 396,888,998 
Cash and cash equivalents56,522,148 68,245,213 
Restricted cash (see Note 2)— 16,038,690 
Other assets2,093,559 2,973,731 
Interest receivable624,524 1,592,406 
Receivable for dispositions and investments sold— 419,299 
Fees receivable119,028 108,305 
Total assets$306,102,808 $486,266,642 
LIABILITIES  
Notes payable (net of debt issuance costs of $905,624 and $5,274,164, respectively)$150,960,662 $251,731,729 
Accounts payable and accrued expenses2,108,225 11,956,755 
Interest and fees payable801,805 2,904,748 
Management and incentive fees payable (see Note 6)1,392,022 2,231,175 
Administrator expenses payable (see Note 6)156,965 861,785 
Deferred revenue10,529 103,583 
Due to affiliate53,083 44,337 
Total liabilities$155,483,291 $269,834,112 
Guarantees and Commitments (see Note 8)  
NET ASSETS  
Common stock, par value $0.001 per share, 5,000,000 common shares authorized, 2,723,709 and 2,723,709 common shares issued and outstanding, respectively(1)
$2,724 $2,724 
Capital in excess of par value672,381,617 673,584,467 
Total distributable earnings/(loss)(521,764,824)(457,154,661)
Total net assets150,619,517 216,432,530 
Total liabilities and net assets$306,102,808 $486,266,642 
NET ASSET VALUE PER SHARE(1)
$55.30 $79.46 

(1)Authorized, issued and outstanding common shares and net asset value per share have been adjusted for the periods shown to reflect the one-for-twenty reverse stock split effected on July 24, 2020 on a retroactive basis, as described in Note 1.

  September 30,
2021		  September 30,
2020		 
Assets:      
Investments at fair value      
Non-controlled, non-affiliated investments (amortized cost of $92,214,167 and $117,360,954, respectively) $84,152,678  $114,321,948 
Affiliated investments (amortized cost of $75,963,427 and $92,898,755, respectively)  57,595,245   84,873,023 
Controlled investments (amortized cost of $39,490,097 and $117,874,821, respectively)  9,891,860   47,548,578 
Total Investments at fair value  151,639,783   246,743,549 
Cash and cash equivalents  69,433,256   56,522,148 
Receivables:        
Fees receivable  1,872,700   119,028 
Interest receivable  371,576   624,524 
Paydown receivable  292,015   - 
Dividends receivable  81,211   - 
Other assets  1,401,746   2,093,559 
Total Assets $225,092,287  $306,102,808 
         
Liabilities:        
Notes payable (net of debt issuance costs of $412,795 and $905,624, respectively) $77,434,005  $150,960,662 
Due to broker  1,586,000   - 
Accounts payable and accrued expenses  1,416,524   2,108,225 
Due to affiliates  280,323   53,083 
Administrator expenses payable (see Note 6)  67,920   156,965 
Management and incentive fees payable (see Note 6)  -   1,392,022 
Interest and fees payable  -   801,805 
Deferred revenue  -   10,529 
Other liabilities  613,534   - 
Total Liabilities  81,398,306   155,483,291 
         
Commitments and Contingencies (see Note 8)        
         
Net Assets:        
Common Shares, $0.001 par value; 5,000,000 shares authorized; 2,723,709 shares issued; 2,517,221 and 2,723,709 common shares outstanding, respectively  2,517   2,724 
Capital in excess of par value  688,866,642   672,381,617 
Total distributable earnings (loss)  (545,175,178)  (521,764,824)
Total Net Assets  143,693,981   150,619,517 
Total Liabilities and Net Assets $225,092,287  $306,102,808 
         
Net Asset Value Per Common Share $57.08  $55.30 

See accompanying notes to consolidated financial statements.


F-2


PHENIXFIN CORPORATION






Medley Capital Corporation

Consolidated Statements of Operations
 For the years ended September 30
 202020192018
INVESTMENT INCOME   
Interest from investments   
Non-controlled/non-affiliated investments:   
Cash$9,137,394 $25,368,027 $39,636,027 
Payment-in-kind863,744 1,755,260 3,815,332 
Affiliated investments:   
Cash1,182,294 2,197,555 2,177,167 
Payment-in-kind2,425,557 2,604,279 3,398,660 
Controlled investments:   
Cash84,505 337,956 1,521,820 
Payment-in-kind500,767 2,800,890 3,560,572 
Total interest income14,194,261 35,063,967 54,109,578 
Dividend income (net of provisional taxes of $0, $0 and $(437,584), respectively)6,256,250 8,218,480 7,991,444 
Interest from cash and cash equivalents378,077 712,017 245,356 
Fee income (see Note 9)692,988 2,304,287 4,474,220 
Total investment income21,521,576 46,298,751 66,820,598 
EXPENSES   
Base management fees (see Note 6)6,358,750 11,189,646 14,723,910 
Interest and financing expenses14,935,017 24,049,485 27,918,291 
Professional fees (see Note 8)(4,768,050)19,323,082 4,430,233 
General and administrative3,285,259 7,398,534 2,170,904 
Administrator expenses (see Note 6)2,226,831 3,323,989 3,582,162 
Directors fees1,451,077 1,258,378 1,270,523 
Insurance1,463,391 623,064 542,314 
Expenses before expense support reimbursement and management and incentive fee waivers24,952,275 67,166,178 54,638,337 
Expense support reimbursement (see Note 6)(710,294)
Management fee waiver (see Note 6)— — (380,000)
Total expenses net of expense support reimbursement and management and incentive fee waivers24,241,981 67,166,178 54,258,337 
Net investment income before excise taxes(2,720,405)(20,867,427)12,562,261 
Excise tax expense— — (157,922)
NET INVESTMENT INCOME/(LOSS)(2,720,405)(20,867,427)12,404,339 
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS   
Net realized gain/(loss) from investments
Non-controlled/non-affiliated investments(9,973,416)(24,762,224)(89,221,587)
Affiliated investments(928,990)(7,670,970)— 
Controlled investments(39,076,425)(79,739,742)— 
Net realized gain/(loss) from investments(49,978,831)(112,172,936)(89,221,587)
Net unrealized appreciation/(depreciation) on investments
Non-controlled/non-affiliated investments9,898,237 20,727,499 14,044,097 
Affiliated investments2,648,353 (6,864,255)(950,805)
Controlled investments(23,178,993)24,634,707 (45,287,441)
Net unrealized appreciation/(depreciation) on investments(10,632,403)38,497,951 (32,194,149)
Change in provision for deferred taxes on unrealized (appreciation)/depreciation on investments— — 474,352 
Loss on extinguishment of debt (see Note 5)(2,481,374)(2,032,655)(2,386,957)
Net realized and unrealized gain/(loss) on investments(63,092,608)(75,707,640)(123,328,341)
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS$(65,813,013)$(96,575,067)$(110,924,002)
WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS PER COMMON SHARE(1)
$(24.16)$(35.46)$(40.73)
WEIGHTED AVERAGE - BASIC AND DILUTED NET INVESTMENT INCOME PER COMMON SHARE(1)
$(1.00)$(7.66)$4.55 
WEIGHTED AVERAGE COMMON STOCK OUTSTANDING - BASIC AND DILUTED (SEE NOTE 11)(1)
2,723,709 2,723,709 2,723,709 
DIVIDENDS DECLARED PER COMMON SHARE(2)
$— $3.00 $10.40 

(1)Basic and diluted shares has been adjusted for the periods shown to reflect the one-for-twenty reverse stock split effected on July 24, 2020 on a retroactive basis, as described in Note 1.
F-3






(2)Dividends declared per common share has been adjusted for the periods shown to reflect the one-for-twenty reverse stock split effected on July 24, 2020 on a retroactive basis, as described in Note 1.

  For the Years Ended September 30 
  2021  2020  2019 
Interest Income:         
Interest from investments         
Non-controlled, non-affiliated investments:         
Cash $5,974,807  $9,137,394  $25,368,027 
Payment in-kind  609,964   863,744   1,755,260 
Affiliated investments:            
Cash  1,099,809   1,182,294   2,197,555 
Payment in-kind  327,804   2,425,557   2,604,279 
Controlled investments:            
Cash  75,000   84,505   337,956 
Payment in-kind  -   500,767   2,800,890 
Total interest income  8,087,384   14,194,261   35,063,967 
Dividend income  21,564,348   6,256,250   8,218,480 
Interest from cash and cash equivalents  10,402   378,077   712,017 
Fee income (see Note 9)  2,566,519   692,988   2,304,287 
Other income  78,204   -   - 
Total Investment Income  32,306,857   21,521,576   46,298,751 
             
Expenses:            
Base management fees (see Note 6)  1,146,403   6,358,750   11,189,646 
Interest and financing expenses  5,800,100   14,935,017   24,049,485 
General and administrative expenses  1,012,147   3,285,259   7,398,534 
Salaries and benefits  1,993,277   -   - 
Administrator expenses (see Note 6)  612,983   2,226,831   3,323,989 
Insurance expenses  1,619,536   1,463,391   623,064 
Directors fees  1,039,717   1,451,077   1,258,378 
Professional fees, net (see Note 8)  559,975   (4,768,050)  19,323,082 
Expenses before expense support reimbursement and management and incentive fee waivers  13,784,138   24,952,275   67,166,178 
Expense support reimbursement (see Note 6)  -   (710,294)  - 
Total expenses net of expense support reimbursement and management and incentive fee waivers  13,784,138   24,241,981   67,166,178 
Net Investment Income  18,522,719   (2,720,405)  (20,867,427)
             
Realized and unrealized gains (losses) on investments            
Net realized gains (losses):            
Non-controlled, non-affiliated investments  7,747,672   (9,973,416)  (24,762,224)
Affiliated investments  (10,088,405)  (928,990)  (7,670,970)
Controlled investments  (40,144,795)  (39,076,425)  (79,739,742)
Total net realized gains (losses)  (42,485,528)  (49,978,831)  (112,172,936)
Net change in unrealized gains (losses):            
Non-controlled, non-affiliated investments  (5,022,484)  9,898,237   20,727,499 
Affiliated investments  (10,342,450)  2,648,353   (6,864,255)
Controlled investments  40,728,006   (23,178,993)  24,634,707 
Total net change in unrealized gains (losses)  25,363,072   (10,632,403)  38,497,951 
Loss on extinguishment of debt (see Note 5)  (122,355)  (2,481,374)  (2,032,655)
Total realized and unrealized gains (losses)  (17,244,811)  (63,092,608)  (75,707,640)
             
Net Increase (Decrease) in Net Assets Resulting from Operations $1,277,908  $(65,813,013) $(96,575,067)
             
Weighted Average Basic and diluted earnings per common share $0.48  $(24.16) $(35.46)
Weighted Average Basic and diluted net investment income (loss) per common share $6.92  $(1.00) $(7.66)
Weighted Average Common Shares Outstanding - Basic and Diluted (see Note 11)  2,677,891   2,723,709   2,723,709 
Dividends Declared per Common Share $-  $-  $3.00 

See accompanying notes to consolidated financial statements.



PHENIXFIN CORPORATION

F-4







Medley Capital Corporation

Consolidated Statements of Changes in Net Assets
Common StockTotal Distributable Earnings/(Loss)Total Net Assets
Shares(1)
Par AmountCapital in Excess of Par Value
Balance at September 30, 20172,723,709 $2,724 $705,097,848 $(244,671,255)$460,429,317 
OPERATIONS
Net investment income/(loss)— — — 12,404,339 12,404,339 
Net realized gain/(loss) from investments— — — (89,221,587)(89,221,587)
Net unrealized appreciation/(depreciation) on investments— — — (32,194,149)(32,194,149)
Change in provision for deferred taxes on unrealized (appreciation)/depreciation on investments— — — 474,352 474,352 
Net loss on extinguishment of debt— — — (2,386,957)(2,386,957)
SHAREHOLDER DISTRIBUTIONS
Distributions from earnings— — — (22,025,185)(22,025,185)
Return of Capital(6,301,403)— (6,301,403)
Tax reclassification of shareholders' equity in accordance with generally accepted accounting principals— — (157,925)157,925 — 
Total increase/(decrease) in net assets— — (6,459,328)(132,791,262)(139,250,590)
Balance at September 30, 20182,723,709 2,724 698,638,520 (377,462,517)321,178,727 
OPERATIONS
Net investment income/(loss)— — — (20,867,427)(20,867,427)
Net realized gain/(loss) from investments— — — (112,172,936)(112,172,936)
Net unrealized appreciation/(depreciation) on investments— — — 38,497,951 38,497,951 
Net loss on extinguishment of debt— — — (2,032,655)(2,032,655)
SHAREHOLDER DISTRIBUTIONS
Return of capital— — (8,171,130)— (8,171,130)
Tax reclassification of shareholders' equity in accordance with generally accepted accounting principals— — (16,882,923)16,882,923 — 
Total increase/(decrease) in net assets— — (25,054,053)(79,692,144)(104,746,197)
Balance at September 30, 20192,723,709 2,724 673,584,467 (457,154,661)216,432,530 
OPERATIONS
Net investment income/(loss)— — — (2,720,405)(2,720,405)
Net realized gain/(loss) from investments— — — (49,978,831)(49,978,831)
Net unrealized appreciation/(depreciation) on investments— — — (10,632,403)(10,632,403)
Net loss on extinguishment of debt— — — (2,481,374)(2,481,374)
SHAREHOLDER DISTRIBUTIONS
Tax reclassification of shareholders' equity in accordance with generally accepted accounting principals— — (1,202,850)1,202,850 — 
Total increase/(decrease) in net assets— — (1,202,850)(64,610,163)(65,813,013)
Balance at September 30, 20202,723,709 $2,724 $672,381,617 $(521,764,824)$150,619,517 
(1)Shares of Common Stock have been adjusted for the periods shown to reflect the one-for-twenty reverse stock split effected on July 24, 2020 on a retroactive basis, as described in Note 1.

  Common Stock  Total    
  Shares  Par Amount  Capital in Excess of Par Value  Distributable Earnings/(Loss)  Total Net Assets 
Balance at September 30, 2018  2,723,709  $2,724  $698,638,520  $(377,462,517) $321,178,727 
                     
OPERATIONS                    
Net investment income (loss)  -   -   -   (20,867,427)  (20,867,427)
Net realized gains (losses) on investments  -   -   -   (112,172,936)  (112,172,936)
Net change in unrealized appreciation (depreciation) on investments  -   -   -   38,497,951   38,497,951 
Net loss on extinguishment of debt  -   -   -   (2,032,655)  (2,032,655)
SHAREHOLDER DISTRIBUTIONS                    
Return of Capital  -   -   (8,171,130)  -   (8,171,130)
Tax reclassification of shareholders’ equity in accordance with generally accepted accounting principles  -   -   (16,882,923)  16,882,923   - 
Total Increase (Decrease) in Net Assets  -   -   (25,054,053)  (79,692,144)  (104,746,197)
Balance at September 30, 2019  2,723,709   2,724   673,584,467   (457,154,661)  216,432,530 
                     
OPERATIONS                    
Net investment income (loss)  -   -   -   (2,720,405)  (2,720,405)
Net realized gains (losses) on investments  -   -   -   (49,978,831)  (49,978,831)
Net change in unrealized appreciation (depreciation) on investments  -   -   -   (10,632,403)  (10,632,403)
Net loss on extinguishment of debt  -   -   -   (2,481,374)  (2,481,374)
SHAREHOLDER DISTRIBUTIONS                    
Tax reclassification of shareholders’ equity in accordance with generally accepted accounting principles  -   -   (1,202,850)  1,202,850   - 
Total Increase (Decrease) in Net Assets  -   -   (1,202,850)  (64,610,163)  (65,813,013)
Balance at September 30, 2020  2,723,709   2,724   672,381,617   (521,764,824)  150,619,517 
                     
OPERATIONS                    
Net investment income (loss)  -   -   -   18,522,719   18,522,719 
Net realized gains (losses) on investments  -   -   -   (42,485,528)  (42,485,528)
Net change in unrealized appreciation (depreciation) on investments  -   -   -   25,363,072   25,363,072 
Net loss on extinguishment of debt  -   -   -   (122,355)  (122,355)
CAPITAL SHARE TRANSACTIONS                    
Repurchase of common shares  (206,488)  (207)  (8,203,237)  -   (8,203,444)
Tax reclassification of shareholders’ equity in accordance with generally accepted accounting principles  -   -   24,688,262   (24,688,262)  - 
Total Increase (Decrease) in Net Assets  (206,488)  (207)  16,485,025   (23,410,354)  (6,925,536)
Balance at September 30, 2021  2,517,221  $2,517  $688,866,642  $(545,175,178) $143,693,981 

See accompanying notes to consolidated financial statements.


F-5


PHENIXFIN CORPORATION






Medley Capital Corporation

Consolidated Statements of Cash Flows

  For the Years Ended
September 30		 
  2021  2020  2019 
          
Cash Flows from Operating Activities:         
Net increase (decrease) in net assets resulting from operations $1,277,908  $(65,813,013) $(96,575,067)
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  (937,768)  (4,211,154)  (9,606,292)
Net amortization of premium (discount) on investments  (44,455)  (118,290)  (286,665)
Amortization of debt issuance cost  363,812   2,870,483   3,022,516 
Net realized (gain) loss from investments  42,485,528   49,978,831   112,172,936 
Net unrealized (appreciation) depreciation on investments  (25,363,072)  10,632,403   (38,497,951)
Proceeds from sale and settlements of investments  124,303,888   110,627,326   261,233,495 
Purchases, originations and participations  (45,340,354)  (16,763,667)  (66,474,607)
Loss on extinguishment of debt  122,355   2,481,374   2,032,655 
(Increase) decrease in operating assets:            
Other assets (1)  1,305,347   880,172   446,711 
Interest receivable  252,948   967,883   4,784,670 
Receivable for dispositions and investments sold  -   419,299   (259,042)
Receivable for paydowns  (292,015)  -   - 
Fees receivable  (1,753,672)  (10,723)  78,971 
Dividends receivable  (81,211)  -   - 
Increase (decrease) in operating liabilities:            
Accounts payable and accrued expenses  (691,701)  (9,848,530)  9,020,922 
Interest and fees payable  (801,805)  (2,102,943)  (375,270)
Management and incentive fees payable, net  (1,392,022)  (839,153)  (1,116,499)
Administrator expenses payable  (89,045)  (704,820)  53,239 
Deferred revenue  (10,529)  (93,054)  (88,569)
Due to affiliate  227,240   8,746   5,286 
Due to broker  1,586,000   -   - 
Net cash provided by (used in) operating activities  95,127,377   78,361,170   179,571,439 
Paydowns on debt  (74,012,825)  (106,122,925)  (163,122,780)
Debt issuance costs paid  -   -   (14,361)
Payments of cash dividends  -   -   (8,171,130)
Offering costs paid  -   -   354,754 
Repurchase of common shares  (8,203,444)  -   - 
Net cash provided by (used in) financing activities  (82,216,269)  (106,122,925)  (170,953,517)
Net increase (decrease) in cash and cash equivalents  12,911,108   (27,761,755)  8,617,922 
Cash and cash equivalents, beginning of period  56,522,148   84,283,903   75,665,981 
Cash and cash equivalents, end of period $69,433,256  $56,522,148  $84,283,903 
             
Supplemental information:            
Interest paid during the year $6,601,905  $14,167,477  $21,402,239 
Supplemental non-cash information:            
Non-cash purchase of investments $-  $12,950,924  $20,576,235 
Non-cash sale of investments $-  $12,950,924  $20,528,752 
             
Cash $69,433,256  $56,522,148  $68,245,213 
Restricted Cash  -   -   16,038,690 
Total cash and restricted cash shown in the statement of cash flows $69,433,256  $56,522,148  $84,283,903 

 For the years ended September 30
 202020192018
Cash flows from operating activities   
NET INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS$(65,813,013)$(96,575,067)$(110,924,002)
ADJUSTMENTS TO RECONCILE NET INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS TO NET CASH PROVIDED/(USED) BY OPERATING ACTIVITIES:
Investment increases due to Payment-in-kind interest(4,211,154)(9,606,292)(9,545,703)
Net amortization of premium/(discount) on investments(118,290)(286,665)(959,112)
Amortization of debt issuance costs2,870,483 3,022,516 3,583,158 
Net realized (gain)/loss from investments49,978,831 112,172,936 89,221,587 
Net deferred income taxes— — (911,936)
Net unrealized (appreciation)/depreciation on investments10,632,403 (38,497,951)32,194,149 
Proceeds from sale and settlements of investments110,627,326 261,233,495 267,611,933 
Purchases, originations and participations(16,763,667)(66,474,607)(196,961,869)
Loss on extinguishment of debt2,481,374 2,032,655 2,386,957 
(Increase)/decrease in operating assets:
Other assets880,172 446,711 (98,620)
Interest receivable967,883 4,784,670 2,993,972 
Receivable for dispositions and investments sold419,299 (259,042)71,638 
Fees receivable(10,723)78,971 578,480 
Increase/(decrease) in operating liabilities:
Accounts payable and accrued expenses(9,848,530)9,020,922 1,072,287 
Interest and fees payable(2,102,943)(375,270)(479,873)
Management and incentive fees payable, net(839,153)(1,116,499)(964,330)
Administrator expenses payable(704,820)53,239 (51,248)
Deferred revenue(93,054)(88,569)(67,400)
Due to affiliate8,746 5,286 (42,296)
NET CASH PROVIDED/(USED) BY OPERATING ACTIVITIES78,361,170 179,571,439 78,707,772 
Cash flows from financing activities
Borrowings on debt— — 140,775,690 
Paydowns on debt(106,122,925)(163,122,780)(217,500,000)
Debt issuance costs paid— (14,361)(6,515,112)
Payments of cash dividends— (8,171,130)(28,326,588)
Offering costs paid— 354,754 (47,739)
NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES(106,122,925)(170,953,517)(111,613,749)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS(27,761,755)8,617,922 (32,905,977)
CASH, RESTRICTED CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR84,283,903 75,665,981 108,571,958 
CASH, RESTRICTED CASH AND CASH EQUIVALENTS, END OF YEAR$56,522,148 $84,283,903 $75,665,981 
Supplemental Information:   
Interest paid during the year$14,167,477 $21,402,239 $24,676,749 
Supplemental non-cash information:
Non-cash purchase of investments$12,950,924 $20,576,235 $7,443,658 
Non-cash sale of investments$12,950,924 $20,528,752 $7,443,658 
 For the years ended September 30
 202020192018
Cash$56,522,148 $68,245,213 $75,665,981 
Restricted Cash— 16,038,690 — 
Total cash and restricted cash shown in the statement of cash flows$56,522,148 $84,283,903 $75,665,981 

(1)Excludes non-cash recognition of a right of use asset of $613,534.

See accompanying notes to consolidated financial statements.

F-6

F-6


PHENIXFIN CORPORATION







Medley Capital Corporation

Consolidated Schedule of Investments

September 30, 2021

Company(1) Industry Type of Investment Maturity  Par Amount(2)  Cost(3)  Fair Value(4)  % of Net
Assets(5)		 
                    
Non-Controlled/Non-Affiliated Investments:               
                    
Alpine SG, LLC (8) High Tech IndustriesSenior Secured First Lien Term Loan (LIBOR + 5.75% Cash, 1.00% LIBOR Floor)(14)  11/16/2022  $4,715,808  $4,715,809  $4,715,809   3.29%
    Senior Secured Incremental First Lien Term Loan (LIBOR + 8.50% Cash, 1.00% LIBOR Floor)(14)  11/16/2022   472,087   472,087   472,087   0.33%
    Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 5.75% Cash, 1.00% LIBOR Floor)(14)  11/16/2022   2,277,293   2,277,293   2,277,293   1.58%
    Senior Secured Incremental First Lien Term Loan (LIBOR + 6.50% Cash, 1.00% LIBOR Floor)(14)  11/16/2022   4,174,037   4,107,317   4,174,037   2.90%
    Senior Secured Incremental First Lien Term Loan  (LIBOR + 6.50% Cash, 1.00% LIBOR Floor)(14)  11/16/2022   2,999,802   2,946,540   2,999,802   2.09%
    Senior Secured Incremental First Lien Term Loan (LIBOR + 6.50% Cash, 1.00% LIBOR Floor)(14)  11/16/2022   1,000,000   982,916   1,000,000   0.70%
           15,639,027   15,501,962   15,639,028   10.89%
                         
Autosplice, Inc. Automotive Senior Secured First Lien Term Loan (LIBOR + 8.00% Cash & 2.00% PIK, 1.00% LIBOR Floor)(14)  4/30/2022   11,826,036   11,826,036   11,826,036   8.23%
           11,826,036   11,826,036   11,826,036   8.23%
                         
Be Green Packaging, LLC Containers, Packaging & Glass Equity - 417 Common Units      1   416,250   -   0.00%
           1   416,250   -   0.00%
                         
Chimera Investment Corp.(11) Banking, Finance, Insurance & Real Estate Equity - 117,310 Class C Preferred Units(17)(20)      117,310   2,884,724   3,019,559   2.10%
           117,310   2,884,724   3,019,559   2.10%
                         
Cleaver-Brooks, Inc. Manufacturing 7.875% Senior Secured Notes(18)  3/1/2023   9,364,000   9,306,052   9,270,360   6.45%
           9,364,000   9,306,052   9,270,360   6.45%
                         
CM Finance SPV, LLC Energy: Oil & Gas Unsecured Debt(10)      101,463   101,463   -   0.00%
           101,463   101,463   -   0.00%
                         
CPI International, Inc. Aerospace & Defense Senior Secured Second Lien Term Loan (LIBOR + 7.25% Cash, 1.00% LIBOR Floor)(13)  7/28/2025   2,607,062   2,599,906   2,489,744   1.73%
           2,607,062   2,599,906   2,489,744   1.73%
                         
DataOnline Corp. High Tech Industries Senior Secured First Lien Term Loan (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)(14)  11/13/2025   4,912,500   4,912,500   4,863,375   3.39%
    Revolving Credit Facility  (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)(14)(16)  11/13/2025   714,286   714,286   707,143   0.49%
           5,626,786   5,626,786   5,570,518   3.88%
                         
Dividend and Income Fund(11) Banking, Finance, Insurance & Real Estate Equity - 87,483 Common Units(17)      87,483   1,281,845   1,275,502   0.89%
       ��   87,483   1,281,845   1,275,502   0.89%
                         
Dream Finders Homes, LLC(11) Construction & Building Preferred Equity  (8.00% PIK)      4,905,011   4,905,011   4,757,860   3.31%
           4,905,011   4,905,011   4,757,860   3.31%


Company(1) Industry Type of Investment Maturity  Par Amount(2)  Cost(3)  Fair Value(4)  % of Net
Assets(5)		 
                    
Footprint Acquisition, LLC Services: Business Preferred Equity  (8.75% PIK)(10)      4,049,398   4,049,398   2,956,061   2.06%
    Equity - 150 Common Units      150   -   -   0.00%
           4,049,548   4,049,398   2,956,061   2.06%
                         
Global Accessories Group, LLC Consumer goods: Non-durable Equity - 3.8% Membership Interest      380   151,337   -   0.00%
           380   151,337   -   0.00%
                         
Great AJAX Corp.(11) Banking, Finance, Insurance & Real Estate Equity - 253,651 Common Units(17)      253,651   3,316,414   3,421,752   2.38%
           253,651   3,316,414   3,421,752   2.38%
                         
Invesco Mortgage Capital, Inc.(11) Banking, Finance, Insurance & Real Estate Equity - 205,000 Class C Preferred Units(17)(21)      205,000   5,035,506   5,217,250   3.63%
           205,000   5,035,506   5,217,250   3.63%
                         
Lighting Science Group Corporation Containers, Packaging & Glass Warrants - 0.62% of Outstanding Equity(18)      5,000,000   955,680   -   0.00%
           5,000,000   955,680   -   0.00%
                         
MFA Financial, Inc. Banking, Finance, Insurance & Real Estate Equity - 31,692 Class C Preferred Units(17)(24)      31,692   762,171   778,989   0.54%
           31,692   762,171   778,989   0.54%
                         
New Residential Investment Corp.(11) Banking, Finance, Insurance & Real Estate Equity - 206,684 Class B Preferred Units(17)(22)      206,684   5,129,170   5,206,370   3.62%
           206,684   5,129,170   5,206,370   3.62%
                         
New York Mortgage Trust, Inc.(11) Banking, Finance, Insurance & Real Estate Equity -  165,000 Class E Preferred Units(17)(23)      165,000   4,102,076   4,182,750   2.91%
           165,000   4,102,076   4,182,750   2.91%
                         
Point.360 Services: Business Senior Secured First Lien Term Loan (LIBOR + 6.00% PIK)(10)(15)  7/8/2020   2,777,366   2,103,712   -   0.00%
           2,777,366   2,103,712   -   0.00%
                         
RateGain Technologies, Inc. Hotel, Gaming & Leisure Unsecured Debt (4.50% Cash)(12)  10/2/2023   532,671   532,671   -   0.00%
    Unsecured Debt (4.50% Cash)(12)  4/1/2024   704,762   704,762   -   0.00%
           1,237,433   1,237,433   -   0.00%
                         
Redwood Services Group, LLC(8) Services: Business Revolving Credit Facility  (LIBOR + 6.00% Cash, 1.00% LIBOR Floor)(13)(16)  6/6/2023   175,000   175,000   175,000   0.12%
           175,000   175,000   175,000   0.12%
                         
Sendero Drilling Company, LLC Energy: Oil & Gas Unsecured Debt  (9.00% Cash)(10)  8/1/2022   233,750   222,544   -   0.00%
           233,750   222,544   -   0.00%
                         
Seotowncenter, Inc. Services: Business Equity - 3,434,169.6 Common Units      3,434,170   566,475   -   0.00%
           3,434,170   566,475   -   0.00%


Company(1) Industry Type of Investment Maturity  Par Amount(2)  Cost(3)  Fair Value(4)  % of Net
Assets(5)		 
                    
SMART Financial Operations, LLC Retail Equity - 700,000 Class A Preferred Units      700,000   700,000   -   0.00%
           700,000   700,000   -   0.00%
                         
Stancor, Inc. Services: Business Equity - 263,814.43 Class A Units      263,814   263,814   -   0.00%
           263,814   263,814   -   0.00%
                         
Thryv Holdings, Inc.(11) Services: Business Senior Secured First Lien Term Loan B (LIBOR + 8.50% Cash, 1.00% LIBOR Floor)(13)  3/1/2026   5,770,000   5,610,988   5,863,763   4.08%
           5,770,000   5,610,988   5,863,763   4.08%
                         
Velocity Pooling Vehicle, LLC Automotive Equity - 5,441 Class A Units      5,441   302,464   64,167   0.05%
    Warrants - 0.65% of Outstanding Equity  3/30/2028   6,506   361,667   76,727   0.05%
           11,947   664,131   140,894   0.10%
                         
Walker Edison Furniture Company LLC Consumer goods: Durable Equity - 10,244 Common Units      10,244   1,500,000   2,361,242   1.64%
           10,244   1,500,000   2,361,242   1.64%
                         
Watermill-QMC Midco, Inc. Automotive Equity - 1.3% Partnership Interest(9)      518,283   518,283   -   0.00%
           518,283   518,283   -   0.00%
                         
Wingman Holdings, Inc. (f/k/a Crow Precision Components, LLC) Aerospace & Defense Equity - 350 Common Units      350   700,000   -   0.00%
           350   700,000   -   0.00%
                         
Subtotal Non-Controlled/Non-Affiliated Investments     $75,318,491  $92,214,167  $84,152,678   58.56%
                    
Affiliated Investments:(6)                   
                         
1888 Industrial Services, LLC(8) Energy: Oil & Gas Senior Secured First Lien Term Loan A  (LIBOR + 5.00% PIK, 1.00% LIBOR Floor)(10)(14)  9/30/2021(25)    $9,946,741  $9,473,066  $-   0.00%
    Senior Secured First Lien Term Loan B (LIBOR + 8.00% PIK, 1.00% LIBOR Floor)(10)(14)  9/30/2021(25)   25,937,520   19,468,870   -   0.00%
    Senior Secured First Lien Term Loan C (LIBOR + 5.00%, 1.00% LIBOR Floor)(14)    9/30/2021(25)   1,231,932   1,191,257   24,637   0.02%
    Revolving Credit Facility  (LIBOR +5.00% PIK, 1.00% LIBOR Floor)(14)(16)  9/30/2021(25)     3,554,069   3,554,069   3,554,069   2.47%
    Equity - 17,493.63 Class A Units      -   -   -   0.00%
           40,670,262   33,687,262   3,578,706   2.49%
                         
Black Angus Steakhouses, LLC(8) Hotel, Gaming & Leisure Senior Secured First Lien Delayed Draw Term Loan  (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)(13)  6/30/2022   758,929   758,929   758,929   0.53%
    Senior Secured First Lien Term Loan (LIBOR + 9.00% PIK, 1.00% LIBOR Floor)(10)(13)  6/30/2022   8,412,596   7,767,533   2,279,814   1.59%
    Senior Secured First Lien Super Priority DDTL  (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)(13)(16)  6/30/2022   1,500,000   1,500,000   1,500,000   1.04%
           10,671,525   10,026,462   4,538,743   3.16%


Company(1) Industry Type of Investment Maturity  Par Amount(2)  Cost(3)  Fair Value(4)  % of Net
Assets(5)		 
                    
Caddo Investors Holdings 1 LLC(11) Forest Products & Paper Equity - 6.15% Membership Interest(19)      2,528,826   2,528,826   3,454,786   2.40%
           2,528,826   2,528,826   3,454,786   2.40%
                         
Dynamic Energy Services International LLC Energy: Oil & Gas Senior Secured First Lien Term Loan (LIBOR + 13.50% PIK)(10)(15)  12/31/2021   12,109,957   7,328,568   -   0.00%
    Equity - 12,350,000 Class A Units      12,350,000   -   -   0.00%
           24,459,957   7,328,568   -   0.00%
                         
JFL-NGS Partners, LLC Construction & Building Equity - 57,300 Class B Units      57,300   57,300   26,862,813   18.69%
           57,300   57,300   26,862,813   18.69%
                         
JFL-WCS Partners, LLC Environmental Industries Equity - 129,588 Class B Units      129,588   129,588   8,099,949   5.64%
           129,588   129,588   8,099,949   5.64%
                         
Kemmerer Operations, LLC(8) Metals & Mining Senior Secured First Lien Term Loan (15.00% PIK)  6/21/2023   2,381,985   2,381,985   2,360,547   1.64%
    Senior Secured First Lien Delayed Draw Term Loan  (15.00% PIK)(16)  6/21/2023   163,915   163,915   162,441   0.11%
    Equity - 6.7797 Common Units      7   962,717   553,746   0.39%
           2,545,907   3,508,617   3,076,734   2.14%
                         
Path Medical, LLC Healthcare & Pharmaceuticals Senior Secured First Lien Term Loan A  (LIBOR + 9.50% Cash, 1.00% LIBOR Floor)(10)(13)  10/11/2021   5,805,894   5,805,894   2,249,835   1.57%
    Senior Secured First Lien Term Loan B  (LIBOR + 13.00% PIK, 1.00% LIBOR Floor)(10)(13)  10/11/2021   7,646,823   6,483,741   -   0.00%
    Warrants - 7.68% of Outstanding Equity        123,867   499,751   -   0.00%
           13,576,584   12,789,386   2,249,835   1.57%
                         
URT Acquisition Holdings Corporation Services: Business Warrants      28,912   -   920,000   0.64%
           28,912   -   920,000   0.64%
                         
US Multifamily, LLC (11) Banking, Finance, Insurance & Real Estate Senior Secured First Lien Term Loan (10.00% Cash)  12/31/2022   2,577,418   2,577,418   2,577,418   1.79%
    Equity - 33,300 Preferred Units      33,300   3,330,000   2,236,261   1.56%
           2,610,718   5,907,418   4,813,679   3.35%
                         
Subtotal Affiliated Investments     $97,279,579  $75,963,427  $57,595,245   40.08%
                         
Controlled Investments:(7)                   
                         
FlexFIN LLC Services: Business Equity Interest       $2,500,000  $2,500,000  $2,500,000   1.74%
           2,500,000   2,500,000   2,500,000   1.74%
                         
NVTN LLC(8) Hotel, Gaming & Leisure Senior Secured First Lien Delayed Draw Term Loan  (LIBOR + 4.00% Cash, 1.00% LIBOR Floor)(10)(13)(16)    12/31/2024     6,565,875   6,565,875   6,414,860   4.47%
    Senior Secured First Lien Super Priority DDTL  (LIBOR + 4.00% Cash, 1.00% LIBOR Floor)(13)(16)  12/31/2024   1,000,000   998,150   977,000   0.68%
    Senior Secured First Lien Term Loan B  (LIBOR + 9.25% PIK, 1.00% LIBOR Floor)(10)(13)  12/31/2024   14,963,195   12,305,096   -   0.00%


Company(1) Industry Type of Investment Maturity  Par Amount(2)  Cost(3)  Fair Value(4)  % of Net
Assets(5)		 
                         
    Senior Secured First Lien Term Loan C (LIBOR + 12.00% PIK, 1.00% LIBOR Floor)(10)(13)  12/31/2024   10,014,223   7,570,054   -   0.00%
    Equity - 787.4 Class A Units      9,550,922   9,550,922   -   0.00%
           42,094,215   36,990,097   7,391,860   5.15%
                         
Subtotal Control Investments     $44,594,215  $39,490,097  $9,891,860   6.89%
                         
  Total Investments, September 30, 2021  $217,192,285  $207,667,691  $151,639,783   105.53%

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


(1)All of our investments are domiciled in the United States. Certain investments also have international operations.

(2)Par amount includes accumulated payment-in-kind (“PIK”) interest, as applicable, and is net of repayments.
(3)Net unrealized depreciation for U.S. federal income tax purposes totaled $55,318,330.
The tax cost basis of investments is $206,958,113 as of September 30, 2021.  
(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 $143,693,981 as of September 30, 2021.
(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.
(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, 2021 (see Note 8), and fair value includes the value of any unfunded commitments.
(9)Represents 1.3% partnership interest in Watermill-QMC Partners, LP and Watermill-EMI Partners, LP.
(10)The investment was on non-accrual status as of September 30, 2021.
(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.  
(12)Security is non-income producing.
(13)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%.
(14)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 %.
(15)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 %.
(16)This investment earns 0.50% commitment fee on all unused commitment as of September 30, 2021, and is recorded as a component of interest income on the Consolidated Statements of Operations.
(17)This investment represents a Level 1 security in the ASC 820 table as of September 30, 2021 (see Note 4).
(18)This investment represents a Level 2 security in the ASC 820 table as of September 30, 2021 (see Note 4).
(19)As a practical expedient, the Company uses net asset value (“NAV”) to determine the fair value of this investment.
(20)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.
(21)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.
(22)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.
(23)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.
(24)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.
(25)The maturity date was extended to May 1, 2023 subsequent to September 30, 2021. 



PHENIXFIN CORPORATION

Consolidated Schedule of Investments

September 30, 2020

Company(1) Industry Type of Investment Maturity Par Amount(2)  Cost(3)  Fair Value(6)  % of Net
Assets(4)		 
                   
Non-Controlled/Non-Affiliated Investments:              
                   
Alpine SG, LLC High Tech Industries Senior Secured First Lien Term Loan (LIBOR + 5.75% Cash, 1.00% LIBOR Floor)(13) 11/16/2022  4,715,809   4,715,809   4,466,815   3.0%
    Senior Secured Incremental First Lien Term Loan (LIBOR + 8.50% Cash, 1.00% LIBOR Floor)(13) 11/16/2022  472,087   472,087   472,087   0.3%
    Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 5.75% Cash, 1.00% LIBOR Floor)(13) 11/16/2022  2,277,293   2,277,293   2,157,052   1.4%
    Revolving Credit Facility (LIBOR + 5.75% Cash, 1.00% LIBOR Floor)(13)(15) 11/16/2022  1,000,000   1,000,000   947,200   0.6%
         8,465,189   8,465,189   8,043,154     
                       
American Dental Partners, Inc. Healthcare & Pharmaceuticals Senior Secured Second Lien Term Loan (LIBOR + 8.50% Cash, 1.00% LIBOR Floor)(13) 9/25/2023  4,387,500   4,387,500   3,948,750   2.6%
         4,387,500   4,387,500   3,948,750     
                       
Autosplice, Inc. High Tech Industries Senior Secured First Lien Term Loan (LIBOR + 8.00% Cash, 1.00% LIBOR Floor)(13) 12/17/2021  12,780,349   12,780,349   11,898,505   7.9%
         12,780,349   12,780,349   11,898,505     
                       
Avantor, Inc.(10) Wholesale Equity - 545,931 Common Units(16)    —   9,553,793   12,277,988   8.2%
         —   9,553,793   12,277,988     
                       
Be Green Packaging, LLC Containers, Packaging & Glass Equity - 417 Common Units    —   416,250   —   0.0%
         —   416,250   —     
                       
CM Finance SPV, LLC Banking, Finance, Insurance & Real Estate Unsecured Debt 6/24/2021  101,463   101,463   101,463   0.1%
         101,463   101,463   101,463     
                       
CPI International, Inc. Aerospace & Defense Senior Secured Second Lien Term Loan (LIBOR + 7.25% Cash, 1.00% LIBOR Floor)(12) 7/28/2025  2,607,062   2,598,252   2,219,392   1.5%
         2,607,062   2,598,252   2,219,392     
                       
Crow Precision Components, LLC Aerospace & Defense Equity - 350 Common Units    —   700,000   723,131   0.5%
         —   700,000   723,131     
                       
CT Technologies Intermediate Holdings, Inc.(11) Healthcare & Pharmaceuticals Senior Secured Second Lien Term Loan (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)(13) 12/1/2022  7,500,000   7,500,000   6,832,500   4.5%
         7,500,000   7,500,000   6,832,500     
                       
DataOnline Corp.(7) High Tech Industries Senior Secured First Lien Term Loan (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)(13) 11/13/2025  4,962,500   4,962,500   4,786,331   3.2%
    Revolving Credit Facility (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)(13)(15) 11/13/2025  535,714   535,714   510,357   0.3%
         5,498,214   5,498,214   5,296,688     
                       
Dream Finders Homes, LLC Construction & Building Preferred Equity (8.00% PIK)    4,531,472   4,531,472   3,928,786   2.6%
         4,531,472   4,531,472   3,928,786     

Company(1) Industry Type of Investment Maturity Par Amount(2)  Cost(3)  Fair Value(6)  % of
Net
Assets(4)		 
                   
Footprint Acquisition, LLC Services: Business Preferred Equity (8.75% PIK)    3,969,998   3,969,998   3,969,998   2.6%
    Equity - 150 Common Units    —   —   1,960,830   1.3%
         3,969,998   3,969,998   5,930,828     
                       
Global Accessories Group, LLC(11) Consumer goods: Non-durable Equity - 3.8% Membership Interest    —   151,337   —   0.0%
         —   151,337   —     
                       
Impact Group, LLC Services: Business Senior Secured First Lien Term Loan (LIBOR + 7.37% Cash, 1.00% LIBOR Floor)(13) 6/27/2023  3,219,964   3,219,964   2,994,565   2.0%
    Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 7.37% Cash, 1.00% LIBOR Floor)(13) 6/27/2023  9,330,056   9,330,056   8,676,952   5.8%
         12,550,020   12,550,020   11,671,517   — 
                       
InterFlex Acquisition Company, LLC Containers, Packaging & Glass Senior Secured First Lien Term Loan (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)(12) 8/18/2022  12,098,406   12,098,406   11,987,100   8.0%
         12,098,406   12,098,406   11,987,100     
                       
Lighting Science Group Corporation Containers, Packaging & Glass Warrants - 0.62% of Outstanding Equity(17) 2/19/2024  —   955,680   —   0.0%
         —   955,680   —     
                       
Manna Pro Products, LLC Consumer goods: Non-durable Senior Secured First Lien Term Loan (LIBOR + 6.00% Cash, 1.00% LIBOR Floor)(12) 12/8/2023  5,343,674   5,343,674   5,123,515   3.4%
    Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 6.00% Cash, 1.00% LIBOR Floor)(12) 12/8/2023  1,085,219   1,085,219   1,040,508   0.7%
         6,428,893   6,428,893   6,164,023     
                       
Point.360 Services: Business Senior Secured First Lien Term Loan (LIBOR + 6.00% PIK)(9)(14)(21) 7/8/2020  2,777,366   2,103,712   186,083   0.1%
         2,777,366   2,103,712   186,083     
                       
RateGain Technologies, Inc. Hotel, Gaming & Leisure Unsecured Debt(18) 7/31/2020  704,106   704,106   —   0.0%
    Unsecured Debt(18) 7/31/2021  761,905   761,905   —   0.0%
         1,466,011   1,466,011   —     
                       
Redwood Services Group, LLC(7) Services: Business Revolving Credit Facility (LIBOR + 6.00% Cash, 1.00% LIBOR Floor)(12 )(15) 6/6/2023  700,000   700,000   647,500   0.4%
         700,000   700,000   647,500     
                       
Sendero Drilling Company, LLC Energy: Oil & Gas Unsecured Debt (8.00% Cash)(9) 8/31/2021  488,750   465,319   —   0.0%
         488,750   465,319   —     
                       
Seotowncenter, Inc. Services: Business Equity - 3,434,169.6 Common Units    —   566,475   686,834   0.5%
         —   566,475   686,834     
                       
SFP Holding, Inc. Construction & Building Senior Secured First Lien Term Loan (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)(13) 9/1/2022  4,776,955   4,776,955   4,733,962   3.1%
    Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)(13) 9/1/2022  1,852,522   1,852,522   1,835,850   1.2%
    Equity - 101,165.93 Common Units in CI (Summit) Investment Holdings LLC    —   1,067,546   657,578   0.4%
         6,629,477   7,697,023   7,227,390    

Company(1) Industry Type of Investment Maturity Par Amount(2)  Cost(3)  Fair Value(6)  % of Net
Assets(4)		 
                   
SMART Financial Operations, LLC Retail Equity - 700,000 Class A Preferred Units    —   700,000   343,000   0.2%
         —   700,000   343,000     
                       
Stancor, Inc. Services: Business Equity - 263,814.43 Class A Units    —   263,814   150,374   0.1%
         —   263,814   150,374     
                       
Starfish Holdco, LLC High Tech Industries Senior Secured Second Lien Term Loan (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)(12) 8/18/2025  1,000,000   989,935   926,500   0.6%
         1,000,000   989,935   926,500   — 
                       
URT Acquisition Holdings Corporation Services: Business Unsecured Debt (10.00% PIK) 6/23/2021  2,567,929   2,567,929   2,567,929   1.7%
         2,567,929   2,567,929   2,567,929     
                       
Velocity Pooling Vehicle, LLC Automotive Senior Secured First Lien Term Loan (LIBOR + 11.00% PIK, 1.00% LIBOR Floor)(13) 4/28/2023  1,014,440   951,628   1,014,440   0.7%
    Equity - 5,441 Class A Units    —   302,464   12,841   0.0%
    Warrants - 0.65% of Outstanding Equity 3/30/2028  —   361,667   15,354   0.0%
         1,014,440   1,615,759   1,042,635     
                       
Walker Edison Furniture Company LLC Consumer goods: Durable Senior Secured First Lien Term Loan (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)(13) 9/26/2024  3,519,878   3,519,878   3,519,878   2.3%
    Equity - 1,500 Common Units    —   1,500,000   6,000,000   4.0%
         3,519,878   5,019,878   9,519,878     
                       
Watermill-QMC Midco, Inc. Automotive Equity - 1.3% Partnership Interest(8)    —   518,283   —   0.0%
         —   518,283   —     
                       
Subtotal Non-Controlled/Non-Affiliated Investments  $101,082,417  $117,360,954  $114,321,948     
                       
Affiliated Investments:(20)                    
                       
1888 Industrial Services, LLC(7) Energy: Oil & Gas Senior Secured First Lien Term Loan A (LIBOR + 5.00% PIK, 9/30/2021  9,946,741   9,473,067   —   0.0%
    1.00% LIBOR Floor)(9)(13)                  
    Senior Secured First Lien Term Loan B (LIBOR + 8.00% PIK, 1.00% LIBOR Floor)(9)(13) 9/30/2021  25,937,520   19,468,870   —   0.0%
    Senior Secured First Lien Term Loan C (LIBOR + 5.00%, 1.00% LIBOR Floor)(9)(13) 9/30/2021  1,231,932   1,191,257   1,166,763   0.8%
    Revolving Credit Facility (LIBOR + 5.00% PIK, 1.00% LIBOR Floor)(13)(15) 9/30/2021  3,554,069   3,554,069   3,554,069   2.4%
    Equity - 17,493.63 Class A Units    —   —   —   0.0%
         40,670,262   33,687,263   4,720,832     
                       
Access Media Holdings, LLC Media: Broadcasting & Subscription Senior Secured First Lien Term Loan (10.00% PIK)(9)(21) 7/22/2020  11,105,630   8,446,385   1,110,563   0.7%
    Preferred Equity Series A    1,600,000   1,600,000   —   0.0%
    Preferred Equity Series AA    800,000   800,000   —   0.0%
    Preferred Equity Series AAA    971,200   971,200   —   0.0%
    Equity - 16 Common Units    —   —   —   0.0%
         14,476,830   11,817,585   1,110,563     
                       
Black Angus Steakhouses, LLC Hotel, Gaming & Leisure Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)(12) 12/31/2020  758,929   758,929   758,929   0.5%
    Senior Secured First Lien Term Loan (LIBOR + 9.00% PIK, 1.00% LIBOR Floor)(9)(12) 12/31/2020  8,412,596   7,767,532   5,047,557   3.4%
    Equity - 17.9% Membership Interest    —   —   —   0.0%
         9,171,525   8,526,461   5,806,486     
Company(1)
IndustryType of InvestmentMaturity
Par Amount(2)
Cost(3)
Fair Value(6)
% of
Net Assets(4)
Non-Controlled/Non-Affiliated Investments:
     
Alpine SG, LLCHigh Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 5.75% Cash, 1.00% LIBOR Floor)(13)
11/16/20224,715,809 4,715,809 4,466,815 3.0 %
Senior Secured Incremental First Lien Term Loan (LIBOR + 8.50% Cash, 1.00% LIBOR Floor)(13)
11/16/2022472,087 472,087 472,087 0.3 %
Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 5.75% Cash, 1.00% LIBOR Floor)(13)
11/16/20222,277,293 2,277,293 2,157,052 1.4 %
Revolving Credit Facility (LIBOR + 5.75% Cash, 1.00% LIBOR Floor)(13)(15)
11/16/20221,000,000 1,000,000 947,200 0.6 %
8,465,189 8,465,189 8,043,154 
American Dental Partners, Inc.Healthcare & Pharmaceuticals
Senior Secured Second Lien Term Loan (LIBOR + 8.50% Cash, 1.00% LIBOR Floor)(13)
9/25/20234,387,500 4,387,500 3,948,750 2.6 %
4,387,500 4,387,500 3,948,750 
Autosplice, Inc.High Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 8.00% Cash, 1.00% LIBOR Floor)(13)
12/17/202112,780,349 12,780,349 11,898,505 7.9 %
12,780,349 12,780,349 11,898,505 
Avantor, Inc.(10)
Wholesale
Equity - 545,931 Common Units(16)
— 9,553,793 12,277,988 8.2 %
— 9,553,793 12,277,988 
Be Green Packaging, LLCContainers, Packaging & GlassEquity - 417 Common Units— 416,250 — 0.0 %
— 416,250 — 
CM Finance SPV, LLCBanking, Finance, Insurance & Real EstateUnsecured Debt6/24/2021101,463 101,463 101,463 0.1 %
101,463 101,463 101,463 
CPI International, Inc.Aerospace & Defense
Senior Secured Second Lien Term Loan (LIBOR + 7.25% Cash, 1.00% LIBOR Floor)(12)
7/28/20252,607,062 2,598,252 2,219,392 1.5 %
2,607,062 2,598,252 2,219,392 
Crow Precision Components, LLCAerospace & DefenseEquity - 350 Common Units— 700,000 723,131 0.5 %
— 700,000 723,131 
CT Technologies Intermediate Holdings, Inc.(11)
Healthcare & Pharmaceuticals
Senior Secured Second Lien Term Loan (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)(13)
12/1/20227,500,000 7,500,000 6,832,500 4.5 %
7,500,000 7,500,000 6,832,500 
DataOnline Corp.(7)
High Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)(13)
11/13/20254,962,500 4,962,500 4,786,331 3.2 %
Revolving Credit Facility (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)(13)(15)
11/13/2025535,714 535,714 510,357 0.3 %
5,498,214 5,498,214 5,296,688 
Dream Finders Homes, LLCConstruction & BuildingPreferred Equity (8.00% PIK)4,531,472 4,531,472 3,928,786 2.6 %

Company(1) Industry Type of Investment Maturity Par Amount(2)  Cost(3)  Fair Value(6)  % of Net
Assets(4)		 
                       
Caddo Investors Holdings 1 LLC(10) Forest Products & Paper Equity - 6.15% Membership Interest(19)    —   2,528,826   2,990,776   2.0%
         —   2,528,826   2,990,776   — 
                       
Dynamic Energy Services International LLC Energy: Oil & Gas Senior Secured First Lien Term Loan (LIBOR + 13.50% PIK)(9)(14) 12/31/2021  12,930,235   7,824,974   905,116   0.6%
    Equity - 12,350,000 Class A Units    —   —   —   0.0%
         12,930,235   7,824,974   905,116     
                       
JFL-NGS Partners, LLC Construction & Building Preferred Equity - A-2 Preferred (3.00% PIK)    1,795,034   1,795,034   1,795,034   1.2%
    Preferred Equity - A-1 Preferred (3.00% PIK)    232,292   232,292   232,292   0.2%
    Equity - 57,300 Class B Units    —   57,300   38,780,067   25.7%
         2,027,326   2,084,626   40,807,393   — 
                       
JFL-WCS Partners, LLC Environmental Industries Preferred Equity - Class A Preferred (6.00% PIK)    1,310,649   1,310,649   1,310,649   0.9%
    Equity - 129,588 Class B Units    —   129,588   4,535,580   3.0%
         1,310,649   1,440,237   5,846,229   — 
                       
Kemmerer Operations, LLC(7) Metals & Mining Senior Secured First Lien Term Loan (15.00% PIK) 6/21/2023  2,051,705   2,051,705   2,051,705   1.4%
    Senior Secured First Lien Delayed Draw Term Loan (15.00% PIK) 6/21/2023  515,699   515,699   515,699   0.4%
    Equity - 6.7797 Common Units    —   962,717   962,717   0.6%
         2,567,404   3,530,121   3,530,121     
                       
Path Medical, LLC Healthcare & Pharmaceuticals Senior Secured First Lien Term Loan A (LIBOR + 9.50% Cash, 1.00% LIBOR Floor)(12) 10/11/2021  5,905,080   5,905,080   5,905,080   3.9%
    Senior Secured First Lien Term Loan B (LIBOR + 13% PIK, 1.00% LIBOR Floor)(9)(12) 10/11/2021  7,783,840   6,599,918   6,794,514   4.5%
    Warrants - 7.68% of Outstanding Equity 1/9/2027  —   499,751   —   0.0%
         13,688,920   13,004,749   12,699,594     
                       
US Multifamily, LLC(10) Banking, Finance, Insurance & Real Estate Senior Secured First Lien Term Loan (10.00% Cash) 6/17/2021  5,123,913   5,123,913   5,123,913   3.4%
    Equity - 33,300 Preferred Units    —   3,330,000   1,332,000   0.9%
          5,123,913    8,453,913    6,455,913     
                    
Subtotal Affiliated Investments     $101,967,064  $92,898,755  $84,873,023     
                       
Controlled Investments:(5)                    
                       
MCC Senior Loan Strategy JV I LLC(10) Multisector Holdings Equity - 87.5% ownership of MCC Senior Loan Strategy JV I LLC    —   79,887,500   41,018,500   27.2%
         —   79,887,500   41,018,500     
F-7






Company(1)
IndustryType of InvestmentMaturity
Par Amount(2)
Cost(3)
Fair Value(6)
% of
Net Assets(4)
4,531,472 4,531,472 3,928,786 
Footprint Acquisition, LLCServices:  BusinessPreferred Equity (8.75% PIK)3,969,998 3,969,998 3,969,998 2.6 %
Equity - 150 Common Units— — 1,960,830 1.3 %
3,969,998 3,969,998 5,930,828 
Global Accessories Group, LLC(11)
Consumer goods:  Non-durableEquity - 3.8% Membership Interest— 151,337 — 0.0 %
— 151,337 — 
Impact Group, LLCServices:  Business
Senior Secured First Lien Term Loan (LIBOR + 7.37% Cash, 1.00% LIBOR Floor)(13)
6/27/20233,219,964 3,219,964 2,994,565 2.0 %
Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 7.37% Cash, 1.00% LIBOR Floor)(13)
6/27/20239,330,056 9,330,056 8,676,952 5.8 %
12,550,020 12,550,020 11,671,517 — 
InterFlex Acquisition Company, LLCContainers, Packaging & Glass
Senior Secured First Lien Term Loan (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)(12)
8/18/202212,098,406 12,098,406 11,987,100 8.0 %
12,098,406 12,098,406 11,987,100 
Lighting Science Group CorporationContainers, Packaging & Glass
Warrants - 0.62% of Outstanding Equity(17)
2/19/2024— 955,680 — 0.0 %
— 955,680 — 
Manna Pro Products, LLCConsumer goods:  Non-durable
Senior Secured First Lien Term Loan (LIBOR + 6.00% Cash, 1.00% LIBOR Floor)(12)
12/8/20235,343,674 5,343,674 5,123,515 3.4 %
Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 6.00% Cash, 1.00% LIBOR Floor)(12)
12/8/20231,085,219 1,085,219 1,040,508 0.7 %
6,428,893 6,428,893 6,164,023 
Point.360Services:  Business
Senior Secured First Lien Term Loan (LIBOR + 6.00% PIK)(9)(14)(21)
7/8/20202,777,366 2,103,712 186,083 0.1 %
2,777,366 2,103,712 186,083 
RateGain Technologies, Inc.Hotel, Gaming & Leisure
Unsecured Debt(18)
7/31/2020704,106 704,106 — 0.0 %
Unsecured Debt(18)
7/31/2021761,905 761,905 — 0.0 %
1,466,011 1,466,011 — 
Redwood Services Group, LLC(7)
Services:  Business
Revolving Credit Facility (LIBOR + 6.00% Cash, 1.00% LIBOR Floor)(12 )(15)
6/6/2023700,000 700,000 647,500 0.4 %
700,000 700,000 647,500 
Sendero Drilling Company, LLCEnergy:  Oil & Gas
Unsecured Debt (8.00% Cash)(9)
8/31/2021488,750 465,319 — 0.0 %
488,750 465,319 — 
Seotowncenter, Inc.Services:  BusinessEquity - 3,434,169.6 Common Units— 566,475 686,834 0.5 %
— 566,475 686,834 
SFP Holding, Inc.Construction & Building
Senior Secured First Lien Term Loan (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)(13)
9/1/20224,776,955 4,776,955 4,733,962 3.1 %
Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)(13)
9/1/20221,852,522 1,852,522 1,835,850 1.2 %
Equity - 101,165.93 Common Units in CI (Summit) Investment Holdings LLC— 1,067,546 657,578 0.4 %
6,629,477 7,697,023 7,227,390 
F-8






Company(1)
IndustryType of InvestmentMaturity
Par Amount(2)
Cost(3)
Fair Value(6)
% of
Net Assets(4)
SMART Financial Operations, LLCRetailEquity - 700,000 Class A Preferred Units— 700,000 343,000 0.2 %
— 700,000 343,000 
Stancor, Inc.Services:  BusinessEquity - 263,814.43 Class A Units— 263,814 150,374 0.1 %
— 263,814 150,374 
Starfish Holdco, LLCHigh Tech Industries
Senior Secured Second Lien Term Loan (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)(12)
8/18/20251,000,000 989,935 926,500 0.6 %
1,000,000 989,935 926,500 — 
URT Acquisition Holdings CorporationServices:  BusinessUnsecured Debt (10.00% PIK)6/23/20212,567,929 2,567,929 2,567,929 1.7 %
2,567,929 2,567,929 2,567,929 
Velocity Pooling Vehicle, LLCAutomotive
Senior Secured First Lien Term Loan (LIBOR + 11.00% PIK, 1.00% LIBOR Floor)(13)
4/28/20231,014,440 951,628 1,014,440 0.7 %
Equity - 5,441 Class A Units— 302,464 12,841 0.0 %
Warrants - 0.65% of Outstanding Equity3/30/2028— 361,667 15,354 0.0 %
1,014,440 1,615,759 1,042,635 
Walker Edison Furniture Company LLCConsumer goods:  Durable
Senior Secured First Lien Term Loan (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)(13)
9/26/20243,519,878 3,519,878 3,519,878 2.3 %
Equity - 1,500 Common Units— 1,500,000 6,000,000 4.0 %
3,519,878 5,019,878 9,519,878 
Watermill-QMC Midco, Inc.Automotive
Equity - 1.3% Partnership Interest(8)
— 518,283 — 0.0 %
— 518,283 — 
Subtotal Non-Controlled/Non-Affiliated Investments$101,082,417 $117,360,954 $114,321,948 
Affiliated Investments:(20)
1888 Industrial Services, LLC(7)
Energy:  Oil & Gas
Senior Secured First Lien Term Loan A (LIBOR + 5.00% PIK, 1.00% LIBOR Floor)(9)(13)
9/30/20219,946,741 9,473,067 — 0.0 %
Senior Secured First Lien Term Loan B (LIBOR + 8.00% PIK, 1.00% LIBOR Floor)(9)(13)
9/30/202125,937,520 19,468,870 — 0.0 %
Senior Secured First Lien Term Loan C (LIBOR + 5.00%, 1.00% LIBOR Floor)(9)(13)
9/30/20211,231,932 1,191,257 1,166,763 0.8 %
Revolving Credit Facility (LIBOR + 5.00% PIK, 1.00% LIBOR Floor)(13)(15)
9/30/20213,554,069 3,554,069 3,554,069 2.4 %
Equity - 17,493.63 Class A Units— — — 0.0 %
40,670,262 33,687,263 4,720,832 
Access Media Holdings, LLCMedia:  Broadcasting & Subscription
Senior Secured First Lien Term Loan (10.00% PIK)(9)(21)
7/22/202011,105,630 8,446,385 1,110,563 0.7 %
Preferred Equity Series A1,600,000 1,600,000 — 0.0 %
Preferred Equity Series AA800,000 800,000 — 0.0 %
Preferred Equity Series AAA971,200 971,200 — 0.0 %
Equity - 16 Common Units— — — 0.0 %
14,476,830 11,817,585 1,110,563 
Black Angus Steakhouses, LLCHotel, Gaming & Leisure
Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)(12)
12/31/2020758,929 758,929 758,929 0.5 %
Senior Secured First Lien Term Loan (LIBOR + 9.00% PIK, 1.00% LIBOR Floor)(9)(12)
12/31/20208,412,596 7,767,532 5,047,557 3.4 %
F-9






Company(1)
IndustryType of InvestmentMaturity
Par Amount(2)
Cost(3)
Fair Value(6)
% of
Net Assets(4)
Equity - 17.9% Membership Interest— — — 0.0 %
9,171,525 8,526,461 5,806,486 
Caddo Investors Holdings 1 LLC(10)
Forest Products & Paper
Equity - 6.15% Membership Interest(19)
— 2,528,826 2,990,776 2.0 %
— 2,528,826 2,990,776 — 
Dynamic Energy Services International LLCEnergy:  Oil & Gas
Senior Secured First Lien Term Loan (LIBOR + 13.50% PIK)(9)(14)
12/31/202112,930,235 7,824,974 905,116 0.6 %
Equity - 12,350,000 Class A Units— — — 0.0 %
12,930,235 7,824,974 905,116 
JFL-NGS Partners, LLCConstruction & BuildingPreferred Equity - A-2 Preferred (3.00% PIK)1,795,034 1,795,034 1,795,034 1.2 %
Preferred Equity - A-1 Preferred (3.00% PIK)232,292 232,292 232,292 0.2 %
Equity - 57,300 Class B Units— 57,300 38,780,067 25.7 %
2,027,326 2,084,626 40,807,393 — 
JFL-WCS Partners, LLCEnvironmental IndustriesPreferred Equity - Class A Preferred (6.00% PIK)1,310,649 1,310,649 1,310,649 0.9 %
Equity - 129,588 Class B Units— 129,588 4,535,580 3.0 %
1,310,649 1,440,237 5,846,229 — 
Kemmerer Operations, LLC(7)
Metals & MiningSenior Secured First Lien Term Loan (15.00% PIK)6/21/20232,051,705 — 2,051,705 — 2,051,705 1.4 %
Senior Secured First Lien Delayed Draw Term Loan (15.00% PIK)6/21/2023515,699 — 515,699 — 515,699 0.4 %
Equity - 6.7797 Common Units— — 962,717 — 962,717 0.6 %
2,567,404 3,530,121 3,530,121 
Path Medical, LLCHealthcare & Pharmaceuticals
Senior Secured First Lien Term Loan A (LIBOR + 9.50% Cash, 1.00% LIBOR Floor)(12)
10/11/20215,905,080 — 5,905,080 — 5,905,080 3.9 %
Senior Secured First Lien Term Loan B (LIBOR + 13% PIK, 1.00% LIBOR Floor)(9)(12)
10/11/20217,783,840 — 6,599,918 — 6,794,514 4.5 %
Warrants - 7.68% of Outstanding Equity1/9/2027— — 499,751 — — 0.0 %
13,688,920 13,004,749 12,699,594 
US Multifamily, LLC(10)
Banking, Finance, Insurance & Real EstateSenior Secured First Lien Term Loan (10.00% Cash)6/17/20215,123,913 5,123,913 5,123,913 3.4 %
Equity - 33,300 Preferred Units— 3,330,000 1,332,000 0.9 %
5,123,913 8,453,913 6,455,913 
Subtotal Affiliated Investments$101,967,064 $92,898,755 $84,873,023 
Controlled Investments:(5)
MCC Senior Loan Strategy JV I LLC(10)
Multisector HoldingsEquity - 87.5% ownership of MCC Senior Loan Strategy JV I LLC— 79,887,500 41,018,500 27.2 %
— 79,887,500 41,018,500 
NVTN LLC(7)
Hotel, Gaming & Leisure
Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 4.00% Cash, 1.00% LIBOR Floor)(9)(12)
12/31/20246,565,875 6,565,875 4,530,078 3.0 %
Senior Secured First Lien Super Priority DDTL (LIBOR + 4.00% Cash, 1.00% LIBOR Floor)(9)(12)
12/31/20242,000,000 1,995,374 2,000,000 1.3 %
Senior Secured First Lien Term Loan B (LIBOR + 9.25% PIK, 1.00% LIBOR Floor)(9)(12)
12/31/202414,963,195 12,305,096 — 0.0 %
F-10






Company(1)
IndustryType of InvestmentMaturity
Par Amount(2)
Cost(3)
Fair Value(6)
% of
Net Assets(4)
Senior Secured First Lien Term Loan C (LIBOR + 12.00% PIK, 1.00% LIBOR Floor)(9)(12)
12/31/202410,014,223 7,570,054 — 0.0 %
Equity - 787.4 Class A Units— 9,550,922 — 0.0 %
33,543,293 37,987,321 6,530,078 
Subtotal Control Investments$33,543,293 $117,874,821 $47,548,578 
Total Investments, September 30, 2020$236,592,774 $328,134,530 $246,743,549 163.8 %

(1)All of our investments are domiciled in the United States. Certain investments also have international operations.
(2)Par amount includes accumulated payment-in-kind (“PIK”) interest, as applicable, and is net of repayments.
(3)Gross unrealized appreciation, gross unrealized depreciation, and net unrealized depreciation for U.S. federal income tax purposes totaled $53,757,923, $134,877,746, and $81,119,823, respectively. The tax cost basis of investments is $327,863,372 as of September 30, 2020.
(4)Percentage is based on net assets of $150,619,517 as of September 30, 2020.
(5)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)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).
(7)The investment has an unfunded commitment as of September 30, 2020 (see Note 8), and includes an analysis of the value of any unfunded commitments.
(8)Represents 1.3% partnership interest in Watermill-QMC Partners, LP and Watermill-EMI Partners, LP.
(9)The investment was on non-accrual status as of September 30, 2020.
(10)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, 2020, 25.4% of the Company's portfolio investments were non-qualifying assets.
(11)A portion of this investment was sold via a participation agreement. The amount stated is the portion retained by the Company (see Note 3).
(12)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, 2020 was 0.15%.
(13)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, 2020 was 0.23%.
(14)The interest rate on these loans is subject to 3 month LIBOR plus a base rate. The 3 month LIBOR as of September 30, 2020 was 0.24%.
(15)This investment earns 0.50% commitment fee on all unused commitment as of September 30, 2020, and is recorded as a component of interest income on the Consolidated Statements of Operations.
(16)This investment represents a Level 1 security in the ASC 820 table as of September 30, 2020 (see Note 4).
(17)This investment represents a Level 2 security in the ASC 820 table as of September 30, 2020 (see Note 4).
(18)Security is non-income producing.
(19)As a practical expedient, the Company uses net asset value (“NAV”) to determine the fair value of this investment.
(20)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.
(21)The investment was past due as of September 30, 2020.

Company(1) Industry Type of Investment Maturity Par Amount(2)  Cost(3)  Fair Value(6)  % of Net
Assets(4)		 
                   
NVTN LLC(7) Hotel, Gaming & Leisure Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 4.00% Cash, 1.00% LIBOR Floor)(9)(12) 12/31/2024  6,565,875   6,565,875   4,530,078   3.0%
    Senior Secured First Lien Super Priority DDTL (LIBOR + 4.00% Cash, 1.00% LIBOR Floor)(9)(12) 12/31/2024  2,000,000   1,995,374   2,000,000   1.3%
    Senior Secured First Lien Term Loan B (LIBOR + 9.25% PIK, 1.00% LIBOR Floor)(9)(12) 12/31/2024  14,963,195   12,305,096   —   0.0%
    Senior Secured First Lien Term Loan C (LIBOR + 12.00% 12/31/2024  10,014,223   7,570,054   —   0.0%
    PIK, 1.00% LIBOR Floor)(9)(12)                  
    Equity - 787.4 Class A Units    —   9,550,922   —   0.0%
         33,543,293   37,987,321   6,530,078     
                       
Subtotal Control Investments     $33,543,293 $117,874,821  $47,548,578     
                       
Total Investments, September 30, 2020 $236,592,774  $328,134,530  $246,743,549   163.8%

(1)All of our investments are domiciled in the United States. Certain investments also have international operations.
(2)Par amount includes accumulated payment-in-kind (“PIK”) interest, as applicable, and is net of repayments.
(3)Gross unrealized appreciation, gross unrealized depreciation, and net unrealized depreciation for U.S. federal income tax purposes totaled $53,757,923, $134,877,746, and $81,119,823, respectively. The tax cost basis of investments is $327,863,372 as of September 30, 2020.
(4)Percentage is based on net assets of $150,619,517 as of September 30, 2020.
(5)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)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).
(7)The investment has an unfunded commitment as of September 30, 2020 (see Note 8),and includes an analysis of the value of any unfunded commitments.
(8)Represents 1.3% partnership interest in Watermill-QMC Partners, LP and Watermill-EMI Partners, LP.
(9)The investment was on non-accrual status as of September 30, 2020.
(10)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, 2020, 25.4% of the Company’s portfolio investments were non-qualifying assets.
(11)A portion of this investment was sold via a participation agreement. The amount stated is the portion retained by the Company (see Note 3).
(12)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, 2020 was 0.15%.
(13)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, 2020 was 0.23%.
(14)The interest rate on these loans is subject to 3 month LIBOR plus a base rate. The 3 month LIBOR as of September 30, 2020 was 0.24%.
(15)This investment earns 0.50% commitment fee on all unused commitment as of September 30, 2020, and is recorded as a component of interest income on the Consolidated Statements of Operations.
(16)This investment represents a Level 1 security in the ASC 820 table as of September 30, 2020 (see Note 4).
(17)This investment represents a Level 2 security in the ASC 820 table as of September 30, 2020 (see Note 4).
(18)Security is non-income producing.
(19)As a practical expedient, the Company uses net asset value (“NAV”) to determine the fair value of this investment.
(20)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.
(21)The investment was past due as of September 30, 2020.

See accompanying notes to consolidated financial statements.



PHENIXFIN CORPORATION




F-11






Medley Capital Corporation

Consolidated Schedule of Investments

September 30, 2019

Company(1)
Industry
Type of Investment(6)
Maturity
Par Amount(2)
Cost(3)
Fair Value
% of
Net Assets(4)
Non-Controlled/Non-Affiliated Investments:
     
Alpine SG, LLC(7)
High Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 5.50% Cash, 1.00% LIBOR Floor)(13)(22)
11/16/2022$5,061,750 $5,061,750 $5,020,244 2.3 %
Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 5.50% Cash, 1.00% LIBOR Floor)(13)(22)
11/16/20222,444,350 2,444,350 2,434,306 1.1 %
Revolving Credit Facility (LIBOR + 5.50% Cash, 1.00% LIBOR
Floor)(13)(16)
11/16/2022— — (8,200)0.0 %
7,506,100 7,506,100 7,446,350 
American Dental Partners, Inc.Healthcare & Pharmaceuticals
Senior Secured Second Lien Term Loan (LIBOR + 8.50% Cash, 1.00% LIBOR Floor)(13)
9/25/20234,387,500 4,387,500 4,274,741 2.0 %
4,387,500 4,387,500 4,274,741 
Autosplice, Inc.High Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 8.00% Cash, 1.00% LIBOR Floor)(13)
6/17/202013,336,018 13,336,018 13,252,001 6.1 %
13,336,018 13,336,018 13,252,001 
Avantor, Inc.(10)
Wholesale
Equity - 942,160 Common Units(17)
— 16,487,800 13,849,752 6.4 %
— 16,487,800 13,849,752 
Barry's Bootcamp Holdings, LLCServices:  Consumer
Senior Secured First Lien Term Loan (LIBOR + 6.00% Cash, 1.00% LIBOR Floor)(13)(23)
7/14/20227,609,499 7,609,499 7,609,499 3.5 %
Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 6.50% Cash, 1.00% LIBOR Floor)(13)
7/14/20221,268,251 1,268,251 1,268,251 0.6 %
Revolving Credit Facility (LIBOR + 6.00% Cash, 1.00% LIBOR
Floor)(13)(16)(22)
7/14/20224,400,000 4,400,000 4,400,000 2.0 %
13,277,750 13,277,750 13,277,750 
Be Green Packaging, LLCContainers, Packaging & GlassEquity - 417 Common Units— 416,250 — 0.0 %
— 416,250 — 
Black Angus Steakhouses, LLC(7)
Hotel, Gaming & Leisure
Senior Secured First Lien Term Loan (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)(13)(23)
4/24/20207,341,518 7,341,518 7,307,747 3.4 %
Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)(13)
4/24/2020— — (4,107)0.0 %
Revolving Credit Facility (LIBOR + 9.00% Cash, 1.00% LIBOR
Floor)(13)(16)
4/24/2020892,857 892,857 890,804 0.4 %
8,234,375 8,234,375 8,194,444 
Capstone Nutrition Development, LLCHealthcare & PharmaceuticalsEquity - 13,833.1916 Common Units— 1,383,319 1,383,319 0.6 %
— 1,383,319 1,383,319 
CPI International, Inc.Aerospace & Defense
Senior Secured Second Lien Term Loan (LIBOR + 7.25% Cash, 1.00% LIBOR Floor)(12)
7/28/20253,010,025 2,998,111 2,937,483 1.4 %
3,010,025 2,998,111 2,937,483 
Crow Precision Components, LLCAerospace & DefenseEquity - 350 Common Units— 700,000 666,998 0.3 %
F-12






Company(1)
Industry
Type of Investment(6)
Maturity
Par Amount(2)
Cost(3)
Fair Value
% of
Net Assets(4)
— 700,000 666,998 
CT Technologies Intermediate Holdings, Inc.(11)
Healthcare & Pharmaceuticals
Senior Secured Second Lien Term Loan (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)(12)
12/1/20227,500,000 7,500,000 6,345,750 2.9 %
7,500,000 7,500,000 6,345,750 
DataOnline Corp.(7)
High Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 5.75% Cash, 1.00% LIBOR Floor)(13)(22)
7/31/202515,840,000 15,840,000 15,607,152 7.2 %
Revolving Credit Facility (LIBOR + 5.75% Cash, 1.00% LIBOR
Floor)(13)(16)
7/31/2024— — (18,900)0.0 %
15,840,000 15,840,000 15,588,252 
Dermatologists of Southwestern Ohio, LLCHealthcare & Pharmaceuticals
Senior Secured First Lien Term Loan (LIBOR + 6.50% Cash, 1.00% LIBOR Floor)(12)(23)
4/20/20221,065,457 1,065,457 1,056,614 0.5 %
Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 6.50% Cash, 1.00% LIBOR Floor)(12)(23)
4/20/2022404,248 404,248 400,893 0.2 %
1,469,705 1,469,705 1,457,507 
Dream Finders Homes, LLCConstruction & BuildingSenior Secured First Lien Term Loan B (10.00% Cash)4/1/20201,613,455 1,613,455 1,613,455 0.7 %
Preferred Equity (8.00% PIK)4,185,480 4,185,480 3,315,319 1.5 %
5,798,935 5,798,935 4,928,774 
FKI Security Group, LLCCapital Equipment
Senior Secured First Lien Term Loan (LIBOR + 8.50% Cash, 1.00% LIBOR Floor)(13)(23)
3/30/202010,906,250 10,906,250 10,680,491 4.9 %
10,906,250 10,906,250 10,680,491 
Footprint Acquisition, LLCServices:  BusinessPreferred Equity (8.75% PIK)7,281,664 7,281,664 7,281,664 3.4 %
Equity - 150 Common Units— — 3,347,965 1.5 %
7,281,664 7,281,664 10,629,629 
Freedom Powersports, LLCAutomotive
Senior Secured First Lien Term Loan (LIBOR + 10.00% Cash, 1.50% LIBOR Floor)(13)
11/11/20199,450,000 9,450,000 9,450,000 4.4 %
9,450,000 9,450,000 9,450,000 
Global Accessories Group, LLC(11)
Consumer goods:  Non-durableEquity - 3.8% Membership Interest— 151,337 151,339 0.1 %
— 151,337 151,339 
The Imagine Group, LLCMedia: Advertising, Printing & Publishing
Senior Secured Second Lien Term Loan (LIBOR + 8.75% Cash, 1.00% LIBOR Floor)(12)
6/21/20233,000,000 2,968,775 1,715,100 0.8 %
3,000,000 2,968,775 1,715,100 
Impact Group, LLCServices:  Business
Senior Secured First Lien Term Loan (LIBOR + 6.50% Cash, 1.00% LIBOR Floor)(13)(23)
6/27/20233,254,623 3,254,623 3,104,911 1.4 %
Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 6.50% Cash, 1.00% LIBOR Floor)(13)(23)
6/27/20239,430,010 9,430,010 8,996,229 4.2 %
12,684,633 12,684,633 12,101,140 
InterFlex Acquisition Company, LLCContainers, Packaging & Glass
Senior Secured First Lien Term Loan (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)(12)(23)
8/18/202213,259,175 13,259,175 12,637,320 5.8 %
13,259,175 13,259,175 12,637,320 
L & S Plumbing Partnership, Ltd.Construction & Building
Senior Secured First Lien Term Loan (LIBOR + 7.50% Cash, 1.00% LIBOR Floor)(13)(22)
2/15/20225,345,754 5,345,754 5,345,754 2.5 %
5,345,754 5,345,754 5,345,754 
F-13






Company(1)
Industry
Type of Investment(6)
Maturity
Par Amount(2)
Cost(3)
Fair Value
% of
Net Assets(4)
Lighting Science Group CorporationContainers, Packaging & Glass
Warrants - 0.56% of Outstanding Equity(18)
2/19/2024— 955,680 — 0.0 %
— 955,680 — 
Manna Pro Products, LLCConsumer goods:  Non-durable
Senior Secured First Lien Term Loan (LIBOR + 6.00% Cash, 1.00% LIBOR Floor)(12)
12/8/20235,398,622 5,398,622 5,132,470 2.4 %
Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 6.00% Cash, 1.00% LIBOR Floor)(12)
12/8/20231,096,209 1,096,209 1,042,166 0.5 %
6,494,831 6,494,831 6,174,636 
Point.360Services:  Business
Senior Secured First Lien Term Loan (LIBOR + 6.00% PIK)(9)(15)
7/8/20202,563,464 2,103,712 590,366 0.3 %
2,563,464 2,103,712 590,366 
Quantum Spatial, Inc.Aerospace & Defense
Senior Secured First Lien Term Loan (LIBOR + 5.25% Cash, 1.00% LIBOR Floor)(12)
9/5/20245,000,000 5,000,000 5,000,000 2.3 %
5,000,000 5,000,000 5,000,000 
RateGain Technologies, Inc.Hotel, Gaming & Leisure
Unsecured Debt(19)(23)
7/31/2020761,905 761,905 761,905 0.4 %
Unsecured Debt(19)(23)
7/31/2021761,905 761,905 761,905 0.4 %
1,523,810 1,523,810 1,523,810 
Redwood Services Group, LLC(7)
Services:  Business
Revolving Credit Facility (LIBOR + 6.00% Cash, 1.00% LIBOR
Floor)(13)(16)
6/6/2023875,000 875,000 860,475 0.4 %
875,000 875,000 860,475 
Sendero Drilling Company, LLCEnergy:  Oil & GasUnsecured Debt (8.00% Cash)8/31/2021850,000 850,000 850,000 0.4 %
850,000 850,000 850,000 
Seotowncenter, Inc.Services:  BusinessEquity - 3,434,169.6 Common Units— 566,475 1,236,301 0.6 %
— 566,475 1,236,301 
SFP Holding, Inc.Construction & Building
Senior Secured First Lien Term Loan (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)(13)(23)
9/1/20224,820,605 4,820,605 4,775,291 2.2 %
Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)(13)(23)
9/1/20221,871,234 1,871,234 1,853,644 0.9 %
Equity - 94,393.87 Common Units in CI (Summit) Investment Holdings LLC(23)
— 985,673 849,545 0.4 %
6,691,839 7,677,512 7,478,480 
Ship Supply Acquisition CorporationServices:  Business
Senior Secured First Lien Term Loan (LIBOR + 8.00% Cash, 1.00% LIBOR Floor)(9)(13)(23)
7/31/20207,433,740 7,239,798 — 0.0 %
7,433,740 7,239,798 — 
SMART Financial Operations, LLCRetailEquity - 700,000 Class A Preferred Units— 700,000 532,000 0.2 %
— 700,000 532,000 
Stancor, Inc.Services:  BusinessEquity - 263,814.43 Class A Units— 263,815 274,367 0.1 %
— 263,815 274,367 
Starfish Holdco, LLCHigh Tech Industries
Senior Secured Second Lien Term Loan (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)(12)(22)
8/18/20252,000,000 1,975,691 1,977,000 0.9 %
2,000,000 1,975,691 1,977,000 
F-14






Company(1)
Industry
Type of Investment(6)
Maturity
Par Amount(2)
Cost(3)
Fair Value
% of
Net Assets(4)
Velocity Pooling Vehicle, LLCAutomotive
Senior Secured First Lien Term Loan (LIBOR + 11.00% PIK, 1.00% LIBOR Floor)(13)
4/28/2023894,050 832,281 789,715 0.4 %
Equity - 5,441 Class A Units— 302,464 20,893 0.0 %
Warrants - 0.65% of Outstanding Equity3/30/2028— 361,667 24,983 0.0 %
894,050 1,496,412 835,591 
Walker Edison Furniture Company LLCConsumer goods:  Durable
Senior Secured First Lien Term Loan (LIBOR + 6.50% Cash, 1.00% LIBOR Floor)(13)(23)
9/26/20243,611,900 3,611,900 3,611,900 1.7 %
Equity - 1,500 Common Units— 1,500,000 2,557,657 1.2 %
3,611,900 5,111,900 6,169,557 
Watermill-QMC Midco, Inc.Automotive
Equity - 1.3% Partnership Interest(8)
— 518,283 88,989 0.0 %
— 518,283 88,989 
Subtotal Non-Controlled/Non-Affiliated Investments$180,226,518 $204,736,370 $189,905,466 
Affiliated Investments:
1888 Industrial Services, LLCEnergy:  Oil & Gas
Senior Secured First Lien Term Loan A (LIBOR + 5.00% PIK, 1.00% LIBOR Floor)(13)
9/30/2021$9,304,145 $9,304,145 $9,304,145 4.3 %
Senior Secured First Lien Term Loan B (LIBOR + 8.00% PIK, 1.00% LIBOR Floor)(9)(13)
9/30/202123,547,567 19,468,870 5,886,892 2.7 %
Senior Secured First Lien Term Loan C (LIBOR + 5.00% PIK, 1.00% LIBOR Floor)(13)
6/30/20211,170,014 1,170,014 1,170,014 0.5 %
Senior Secured First Lien Term Loan D (LIBOR + 5.00% PIK, 1.00% LIBOR Floor)(13)
9/18/2020224,456 224,456 224,456 0.1 %
Revolving Credit Facility (LIBOR + 5.00% PIK, 1.00% LIBOR
Floor)(13)(16)
9/30/20214,387,025 4,387,025 4,387,025 2.0 %
Equity - 21,562.16 Class A Units— — — 0.0 %
38,633,207 34,554,510 20,972,532 
Access Media Holdings, LLC(7)
Media:  Broadcasting & Subscription
Senior Secured First Lien Term Loan (10.00% PIK)(9)
7/22/202010,036,355 8,446,385 2,509,089 1.2 %
Preferred Equity Series A1,600,000 1,600,000 — 0.0 %
Preferred Equity Series AA800,000 800,000 — 0.0 %
Preferred Equity Series AAA971,200 971,200 (100,800)0.0 %
Equity - 16 Common Units— — — 0.0 %
13,407,555 11,817,585 2,408,289 
Caddo Investors Holdings 1 LLC(10)
Forest Products & Paper
Equity - 6.15% Membership Interest(21)
— 2,526,373 2,830,051 1.3 %
— 2,526,373 2,830,051 
Dynamic Energy Services International LLC(7)
Energy:  Oil & Gas
Senior Secured First Lien Term Loan (LIBOR + 13.50% PIK)(9)(15)
12/31/202111,124,375 7,824,974 1,264,841 0.6 %
Revolving Credit Facility (12.00% Cash)12/31/2019545,103 545,103 545,103 0.2 %
Equity - 12,350,000 Class A Units— — — 0.0 %
11,669,478 8,370,077 1,809,944 
JFL-NGS Partners, LLCConstruction & BuildingPreferred Equity - A-2 Preferred (3.00% PIK)20,150,684 20,150,684 20,150,684 9.3 %
Preferred Equity - A-1 Preferred (3.00% PIK)2,607,661 2,607,661 2,607,661 1.2 %
Equity - 57,300 Class B Units— 57,300 19,096,371 8.8 %
22,758,345 22,815,645 41,854,716 
F-15






Company(1)
Industry
Type of Investment(6)
Maturity
Par Amount(2)
Cost(3)
Fair Value
% of
Net Assets(4)
JFL-WCS Partners, LLCEnvironmental IndustriesPreferred Equity - Class A Preferred (6.00% PIK)1,236,269 1,236,269 1,236,269 0.6 %
Equity - 129,588 Class B Units— 129,588 2,755,041 1.3 %
1,236,269 1,365,857 3,991,310 
Kemmerer Operations, LLC(7)
Metals & MiningSenior Secured First Lien Term Loan (15.00% PIK)6/21/20231,766,511 1,766,511 1,766,511 0.8 %
Senior Secured First Lien Delayed Draw Term Loan (15.00% PIK)6/21/2023706,604 706,604 706,604 0.3 %
Equity - 6.7797 Common Units— 962,717 962,717 0.4 %
2,473,115 3,435,832 3,435,832 
Path Medical, LLCHealthcare & Pharmaceuticals
Senior Secured First Lien Term Loan (LIBOR + 9.50% PIK, 1.00% LIBOR Floor)(13)
10/11/20219,534,512 9,294,959 8,845,167 4.1 %
Senior Secured First Lien Term Loan A (LIBOR + 9.50% PIK, 1.00% LIBOR Floor)(13)
10/11/20213,284,977 3,284,977 3,047,473 1.4 %
Senior Secured First Lien Term Loan C (LIBOR + 10.00% Cash, 1.00% LIBOR Floor)(13)
10/11/2021344,463 344,463 344,291 0.2 %
Warrants - 7.68% of Outstanding Equity1/9/2027— 499,751 — 0.0 %
13,163,952 13,424,150 12,236,931 
US Multifamily, LLC(10)
Banking, Finance, Insurance & Real Estate
Senior Secured First Lien Term Loan (10.00% Cash)(22)
6/17/20216,670,000 6,670,000 6,670,000 3.1 %
Equity - 33,300 Preferred Units— 3,330,000 3,330,000 1.5 %
6,670,000 10,000,000 10,000,000 
Subtotal Affiliated Investments $110,011,921 $108,310,029 $99,539,605 
Controlled Investments:(5)
MCC Senior Loan Strategy JV I LLC(10)
Multisector Holdings
Equity - 87.5% ownership of MCC Senior Loan Strategy JV I LLC(21)
— 78,575,000 69,948,970 32.3 %
— 78,575,000 69,948,970 
NVTN LLCHotel, Gaming & Leisure
Senior Secured First Lien Term Loan (LIBOR + 4.00% Cash, 1.00% LIBOR Floor)(12)
11/9/20204,255,990 4,255,990 4,255,990 2.0 %
Senior Secured First Lien Term Loan B (LIBOR + 9.25% PIK, 1.00% LIBOR Floor)(9)(12)
11/9/202013,436,693 12,305,096 7,152,352 3.3 %
Senior Secured First Lien Term Loan C (LIBOR + 12.00% PIK, 1.00% LIBOR Floor)(9)(12)
11/9/20208,747,134 7,570,054 — 0.0 %
Equity - 787.4 Class A Units— 9,550,922 — 0.0 %
26,439,817 33,682,062 11,408,342 
TPG Plastics LLCChemicals, Plastics & Rubber
Senior Secured Second Lien Term Loan (Prime + 10.00% Cash)(14)
12/31/2019352,984 352,984 352,984 0.2 %
Unsecured Debt (10.00% Cash)(20)
278,810 278,810 278,810 0.1 %
Equity - 35 Class B Units— 3,317,149 1,644,751 0.8 %
631,794 3,948,943 2,276,545 
URT Acquisition Holdings CorporationServices:  Business
Senior Secured Second Lien Term Loan (LIBOR + 8.00% PIK, 2.00% LIBOR Floor)(13)
5/2/202218,905,403 18,905,403 18,905,403 8.7 %
Preferred Equity (12.00% PIK)(9)
6,552,890 6,552,890 4,914,667 2.3 %
Equity - 397,466 Common Units— 12,936,879 — 0.0 %
25,458,293 38,395,172 23,820,070 
Subtotal Control Investments$52,529,904 $154,601,177 $107,453,927 
F-16






Company(1)
Industry
Type of Investment(6)
Maturity
Par Amount(2)
Cost(3)
Fair Value
% of
Net Assets(4)
Total Investments, September 30, 2019$342,768,343 $467,647,576 $396,898,998 183.4 %

(1)All of our investments are domiciled in the United States. Certain investments also have international operations.
(2)Par amount includes accumulated payment-in-kind (“PIK”) interest, as applicable, and is net of repayments.
(3)Gross unrealized appreciation, gross unrealized depreciation, and net unrealized depreciation for U.S. federal income tax purposes totaled $28,155,804, $96,121,868, and $67,966,064, respectively. The tax cost basis of investments is $464,855,062 as of September 30, 2019.
(4)Percentage is based on net assets of $216,432,530 as of September 30, 2019.
(5)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)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).
(7)The investment has an unfunded commitment as of September 30, 2019 (see Note 8), and includes an analysis of the value of any unfunded commitments.
(8)Represents 1.3% partnership interest in Watermill-QMC Partners, LP and Watermill-EMI Partners, LP.
(9)The investment was on non-accrual status as of September 30, 2019.
(10)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, 2019, 24.3% of the Company's portfolio investments were non-qualifying assets.
(11)A portion of this investment was sold via a participation agreement. The amount stated is the portion retained by Medley Capital Corporation (see Note 3).
(12)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, 2019 was 2.04%.
(13)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, 2019 was 2.10%.
(14)These loans bear interest at an alternate base rate, or in the case of these particular investments the Prime Rate set by the Federal Reserve, plus a given spread. The Prime Rate in effect at September 30, 2019 was 5.00%.
(15)The interest rate on these loans is subject to 3 month LIBOR plus a base rate. The 3 month LIBOR as of September 30, 2019 was 2.10%.
(16)This investment earns 0.50% commitment fee on all unused commitment as of September 30, 2019, and is recorded as a component of interest income on the Consolidated Statements of Operations.
(17)This investment represents a Level 1 security in the ASC 820 table as of September 30, 2019 (see Note 4).
(18)This investment represents a Level 2 security in the ASC 820 table as of September 30, 2019 (see Note 4).
(19)Security is non-income producing.
(20)This investment is scheduled to repay a percentage of the outstanding principal on a quarterly basis. Upon TPG Plastics, LLC obtaining all environmental and product testing authorizations, licenses and permits from all applicable governmental authorities, the remaining outstanding principal is expected to be repaid in full.
(21)As a practical expedient, the Company uses net asset value (“NAV”) to determine the fair value of this investment.
(22)All or a portion of this investment is held in Medley SLF Funding I LLC (see Note 5).
(23)All or a portion of this investment is held in Medley Small Business Fund, LP (see Note 5).

See accompanying notes to consolidated financial statements.
F-17






MEDLEY CAPITAL CORPORATION
Notes to Consolidated Financial Statements

September 30, 2020

2021


Note 1. Organization

Medley Capital

PhenixFIN Corporation (the(“PhenixFIN.” the “Company,” “we” and “us”) is aan 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”). We areOn 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”), which is registered with the Securities and Exchange Commission (the “SEC”) as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), pursuant to an investment management agreement. MCC Advisors is a wholly owned subsidiary of Medley LLC, which is controlled by Medley Management Inc. (NYSE: 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 structure.

On March 26, 2013, our wholly owned subsidiary, Medley SBIC, LP (“SBIC LP”), a Delaware limited partnership that we own directly and through our wholly owned subsidiary, Medley SBIC GP, LLC, received a license from the Small Business Administration (“SBA”) to operate as a Small Business Investment Company (“SBIC”) under Section 301(c) of the Small Business Investment Company Act of 1958, as amended. Effective July 1, 2019, SBIC LP surrendered its SBIC license and changed its name to Medley Small Business Fund, LP (“Medley Small Business Fund”).LP. In addition, Medley SBIC GP, LLC changed its name to Medley Small Business Fund GP, LLC. See Note 5 for further information.


Medley Small Business Fund, LP and Medley Small Business Fund GP, LLC have since changed their names to PhenixFIN Small Business Fund, LP and PhenixFIN Small Business Fund GP, LLC, respectively.

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 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.


The Company’s investment objective is to generate current income and capital appreciation by lendingappreciation. The management team seeks to privately-held middle market companies,achieve this objective primarily through directly originated transactions,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 help these companies fund acquisitions, growth or refinancing.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, and senior secured second lien term loans.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 the 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.



PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2021

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. No fractional shares were issued as a result of the Reverse Stock Split. Instead, any stockholder who would have been entitled to receive a fractional share as a result of the Reverse Stock Split received cash payments in lieu of such fractional shares (without interest and subject to backup withholding and applicable withholding taxes).


The

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 beganto the NASDAQ Global Market. The listing and trading on a split-adjusted basisof the common stock on the NYSE ceased at the market openclose of trading on July 27,December 31, 2020. The trading symbol forSince January 4, 2021, the common stock remains “MCC.”


The Reverse Stock Split was intended to bring the Company into compliance with the $1.00 minimum average closing share price requirement (the “Minimum Share Price Requirement”) for continued listingtrades on the NYSE. NASDAQ Global Market under the trading symbol “PFX.”

Sale of MCC JV

On August 3,October 8, 2020, the Company, received written notice from the NYSE that theGreat American Life Insurance Company has regained compliance(“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 the Minimum Share Price Requirement afterand managed by Golub concurrently purchased all of the Company’s average closinginterest in the MCC JV and all of GALIC’s interest in the MCC JV for a pre-adjusted gross purchase price overof $156.4 million and an adjusted gross purchase price (which constitutes the 30 consecutive trading day period ending onaggregate 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 31,1, 2020 was above $1.00 per share as required under Section 802.01Cthrough October 7, 2020), resulting in net proceeds (before transaction expenses) of the NYSE Listed Company Manual.


Termination of Agreements$41.0 million and Plan of Mergers

On July 29, 2019, the Company entered into the Amended and Restated Agreement and Plan of Merger, dated as of July 29, 2019 (the “Amended MCC Merger Agreement”), by and between$6.6 million for the Company and Sierra Income Corporation (“Sierra”), pursuantGALIC, respectively.

COVID-19 Developments

The COVID-19 pandemic continues to whichhave adverse consequences on the U.S. and global economies, as well as on the Company would,(including certain portfolio companies) in particular. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual portfolio companies, remains uncertain. The Company’s performance (including that of certain of its portfolio companies) was negatively impacted during the pandemic. The longer-term impact of COVID-19 on the termsoperations and subject to the conditions set forth in the Amended MCC Merger Agreement, merge with and into Sierra, with Sierra as the surviving

F-18






company in the merger (the “MCC Merger”). In addition, on July 29, 2019, Sierra and MDLY entered into the Amended and Restated Agreement and Plan of Merger, dated as of July 29, 2019 (the “Amended MDLY Merger Agreement”), by and among MDLY, Sierra, and Sierra Management, Inc., a wholly owned subsidiary of Sierra (“Merger Sub”), pursuant to which MDLY would, on the terms and subject to the conditions set forth in the Amended MDLY Merger Agreement, merge with and into Merger Sub, with Merger Sub as the surviving company in the merger (the “MDLY Merger”).

On May 1, 2020, the Company received a notice of termination from Sierra of the Amended MCC Merger Agreement. Under the Amended MCC Merger Agreement, either party could have, subject to certain conditions, terminated the Amended MCC Merger Agreement if the MCC Merger had not been consummated by March 31, 2020. Representatives of Sierra informed the Company that in determining to terminate the Amended MCC Merger Agreement, Sierra considered a number of factors, including, among other factors, changes in the relative valuationperformance of the Company (including certain portfolio companies) is difficult to predict, but may continue to be adverse. The longer-term potential impact on such operations and Sierra,performance could depend to a large extent on future developments and actions taken by authorities and other entities to mitigate COVID-19 and its economic impact. The impacts, as well as the changed circumstancesuncertainty over impacts to come, of COVID-19 (including the Delta variant) have adversely affected the performance of the Company (including certain portfolio companies) and may continue to do so in the unpredictable economic conditions resulting fromfuture. Further, the potential exists for additional variants of COVID-19, including the Omicron variant, to impede the global health crisis caused by the coronavirus (COVID-19) pandemic,economic recovery and the uncertainty regarding the parties’ ability to satisfy the conditions to closing the MCC Merger in a timely manner.

In addition, on May 1, 2020, MDLY received a notice of termination from Sierra of the Amended MDLY Merger Agreement. Under the Amended MDLY Merger Agreement, either party could have, subject to certain conditions, terminate the Amended MDLY Merger Agreement if the MDLY Merger had not been consummated by March 31, 2020. Representatives of Sierra informed MDLY that in determining to terminate the Amended MDLY Merger Agreement, Sierra considered a number of factors, including, among other factors, changesexacerbate geographic differences in the relative valuationspread of, MDLY and Sierra, the changed circumstances and the unpredictable economic conditions resulting from the global health crisis caused by the coronavirus (COVID-19) pandemic, and the uncertainty regarding the parties’ abilityresponse to, satisfy the conditionsCOVID-19.

F-19

PHENIXFIN CORPORATION

Notes to closing the MDLY Merger in a timely manner.

Consolidated Financial Statements (continued)


September 30, 2021

Note 2. Significant Accounting Policies


Basis of Presentation

The Company followsis an investment company following the accounting and reporting guidance in the 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 MedleyPhenixFIN Small Business Fund, LP (“PhenixFIN Small Business Fund”) and MedleyPhenixFIN SLF Funding I LLC (“MedleyPhenixFIN SLF”), and its wholly owned Taxable Subsidiaries. All references made to the “Company,” “we,” and “us” herein include Medley CapitalPhenixFIN 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.  All intercompany balances and transactions have been eliminated.


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 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, 2021 and 2020, we had $69.4 million and $56.5 million in cash and cash equivalents. As of September 30, 2019, we had $68.2 million in cash and cash equivalents, and $16.0 million of restricted cash, which was restricted for the purposes of repaying principal and interest on our Series A Israeli Notes (the “Israeli Notes”).

respectively.


Use of Estimates in the Preparation of Financial Statements

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. Actual results could differ from those estimates.


Debt Issuance Costs

Debt issuance costs incurred in connection with any credit facilities and unsecured notes and SBA-guaranteed debentures (the "SBA Debentures") (see Note 5) are deferred and amortized over the life of the respective credit facility or instrument.


Indemnification

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.


Reclassification

Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements.

Revenue Recognition

F-19






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 due. For the years ended September 30, 2021, 2020 2019 and 2018,2019, the Company earned approximately $0.9 million, $3.8 million, $7.2 million, and $10.8$7.2 million in PIK interest, respectively.



PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2021

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. 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, 2021, 2020 2019 and 2018,2019, fee income was approximately $2.6 million, $0.7 million $2.3 million and $4.5$2.3 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 years ended September 30, 2020 2019 and 2018,2019, $0.9 million and $47.8 million, and $73.0 million, respectively,, of the Company'sCompany’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. 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, 2021, certain investments in 9 portfolio companies held by the Company were on non-accrual status with a combined fair value of approximately $13.9 million, or 9.2% of the fair value of our portfolio. At September 30, 2020, certain investments in eight portfolio companies held by the Company were on non-accrual status with a combined fair value of approximately $21.7 million, or 8.8% of the fair value of our portfolio. At September 30, 2019, certain investments in seven portfolio companies held by the Company were on non-accrual status with a combined fair value of approximately $22.3 million, or 5.6% of the fair value of our portfolio. At September 30, 2018, certain investments in nine portfolio companies held by the Company were on non-accrual status with a combined fair value of approximately $48.1 million, or 7.3% 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 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.”


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 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 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. 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.


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 partythird-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 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

F-20






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.



PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2021

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 “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 useshas engaged third-party valuation firms (the “Valuation Firms”) to assist theit and its board of directors in the valuation of its portfolio investments. The valuation reports generated by the third-party valuation firmsValuation Firms consider the evaluation of financing and sale transactions with third parties, expected cash flows and market basedmarket-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 value.


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”); and

•estimating the value to potential buyers.

●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”); and

●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); and

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

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

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

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 begins with each portfolio investment being internally valued by the valuation professionals;

•preliminary valuation conclusions are then documented and discussed with senior management; and

•an independent valuation firm engaged by our board of directors reviews approximately one third of these preliminary valuations each quarter on a rotating quarterly basis on non-fiscal year-end quarters, such that each of these investments will be valued by independent valuation firms at least twice per annum when combined with the fiscal year-end review of all the investments by independent valuation firms.

In addition, all of our investments are subject to the following valuation process:

•the audit committee of our board of directors reviews the preliminary valuations of the valuation professionals, senior management and independent valuation firms; and

•our board of directors discusses valuations and determines the fair value of each investment in our portfolio in good faith based on the input of MCC Advisors, the respective independent valuation firms and the audit committee.

F-21






●our quarterly valuation process generally begins with each portfolio investment being internally valued by a Valuation Firm;

●preliminary valuation conclusions are then documented and discussed with senior management;

●the audit committee of the board of directors reviews the preliminary valuations with management and the Valuation Firms; and

●the board of directors discusses the valuations and determines the fair value of each investment in the Company’s portfolio in good faith based on the input of management, the respective Valuation Firms and the audit committee.

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 the financial market)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.



PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2021

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 nature. 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“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. Many of 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. The standard isIn 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 as of March 12, 2020 through December 31, 2022 andwhen 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 that itthe adoption of ASU 2020-04 and ASU 2021-01 will have a material impact on its consolidated financial statements and disclosures.


In May 2020, the SEC adopted rule amendments that will impactimpacted the requirement of investment companies, including BDCs, to disclose the financial statements of certain of their portfolio companies or certain acquired funds (the “Final Rules”). The Final Rules adopted a new definition of “significant subsidiary” set forth in Rule 1-02(w)(2) of Regulation S-X under the Securities Act. Rules 3-09 and 4-08(g) of Regulation S-X require investment companies to include separate financial statements or summary financial information, respectively, in such investment company’s periodic reports for any portfolio company that meets the definition of “significant subsidiary.” The Final Rules adopt a new definition of “significant subsidiary” applicable only to investment companies that (i) modifies the investment test and the income test, and (ii) eliminates the asset test currently in the definition of “significant subsidiary” in Rule 1-02(w) of Regulation S-X. The new Rule 1-02(w)(2) of Regulation S-X is intended to more accurately capture those portfolio companies that are more likely to materially impact the financial condition of an investment company. The Final Rules will bebecame effective on January 1, 2021, but voluntary compliance is permitted in advance of the effective date.2021. The Company has evaluated the impact of the Final RuleRules and has determined its impact not to be material and as such, has adopted it forbegan voluntary compliance with the Final Rules since the quarter ended June 30, 2020.


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”) including PIK,, as defined by the Code, including PIK interest, and net tax exempt interest income (which is the excess of our gross tax exempt interest income over certain disallowed deductions) for each taxable year in order to be eligible for tax treatment under Subchapter M of the Code.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.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 iswas no provision for federal excise tax for the calendar year ended 2020 accrued at September 30, 2021 and the calendar year ended 2019 accrued at September 30, 2020. For the calendar year ended December 31, 2018, there was no excise tax expense as the Company distributed at least 98% of its ordinary income and 98.2% of its capital gains. For the calendar year ended December 31, 2017, the Company did not distribute at least 98% of its ordinary income and 98.2% of its capital gains. Accordingly, with respect to the calendar year ended December 31, 2017 an excise tax expense of $0.2 was recorded in the fiscal year ended September 30, 2018.


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, 20202021 and 2019,2020, 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, 2021, 2020 and 2019, the Company did not record a change in provision for deferred taxes on the unrealized (appreciation)/depreciation on investments.  For the year ended September 30, 2018, the change in provision for deferred taxes on the unrealized depreciation on investments was $0.5.


As of September 30, 20202021 and 2019,2020, the Company hashad a net deferred tax asset of $22.8$22.2 million and $20.9$22.8 million, respectively, consisting primarily of net operating losses offset byand net unrealized gainslosses on the investments held within its Taxable Subsidiaries. As of September 30, 20202021 and 2019,2020, the Company has booked a valuation allowance of $22.8$22.2 million and $20.9$22.8 million, respectively, against its net 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,

F-22






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

F-23


PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2021

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. During the years ended September 30, 2021, 2020 2019 and 2018,2019, 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
 202020192018
Capital in excess of par value$(1,202,850)$(16,882,923)$(157,925)
Accumulated undistributed net investment income/(loss)1,202,850 23,174,206 280,924 
Accumulated net realized gain/(loss) from investments— (6,291,283)(122,999)

  For the years ended September 30  
  2021  2020  2019 
Capital in excess of par value $24,688,262  $(1,202,850) $(16,882,923)
Accumulated undistributed net investment income/(loss)  

(19,047,396

)  1,202,850   23,174,206 
Accumulated net realized gain/(loss) from investments  (5,640,866)  —   (6,291,283)

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, 2021, 2020 2019 and 20182019 were as follows:

 For the years ended September 30
 202020192018
Ordinary income$— $— $22,025,185 
Distributions of long-term capital gains— — — 
Return of capital— 8,171,130 6,301,403 
Distributions on a tax basis$— $8,171,130 $28,326,588 

  For the years ended September 30  
  2021  2020  2019 
Ordinary income $       —  $—  $— 
Distributions of long-term capital gains  —   —   — 
Return of capital  —   —   8,171,130 
Distributions on a tax basis $        — $—  $8,171,130 

For federal income tax purposes, the cost of investments owned at September 30, 2021, 2020 2019 and 20182019 were approximately $206.9 million, $327.9 million, and $464.9 million, and $757.9 million, respectively.

At September 30, 2021, 2020 2019 and 2018,2019, 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
 202020192018
Undistributed ordinary income$— $— $— 
Accumulated capital and other losses(1)
(440,538,935)(389,066,323)(268,569,450)
Other temporary differences(106,066)(122,274)(6,429,766)
Unrealized appreciation/(depreciation)(81,119,823)(67,966,064)(102,463,301)
Components of distributable earnings/(accumulated deficits) at year end$(521,764,824)$(457,154,661)$(377,462,517)
(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, 2020, the Company a had long-term capital loss carryforward available to offset future realized capital gains of $440,538,935.

  For the years ended September 30 
  2021  2020  2019 
Undistributed ordinary income $265,798  $—  $— 
Accumulated capital and other losses(1)  (490,032,788)   (440,538,935)  (389,066,323)
Other temporary differences  (89,856)   (106,066)  (122,274)
Unrealized appreciation/(depreciation)  (55,318,332)   (81,119,823)  (67,966,064)
Components of distributable earnings/(accumulated deficits) at year end $ (545,175,178)  $(521,764,824) $(457,154,661)

(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, 2021, the Company had a long-term capital loss carryforward available to offset future realized capital gains of $488,446,626 and a short-term capital loss carryforward of $1,586,162.

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, 2020.2021.   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.

Service and applicable state tax authorities.


Retroactive Adjustments for Reverse Stock Split and the Authorized Share Reduction

The per share amount of the common stock and the authorized shares of common stock in the audited financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the Reverse Stock Split effected on July 24, 2020. See Note 1 for more information regarding the Reverse Stock Split and the Authorized Share Reduction.


Segments

Segments

The Company invests in various industries. The 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

F-23






segment. All applicable segment disclosures are included in or can be derived from the Company’s financial statements. See Note 3 for further information.



PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2021

Company Investment Risk, Concentration of Credit Risk, and Liquidity Risk


MCC Advisors

The Company has broad discretion in making investments for the Company.investments. Investments will 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.


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. MCC Advisors may attempt to minimize this risk by maintaining low loan-to-liquidation values with each loan and the collateral underlying the loan.


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.

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. The COVID-19 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 (including the Delta variant) 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, including the Omicron variant, to impede the global economic recovery and exacerbate geographic differences in the spread of, and response to, COVID-19.


Note 3. 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):

  Amortized Cost  Percentage  Fair Value  Percentage 
Senior Secured First Lien Term Loans $136,740   65.7% $61,934   40.9%
Senior Secured Second Lien Term Loans  2,600   1.3   2,490   1.6 
Senior Secured Notes  9,306   4.5   9,270   6.1 
Secured Debt  2,500   1.2   2,500   1.6 
Unsecured Debt  1,561   0.8   -   - 
Equity/Warrants  54,961   26.5   75,446   49.8 
Total Investments $207,668   100.0% $151,640   100.0%

The composition of our investments as of September 30, 2020 as a percentage of our total portfolio, at amortized cost and fair value were as follows (dollars in thousands):

 Amortized CostPercentageFair ValuePercentage
Senior Secured First Lien Term Loans$178,843 54.5 %$106,463 43.2 %
Senior Secured Second Lien Term Loans15,476 4.7 13,927 5.6 
Unsecured Debt4,601 1.4 2,669 1.1 
MCC Senior Loan Strategy JV I LLC79,888 24.4 41,019 16.6 
Equity/Warrants49,327 15.0 82,666 33.5 
Total$328,135 100.0 %$246,744 100.0 %
The composition of our investments as of September 30, 2019 as a percentage of our total portfolio, at amortized cost and fair value were as follows (dollars in thousands):
 Amortized CostPercentageFair ValuePercentage
Senior Secured First Lien Term Loans$243,342 52.0 %$192,770 48.6 %
Senior Secured Second Lien Term Loans39,089 8.4 36,508 9.2 
Unsecured Debt2,653 0.6 2,653 0.7 
MCC Senior Loan Strategy JV I LLC78,575 16.8 69,949 17.6 
Equity/Warrants103,989 22.2 95,009 23.9 
Total$467,648 100.0 %$396,889 100.0 %

  Amortized
Cost		   Percentage  Fair
Value		  Percentage 
Senior Secured First Lien Term Loans $178,843   54.5% $106,463   43.2%
Senior Secured Second Lien Term Loans  15,476   4.7   13,927   5.6 
Unsecured Debt  4,601   1.4   2,669   1.1 
MCC Senior Loan Strategy JV I LLC  79,888   24.4   41,019   16.6 
Equity/Warrants  49,327   15.0   82,666   33.5 
Total $328,135   100.0% $246,744   100.0%

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, 20202021 and 2019,2020, the total fair value of warrants was $15,354$996.7 thousand and $24,983,$15.3 thousand, respectively, and were included in investments at fair value on the Consolidated Statements of Assets and Liabilities. During the year ended September 30, 2020,2021, the Company had no warrant activity. During the year ended September 30, 2019, the Company exercised its warrant positions in one portfolio company in exchange for common stock in Avantor, Inc., forfeited its warrant positions in another portfolio company, and 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, 2021, 2020, and 2019 was $981.4 thousand, $9.6 thousand, and 2018 was $9,628, $0.5 million, and $1.3 million, 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, 2021

The following table shows the portfolio composition by industry grouping at fair value at September 30, 2021 (dollars in thousands):

  Fair Value  Percentage 
Construction & Building $31,619   20.8%
Banking, Finance, Insurance & Real Estate  27,916   18.4 
High Tech Industries  21,210   14.0 
Services: Business  12,415   8.2 
Automotive  11,967   7.9 
Hotel, Gaming & Leisure  11,931   7.9 
Manufacturing  9,270   6.1 
Environmental Industries  8,100   5.3 
Energy: Oil & Gas  3,579   2.4 
Forest Products & Paper  3,455   2.3 
Metals & Mining  3,077   2.0 
Aerospace & Defense  2,490   1.6 
Consumer goods: Durable  2,361   1.6 
Healthcare & Pharmaceuticals  2,250   1.5 
Total $151,640   100.0%

The following table shows the portfolio composition by industry grouping at fair value at September 30, 2020 (dollars in thousands):

  Fair Value  Percentage 
Construction & Building $51,964   21.1%
Multisector Holdings  41,019   16.6 
High Tech Industries  26,165   10.6 
Healthcare & Pharmaceuticals  23,481   9.5 
Services: Business  21,841   8.9 
Hotel, Gaming & Leisure  12,337   5.0 
Wholesale  12,278   5.0 
Containers, Packaging & Glass  11,987   4.8 
Consumer goods: Durable  9,520   3.8 
Banking, Finance, Insurance & Real Estate  6,557   2.7 
Consumer goods: Non-durable  6,164   2.5 
Environmental Industries  5,846   2.4 
Energy: Oil & Gas  5,626   2.3 
Metals & Mining  3,530   1.4 
Forest Products & Paper  2,991   1.2 
Aerospace & Defense  2,942   1.2 
Media: Broadcasting & Subscription  1,110   0.5 
Automotive  1,043   0.4 
Retail  343   0.1 
Total $246,744   100.0%


F-24


PHENIXFIN CORPORATION


Notes to Consolidated Financial Statements (continued)





 Fair ValuePercentage
Construction & Building$51,964 21.1 %
Multisector Holdings41,019 16.6 
High Tech Industries26,165 10.6 
Healthcare & Pharmaceuticals23,481 9.5 
Services:  Business21,841 8.9 
Hotel, Gaming & Leisure12,337 5.0 
Wholesale12,278 5.0 
Containers, Packaging & Glass11,987 4.8 
Consumer goods:  Durable9,520 3.8 
Banking, Finance, Insurance & Real Estate6,557 2.7 
Consumer goods:  Non-durable6,164 2.5 
Environmental Industries5,846 2.4 
Energy:  Oil & Gas5,626 2.3 
Metals & Mining3,530 1.4 
Forest Products & Paper2,991 1.2 
Aerospace & Defense2,942 1.2 
Media:  Broadcasting & Subscription1,110 0.5 
Automotive1,043 0.4 
Retail343 0.1 
Total$246,744 100.0 %
The following table shows the portfolio composition by industry grouping at fair value at September 30, 2019 (dollars in thousands): 
 Fair ValuePercentage
Multisector Holdings$69,949 17.6 %
Construction & Building59,608 15.0 
Services:  Business49,512 12.5 
High Tech Industries38,254 9.6 
Healthcare & Pharmaceuticals25,698 6.5 
Energy:  Oil & Gas23,632 6.0 
Hotel, Gaming & Leisure21,127 5.3 
Wholesale13,850 3.5 
Services:  Consumer13,278 3.3 
Containers, Packaging & Glass12,637 3.2 
Capital Equipment10,680 2.7 
Automotive10,375 2.6 
Banking, Finance, Insurance & Real Estate10,000 2.5 
Aerospace & Defense8,604 2.2 
Consumer goods:  Non-durable6,326 1.6 
Consumer goods:  Durable6,170 1.6 
Environmental Industries3,991 1.0 
Metals & Mining3,436 0.9 
Forest Products & Paper2,830 0.7 
Media:  Broadcasting & Subscription2,408 0.6 
Chemicals, Plastics & Rubber2,277 0.6 
Media: Advertising, Printing & Publishing1,715 0.4 
Retail532 0.1 
Total$396,889 100.0 %

2021

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, 2021 (dollars in thousands):

  Fair Value  Percentage 
Northeast $54,211   35.8%
West  44,030   29.0 
Southeast  28,887   19.0 
Southwest  17,418   11.5 
Midwest  7,094   4.7 
Total $151,640   100.0%

The following table shows the portfolio composition by geographic location at fair value at September 30, 2020 (dollars in thousands):

  Fair Value  Percentage 
Northeast $98,555   39.9%
West  55,400   22.5 
Southeast  42,321   17.1 
Midwest  27,574   11.2 
Mid-Atlantic  13,334   5.4 
Southwest  9,560   3.9 
Total $246,744   100.0%


F-25


PHENIXFIN CORPORATION


Notes to Consolidated Financial Statements (continued)





 Fair ValuePercentage
Northeast$98,555 39.9 %
West55,400 22.5 
Southeast42,321 17.1 
Midwest27,574 11.2 
Mid-Atlantic13,334 5.4 
Southwest9,560 3.9 
Total$246,744 100.0 %

The following table shows the portfolio composition by geographic location at fair value at September 30, 2019 (dollars in thousands):
 Fair ValuePercentage
Northeast$143,795 36.2 %
West88,412 22.3 
Midwest76,001 19.2 
Southeast48,089 12.1 
Southwest24,658 6.2 
Mid-Atlantic15,934 4.0 
Total$396,889 100.0 %
F-26
2021







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, 20202021 and 20192020 were as follows:

Name of Investment(3) Type of
Investment		 Fair Value at
September 30,
2020		  Purchases/
(Sales) of or
Advances/
(Distributions)		  Transfers
In/(Out) of
Affiliates		  Unrealized
Gain/(Loss)		  Realized
Gain/(Loss)		  Fair Value at
September 30,
2021		  Income
Earned		 
Affiliated Investments                     
1888 Industrial Services, LLC Senior Secured First Lien Term Loan A $-  $-  $-  $-  $-  $-  $- 
  Senior Secured First Lien Term Loan B  -   -   -   -   -   -   - 
  Senior Secured First Lien Term Loan C  1,166,763   -   -   (1,142,124)  -   24,639   93,832 
  Revolving Credit Facility  3,554,069   -   -   -   -   3,554,069   219,687 
Access Media Holdings, LLC Senior Secured First Lien Term Loan  1,110,563   (1,239,334)  -   7,335,819   (7,207,048)  -   - 
  Preferred Equity Series A  -   -   -   1,600,000   (1,600,000)  -   - 
  Preferred Equity Series AA  -   -   -   800,000   (800,000)  -   - 
  Preferred Equity Series AAA  -   -   -   971,200   (971,200)  -   - 
Black Angus Steakhouses,LLC Senior Secured First Lien Delayed Draw Term Loan  758,929   -   -   -   -   758,929   76,947 
  Senior Secured First Lien Term Loan  5,047,557   -   -   (2,767,743)  -   2,279,814   - 
  Senior Secured First Lien Super Priority DDTL  -   1,500,000   -   -   -   1,500,000   125,262 
Caddo Investors Holdings 1 LLC Equity  2,990,776   -   -   464,010   -   3,454,786   - 
Dynamic Energy Services International LLC Senior Secured First Lien Term Loan  905,116   (820,278)  -   (408,709)  323,871   -   - 
JFL-NGS Partners, LLC Preferred Equity A-2  1,795,034   (2,110,987)  -   -   315,953   -   (16,377)
  Preferred Equity A-1  232,292   -   -   -   (232,292)  -   (2,119)
  Equity  38,780,067   -   -   (11,917,254)  -   26,862,813   - 
JFL-WCS Partners, LLC Preferred Equity Class A  1,310,649   (1,330,460)  -   -   19,811   -   (53,623)
  Equity  4,535,580   -   -   3,564,369   -   8,099,949   - 
Kemmerer Operations, LLC Senior Secured First Lien Term Loan  2,051,705   330,280   -   (21,438)  -   2,360,547   330,418 
  Senior Secured First Lien Delayed Draw Term Loan  515,699   (351,784)  -   (1,474)  -   162,441   54,849 
  Equity  962,717   -   -   (408,971)  -   553,746   - 
Path Medical, LLC Senior Secured First Lien Term Loan A  5,905,080   (99,186)  -   (3,556,059)  -   2,249,835   105,026 
  Senior Secured First Lien Term Loan B  6,794,514   (137,017)  -   (6,678,337)  20,840   -   2,974 
URT Acquisition Holdings Corporation Unsecured Debt  -   (2,609,589)  2,567,929   -   41,660   -   168,642 
  Warrants  -   -   -   920,000   -   920,000   - 
US Multifamily, LLC Senior Secured First Lien Term Loan  5,123,913   (2,546,497)  -   -   -   2,577,416   322,095 
  Equity  1,332,000   -   -   904,261   -   2,236,261   - 
Total Affiliated Investments   $84,873,023  $(9,414,852) $2,567,929  $(10,342,450) $(10,088,405) $57,595,245  $1,427,613 



PHENIXFIN CORPORATION


Name of Investment(3)
Type of InvestmentFair Value at September 30, 2019Purchases/(Sales) of or Advances/(Distributions)Transfers In/(Out) of AffiliatesUnrealized Gain/(Loss)Realized Gain/(Loss)Fair Value at September 30, 2020Income Earned
Affiliated Investments
1888 Industrial Services, LLCSenior Secured First Lien Term Loan A$9,304,145 $168,923 $— $(9,473,068)$— $— $167,086 
Senior Secured First Lien Term Loan B5,886,892 — — (5,886,892)— — — 
Senior Secured First Lien Term Loan C1,170,014 21,242 — (24,493)— 1,166,763 21,012 
Senior Secured First Lien Term Loan D224,456 (224,456)— — — — 15,103 
Senior Secured First Lien Term Loan E— — — — — — 53,342 
Revolving Credit Facility4,387,025 (832,956)— — — 3,554,069 246,271 
Equity— — — — — — — 
Access Media Holdings, LLCSenior Secured First Lien Term Loan2,509,089 — — (1,398,526)— 1,110,563 — 
Preferred Equity Series A— — — — — — — 
Preferred Equity Series AA— — — — — — — 
Preferred Equity Series AAA(100,800)— — 100,800 — — — 
Equity— — — — — — — 
Black Angus Steakhouses, LLCSenior Secured First Lien Delayed Draw Term Loan— — 758,929 — — 758,929 11,148 
Senior Secured First Lien Term Loan— — 5,863,872 (816,315)— 5,047,557 — 
Equity— — — — — — — 
Caddo Investors Holdings 1 LLCEquity2,830,051 2,452 — 158,273 — 2,990,776 — 
Dynamic Energy Services International LLCSenior Secured First Lien Term Loan1,264,841 — — (359,725)— 905,116 — 
Revolving Credit Facility545,103 (545,103)— — — — 6,692 
Equity— — — — — — — 
JFL-NGS Partners, LLCPreferred Equity A-220,150,684 (18,355,650)— — — 1,795,034 352,315 
Preferred Equity A-12,607,661 (2,375,369)— — — 232,292 45,592 
Equity19,096,371 — — 19,683,696 — 38,780,067 — 
JFL-WCS Partners, LLCPreferred Equity Class A1,236,269 74,380 — — — 1,310,649 77,412 
Equity2,755,041 — — 1,780,539 — 4,535,580 — 
Kemmerer Operations, LLCSenior Secured First Lien Term Loan1,766,511 285,194 — — — 2,051,705 285,313 
Senior Secured First Lien Delayed Draw Term Loan706,604 (190,905)— — — 515,699 80,201 
Equity962,717 — — — — 962,717 — 
F-27






Name of Investment(3)
Type of InvestmentFair Value at September 30, 2019Purchases/(Sales) of or Advances/(Distributions)Transfers In/(Out) of AffiliatesUnrealized Gain/(Loss)Realized Gain/(Loss)Fair Value at September 30, 2020Income Earned
Path Medical, LLCSenior Secured First Lien Term Loan8,845,167 (8,639,959)— 449,792 (655,000)— 1,203,692 
Senior Secured First Lien Term Loan A3,047,473 (3,010,987)— 237,504 (273,990)— 380,499 
Senior Secured First Lien Term Loan C344,291 (344,463)— 172 — — 17,776 
Senior Secured First Lien Term Loan A— 5,905,080 — — — 5,905,080 51,670 
Senior Secured First Lien Term Loan B— 6,599,918 — 194,596 — 6,794,514 — 
Equity— — — — — — — 
US Multifamily, LLCSenior Secured First Lien Term Loan6,670,000 (1,546,087)— — — 5,123,913 592,727 
Equity3,330,000 — — (1,998,000)— 1,332,000 — 
Total Affiliated Investments$99,539,605 $(23,008,746)$6,622,801 $2,648,353 $(928,990)$84,873,023 $3,607,851 
Controlled Investments
MCC Senior Loan Strategy JV I LLC(1)(2)
Equity69,948,970 1,312,500 — (30,242,970)— 41,018,500 6,256,250 
NVTN LLCSenior Secured First Lien Term Loan4,255,990 2,309,885 — (2,035,797)— 4,530,078 62,840 
Super Priority Senior Secured First Lien Term Loan— 1,995,374 — 4,626 — 2,000,000 1,983 
Senior Secured First Lien Term Loan B7,152,352 — — (7,152,352)— — — 
Senior Secured First Lien Term Loan C— — — — — — — 
Equity— — — — — — — 
TPG Plastics LLCSenior Secured Second Lien Term Loan352,984 (352,984)— — — — 12,806 
Unsecured Debt278,810 (278,810)— — — — 6,876 
Unsecured Debt1,644,751 (1,630,312)— 1,672,398 (1,686,837)— — 
URT Acquisition Holdings CorporationSenior Secured Second Lien Term Loan18,905,403 1,594,416 — — (20,499,819)— 500,767 
Preferred Equity4,914,667 (2,533,622)— 1,638,223 (4,019,268)— — 
Equity— (66,378)— 12,936,879 (12,870,501)— — 
Total Controlled Investments$107,453,927 $2,350,069 $— $(23,178,993)$(39,076,425)$47,548,578 $6,841,522 




Name of Investment(3)
Type of InvestmentFair Value at September 30, 2018Purchases/(Sales) of or Advances/(Distributions)Transfers In/(Out) of AffiliatesUnrealized Gain/(Loss)Realized Gain/(Loss)Fair Value at September 30, 2019Income Earned
Affiliated Investments
1888 Industrial Services, LLCSenior Secured First Lien Term Loan A$8,984,232 $319,913 $— $— $— $9,304,145 $688,498 
Senior Secured First Lien Term Loan B19,725,217 142,757 — (13,981,082)— 5,886,892 752,483 
F-28






Name of Investment(3)
Type of InvestmentFair Value at September 30, 2018Purchases/(Sales) of or Advances/(Distributions)Transfers In/(Out) of AffiliatesUnrealized Gain/(Loss)Realized Gain/(Loss)Fair Value at September 30, 2019Income Earned
Senior Secured First Lien Term Loan C— 1,170,014 — — — 1,170,014 22,203 
Senior Secured First Lien Term Loan D— 224,456 — — — 224,456 546 
Revolving Credit Facility3,593,693 793,332 — — — 4,387,025 247,920 
Equity— — — — — — — 
Access Media Holdings, LLCSenior Secured First Lien Term Loan5,876,279 — — (3,367,190)— 2,509,089 (25,391)
Preferred Equity Series A— — — — — — — 
Preferred Equity Series AA— — — — — — — 
Preferred Equity Series AAA(172,800)72,000 — — — (100,800)— 
Equity— — — — — — — 
Brantley Transportation LLCSenior Secured First Lien Term Loan2,882,800 (1,329,030)— 6,117,200 (7,670,970)— — 
Senior Secured First Lien Delayed Draw Term Loan503,105 (503,105)— — — — 35,561 
Equity— — — — — — — 
Caddo Investors Holdings 1 LLCEquity2,500,000 26,373 — 303,678 — 2,830,051 (61,927)
Dynamic Energy Services International LLCSenior Secured First Lien Term Loan— — 7,824,975 (6,560,134)— 1,264,841 (393,474)
Revolving Credit Facility— (776,898)1,322,001 — — 545,103 65,754 
Equity— — — — — — — 
JFL-NGS Partners, LLCPreferred Equity A-231,468,755 (11,318,071)— — — 20,150,684 924,898 
Preferred Equity A-14,072,311 (1,464,650)— — — 2,607,661 119,689 
Equity9,825,804 — — 9,270,567 — 19,096,371 — 
JFL-WCS Partners, LLCPreferred Equity Class A1,166,292 69,977 — — — 1,236,269 72,830 
Equity215,116 — — 2,539,925 — 2,755,041 — 
Kemmerer Operations, LLCSenior Secured First Lien Term Loan— 1,766,511 — — — 1,766,511 72,332 
Senior Secured First Lien Delayed Draw Term Loan— 706,604 — — — 706,604 28,932 
Equity— 962,717 — — — 962,717 — 
Path Medical, LLCSenior Secured First Lien Term Loan— 1,473,135 7,821,824 (449,792)— 8,845,167 1,148,712 
Senior Secured First Lien Term Loan A— 476,477 2,808,500 (237,504)— 3,047,473 364,754 
Senior Secured First Lien Term Loan C— 344,463 — (172)— 344,291 70,514 
Equity— — 499,751 (499,751)— — — 
US Multifamily, LLCSenior Secured First Lien Term Loan6,670,000 — — — — 6,670,000 667,000 
Equity3,330,000 — — — — 3,330,000 — 
Total Affiliated Investments$100,640,804 $(6,843,025)$20,277,051 $(6,864,255)$(7,670,970)$99,539,605 $4,801,834 
Controlled Investments
F-29






Name of Investment(3)
Type of InvestmentFair Value at September 30, 2018Purchases/(Sales) of or Advances/(Distributions)Transfers In/(Out) of AffiliatesUnrealized Gain/(Loss)Realized Gain/(Loss)Fair Value at September 30, 2019Income Earned
Capstone NutritionSenior Secured First Lien Term Loan$12,657,663 $(1,884,717)$— $8,188,908 $(18,961,854)$— $(34,719)
Senior Secured First Lien Delayed Draw Term Loan5,692,096 (847,549)— 3,994,770 (8,839,317)— — 
Senior Secured First Lien Incremental Delayed Draw Term Loan2,242,721 (2,242,721)— — — — 488,373 
Equity - Class B and C Units— — — 12 (12)— — 
Equity - Common Units— — — 400,003 (400,003)— — 
MCC Senior Loan Strategy JV I LLC(1)(2)
Equity78,370,891 — — (8,421,921)— 69,948,970 8,050,000 
NVTN LLCSenior Secured First Lien Term Loan4,005,990 250,000 — — — 4,255,990 270,259 
Senior Secured First Lien Term Loan B11,837,367 467,729 — (5,152,744)— 7,152,352 352,280 
Senior Secured First Lien Term Loan C7,479,397 90,657 — (7,570,054)— — — 
Equity— — — — — — — 
OmniVere, LLCSenior Secured First Lien Term Loan— — — 22,880,599 (22,880,599)— (2,822)
Senior Secured First Lien Term Loan1,374,048 661,225 — 2,963,001 (4,998,274)— — 
Unsecured Debt— — — 22,727,575 (22,727,575)— (2,205)
Equity— — — 872,698 (872,698)— — 
TPG Plastics LLCSenior Secured Second Lien Term Loan401,346 (48,362)— — — 352,984 38,253 
Unsecured Debt360,000 (21,780)— — (59,410)278,810 27,281 
Unsecured Debt646,996 (646,996)— — — — 2,163 
Equity2,670,154 646,996 — (1,672,399)— 1,644,751 — 
URT Acquisition Holdings CorporationSenior Secured Second Lien Term Loan15,112,754 3,792,649 — — — 18,905,403 1,824,940 
Preferred Equity5,850,795 702,095 — (1,638,223)— 4,914,667 175,043 
Equity12,937,518 — — (12,937,518)— — — 
Total Controlled Investments$161,639,736 $919,226 $— $24,634,707 $(79,739,742)$107,453,927 $11,188,846 

F-30








(1)The Company and Great American Life Insurance Company (“GALIC”) are the members of MCC Senior Loan Strategy JV I LLC (“MCC JV”), a joint venture formed as a Delaware limited liability company that is not consolidated by either member for financial reporting purposes. The members of MCC JV make capital contributions as investments by MCC JV are completed, and all portfolio and other material decisions regarding MCC JV must be submittedNotes to MCC JV’s board of managers, which is comprised of an equal number of members appointed by each of the Company and GALIC. Approval of MCC JV’s board of managers requires 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 is shared equally between the Company and GALIC, the Company does not have operational control over the MCC JV for purposes of the 1940 Act or otherwise.Consolidated Financial Statements (continued)

September 30, 2021

Name of Investment(3) Type of
Investment		 Fair Value at
September 30,
2020		  Purchases/
(Sales) of or
Advances/
(Distributions)		  Transfers
In/(Out) of
Affiliates		  Unrealized
Gain/(Loss)		  Realized
Gain/(Loss)		  Fair Value at
September 30,
2021		  Income
Earned		 
Controlled Investments                     
FlexFin LLC Equity Interest   $-  $2,500,000  $             -  $-  $-  $2,500,000  $75,000 
MCC Senior Loan Strategy JV I  LLC(1)(2) Equity  41,018,500   (39,739,929)  -   38,869,000   (40,147,571)  -   - 
NVTN LLC Senior Secured First Lien Term Loan  4,530,078   -   -   1,884,782   -   6,414,860   - 
  Super Priority Senior Secured First Lien Term Loan  2,000,000   (1,000,000)  -   (25,776)  2,776   977,000   - 
Total Controlled Investments  $47,548,578  $(38,239,929) $-  $40,728,006  $(40,144,795) $9,891,860  $   75,000 

Name of Investment(3) Type of
Investment		 Fair Value at
September 30,
2019		  Purchases/
(Sales) of or
Advances/
(Distributions)		  Transfers
In/(Out) of
Affiliates		  Unrealized
Gain/(Loss)		  

Realized
Gain/(Loss)

  Fair Value at
September 30,
2020		  Income
Earned		 
Affiliated Investments                       
1888 Industrial Services, LLC Senior Secured First Lien Term Loan A $9,304,145  $168,923  $—  $(9,473,068)  $—   $—   $    167,086 
  Senior Secured First Lien Term Loan B  5,886,892   —   —   (5,886,892)  —   —   — 
  Senior Secured First Lien Term Loan C  1,170,014   21,242   —   (24,493)  —   1,166,763   21,012 
  Senior Secured First Lien Term Loan D  224,456   (224,456)  —   —   —   —   15,103 
  Senior Secured First Lien Term Loan E  —   —   —   —   —   —   53,342 
  Revolving Credit Facility  4,387,025   (832,956)  —   —   —   3,554,069   246,271 
  Equity  —   —   —   —   —   —   — 
Access Media Holdings, LLC Senior Secured First Lien Term Loan  2,509,089   —   —   (1,398,526)  —   1,110,563   — 
  Preferred Equity Series A  —   —   —   —   —   —   — 
  Preferred Equity Series AA  —   —   —   —   —   —   — 
  Preferred Equity Series AAA  (100,800)  —   —   100,800   —   —   — 
  Equity  —   —   —   —   —   —   — 
Black Angus Steakhouses, LLC Senior Secured First Lien Delayed Draw Term Loan  —   —   758,929   —   —   758,929   11,148 
  Senior Secured First Lien Term Loan  —   —   5,863,872   (816,315)  —   5,047,557   — 
  Equity  —   —   —   —   —   —   — 
Caddo Investors Holdings 1 LLC Equity  2,830,051   2,452   —   158,273   —   2,990,776   — 
Dynamic Energy Services International LLC Senior Secured First Lien Term Loan  1,264,841   —   —   (359,725)  —   905,116   — 
  Revolving Credit Facility  545,103   (545,103)  —   —   —   —   6,692 
  Equity  —   —   —   —   —   —   — 
JFL-NGS Partners, LLC Preferred Equity A-2  20,150,684   (18,355,650)  —   —   —   1,795,034   352,315 
  Preferred Equity A-1  2,607,661   (2,375,369)  —   —   —   232,292   45,592 
  Equity  19,096,371   —   —   19,683,696   —   38,780,067   — 
JFL-WCS Partners, LLC Preferred Equity Class A  1,236,269   74,380   —   —   —   1,310,649   77,412 
  Equity  2,755,041   —   —   1,780,539   —   4,535,580   — 
Kemmerer Operations, LLC Senior Secured First Lien Term Loan  1,766,511   285,194   —   —   —   2,051,705   285,313 
  Senior Secured First Lien Delayed Draw Term Loan  706,604   (190,905)  —   —   —   515,699   80,201 
  Equity  962,717   —   —   —   —   962,717   — 



PHENIXFIN CORPORATION

(2)Amount of income earned represents distributions from MCC JVNotes to the Company and is a component of dividend income, net of provisional taxes in the Consolidated Financial Statements of Operations.(continued)

September 30, 2021

Name of Investment(3) Type of
Investment		 Fair Value at
September 30,
2019		  Purchases/
(Sales) of or
Advances/
(Distributions)		  Transfers
In/(Out) of
Affiliates		  Unrealized
Gain/(Loss)		  Realized
Gain/(Loss)		  Fair Value at
September 30,
2020		  Income
Earned		 
                        
Path Medical, LLC Senior Secured First Lien Term Loan  8,845,167   (8,639,959)  —   449,792   (655,000)  —   1,203,692 
  Senior Secured First Lien Term Loan A  3,047,473   (3,010,987)  —   237,504   (273,990)  —   380,499 
  Senior Secured First Lien Term Loan C  344,291   (344,463)  —   172   —   —   17,776 
  Senior Secured First Lien Term Loan A  —   5,905,080   —   —   —   5,905,080   51,670 
  Senior Secured First Lien Term Loan B  —   6,599,918   —   194,596   —   6,794,514   — 
  Equity  —   —   —   —   —   —   — 
US Multifamily, LLC Senior Secured First Lien Term Loan  6,670,000   (1,546,087)  —   —   —   5,123,913   592,727 
  Equity  3,330,000   —   —   (1,998,000)  —   1,332,000   — 
Total Affiliated Investments   $99,539,605  $(23,008,746) $6,622,801  $2,648,353  $(928,990) $84,873,023  $3,607,851 
                               
Name of Investment(3) Type of
Investment		  

Fair Value at
September 30,
2019

   

Purchases/
(Sales) of or
Advances/
(Distributions)

   

Transfers
In/(Out) of
Affiliates

   

Unrealized
 Gain/(Loss)

   

Realized
 Gain/(Loss)

   

Fair Value at
September 30,
2020

   

Income
Earned

 
Controlled Investments                              
MCC Senior Loan Strategy JV I LLC(1)(2) Equity  $69,948,970   $1,312,500   $—   $(30,242,970)  $—   $41,018,500   $   6,256,250 
NVTN LLC Senior Secured First Lien Term Loan  4,255,990   2,309,885   —   (2,035,797)  —   4,530,078   62,840 
  Super Priority Senior Secured First Lien Term Loan  —   1,995,374   —   4,626   —   2,000,000   1,983 
  Senior Secured First Lien Term Loan B  7,152,352   —   —   (7,152,352)  —   —   — 
  Senior Secured First Lien Term Loan C  —   —   —   —   —   —   — 
  Equity  —   —   —   —   —   —   — 
TPG Plastics LLC Senior Secured Second Lien Term Loan  352,984   (352,984)  —   —   —   —   12,806 
  Unsecured Debt  278,810   (278,810)  —   —   —   —   6,876 
  Unsecured Debt  1,644,751   (1,630,312)  —   1,672,398   (1,686,837)  —   — 
URT Acquisition Holdings Corporation Senior Secured Second Lien Term Loan  18,905,403   1,594,416   —   —   (20,499,819)  —   500,767 
  Preferred Equity  4,914,667   (2,533,622)  —   1,638,223   (4,019,268)  —   — 
  Equity  —   (66,378)  —   12,936,879   (12,870,501)  —   — 
Total Controlled Investments   $107,453,927  $2,350,069  $—  $(23,178,993) $(39,076,425) $47,548,578  $6,841,522 

(1)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 purposes. 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.

(2)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.



PHENIXFIN CORPORATION

(3)Notes to Consolidated Financial Statements (continued)

The par amount and additional detail are shown in the consolidated schedule of investments.September 30, 2021


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, 2021, 2020 2019 and 2018.2019. 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.Investment, as applicable. 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, 2021, 2020 2019 and 2018.

2019.


Loan Participation Sales

The Company may sell portions of its investments via participation agreements to a managed account, managed by an affiliate and non-affiliate of the Company. At September 30, 2021, there were no participation agreements outstanding. At September 30, 2020, there were two participation agreements outstanding with an aggregate fair value of $6.8 million. At September 30, 2019, there were two participation agreements outstanding with an aggregate fair value of $6.5 million. The transfer of the participated portion of the investments met the criteria set forth in ASC 860, Transfers and Servicingfor treatment as a sale. In each case, the Company’s loan participation agreements satisfy the following conditions:


•transferred investments have been isolated from the Company, and put presumptively beyond the reach of the Company and its creditors, even in bankruptcy or other receivership,

•each participant has the right to pledge or exchange the transferred investments it received, and no condition both constrains the participant from taking advantage of its right to pledge or exchange and provides more than a trivial benefit to the Company; and

•the Company, its consolidated affiliates or its agents do not maintain effective control over the transferred investments through either: (i) an agreement that entitles and/or obligates the Company to repurchase or redeem the assets before maturity, or (ii) the ability to unilaterally cause the holder to return specific assets, other than through a cleanup call.

●transferred investments have been isolated from the Company, and put presumptively beyond the reach of the Company and its creditors, even in bankruptcy or other receivership,

●each participant has the right to pledge or exchange the transferred investments it received, and no condition both constrains the participant from taking advantage of its right to pledge or exchange and provides more than a trivial benefit to the Company; and

●the Company, its consolidated affiliates or its agents do not maintain effective control over the transferred investments through either: (i) an agreement that entitles and/or obligates the Company to repurchase or redeem the assets before maturity, or (ii) the ability to unilaterally cause the holder to return specific assets, other than through a cleanup call.

Such investments where the Company has retained proportionate interests are included in the consolidated scheduleConsolidated Schedule of investments.Investments. All of these investments are classified within Level 3 of the fair value hierarchy, as defined in Note 4.


During the year ended September 30, 2021, the Company did not collect interest and principal payments on behalf of any participant, since there were no participation agreements outstanding. During the years ended September 30, 2020 2019 and 2018,2019, the Company collected interest and principal payments on behalf of the participantparticipants in aggregate amounts of $2.7 million $3.7 million and $21.8$3.7 million, respectively. Under the terms of the participation agreements, the Company will collectcollected and remitremitted periodic payments to the participantparticipants equal to the participant'sparticipant’s proportionate share of any principal and interest payments received by the Company from the underlying investee companies.


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 must bewere submitted to MCC JV’s board of managers, which iswas comprised of four members, two of whom arewere selected by the Company and the other two of whom arewere selected by GALIC. The Company has concluded that it doesdid not operationally control MCC JV. As the Company doesdid not operationally control MCC JV, it doesdid not consolidate the operations of MCC JV within the consolidated financial statements.


Subsequent to the year ended September 30, 2020, the Company, MCC JV, GALIC, and an affiliate of Golub Capital LLC (“Golub”) entered into a Membership Interest Purchase Agreement pursuant to which a private 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 the MCC JV. In connection therewith, MCC JV repaid in full all outstanding borrowings under, and terminated, the JV Facility (defined below). See “Note 15” for more information. Because of the aforementioned transaction, the Company determined the value of MCC JV using the proceeds from the sale. Historically, as a practical expedient, the Company had used NAV to determine the value of its investment in MCC JV; therefore, this investment had been presented as a reconciling item within the fair value hierarchy (see Note 4). Investments held by MCC JV are measured at fair value using the same valuation methodologies as described in Note 2.

As of September 30, 2020, MCC JV had total capital commitments of $100.0 million, with the Company providing $87.5 million and GALIC providing $12.5 million. Approximately $89.8 million was funded as of September 30, 2020 relating to these commitments, of which $78.6 million
F-31






was from the Company. As of September 30, 2020, MCC JV’s board of managers had approved advances of capital of up to $0.3 million of the remaining capital commitments, of which $0.2 million is from the Company.

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. The JV Facility bears interest at a rate of LIBOR (with no minimum + 2.50% per annum. On March 29, 2019, the JV Facility reinvestment period was extended from March 30, 2019 to June 28, 2019 from March 30, 2019. On June 28, 2019, the JV Facility reinvestment period was further extended from June 28, 2019 to October 28, 2019. The stated maturity date was not impacted byOn October 28, 2019, the JV Facility reinvestment period extensionwas further extended from October 28, 2019 to March 31, 2020 and remainedthe 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 30, 2022.31, 2020, the maturity date of the JV Facility was extended to March 31, 2023. As of September 30, 2020, and 2019, there was approximately $111.3 million and $179.3 million outstanding under the JV Facility, respectively.


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 iswas 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 willwere to be swept to amortize the amount outstanding under the JV Facility and interest collections willwere to be swept, as applicable, in order to meet the target effective advance rate for the applicable period.



PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2021

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. At September 30, 2020, and 2019, MCC JV had total investments at fair value of $163.1 million and $249.3 million, respectively.million. As of September 30, 2020, and 2019, MCC JV’s portfolio was comprised of senior secured first lien term loans toof 45 and 61 borrowers, respectively.borrowers. As of September 30, 2020, and 2019, certain investments in one portfolio company held by MCC JV were on non-accrual status.


Below is a summary of MCC JV’s portfolio, excluding equity investments, as of September 30, 2020, followed by a listing of the individual investments in MCC JV’s portfolio as of September 30, 2020 and 2019:

 September 30, 2020September 30, 2019
Senior secured loans(1)
$182,514,110 $261,170,437 
Weighted average current interest rate on senior secured loans(2)
6.02 %7.17 %
Number of borrowers in MCC JV45 61 
Largest loan to a single borrower(1)
$10,653,501 $10,884,644 
Total of five largest loans to borrowers(1)
$39,191,213 $43,626,877 
2020:

  September 30,
2020		 
Senior secured loans(1) $182,514,110 
Weighted average current interest rate on senior secured loans(2)  6.02%
Number of borrowers in MCC JV  45 
Largest loan to a single borrower(1) $10,653,501 
Total of five largest loans to borrowers(1) $39,191,213 

(1)At par value.

(2)Computed as the (a) annual stated interest rate on accruing senior secured loans, divided by (b) total senior secured loans at par.

(1)At par value.

(2)Computed as the (a) annual stated interest rate on accruing senior secured loans, divided by (b) total senior secured loans at par.

MCC JV Loan Portfolio as of September 30, 2020

Company Industry Type of Investment Maturity  Par Amount  Cost  Fair
Value(2)		  % of  Net  Assets(3) 
4Over International, LLC Media: Advertising, Printing & Senior Secured First Lien Term Loan (LIBOR + 6.00%,  6/7/2022  $10,653,501  $10,653,501  $9,995,115   16.8%
  Publishing 1.00% LIBOR Floor)(1)      10,653,501   10,653,501   9,995,115     
                         
Cardenas Markets LLC Retail Senior Secured First Lien Term Loan (LIBOR + 5.75%,  11/29/2023   5,293,750   5,269,829   5,287,398   8.9%
    1.00% LIBOR Floor)(1)      5,293,750   5,269,829   5,287,398     
                         
CHA Consulting, Inc. Construction & Building Senior Secured First Lien Term Loan (LIBOR + 4.50%,              
    1.00% LIBOR Floor)(1)  4/10/2025   1,340,389   1,336,046   1,274,308   2.1%
                         
    Senior Secured First Lien Term Loan (LIBOR + 4.50%,  4/10/2025   592,500   592,500   563,290   0.9%
    1.00% LIBOR Floor)(1)      1,932,889   1,928,546   1,837,598     
                         
Covenant Surgical Partners, Inc. Healthcare & Pharmaceuticals Senior Secured First Lien Term Loan (LIBOR + 4.00%)(1)  7/1/2026   4,950,187   4,909,373   4,435,496   7.4%
           4,950,187   4,909,373   4,435,496     
                         
CT Technologies Intermediate Healthcare & Pharmaceuticals  Senior Secured First Lien Term Loan (LIBOR + 4.25%,  12/1/2021   5,086,116   5,005,862   4,875,042   8.2%
Holdings, Inc.   1.00% LIBOR Floor)(1)      5,086,116   5,005,862   4,875,042     


CompanyIndustryType of InvestmentMaturityPar
Amount		Cost
Fair
Value(2)
% of
Net Assets(3)
4Over International, LLCMedia: Advertising, Printing & Publishing
Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)
6/7/2022$10,653,501 $10,653,501 $9,995,115 16.8 %
10,653,501 10,653,501 9,995,115 
Cardenas Markets LLCRetail
Senior Secured First Lien Term Loan (LIBOR + 5.75%, 1.00% LIBOR Floor)(1)
11/29/20235,293,750 5,269,829 5,287,398 8.9 %
5,293,750 5,269,829 5,287,398 
CHA Consulting, Inc.Construction & Building
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
4/10/20251,340,389 1,336,046 1,274,308 2.1 %
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
4/10/2025592,500 592,500 563,290 0.9 %
1,932,889 1,928,546 1,837,598 
Covenant Surgical Partners, Inc.Healthcare & Pharmaceuticals
Senior Secured First Lien Term Loan (LIBOR + 4.00%)(1)
7/1/20264,950,187 4,909,373 4,435,496 7.4 %
4,950,187 4,909,373 4,435,496 
CT Technologies Intermediate Holdings, Inc.Healthcare & Pharmaceuticals
Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor)(1)
12/1/20215,086,116 5,005,862 4,875,042 8.2 %
F-32


PHENIXFIN CORPORATION


Notes to Consolidated Financial Statements (continued)





CompanyIndustryType of InvestmentMaturityPar
Amount		Cost
Fair
Value(2)
% of
Net Assets(3)
5,086,116 5,005,862 4,875,042 
Envision Healthcare CorporationHealthcare & Pharmaceuticals
Senior Secured First Lien Term Loan (LIBOR + 3.75%, 1.00% LIBOR Floor)(1)
10/10/20251,940,438 1,888,530 1,397,503 2.3 %
1,940,438 1,888,530 1,397,503 
GC EOS Buyer, Inc.Automotive
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
8/1/20251,420,440 1,404,814 1,304,532 2.2 %
1,420,440 1,404,814 1,304,532 
GK Holdings, Inc.Services: Business
Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)
1/20/20212,877,863 2,876,803 2,142,856 3.6 %
2,877,863 2,876,803 2,142,856 
Glass Mountain Pipeline Holdings, LLCEnergy: Oil & Gas
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
12/23/20244,850,625 4,839,587 2,601,390 4.4 %
4,850,625 4,839,587 2,601,390 
Golden West Packaging Group LLCForest Products & Paper
Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(1)
6/20/20234,069,771 4,069,771 3,968,027 6.7 %
4,069,771 4,069,771 3,968,027 
High Ridge Brands Co.Consumer Goods: Non-Durable
Senior Secured First Lien Term Loan (LIBOR + 7.00%, 1.00% LIBOR Floor)(1)(4)
6/30/20221,732,439 1,724,570 593,187 1.0 %
1,732,439 1,724,570 593,187 
Highline Aftermarket Acquisitions, LLCAutomotive
Senior Secured First Lien Term Loan (LIBOR + 3.50%, 1.00% LIBOR Floor)(1)
4/26/20254,025,000 4,016,286 3,597,545 6.0 %
4,025,000 4,016,286 3,597,545 
Infogroup, Inc.High Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 6.50%, 1.00% LIBOR Floor)(1)
4/3/20234,825,000 4,804,770 4,224,770 7.1 %
4,825,000 4,804,770 4,224,770 
Intermediate LLCHigh Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 4.00%, 1.00% LIBOR Floor)(1)
7/1/20262,722,500 2,708,089 2,513,684 4.2 %
2,722,500 2,708,089 2,513,684 
Isagenix International, LLCWholesale
Senior Secured First Lien Term Loan (LIBOR + 5.75%, 1.00% LIBOR Floor)(1)
6/16/20252,626,629 2,616,715 1,337,742 2.2 %
2,626,629 2,616,715 1,337,742 
IXS Holdings, Inc.Automotive
Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(1)
3/5/2027994,874 985,714 981,543 1.6 %
994,874 985,714 981,543 
Keystone Acquisition Corp.Healthcare & Pharmaceuticals
Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(1)
5/1/20246,099,815 6,040,757 5,505,083 9.2 %
6,099,815 6,040,757 5,505,083 
KNB Holdings CorporationConsumer Goods: Durable
Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor)(1)
4/26/20244,743,170 4,694,643 1,992,131 3.3 %
4,743,170 4,694,643 1,992,131 
Liason Acquisition, LLCHigh Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
12/20/20263,466,288 3,458,579 3,372,351 5.7 %
F-33






CompanyIndustryType of InvestmentMaturityPar
Amount		Cost
Fair
Value(2)
% of
Net Assets(3)
3,466,288 3,458,579 3,372,351 
LifeMiles Ltd.Services: Consumer
Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor)(1)
8/18/20224,229,263 4,220,573 3,880,349 6.5 %
4,229,263 4,220,573 3,880,349 
Manna Pro Products, LLCConsumer Goods: Non-Durable
Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)
12/8/20232,998,542 2,998,542 2,875,002 4.8 %
Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)
12/8/2023608,958 608,958 583,869 1.0 %
3,607,500 3,607,500 3,458,871 
Mileage Plus Holdings, LLCTransportation: Consumer
Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(1)
6/21/20274,401,819 4,407,746 4,475,769 7.5 %
4,401,819 4,407,746 4,475,769 
NGS US Finco, LLCCapital Equipment
Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor)(1)
10/1/20252,943,223 2,932,700 2,755,445 4.6 %
2,943,223 2,932,700 2,755,445 
Northern Star Industries, Inc.Capital Equipment
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
3/28/20254,143,750 4,130,394 3,630,754 6.1 %
4,143,750 4,130,394 3,630,754 
Offen, Inc.Transportation: Cargo
Senior Secured First Lien Term Loan (LIBOR + 5.00%)(1)
6/22/20263,626,659 3,596,886 3,494,880 5.9 %
3,626,659 3,596,886 3,494,880 
Patriot Rail Company LLCTransportation: Cargo
Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(1)
10/19/20261,741,250 1,711,104 1,730,454 2.9 %
1,741,250 1,711,104 1,730,454 
PetroChoice Holdings, Inc.Chemicals, Plastics and Rubber
Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(1)
8/19/20226,279,803 6,270,073 5,418,842 9.1 %
6,279,803 6,270,073 5,418,842 
Port Townsend Holdings Company, Inc.Forest Products & Paper
Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(1)
4/3/20242,945,600 2,928,240 2,632,777 4.4 %
2,945,600 2,928,240 2,632,777 
PT Network, LLCHealthcare & Pharmaceuticals
Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor, 2% PIK)(1)(5)
11/30/20234,955,627 4,638,237 4,460,064 7.5 %
Class C Common Stock1 — — 
4,955,628 4,638,237 4,460,064 
F-34






CompanyIndustryType of InvestmentMaturityPar
Amount		Cost
Fair
Value(2)
% of
Net Assets(3)
PVHC Holding CorpContainers, Packaging and Glass
Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(1)
8/5/20241,952,427 1,946,107 1,850,511 3.1 %
1,952,427 1,946,107 1,850,511 
Quartz Holding CompanyHigh Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 4.00%, 1.00% LIBOR Floor)(1)
4/2/20263,936,357 3,924,382 3,847,789 6.5 %
3,936,357 3,924,382 3,847,789 
RB Media, Inc.Media: Diversified & Production
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
8/29/20255,651,270 5,620,482 5,605,495 9.4 %
5,651,270 5,620,482 5,605,495 
Salient CRGT Inc.High Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)
2/28/20222,533,036 2,518,601 2,343,058 3.9 %
2,533,036 2,518,601 2,343,058 
SFP Holding, Inc.Construction & Building
Senior Secured First Lien Term Loan (LIBOR + 6.25%, 1.00% LIBOR Floor)(1)
9/1/20224,776,954 4,739,017 4,733,961 7.9 %
Senior Secured First Lien Term Loan (LIBOR + 6.25%, 1.00% LIBOR Floor)(1)
9/1/20221,852,521 1,852,521 1,835,849 3.1 %
6,629,475 6,591,538 6,569,810 
Shift4 Payments, LLCBanking, Finance, Insurance & Real Estate
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
11/29/20247,304,819 7,283,042 7,255,877 12.2 %
7,304,819 7,283,042 7,255,877 
Simplified Logistics, LLCServices: Business
Senior Secured First Lien Term Loan (LIBOR + 6.50%, 1.00% LIBOR Floor)(1)
2/27/20223,447,500 3,447,500 3,358,899 5.6 %
3,447,500 3,447,500 3,358,899 
Syniverse Holdings, Inc.High Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(1)
3/9/20232,905,253 2,891,007 2,229,200 3.7 %
2,905,253 2,891,007 2,229,200 
The Octave Music Group, Inc.Media: Diversified & Production
Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(1)
5/29/20255,896,552 5,844,063 5,071,034 8.5 %
5,896,552 5,844,063 5,071,034 
ThoughtWorks, Inc.High Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 3.75%, 1.00% LIBOR Floor)(1)
10/11/20242,627,704 2,620,849 2,585,136 4.3 %
2,627,704 2,620,849 2,585,136 
Vero Parent, Inc.High Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
8/16/20243,875,924 3,856,982 3,813,522 6.4 %
3,875,924 3,856,982 3,813,522 
Wawona Delaware Holdings, LLCBeverage & Food
Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(1)
9/11/2026945,350 937,295 912,358 1.5 %
945,350 937,295 912,358 
Wheels Up Partners LLCAerospace & Defense
Senior Secured First Lien Term Loan (LIBOR + 8.55%, 1.00% LIBOR Floor)(1)
10/15/20211,509,917 1,497,761 1,509,917 2.5 %
F-35






CompanyIndustryType of InvestmentMaturityPar
Amount		Cost
Fair
Value(2)
% of
Net Assets(3)
1,509,917 1,497,761 1,509,917 
Wok Holdings Inc.Retail
Senior Secured First Lien Term Loan (LIBOR + 6.50%, 1.00% LIBOR Floor)(1)
3/1/20266,550,249 6,505,809 4,864,216 8.2 %
6,550,249 6,505,809 4,864,216 
Wrench Group LLCServices: Consumer
Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor)(1)
4/30/20262,942,820 2,920,082 2,834,231 4.8 %
2,942,820 2,920,082 2,834,231 
Xebec Global Holdings, LLCHigh Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(1)
2/12/20248,053,168 8,053,168 8,053,168 13.5 %
8,053,168 8,053,168 8,053,168 
Z Medica, LLCHealthcare & Pharmaceuticals
Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor)(1)
9/29/20222,566,500 2,566,500 2,528,002 4.3 %
2,566,500 2,566,500 2,528,002 
Total Investments, September 30, 2020$182,514,111 $181,365,360 $163,133,421 273.5 %

(1)Represents the annual current interest rate as of September 30, 2020. All interest rates are payable in cash, unless otherwise noted.2021

Company Industry Type of Investment Maturity  Par Amount  

Fair Value (2)

  Cost  

% of Net  Assets (3)

 
                    
Envision Healthcare Corporation Healthcare & Pharmaceuticals Senior Secured First Lien Term Loan (LIBOR + 3.75%, 1.00%  10/10/2025   1,940,438   1,888,530   1,397,503   2.3%
    LIBOR Floor)(1)      1,940,438   1,888,530   1,397,503     
                         
GC EOS Buyer, Inc. Automotive Senior Secured First Lien Term Loan (LIBOR + 4.50%,  8/1/2025   1,420,440   1,404,814   1,304,532   2.2%
    1.00% LIBOR Floor)(1)      1,420,440   1,404,814   1,304,532     
                         
GK Holdings, Inc. Services: Business Senior Secured First Lien Term Loan (LIBOR + 6.00%,  1/20/2021   2,877,863   2,876,803   2,142,856   3.6%
    1.00% LIBOR Floor)(1)      2,877,863   2,876,803   2,142,856     
                         
Glass Mountain Pipeline Holdings, Energy: Oil & Gas Senior Secured First Lien Term Loan (LIBOR + 4.50%,  12/23/2024   4,850,625   4,839,587   2,601,390   4.4%
LLC   1.00% LIBOR Floor)(1)      4,850,625   4,839,587   2,601,390     
                         
Golden West Packaging Group LLC Forest Products & Paper Senior Secured First Lien Term Loan (LIBOR + 5.25%,  6/20/2023   4,069,771   4,069,771   3,968,027   6.7%
    1.00% LIBOR Floor)(1)      4,069,771   4,069,771   3,968,027     
                         
High Ridge Brands Co. Consumer Goods: Non-Durable Senior Secured First Lien Term Loan (LIBOR + 7.00%,  6/30/2022   1,732,439   1,724,570   593,187   1.0%
    1.00% LIBOR Floor)(1)(4)      1,732,439   1,724,570   593,187     
                         
Highline Aftermarket Acquisitions, Automotive Senior Secured First Lien Term Loan (LIBOR + 3.50%,  4/26/2025   4,025,000   4,016,286   3,597,545   6.0%
LLC   1.00% LIBOR Floor)(1)      4,025,000   4,016,286   3,597,545     
                         
Infogroup, Inc. High Tech Industries Senior Secured First Lien Term Loan (LIBOR + 6.50%,  4/3/2023   4,825,000   4,804,770   4,224,770   7.1%
    1.00% LIBOR Floor)(1)      4,825,000   4,804,770   4,224,770     
                         
Intermediate LLC High Tech Industries Senior Secured First Lien Term Loan (LIBOR + 4.00%,  7/1/2026   2,722,500   2,708,089   2,513,684   4.2%
    1.00% LIBOR Floor)(1)      2,722,500   2,708,089   2,513,684     
                         
Isagenix International, LLC Wholesale Senior Secured First Lien Term Loan (LIBOR + 5.75%,  6/16/2025   2,626,629   2,616,715   1,337,742   2.2%
    1.00% LIBOR Floor)(1)      2,626,629   2,616,715   1,337,742     
                         
IXS Holdings, Inc. Automotive Senior Secured First Lien Term Loan (LIBOR + 5.00%,  3/5/2027   994,874   985,714   981,543   1.6%
    1.00% LIBOR Floor)(1)      994,874   985,714   981,543     
                         
Keystone Acquisition Corp. Healthcare & Pharmaceuticals Senior Secured First Lien Term Loan (LIBOR + 5.25%,  5/1/2024   6,099,815   6,040,757   5,505,083   9.2%
    1.00% LIBOR Floor)(1)      6,099,815   6,040,757   5,505,083     
                         
KNB Holdings Corporation Consumer Goods: Durable Senior Secured First Lien Term Loan (LIBOR + 5.50%,  4/26/2024   4,743,170   4,694,643   1,992,131   3.3%
    1.00% LIBOR Floor)(1)      4,743,170   4,694,643   1,992,131     
                         
Liason Acquisition, LLC  High Tech Industries Senior Secured First Lien Term Loan (LIBOR + 4.50%,  12/20/2026   3,466,288   3,458,579   3,372,351   5.7%
    1.00% LIBOR Floor)(1)      3,466,288   3,458,579   3,372,351     


(2)PHENIXFIN CORPORATION

Represents the fair value in accordance with ASC 820 as reported by MCC JV. The determination of such fair value is not included in the Company’s board of directors’ valuation process described elsewhere herein.Notes to Consolidated Financial Statements (continued)

(3)Percentage is based on MCC JV's net assets of $59,617,800 as of September 30, 2020.2021

Company Industry Type of Investment Maturity  Par Amount  Cost  

Fair Value (2)

  

% of Net   Assets (3)

 
                    
LifeMiles Ltd. Services: Consumer Senior Secured First Lien Term Loan (LIBOR + 5.50%,  8/18/2022   4,229,263   4,220,573   3,880,349   6.5%
    1.00% LIBOR Floor)(1)      4,229,263   4,220,573   3,880,349     
                         
Manna Pro Products, LLC Consumer Goods: Non-Durable Senior Secured First Lien Term Loan (LIBOR + 6.00%,              
    1.00% LIBOR Floor)(1)  12/8/2023   2,998,542   2,998,542   2,875,002   4.8%
                         
    Senior Secured First Lien Delayed Draw Term Loan  12/8/2023   608,958   608,958   583,869   1.0%
    (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)      3,607,500   3,607,500   3,458,871     
                         
Mileage Plus Holdings, LLC Transportation: Consumer Senior Secured First Lien Term Loan (LIBOR + 5.25%,  6/21/2027   4,401,819   4,407,746   4,475,769   7.5%
    1.00% LIBOR Floor)(1)      4,401,819   4,407,746   4,475,769     
                         
NGS US Finco, LLC Capital Equipment Senior Secured First Lien Term Loan (LIBOR + 4.25%,  10/1/2025   2,943,223   2,932,700   2,755,445   4.6%
    1.00% LIBOR Floor)(1)      2,943,223   2,932,700   2,755,445     
                         
Northern Star Industries, Inc. Capital Equipment Senior Secured First Lien Term Loan (LIBOR + 4.50%,  3/28/2025   4,143,750   4,130,394   3,630,754   6.1%
    1.00% LIBOR Floor)(1)      4,143,750   4,130,394   3,630,754     
                         
Offen, Inc. Transportation: Cargo Senior Secured First Lien Term Loan (LIBOR + 5.00%)(1)  6/22/2026   3,626,659   3,596,886   3,494,880   5.9%
           3,626,659   3,596,886   3,494,880     
                         
Patriot Rail Company LLC Transportation: Cargo Senior Secured First Lien Term Loan (LIBOR + 5.25%,  10/19/2026   1,741,250   1,711,104   1,730,454   2.9%
    1.00% LIBOR Floor)(1)      1,741,250   1,711,104   1,730,454     
                         
PetroChoice Holdings, Inc. Chemicals, Plastics and Rubber Senior Secured First Lien Term Loan (LIBOR + 5.00%,  8/19/2022   6,279,803   6,270,073   5,418,842   9.1%
    1.00% LIBOR Floor)(1)      6,279,803   6,270,073   5,418,842     
                         
Port Townsend Holdings Company, Forest Products & Paper Senior Secured First Lien Term Loan (LIBOR + 4.75%,  4/3/2024   2,945,600   2,928,240   2,632,777   4.4%
Inc.   1.00% LIBOR Floor)(1)      2,945,600   2,928,240   2,632,777     
                         
PT Network, LLC Healthcare & Pharmaceuticals Senior Secured First Lien Term Loan (LIBOR + 5.50%,  11/30/2023   4,955,627   4,638,237   4,460,064   7.5%
    1.00% LIBOR Floor, 2% PIK)(1)(5)                    
    Class C Common Stock      1   —   —     
           4,955,628   4,638,237   4,460,064     


(4)PHENIXFIN CORPORATION

This investment was on non-accrual status as of Notes to Consolidated Financial Statements (continued)

September 30, 2020.2021

Company Industry Type of Investment Maturity  Par
Amount		  Cost  

Fair Value (2)

  

% of Net  Assets (3)

 
                    
PVHC Holding Corp Containers, Packaging and Glass Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(1)  8/5/2024   1,952,427   1,946,107   1,850,511   3.1%
          1,952,427   1,946,107   1,850,511     
                         
Quartz Holding Company High Tech Industries Senior Secured First Lien Term Loan (LIBOR + 4.00%, 1.00% LIBOR Floor)(1)  4/2/2026   3,936,357   3,924,382   3,847,789   6.5%
          3,936,357   3,924,382   3,847,789     
                         
RB Media, Inc. Media: Diversified & Production Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)  8/29/2025   5,651,270   5,620,482   5,605,495   9.4%
          5,651,270   5,620,482   5,605,495     
                         
Salient CRGT Inc. High Tech Industries Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)  2/28/2022   2,533,036   2,518,601   2,343,058   3.9%
          2,533,036   2,518,601   2,343,058     
                         
SFP Holding, Inc. Construction & Building Senior Secured First Lien Term Loan (LIBOR + 6.25%, 1.00% LIBOR Floor)(1)  9/1/2022            
         4,776,954   4,739,017   4,733,961   7.9%
                         
    Senior Secured First Lien Term Loan (LIBOR + 6.25%, 1.00% LIBOR Floor)(1)  9/1/2022   1,852,521   1,852,521   1,835,849   3.1%
          6,629,475   6,591,538   6,569,810     
                         
Shift4 Payments, LLC Banking, Finance, Insurance & Real Estate Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)  11/29/2024   7,304,819   7,283,042   7,255,877   12.2%
          7,304,819   7,283,042   7,255,877     
                         
Simplified Logistics, LLC Services: Business Senior Secured First Lien Term Loan (LIBOR + 6.50%, 1.00% LIBOR Floor)(1)  2/27/2022   3,447,500   3,447,500   3,358,899   5.6%
          3,447,500   3,447,500   3,358,899     
                         
Syniverse Holdings, Inc. High Tech Industries Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(1)  3/9/2023   2,905,253   2,891,007   2,229,200   3.7%
          2,905,253   2,891,007   2,229,200     
                         
The Octave Music Group, Inc. Media: Diversified & Production Senior Secured First Lien Term Loan (LIBOR + 4.75%,1.00% LIBOR Floor)(1)  5/29/2025   5,896,552   5,844,063   5,071,034   8.5%
          5,896,552   5,844,063   5,071,034     
                         
ThoughtWorks, Inc. High Tech Industries Senior Secured First Lien Term Loan (LIBOR + 3.75%, 1.00% LIBOR Floor)(1)  10/11/2024   2,627,704   2,620,849   2,585,136   4.3%
          2,627,704   2,620,849   2,585,136     
                         
Vero Parent, Inc. High Tech Industries Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)  8/16/2024   3,875,924   3,856,982   3,813,522   6.4%
          3,875,924   3,856,982   3,813,522     
                         
Wawona Delaware Holdings, LLC Beverage & Food Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(1)  9/11/2026   945,350   937,295   912,358   1.5%
          945,350   937,295   912,358     
                         
Wheels Up Partners LLC Aerospace & Defense Senior Secured First Lien Term Loan (LIBOR + 8.55%, 1.00% LIBOR Floor)(1)  10/15/2021            
         1,509,917   1,497,761   1,509,917   2.5%
           1,509,917   1,497,761   1,509,917     


(5)PHENIXFIN CORPORATION

Par amount includes accumulated PIK interest and is net of repayments.Notes to Consolidated Financial Statements (continued)


MCC JV Loan Portfolio as of September 30, 2019
CompanyIndustryType of InvestmentMaturityPar
Amount		Cost
Fair
Value(2)
% of
Net Assets(3)
4Over International, LLCMedia: Advertising, Printing & Publishing
Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)
6/7/2022$10,884,644 $10,884,644 $10,635,385 13.3 %
10,884,644 10,884,644 10,635,385 
Acrisure, LLCBanking, Finance, Insurance & Real Estate
Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor)(1)
11/22/2023724,217 722,980 720,162 0.9 %
724,217 722,980 720,162 
AL Midcoast Holdings, LLCEnergy: Oil & Gas
Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor)(1)
8/1/20254,330,542 4,297,473 4,246,963 5.3 %
4,330,542 4,297,473 4,246,963 
Brightspring Health ServicesHealthcare & Pharmaceuticals
Senior Secured First Lien Term Loan (LIBOR + 4.50%)(1)
3/5/20263,990,000 3,941,288 3,990,000 5.0 %
3,990,000 3,941,288 3,990,000 
Callaway Golf CompanyConsumer Goods: Durable
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
1/4/20262,774,187 2,724,326 2,801,929 3.5 %
2,774,187 2,724,326 2,801,929 
Cardenas Markets LLCRetail
Senior Secured First Lien Term Loan (LIBOR + 5.75%, 1.00% LIBOR Floor)(1)
11/29/20235,348,750 5,316,921 5,172,776 6.5 %
5,348,750 5,316,921 5,172,776 
F-36

2021





CompanyIndustryType of InvestmentMaturityPar
Amount		Cost
Fair
Value(2)
% of
Net Assets(3)
CHA Consulting, Inc.Construction & Building
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
4/10/20251,354,100 1,348,742 1,324,581 1.7 %
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
4/10/2025598,500 598,500 584,908 0.7 %
1,952,600 1,947,242 1,909,489 
Covenant Surgical Partners, Inc.Healthcare & Pharmaceuticals
Senior Secured First Lien Term Loan (LIBOR + 4.00%)(1)
7/1/20265,000,000 4,951,590 4,940,000 6.2 %
5,000,000 4,951,590 4,940,000 
CT Technologies Intermediate Holdings, Inc.Healthcare & Pharmaceuticals
Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor)(1)
12/1/20214,131,900 4,067,981 3,770,359 4.7 %
4,131,900 4,067,981 3,770,359 
Envision Healthcare CorporationHealthcare & Pharmaceuticals
Senior Secured First Lien Term Loan (LIBOR + 3.75%, 1.00% LIBOR Floor)(1)
10/10/20251,960,188 1,897,299 1,594,220 2.0 %
1,960,188 1,897,299 1,594,220 
GC EOS Buyer, Inc.Automotive
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
8/1/20253,445,086 3,399,335 3,400,989 4.3 %
3,445,086 3,399,335 3,400,989 
GK Holdings, Inc.Services: Business
Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)
1/20/20212,908,397 2,903,827 2,641,697 3.3 %
2,908,397 2,903,827 2,641,697 
Glass Mountain Pipeline Holdings, LLCEnergy: Oil & Gas
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
12/23/20244,900,375 4,886,582 4,618,604 5.8 %
4,900,375 4,886,582 4,618,604 
Golden West Packaging Group LLCForest Products & Paper
Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(1)
6/20/20234,188,348 4,188,348 4,163,637 5.2 %
4,188,348 4,188,348 4,163,637 
High Ridge Brands Co.Consumer Goods: Non-Durable
Senior Secured First Lien Term Loan (LIBOR + 7.00%, 1.00% LIBOR Floor)(1)(4)
6/30/20221,818,750 1,805,750 1,421,353 1.8 %
1,818,750 1,805,750 1,421,353 
Highline Aftermarket Acquisitions, LLCAutomotive
Senior Secured First Lien Term Loan (LIBOR + 3.50%, 1.00% LIBOR Floor)(1)
4/26/20254,066,176 4,055,443 3,601,412 4.5 %
4,066,176 4,055,443 3,601,412 
The Imagine Group, LLCMedia: Advertising, Printing & Publishing
Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(1)
6/21/20227,800,000 7,757,145 5,187,780 6.5 %
7,800,000 7,757,145 5,187,780 
Infogroup, Inc.High Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 6.50%, 1.00% LIBOR Floor)(1)
4/3/20234,875,000 4,846,330 4,748,738 5.9 %
4,875,000 4,846,330 4,748,738 
Intermedia Holdings, Inc.High Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)
7/21/20252,977,500 2,952,588 2,973,034 3.7 %
2,977,500 2,952,588 2,973,034 
F-37






CompanyIndustryType of InvestmentMaturityPar
Amount		Cost
Fair
Value(2)
% of
Net Assets(3)
Intermediate LLCHigh Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 4.00%, 1.00% LIBOR Floor)(1)
7/1/20262,750,000 2,732,906 2,732,400 3.4 %
2,750,000 2,732,906 2,732,400 
Isagenix International, LLCWholesale
Senior Secured First Lien Term Loan (LIBOR + 5.75%, 1.00% LIBOR Floor)(1)
6/16/20252,788,268 2,775,502 2,115,738 2.6 %
2,788,268 2,775,502 2,115,738 
Jackson Hewitt Tax Service Inc.Services: Consumer
Senior Secured First Lien Term Loan (LIBOR + 6.25%)(1)
5/31/20235,850,000 5,850,000 5,811,390 7.3 %
5,850,000 5,850,000 5,811,390 
Jordan Health Products I, Inc.Healthcare & Pharmaceuticals
Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(1)
5/15/20255,181,776 5,118,971 4,378,601 5.5 %
5,181,776 5,118,971 4,378,601 
Keystone Acquisition Corp.Healthcare & Pharmaceuticals
Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(1)
5/1/20246,162,699 6,086,349 5,972,888 7.5 %
6,162,699 6,086,349 5,972,888 
KNB Holdings CorporationConsumer Goods: Durable
Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor)(1)
4/26/20244,871,364 4,807,569 3,975,033 5.0 %
4,871,364 4,807,569 3,975,033 
LifeMiles Ltd.Services: Consumer
Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor)(1)
8/18/20224,836,393 4,821,161 4,759,978 6.0 %
4,836,393 4,821,161 4,759,978 
Manna Pro Products, LLCConsumer Goods: Non-Durable
Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)
12/8/20233,029,375 3,029,375 2,880,027 3.6 %
Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)
12/8/2023615,125 615,125 584,799 0.7 %
3,644,500 3,644,500 3,464,826 
New Media Holdings II LLCMedia: Advertising, Printing & Publishing
Senior Secured First Lien Term Loan (LIBOR + 6.25%, 1.00% LIBOR Floor)(1)
7/14/20222,446,853 2,443,556 2,442,205 3.1 %
2,446,853 2,443,556 2,442,205 
NGS US Finco, LLCCapital Equipment
Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor)(1)
10/1/20252,977,500 2,964,722 2,903,360 3.6 %
2,977,500 2,964,722 2,903,360 
Northern Star Industries, Inc.Capital Equipment
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
3/28/20254,186,250 4,169,745 3,984,054 5.0 %
4,186,250 4,169,745 3,984,054 
Nuvei Technologies Corp.Banking, Finance, Insurance & Real Estate
Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(1)
9/29/20253,543,616 3,512,593 3,477,350 4.3 %
Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(1)
9/29/2025519,107 519,107 509,399 0.6 %
Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(1)
9/29/2025716,005 716,005 702,616 0.9 %
4,778,728 4,747,705 4,689,365 
Offen, Inc.Transportation: Cargo
Senior Secured First Lien Term Loan (LIBOR + 5.00%)(1)
6/22/20263,663,385 3,628,046 3,613,477 4.5 %
F-38






CompanyIndustryType of InvestmentMaturityPar
Amount		Cost
Fair
Value(2)
% of
Net Assets(3)
3,663,385 3,628,046 3,613,477 
Peraton Corp.Aerospace and Defense
Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(1)
4/29/20243,406,439 3,395,256 3,384,979 4.2 %
3,406,439 3,395,256 3,384,979 
PetroChoice Holdings, Inc.Chemicals, Plastics and Rubber
Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(1)
8/19/20226,345,900 6,333,392 6,092,064 7.6 %
6,345,900 6,333,392 6,092,064 
Port Townsend Holdings Company, Inc.Forest Products & Paper
Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(1)
4/3/20243,041,842 3,018,790 2,992,564 3.7 %
3,041,842 3,018,790 2,992,564 
PT Network, LLCHealthcare & Pharmaceuticals
Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor, 2% PIK)(1)(5)
11/30/20234,880,028 4,562,638 4,562,338 5.7 %
Class C Common Stock1 — — 
4,880,029 4,562,638 4,562,338 
PVHC Holding CorpContainers, Packaging and Glass
Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(1)
8/5/20241,972,350 1,964,300 1,912,137 2.4 %
1,972,350 1,964,300 1,912,137 
Quantum Spatial, Inc.Aerospace & Defense
Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(1)
9/5/20245,000,000 5,000,000 5,000,000 6.3 %
5,000,000 5,000,000 5,000,000 
Quartz Holding CompanyHigh Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 4.00%, 1.00% LIBOR Floor)(1)
4/2/20266,982,500 6,957,391 6,885,443 8.6 %
6,982,500 6,957,391 6,885,443 
RB Media, Inc.Media: Diversified & Production
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
8/29/20253,960,000 3,926,377 3,960,000 5.0 %
3,960,000 3,926,377 3,960,000 
Rough Country, LLCAutomotive
Senior Secured First Lien Term Loan (LIBOR + 3.75%, 1.00% LIBOR Floor)(1)
5/25/20234,080,727 4,063,983 4,014,619 5.0 %
4,080,727 4,063,983 4,014,619 
Safe Fleet Holdings LLCAutomotive
Senior Secured First Lien Term Loan (LIBOR + 3.00%, 1.00% LIBOR Floor)(1)
2/3/20253,422,875 3,417,582 3,297,255 4.1 %
Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 3.75%, 1.00% LIBOR Floor)(1)
2/3/20251,335,880 1,288,373 1,288,055 1.6 %
4,758,755 4,705,955 4,585,310 
Salient CRGT Inc.High Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(1)
2/28/20222,645,536 2,619,767 2,503,471 3.1 %
2,645,536 2,619,767 2,503,471 
SCS Holdings I Inc.Wholesale
Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor)(1)
7/1/20262,244,375 2,238,962 2,249,986 2.8 %
2,244,375 2,238,962 2,249,986 
SFP Holding, Inc.Construction & Building
Senior Secured First Lien Term Loan (LIBOR + 6.25%, 1.00% LIBOR Floor)(1)
9/1/20224,820,605 4,762,317 4,775,291 6.0 %
F-39






CompanyIndustryType of InvestmentMaturityPar
Amount		Cost
Fair
Value(2)
% of
Net Assets(3)
Senior Secured First Lien Term Loan (LIBOR + 6.25%, 1.00% LIBOR Floor)(1)
9/1/20221,871,234 1,871,234 1,853,644 2.3 %
6,691,839 6,633,551 6,628,935 
Shift4 Payments, LLCBanking, Finance, Insurance & Real Estate
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
11/29/20249,825,000 9,788,662 9,825,000 12.3 %
9,825,000 9,788,662 9,825,000 
Sierra Enterprises, LLCBeverage & Food
Senior Secured First Lien Term Loan (LIBOR + 4.00%, 1.00% LIBOR Floor)(1)
11/11/20243,918,993 3,909,644 3,821,018 4.8 %
3,918,993 3,909,644 3,821,018 
Simplified Logistics, LLCServices: Business
Senior Secured First Lien Term Loan (LIBOR + 6.50%, 1.00% LIBOR Floor)(1)
2/27/20223,482,500 3,482,500 3,482,500 4.4 %
3,482,500 3,482,500 3,482,500 
SMB Shipping Logistics, LLCTransportation: Cargo
Senior Secured First Lien Term Loan (LIBOR + 4.00%, 1.00% LIBOR Floor)(1)
2/5/20242,465,807 2,446,381 2,453,478 3.1 %
2,465,807 2,446,381 2,453,478 
Syniverse Holdings, Inc.High Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(1)
3/9/20233,935,050 3,907,819 3,695,799 4.6 %
3,935,050 3,907,819 3,695,799 
The Octave Music Group, Inc.Media: Diversified & Production
Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(1)
5/28/20214,348,644 4,348,644 4,325,596 5.4 %
4,348,644 4,348,644 4,325,596 
ThoughtWorks, Inc.High Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 4.00%, 1.00% LIBOR Floor)(1)
10/11/20246,674,943 6,659,353 6,674,943 8.3 %
6,674,943 6,659,353 6,674,943 
Tortoise Borrower LLCBanking, Finance, Insurance & Real Estate
Senior Secured First Lien Term Loan (LIBOR + 3.50%, 1.00% LIBOR Floor)(1)
1/31/20252,437,875 2,428,557 2,392,287 3.0 %
2,437,875 2,428,557 2,392,287 
F-40






CompanyIndustryType of InvestmentMaturityPar
Amount		Cost
Fair
Value(2)
% of
Net Assets(3)
United Road Services, Inc.Transportation: Cargo
Senior Secured First Lien Term Loan (LIBOR + 5.75%, 1.00% LIBOR Floor)(1)
9/2/20243,759,999 3,746,467 3,699,087 4.6 %
3,759,999 3,746,467 3,699,087 
Vero Parent, Inc.High Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(1)
8/16/20243,915,475 3,891,393 3,886,109 4.9 %
3,915,475 3,891,393 3,886,109 
Wawona Delaware Holdings, LLCBeverage & Food
Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(1)
9/11/20264,975,000 4,925,465 4,925,250 6.2 %
4,975,000 4,925,465 4,925,250 
Wheels Up Partners LLCAerospace & Defense
Senior Secured First Lien Term Loan (LIBOR + 8.55%, 1.00% LIBOR Floor)(1)
10/15/20213,633,328 3,575,903 3,569,381 4.5 %
3,633,328 3,575,903 3,569,381 
Wok Holdings Inc.Retail
Senior Secured First Lien Term Loan (LIBOR + 6.50%, 1.00% LIBOR Floor)(1)
3/1/20266,616,750 6,563,551 5,599,756 7.0 %
6,616,750 6,563,551 5,599,756 
Wrench Group LLCServices: Consumer
Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor)(1)
4/30/20262,225,672 2,208,221 2,225,672 2.8 %
2,225,672 2,208,221 2,225,672 
Xebec Global Holdings, LLCHigh Tech Industries
Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(1)
2/12/20248,134,734 8,134,734 8,114,397 10.1 %
8,134,734 8,134,734 8,114,397 
Z Medica, LLCHealthcare & Pharmaceuticals
Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor)(1)
9/29/20222,596,000 2,596,000 2,498,910 3.1 %
2,596,000 2,596,000 2,498,910 
Total Investments, September 30, 2019$261,170,438 $259,371,480 $249,342,871 311.9 %

(1)Represents the annual current interest rate as of September 30, 2019. All interest rates are payable in cash, unless otherwise noted.
(2)Represents the fair value in accordance with ASC 820 as reported by MCC JV. The determination of such fair value is not included in the Company’s board of directors’ valuation process described elsewhere herein.
(3)Percentage is based on MCC JV's net assets of $79,941,680 as of September 30, 2019.
(4)This investment was on non-accrual status as of September 30, 2019.
(5)Par amount includes accumulated PIK interest and is net of repayments.

F-41






Company Industry Type of Investment Maturity Par Amount  Cost  Fair Value(2)  % of
Net Assets(3)		 
                   
Wok Holdings Inc. Retail Senior Secured First Lien Term Loan (LIBOR + 6.50%, 1.00% LIBOR Floor)(1) 3/1/2026  6,550,249   6,505,809   4,864,216   8.2%
         6,550,249   6,505,809   4,864,216     
                       
Wrench Group LLC Services: Consumer Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor)(1) 4/30/2026  2,942,820   2,920,082   2,834,231   4.8%
         2,942,820   2,920,082   2,834,231     
                       
Xebec Global Holdings, LLC High Tech Industries Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(1) 2/12/2024  8,053,168   8,053,168   8,053,168   13.5%
         8,053,168   8,053,168   8,053,168     
                       
Z Medica, LLC Healthcare & Pharmaceuticals Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor)(1) 9/29/2022  2,566,500   2,566,500   2,528,002   4.3%
         2,566,500   2,566,500   2,528,002     
                       
Total Investments, September 30, 2020     $182,514,111  $181,365,360  $163,133,421   273.5%

(1)Represents the annual current interest rate as of September 30, 2020. All interest rates are payable in cash, unless otherwise noted.

(2)Represents the fair value in accordance with ASC 820 as reported by MCC JV. The determination of such fair value is not included in the Company’s board of directors’ valuation process described elsewhere herein.
(3)Percentage is based on MCC JV’s net assets of $59,617,800 as of September 30, 2020.
(4)This investment was on non-accrual status as of September 30, 2020.
(5)Par amount includes accumulated PIK interest and is net of repayments.

Below is certain summarized financial Information for MCC JV as of September 30, 2020, and 2019, and for the years ended September 30, 2020 2019 and 2018:2019:

  September 30,
2020		 
Selected Consolidated Statement of Assets and Liabilities Information:   
Investments in loans at fair value (amortized cost of $181,365,360) $163,133,421 
Cash  6,055,178 
Other assets  1,148,102 
Total assets $170,336,701 
     
Line of credit (net of debt issuance costs of $1,574,115) $109,745,367 
Other liabilities  424,095 
Interest payable  549,439 
Total liabilities  110,718,901 
Members’ capital  59,617,800 
Total liabilities and members’ capital $170,336,701 

  For the Years Ended
September 30		 
  2020  2019 
Selected Consolidated Statement of Operations Information:      
Total revenues $15,727,674  $20,351,843 
Total expenses  (9,346,799)  (10,962,484)
Net unrealized appreciation/(depreciation)  (8,203,330)  (9,055,476)
Net realized gain/(loss)  (12,851,425)  (772,239)
Net income/(loss) $(14,673,880) $(438,356)


September 30, 2020September 30, 2019
Selected Consolidated Statement of Assets and Liabilities Information:  
Investments in loans at fair value (amortized cost of $181,365,360 and $259,371,480, respectively)$163,133,421 $249,342,871 
Cash6,055,178 8,007,466 
Other assets1,148,102 1,466,352 
Total assets$170,336,701 $258,816,689 
Line of credit (net of debt issuance costs of $1,574,115 and $1,552,067, respectively)$109,745,367 $177,694,223 
Other liabilities424,095 472,737 
Interest payable549,439 708,049 
Total liabilities110,718,901 178,875,009 
Members' capital59,617,800 79,941,680 
Total liabilities and members' capital$170,336,701 $258,816,689 
For the years ended September 30
202020192018
Selected Consolidated Statement of Operations Information:
Total revenues$15,727,674 $20,351,843 $17,017,831 
Total expenses(9,346,799)(10,962,484)(9,054,415)
Net unrealized appreciation/(depreciation)(8,203,330)(9,055,476)(1,358,880)
Net realized gain/(loss)(12,851,425)(772,239)1,048,233 
Net income/(loss)$(14,673,880)$(438,356)$7,652,769 


PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2021

Unconsolidated Significant Subsidiaries

The Company evaluated and determined that it had no significant subsidiaries as of September 30, 2021.

Note 4. 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 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:


•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.

●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 thea 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. During

The following table presents the year ended September 30 2020, onefair value measurements of our investments, transferred into Level 3.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 
Investments: Level 1  Level 2  Level 3  Total 
Senior Secured First Lien Term Loans $-  $-  $61,934  $61,934 
Senior Secured Second Lien Term Loans  -   -   2,490   2,490 
Senior Secured Notes  -   9,270   -   9,270 
Secured Debt  -   -   2,500   2,500 
Equity/Warrants  23,102   -   48,889   71,991 
Total $23,102  $9,270  $115,813  $148,185 
Investments measured at net asset value(1)              3,455 
Total Investments, at fair value             $151,640 

(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.



PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2021

The following table presents the fair value measurements of our investments, by major class according to the fair value hierarchy, as of September 30, 2020 (dollars in thousands):

F-42






  Level 1  Level 2  Level 3  Total 
Senior Secured First Lien Term Loans $—  $—  $106,463  $106,463 
Senior Secured Second Lien Term Loans  —   —   13,927   13,927 
Unsecured Debt  —   —   2,669   2,669 
MCC Senior Loan Strategy JV I LLC(1)  —   —   41,019   41,019 
Equity/Warrants  12,278   —   67,397   79,675 
Total $12,278  $—  $231,475  $243,753 
Investments measured at net asset value(2)              2,991 
Total Investments, at fair value             $246,744 

(1)MCC Senior Loan Strategy JV I LLC was sold on October 8, 2020 and as such fair value was measured as a Level 3 investment as of September 30, 2020. Previously fair value had been measured using NAV.

(2)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 presentsprovides a reconciliation of the fair value measurements of ourbeginning and ending balances for investments by major class according tothat use Level 3 inputs for the fair value hierarchy, as ofyear ended September 30, 20192021 (dollars in thousands):

 Level 1Level 2Level 3Total
Senior Secured First Lien Term Loans$— $— $192,770 $192,770 
Senior Secured Second Lien Term Loans— — 36,508 36,508 
Unsecured Debt— — 2,653 2,653 
Equity/Warrants13,850 — 78,329 92,179 
Total$13,850 $— $310,260 $324,110 
Investments measured at net asset value(2)
   72,779 
Total Investments, at fair value   $396,889 

(1)MCC Senior Loan Strategy JV I LLC was sold on October 8, 2020 and as such fair value was measured as a Level 3 investment as of September 30, 2020. Previously fair value had been measured using NAV.
(2)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.

  Senior Secured First Lien Term Loans  Senior Secured Second Lien Term Loans  Secured Debt  Unsecured Debt  MCC Senior Loan Strategy JV I LLC  Equities/ Warrants  Total 
Balance as of September 30, 2020 $106,463  $13,927  $-  $2,669  $41,019  $67,397  $231,475 
Purchases and other adjustments to cost  11,026   -   2,500   -   -   -   13,526 
Sales  (28,374)  (11,892)  -   (3,070)  (39,740)  (7,635)  (90,711)
Net realized gains/(losses) from investments  (24,818)  4   -   30   (40,148)  311   (64,621)
Net unrealized gains/(losses)  (2,363)  451   -   371   38,869   (11,184)  26,144 
Balance as of September 30, 2021 $61,934  $2,490  $2,500  $-  $-  $48,889  $115,813 

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, 2020 (dollars in thousands):

  Senior  Senior     MCC         
  Secured  Secured     Senior       
  First Lien  Second     Loan      
  Term  Lien Term  Unsecured  Strategy  Equities/   
   Loans  Loans  Debt  JV I LLC  Warrants  Total  
Balance as of September 30, 2019 $192,770  $36,508  $2,653  $—  $78,329  $310,260 
Purchases and other adjustments to cost  1,820   655   168   —   1,259   3,902 
Originations  28,085   945   2,500   —   182   31,712 
Sales  (186)  (1,237)  —   —   (5,714)  (7,137)
Settlements  (86,048)  (613)  (721)  —   (24,881)  (112,263)
Net realized gains/(losses) from investments  (929)  (23,362)  —   —   (18,577)  (42,868)
Net transfers in and/or out of Level 3  —��  —   —   41,019   —   41,019 
Net unrealized gains/(losses)  (29,049)  1,031   (1,931)  —   36,799   6,850 
Balance as of September 30, 2020 $106,463  $13,927  $2,669  $41,019  $67,397  $231,475 


 Senior
Secured
First Lien
Term
Loans		Senior
Secured
Second
Lien Term
Loans		Unsecured
Debt		MCC Senior Loan Strategy JV I LLCEquities/WarrantsTotal
Balance as of September 30, 2019$192,770 $36,508 $2,653 $— $78,329 $310,260 
Purchases and other adjustments to cost1,820 655 168 — 1,259 3,902 
Originations28,085 945 2,500 — 182 31,712 
Sales(186)(1,237)— — (5,714)(7,137)
Settlements(86,048)(613)(721)— (24,881)(112,263)
Net realized gains/(losses) from investments(929)(23,362)— — (18,577)(42,868)
Net transfers in and/or out of Level 3— — — 41,019 — 41,019 
Net unrealized gains/(losses)(29,049)1,031 (1,931)— 36,799 6,850 
Balance as of September 30, 2020$106,463 $13,927 $2,669 $41,019 $67,397 $231,475 
The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended

PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2019 (dollars in thousands):

 Senior
Secured
First Lien
Term
Loans		Senior
Secured
Second
Lien Term
Loans		Senior
Secured
First Lien
Notes		Unsecured
Debt		Equities/WarrantsTotal
Balance as of September 30, 2018$395,015 $48,890 $19,268 $3,381 $107,955 $574,509 
Purchases and other adjustments to cost7,116 1,801 — (647)(9,783)(1,513)
Originations58,386 2,000 — — 387 60,773 
Sales(144,081)(11,828)— — — (155,909)
Settlements(56,346)(2,161)(20,000)(22)(25,501)(104,030)
Net realized gains/(losses) from investments(97,534)114 — (22,787)7,333 (112,874)
Net transfers in and/or out of Level 3— — — — — — 
Net unrealized gains/(losses)30,214 (2,308)732 22,728 (2,062)49,304 
Balance as of September 30, 2019$192,770 $36,508 $— $2,653 $78,329 $310,260 
F-43

2021





Net change in unrealized lossgain (loss) for the years ended September 30, 2021 and 2020 included in earnings related to investments still held as of September 30, 20202021 and 20192020 was approximately $42.6$(24.3) million and $43.4$(42.6) 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 sold.

Settlements represent principal paydowns received.


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, 2021, none of our investments transferred into or out of Level 3.  During the year ended September 30, 2020 MCC JV transferred into the Level 3 category as the investment was sold subsequently to September 30, 2020 (see Note 3). In previous periods, as a practical expedient the Company had used the net asset value of MCC JV to determine the fair value of the investment. During

The following table presents the year ended September 30, 2019, nonequantitative information about Level 3 fair value measurements of our investments, transferredas of September 30, 2021 (dollars in or out of Level 3.thousands):

  Fair Value  Valuation Methodology Unobservable Input Range
(Weighted Average)		 
Senior Secured First Lien Term Loans $25,783  Market Approach Market Yield   7.50% - 102.38% (32.78%)
Senior Secured First Lien Term Loans  15,639  Market Approach Arms Length Transaction  N/A 
Senior Secured First Lien Term Loans  7,567  Market Approach (Guideline Comparable) Market Yield  5.00% - 8.00% (5.55%)
Senior Secured First Lien Term Loans  4,539  Market Approach EBITDA Multiple(1)  4.50x - 5.50x (5.00x)
Senior Secured First Lien Term Loans  3,579  Enterprise Value Analysis Revenue Multiple(1)  0.40x - 0.50x (0.45x)
Senior Secured First Lien Term Loans  2,577  Market Approach Capitalization Rate  4.50% - 5.50% (5.00%)
        Estimated Proceeds  $1.04 - $8.10 ($4.57)
Senior Secured First Lien Term Loans  2,250  Market Approach Revenue Multiple(1)  0.25x - 0.40x (0.33x)
             
Senior Secured Second Lien Term Loans  2,490  Market Approach (Guideline Comparable) EBITDA Multiple(1)  9.75x - 10.75x (10.25x)
             
Secured Debt  2,500  Cost Approach Replacement Cost  N/A 
             
Equity/Warrants  38,939  Market Approach EBITDA Multiple(1)  1.25x - 12.75x (12.31x)
Equity/Warrants  4,758  Market Approach Market Yield  10.50% - 12.00% (11.25%)
Equity/Warrants  2,956  Market Approach Revenue Multiple(1)  0.11x - 0.40x (0.16x)
Equity/Warrants  2,236  Market Approach Capitalization Rate  4.50% - 5.50% (5.00%)
        Estimated Proceeds  $1.04 - $8.10 ($4.57)
Total $115,813         

(1)Represents inputs used when the Company has determined that market participants would use such multiples when measuring the fair value of these investments.



PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2021

The following table presents the quantitative information about Level 3 fair value measurements of our investments, as of September 30, 2020 (dollars in thousands):

  Fair Value  Valuation Methodology Unobservable Input   Range
(Weighted Average)		 
           
Senior Secured First Lien Term Loans $50,135  Income Approach (DCF) Market yield  7.52% - 15.27% (10.34%) 
Senior Secured First Lien Term Loans  55,856  Market Approach (Guideline Revenue Multiple(1)  0.25x - 0.50x (0.49x) 
      Comparable)//Income Approach (DCF)/ EBITDA Multiple(1)  2.50x - 8.50x (5.73x) 
      Enterprise Value Analysis Capitalization Rate  5.50x - 5.50x (5.50x) 
        Discount Rate  17.90% - 17.90% (17.90%) 
        Expected Proceeds  $8.25 - $52.00 ($45.65) 
Senior Secured First Lien Term Loans  472  Recent Arms-Length Transaction Recent Arms Length Transaction  N/A     
Senior Secured Second Lien Term Loan  9,978  Income Approach (DCF) Market yield  12.01% - 14.82% (14.01%) 
Senior Secured Second Lien Term Loans  3,949  Market Approach (Guideline EBITDA Multiple(1)  8.00x - 8.00x (8.00x) 
      Comparable)/Income Approach (DCF) Discount Rate  21.00% - 21.00% (21.00%) 
Unsecured Debt  —  Market Approach (Guideline Comparable) EBITDA Multiple(1)  2.50x - 4.50x (3.50x) 
             
Unsecured Debt  2,669  Recent Arms-Length Transaction Recent Arms Length Transaction  N/A     
MCC Senior Loan Strategy JV I LLC  41,019  Recent Arms-Length Transaction Recent Arms Length Transaction  N/A     
Equity  63,468  Market Approach (Guideline Revenue Multiple(1)  0.50x - 0.88x (0.69x) 
      Comparable)/Income Approach/Enterprise EBITDA Multiple(1)  2.50x - 9.50x (8.25x) 
      Value Analysis Capitalization Rate  5.50% - 5.50% (5.50%) 
        Discount Rate  14.50% - 14.50% (14.50%) 
        Expected Proceeds  $8.25 - $52.00 ($38.00) 
Equity  3,929  Income Approach (DCF) Market Yield  15.40% - 15.40% (15.40%) 
Total $231,475         

(1)
Fair ValueValuation TechniqueUnobservable InputRange (Weighted Average)
Senior Secured First Lien Term Loans$50,135 Income Approach (DCF)Market yield7.52% - 15.27% (10.34%)
Senior Secured First Lien Term Loans55,856 Market Approach (Guideline Comparable)//Income Approach (DCF)/ Enterprise Value Analysis
Revenue Multiple(1)
EBITDA Multiple(1)
Capitalization Rate
Discount Rate
Expected Proceeds
0.25x - 0.50x (0.49x)
2.50x - 8.50x (5.73x)
5.50x - 5.50x (5.50x)
17.90% - 17.90% (17.90%)
$8.25 - $52.00 ($45.65)
Senior Secured First Lien Term Loans472 Recent Arms-Length TransactionRecent Arms Length TransactionN/A
Senior Secured Second Lien Term Loan9,978 Income Approach (DCF)Market yield12.01% - 14.82% (14.01%)
Senior Secured Second Lien Term Loans3,949 Market Approach (Guideline Comparable)/Income Approach (DCF)
EBITDA Multiple(1)
Discount Rate
8.00x - 8.00x (8.00x)
21.00% - 21.00% (21.00%)
Unsecured Debt— Market Approach (Guideline Comparable)
EBITDA Multiple(1)


2.50x - 4.50x (3.50x)
Unsecured Debt2,669 Recent Arms-Length TransactionRecent Arms Length TransactionN/A
MCC Senior Loan Strategy JV I LLC41,019 Recent Arms-Length TransactionRecent Arms Length TransactionN/A
Equity63,468 Market Approach (Guideline Comparable)/Income Approach/Enterprise Value Analysis
Revenue Multiple(1)
EBITDA Multiple(1)
Capitalization Rate
Discount Rate
Expected Proceeds
0.50x - 0.88x (0.69x)
2.50x - 9.50x (8.25x)
5.50% - 5.50% (5.50%)
14.50% - 14.50% (14.50%)
$8.25 - $52.00 ($38.00)
Equity3,929 Income Approach (DCF)Market Yield15.40% - 15.40% (15.40%)
Total$231,475Represents inputs used when the Company has determined that market participants would use such multiples when measuring the fair value of these investments.



PHENIXFIN CORPORATION

The following table has been modified

Notes to conform to the current year presentation, and presents the quantitative information about Level 3 fair value measurements of our investments, as of Consolidated Financial Statements (continued)

September 30, 2019 (dollars in thousands):


2021
F-44






 Fair ValueValuation TechniqueUnobservable InputRange (Weighted Average)
Senior Secured First Lien Term Loans$141,337 Income Approach (DCF)Market yield6.38% - 16.98% (10.49%)
Senior Secured First Lien Term Loans43,960 Market Approach (Guideline Comparable)/Market Approach (Comparable Transactions)/Income Approach (DCF)/ Enterprise Value Analysis
Revenue Multiple(1)
EBITDA Multiple(1)
Discount rate
Expected Proceeds
0.25x - 0.25x (0.25x)
3.50x - 6.00x (4.95x)
9.00% - 18.70% (16.53%)
$9.0M - $16.2M ($9.0M)
Senior Secured First Lien Term Loans7,473 Recent Arms-Length TransactionRecent Arms Length TransactionN/A
Senior Secured Second Lien Term Loan17,250 Income Approach (DCF)Market yield9.78% - 29.76% (14.66%)
Senior Secured Second Lien Term Loans19,258 Market Approach (Guideline Comparable)/Income Approach (DCF)
EBITDA Multiple(1)
Discount Rate
4.50x - 6.00x (5.97x)
16.40% - 16.40% (16.40%)
Unsecured Debt850 Income Approach (DCF)Market yield7.43%
Unsecured Debt1,803 Market Approach (Guideline Comparable)
EBITDA Multiple(1)
4.00x - 7.00x (6.54x)
Equity75,983 Market Approach (Guideline Comparable)/Market Approach (Comparable Transactions)/Income Approach (DCF)/Enterprise Value Analysis
Revenue Multiple(1)
EBITDA Multiple(1)
Discount rate
Expected Proceeds
0.88x - 0.88x (0.69x)
3.50x - 9.50x (8.72x)
9.00% - 22.50% (14.68%)
$16.2M - $47.5M ($53.1M)
Equity2,346 Recent Arms-Length TransactionRecent Arms Length TransactionN/A
Total$310,260    

(1)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. 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, 2021 and September 30, 2020, the Company deemed the contingent consideration to be not collectible, and, as such, placed a full reserve against its fair value. As of September 30, 2019, the fair value of the contingent consideration was $1.8 million.

uncollectible.


Note 5. Borrowings

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 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.


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.

As of September 30, 2020, the Company’s asset coverage was 199.2% after giving effect to leverage and therefore the Company’s asset coverage iswas below 200%, the minimum asset coverage requirement under the 1940 Act. As a result, the Company iswas prohibited from making distributions to stockholders, including the payment of any dividend, and maycould not employ further leverage until the Company’s asset coverage iswas at least 200% after giving effect to such leverage.



PHENIXFIN CORPORATION

F-45


Notes to Consolidated Financial Statements (continued)


September 30, 2021





The Company’s outstanding debt excluding debt issuance costs as of September 30, 20202021 and 20192020 was as follows (dollars in thousands):

 September 30, 2020September 30, 2019
 Aggregate
Principal
Amount
Available		Principal
Amount
Outstanding		Carrying
Value		Fair
Value		Aggregate
Principal
Amount
Available		Principal
Amount
Outstanding
Carrying(1)
Value
Fair
Value
2021 Notes$74,013 $74,013 $73,803 $73,095 $74,013 $74,013 $73,172 $72,473 
2023 Notes77,847 77,847 77,158 72,460 77,847 77,847 76,881 74,453 
Israeli Notes— — — — 105,137 105,137 101,679 104,604 
Total$151,860 $151,860 $150,961 $145,555 $256,997 $256,997 $251,732 $251,530 

  September 30, 2021  September 30, 2020 
  Aggregate
Principal Available		  Principal Amount
Outstanding		  Carrying Value  Fair Value  Aggregate
Principal Available		  Principal Amount
Outstanding		  Carrying Value  Fair Value 
2021 Notes $          -  $         -  $-  $-  $74,013  $74,013  $73,803  $73,095 
2023 Notes 77,847  77,847  77,434  79,092  77,847  77,847  77,158  72,460 
Total debt $77,847  $77,847  $77,434  $79,092  $151,860  $151,860  $150,961  $145,555 


(1) Modified to conform to the current year presentation.
Credit Facilities

Term Loan Facility

The Company had a Senior Secured Term Loan Credit Agreement, as amended (the ‘‘Term Loan Facility’’), that was scheduled to mature on July 28, 2020.

On September 1, 2017, the Company reduced the Term Loan Facility commitment to $102.0 million from $174.0 million. The reduction was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.6 million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment of debt.

On January 31, 2018, the Company voluntarily prepaid the remaining $102.0 million outstanding on the Term Loan Facility in accordance with its terms. The 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.

Revolving Credit Facility

The Company had a Senior Secured Revolving Credit Agreement, as amended (the ‘‘Revolving Credit Facility’’ and collectively with the Term Loan Facility, the ‘‘Facilities’’), with ING Capital LLC, as Administrative Agent, in order to borrow funds to make additional investments.

The pricing on the Revolving Credit Facility was LIBOR (with no minimum) plus 2.75% and had a revolving period that was to end July 28, 2019, followed by a one year amortization period and a final maturity on July 28, 2020.

On February 14, 2017, the Company elected to reduce the total commitment of the Revolving Credit Facility to $200.0 million from $343.5 million. The reduction was accounted for as a debt modification to a line-of credit or revolving-debt arrangement in accordance with ASC 470-50, Modifications and Extinguishments, which attributed to an acceleration of debt issuance costs in the amount of $1.3 million and recorded on the Consolidated Statements of Operations as a component of interest and financing expenses.

On February 12, 2018, the Company elected to reduce the total commitment of the Revolving Credit Facility to $150.0 million from $200.0 million. The reduction was accounted for as a debt modification to a line-of credit or revolving-debt arrangement in accordance with ASC 470-50, Modifications and Extinguishments, which attributed to an acceleration of debt issuance costs in the amount of $0.4 million and recorded on the Consolidated Statements of Operations as a component of interest and financing expenses.

On September 28, 2018, the Company voluntarily satisfied and terminated the commitments under the Revolving Credit Facility in accordance with its terms. The termination was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $1.0 million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment of debt.

The following table shows the components of interest expense, commitment fees related to the Facilities, amortized debt issuance costs, weighted average stated interest rate and weighted average outstanding debt balance for the Facilities for the years ended September 30, 2020, 2019 and 2018 (dollars in thousands):
For the years ended September 30
 202020192018
Revolving Facility interest$— $— $729 
Revolving Facility commitment fee— — 1,521 
Term Facility interest— — 1,505 
Amortization of debt issuance costs— — 1,087 
Agency and other fees— — 138 
Total$— $— $4,980 
Weighted average stated interest rate— %— %4.4 %
Weighted average outstanding balance$— $— $50,900 

Unsecured Notes
F-46








2021 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”). 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 became redeemable in whole or in part at any time or from time to time at the Company’s option on or after January 30, 2019. 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. The 2021 Notes were listed on the NYSE and traded thereon under the trading symbol “MCX”.


Subsequent to fiscal year ended September 30,

On October 21, 2020, the Company redeemedcaused 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. See “Note 15” for more information.

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.


2023 Notes

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,” and together with the 2021 Notes, the "U.S. 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'sCompany’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. The 2023 Notes are listed on the NYSE and trade thereon under the trading symbol “MCV”.


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 agreement.


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.


On December 31, 2018,21, 2020, the Company redeemed $12.0 million in aggregate principal amountannounced that it completed the application process for and was authorized to transfer the listing of the 2023 Notes.Notes to the NASDAQ Global Market. The redemption was accounted for as a debt extinguishment in accordance with ASC 470-50, Modificationslisting and Extinguishments, which resulted in a realized losstrading of $0.2 million and was recordedthe 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.”


PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements of Operations as a loss on extinguishment of debt.

(continued)


Secured Notes

Israeli Notes

Effective as of April 14, 2020, the Company had repaid all of its outstanding Israeli Notes. Below is a description of the terms of the Israeli Notes, including covenants related thereto, that the Company was subject to during the years ended September 30, 2020 and 2019 prior to the full repayment of the 2021

Secured Notes

Israeli Notes.


Notes

On January 26, 2018, the Company priced a debt offering in Israel of $121.3 million of Israeli Notes.Notes (as defined below). The Israeli Notes were listed on the Tel Aviv Stock Exchange (the "TASE")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. The Israeli Notes were not registered under the Securities Act of 1933, and could not be offered or sold in the United States absent registration under the Securities Act or in transactions exempt from, or not subject to, such registration requirements. In connection with this offering, we were dually listed our common stock on the TASE.


On August 12, 2019, the Company and its wholly owned subsidiaries, Medley Small Business Fund, LP (formerly known as Medley SBIC, LP) and Medley SLF, on the one hand, and the Trustee, on the other hand, entered into an amendment to the deed of trust (the “Deed”) governing the Israeli Notes (the “Amendment” together with the Deed, the “Deed of Trust”). The Amendment amended the Deed by, among other things: (a) modifying Section 2.2 of the Deed to provide for full repayment of the Israeli Notes in eight (8) equal installments, each comprising twelve and one-half percent (12.5%) of the principal amount of the Israeli Notes, beginning on August 12, 2019 (the “Effective Date”) and ending on January 31, 2021, rather than four (4) equal annual installments, each comprising twenty five percent (25%) of the principal amount of the Israeli Notes, that were payable on February 27 of each of the years 2021-2024 (inclusive); (b) changing the interest payment dates for the Israeli Notes from semi-annual to quarterly except for the initial interest payment, which was paid on the Effective Date, and the final interest payment, which will be paid on January 31, 2021; (c) decreasing the annual interest rate on the Israeli Notes by 0.25% per annum on the Effective Date and further decreasing the annual interest rate on the Israeli Notes by 0.50% per annum if the mergers of the Company, Sierra, and MDLY (the “Mergers”) close, which further decrease will be effective upon the closing of the Mergers; (d) decreasing the minimum Total Net Asset covenant in Section 6.1.1 of the Deed from $275 million to $215 million; (e) modifying the acceleration event in Section 10.1.25 of the Deed to provide that it will occur if the credit rating on the Israeli Notes drops below (i) il/B of Maalot before November 30, 2019, (ii) il/BB- of Maalot during the period between December 1, 2019 and April 1, 2020, and (iii) il/BBB- of Maalot on or after April 1, 2020; (f) waiving the make-whole and market value payment requirements of Section 9.1.7 of the Deed for all early redemption payments on the Israeli Notes within eighteen (18) months following the Effective Date; (g) requiring each of Medley Small Business Fund and Medley SLF to guarantee all of the Company’s obligations under the Deed (including the Amendment) and the Israeli Notes and to grant security interests on all of their assets (the “Collateral”) to secure such guaranties and providing for the termination of the Medley SLF guaranty and release of the security interests in Medley SLF’s assets upon the closing of the Mergers, subject to certain limitations; (h) that the Company use principal collections from the Collateral to make early redemption payments on the Israeli Notes, which payments will be applied in inverse order of the maturity of the required principal installment payments on the Israeli Notes; (i) providing for a waiver by the Trustee and the holders of the Israeli
F-47






Notes of any right to accelerate the full balance of the amount due to the holders of the Israeli Notes based on any claims, allegations, actions, and/or rights that were raised, and/or resulting or deriving from certain claims or allegations as set forth in Section 19.1 of the Amendment; (j) providing for a waiver by the Trustee and the holders of the Israeli Notes of certain claims, demands, rights, and/or actions against and/or relating to the Company, its subsidiaries and/or affiliates and their respective employees (including their respective directors, officers, members of the Company’s board of directors, employees, stockholders, stakeholders and advisors); and (k) adding other definitions, representations and covenants to the Deed and making related conforming changes to the Deed. Pursuant to the Amendment, no prepayment penalties were due or payable in connection with the payment of principal made by the Company on the Effective Date.

The Deed (including the Amendment) includes certain customary covenants, including minimum net assets of $215 million and a maximum debt to total assets ratio of 70%. The date for determining compliance with these financial covenants is the date that the Company publishes its financial statements (i.e., in a quarterly report on Form 10-Q or an annual report on Form 10-K) with the SEC. If the Company did not satisfy these financial covenants for two consecutive quarters, it would be an event of default under the Deed. If this event of default would have occurred, the Company had the right to request the trustee for the Israeli Notes (the “Trustee”) to appoint an emergency committee of the three largest noteholders for the purpose of obtaining a one-quarter extension of time to satisfy the financial covenants. If the Company did not make this request and the breach occurred, or if the emergency committee did not grant the extension, then the Trustee would be required to convene a meeting of the noteholders as described below.

In addition to not complying with the financial covenants as described above, the events of default include: (i) a change of control of the Company (defined in the Deed as MCC Advisors’ ceasing to provide investment management or advisory services to the Company); (ii) the Company not publishing a tender offer for the purchase of all of the Israeli Notes within 45 days; (iii) the Company not paying any amount due and payable to the holders of the Israeli Notes within seven business days after the payment due date; (iv) certain insolvency and receivership events with respect to the Company or with respect to all or substantially all of its assets, and (v) the Israeli Notes being delisted from the TASE or the TASE’s suspension of trading of the Israeli Notes for more than 60 days.

If an event of default occurs under the Deed, there is no automatic acceleration or mandatory redemption of the Israeli Notes. Rather, the Trustee is required to convene a meeting of the noteholders for a vote on whether to accelerate the Israeli Notes. Noteholders holding at least 50% of the principal amount of the Israeli Notes must be present at the meeting for a quorum to exist, and if a quorum exists, then the vote of a majority of the noteholders present at the meeting controls.

The foregoing description of the terms of Israeli Notes, the Deed, and the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of each of the Deed and the Amendment incorporated by reference as an exhibit to this annual report on Form 10-K.

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. Execution of the repurchase plan was subject to an open trading window for the Company and continued liquidity at that time and was expected to continue until the full authorized amount was purchased or market conditions changed. The repurchase of the Israeli Notes was not expected to result in any material tax consequences to the Company or its note holders.


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 MedleyPhenixFIN SLF and MedleyPhenixFIN 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 MedleyPhenixFIN SLF and MedleyPhenixFIN 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.


On September 13, 2020, in connection with to the redemptionFair Value of the Israeli Notes, the Company delisted its common stock from the TASE.

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, 20202021 and 2019,September 30, 2020, the Notes would be deemed to be Level 1 in the fair value hierarchy, as defined in Note 4.


In accordance with ASU 2015-03, the 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, 20202021 and 2019,September 30, 2020, debt issuance costs related to the Notes were as follows (dollars in thousands):

  September 30, 2021  September 30, 2020 
  2023 Notes  Total  2021 Notes  2023 Notes  Total 
Total debt issuance costs $3,102  $3,102  $3,226  $3,102  $6,328 
Amortized debt issuance costs  2,689   2,689   3,016   2,406  5,422 
Unamortized debt issuance costs $413  $413  $210  $696  $906 


F-48


PHENIXFIN CORPORATION


Notes to Consolidated Financial Statements (continued)


September 30, 2021




 September 30, 2020September 30, 2019
 2021
Notes		2023
Notes		Israeli
Notes		Total2021
Notes		2023
Notes		Israeli
Notes		Total
Total Debt Issuance Costs$3,226 $3,102 $— $6,328 $3,226 $3,102 $6,287 $12,615 
Amortized Debt Issuance Costs3,016 2,406 — 5,422 2,385 2,127 2,829 7,341 
Unamortized Debt Issuance Costs$210 $696 $— $906 $841 $975 $3,458 $5,274 

For the years ended September 30, 2021, 2020 2019 and 2018,2019, 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
 202020192018
2021 Notes interest4,811 4,811 4,811 
2023 Notes interest4,768 4,954 5,857 
2023 Notes premium(3)(3)(3)
Israeli Notes interest2,486 6,817 4,366 
Amortization of debt issuance costs2,873 2,735 1,936 
Total$14,935 $19,314 $16,967 
Weighted average stated interest rate6.4 %6.1 %6.0 %
Weighted average outstanding balance$189,039 $273,211 $251,924 

  For the Years Ended September 30 
  2021  2020  2019 
2021 Notes Interest $668  $4,811  $4,811 
2023 Notes Interest  4,768   4,768   4,954 
2023 Notes Premium  (3)  (3)  (3)
Israeli Notes Interest  -   2,486   6,817 
Amortization of debt issuance costs  367   2,873   2,735 
Total $5,800  $14,935  $19,314 
Weighted average stated interest rate  7.0%  6.4%  6.1%
Weighted average outstanding balance $82,930  $189,039  $273,211 


SBA Debentures

On March 26, 2013, SBIC LP received a SBIC license from the SBA. The SBIC license allowed SBIC LP to obtain leverage by issuing SBA Debentures, subject to the issuance of a capital commitment by the SBA and other customary procedures. SBA Debentures were non-recourse, interest only debentures with interest payable semi-annually and had a ten year maturity. The principal amount of SBA Debentures were not required to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate of SBA Debentures were fixed on a semi-annual basis at a market-driven spread over U.S. Treasury Notes with 10-year maturities. The SBA, as a creditor, had a superior claim to the SBIC LP’s assets over our stockholders in the event we liquidated the SBIC LP or the SBA exercised its remedies under the SBA Debentures issued by the SBIC LP upon an event of default.

On September 1, 2018, the Company repaid $15.0 million in aggregate principal amount of the SBA Debentures. The repayment 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.

SBIC LP received a letter from the SBA (the “SBA Letter”), dated March 14, 2019, informing SBIC LP of certain alleged regulatory issues constituting a default under the terms of the SBIC LP’s outstanding SBA Debentures. The SBA Letter stated that SBIC LP had until March 29, 2019, fifteen (15) days from the date of the SBA Letter, to provide the SBA with certain additional information regarding the alleged regulatory issues, unless extended by the SBA. SBIC LP’s management submitted an orderly wind-down plan to the SBA to prepay the remaining $135.0 million of outstanding SBA Debentures using available cash at SBIC LP as well as the sale of assets to third parties or affiliates of SBIC LP. On March 28, 2019, SBIC LP agreed and made a repayment of $50.0 million of outstanding SBA Debentures by April 3, 2019 using available cash at SBIC LP and the cure period was extended to April 19, 2019. On April 18, 2019, SBIC LP agreed and made a repayment of $20.0 million of outstanding SBA Debentures on April 23, 2019 and an additional $30.0 million of outstanding SBA Debentures on April 30, 2019 using proceeds from the sale of certain assets and the cure period was extended to May 10, 2019. On May 10, 2019, SBIC LP made the final repayment of the remaining $35.0 million of outstanding SBA Debentures using proceeds from the sale of certain assets. In connection therewith, effective July 1, 2019, SBIC LP surrendered its SBIC license and operates as Medley Small Business Fund.

The $135.0 million in aggregate repayments made in connection with the orderly wind-down plan was accounted for as debt extinguishments in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a cumulative realized loss of $1.8 million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment of debt.

As of September 30, 2020 and 2019, Medley Small Business Fund did not have any SBA Debentures outstanding.

For the years ended September 30, 2020, 2019 and 2018, the components of interest, amortized debt issuance costs, weighted average stated interest rate and weighted average outstanding debt balance for the SBA Debentures were as follows (dollars in thousands):

F-49






For the years ended September 30
 202020192018
SBA Debentures interest$— $4,445 $5,408 
Amortization of debt issuance costs— 290 563 
Total$— $4,735 $5,971 
Weighted average stated interest rate— %5.9 %3.6 %
Weighted average outstanding balance$— $74,781 $148,767 

Note 6. Agreements


Investment Management Agreement

We had entered into an investment management agreement with MCC Advisors on January 11, 2011 (the “Investment Management Agreement”). Mr. Brook Taube, our Chairman and Chief Executive Officer, is a managing partner and senior portfolio manager of MCC Advisors, and Mr. Seth Taube, one of our directors, is a managing partner of MCC Advisors.


, which expired on December 31, 2020.

Under the terms of the Investment Management Agreement, MCC Advisors:


•determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes;

•identifies, evaluates and negotiates the structure of the investments we make (including performing due diligence on our prospective portfolio companies); and

•executes, closes, monitors and administers the investments we make, including the exercise of any voting or consent rights.

●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); and

●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 arewere not exclusive, and it iswas free to furnish similar services to other entities so long as its services to us arewere not impaired.


Pursuant to the Investment Management Agreement, we paypaid MCC Advisors a fee for investment advisory and management services consisting of a base management fee and a two-part incentive fee.


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. Moreover, the revised incentive fee includes a netting mechanism and is subject to a rolling three-year look back from January 1, 2016 forward. Under no circumstances willwould the new fee structure result in higher fees to MCC Advisors than fees under the prior investment management agreement.



PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2021

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 arewere effective as of January 1, 2016 and arewere 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 providesprovided under the Investment Management Agreement. The Fee Waiver Agreement doesdid not change the second component of the incentive fee, which iswas 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 AgreementAgreement”), 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 were to bewas 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 such termination to the Company. In that regard, onOn 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, without further action by the board of directors.2020. On May 21, 2020, the board of directors,Board, including all of the independent directors, extended the term of the Investment Management Agreement through the end of the then-current quarter, ended June 30, 2020. On June 15,12, 2020, the board of directors,Board, including all of the independent directors, extended the term of the Investment Management Agreement through the end of the quarter ended September 30, 2020. On September 29, 2020, the Board, including all of the independent directors, extended the term of the Investment Management Agreement through the end of the quarter ending December 31, 2020. See "Note 15" for more information.

Mr. 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 interim Chief Executive Officer, and Ellida McMillan as Chief Financial Officer of the Company, each effective January 1, 2021. In connection with his appointment, Mr. Lorber stepped down from the Compensation Committee of the Board, the Nominating and Corporate Governance Committee of the Board, and the Special Committee of the Board.


Base Management Fee

For

Through December 31, 2020, for providing investment advisory and management services to us, MCC Advisors receivesreceived a base management fee. The base management fee iswas 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 iswas payable quarterly in arrears. The base management fee will bewas calculated based on the average value of the Company’s gross assets at the end of the two most recently completed calendar quartersquarters. For the years ended September 30, 2021, 2020 and will be appropriately pro-rated for any partial quarter. On May 4, 2018,2019, the Company incurred base management fees to MCC Advisors voluntarily electedof $1.1 million, $6.4 million and $11.2 million, respectively. Since January 1, 2021, the Company no longer incurs management fees under its current internalized structure.


PHENIXFIN CORPORATION

Notes to waive $380,000 of the base management fee payable for the quarter ended March 31, 2018, which is shown on the Consolidated Financial Statements of Operations.

F-50
(continued)


September 30, 2021







Incentive Fee

The

Through December 31, 2020, the incentive fee hashad two components, as follows:


Incentive Fee Based on Income

The first component of the incentive fee iswas payable quarterly in arrears and iswas based on our pre-incentive fee net investment income earned during the calendar quarter for which the incentive fee iswas being calculated. MCC Advisors iswas entitled to receive the incentive fee on net investment income from us if our Ordinary Income (as defined below) exceedsexceeded a quarterly “hurdle rate” of 1.5%. The hurdle amount iswas 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.


Beginning with the calendar quarter that commenced on January 1, 2016, the incentive fee on net investment income is determined and paid quarterly in arrears at the end of each calendar quarter by reference to our aggregate net investment income, as adjusted as described below, from the calendar quarter then ending and the eleven preceding calendar quarters (or if shorter, the number of quarters that have occurred since January 1, 2016). We refer to such period as the “Trailing Twelve Quarters.”

The hurdle amount for the incentive fee on net investment income is determined on a quarterly basis, and is equal to 1.5% multiplied by the Company’s net asset value at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. The hurdle amount is 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 incentive fee for any partial period will be appropriately pro-rated. Any incentive fee on net investment income will be paid to MCC Advisors on a quarterly basis, and will be based on the amount by which (A) aggregate net investment income (“Ordinary Income”) in respect of the relevant Trailing Twelve Quarters exceeds (B) the hurdle amount for such Trailing Twelve Quarters. The amount of the excess of (A) over (B) described in this paragraph for such Trailing Twelve Quarters is referred to as the “Excess Income Amount.” For the avoidance of doubt, Ordinary Income is net of all fees and expenses, including the reduced base management fee but excluding any incentive fee on Pre-Incentive Fee net investment income or on the Company’s capital gains.

Determination of Quarterly Incentive Fee Based on Income

The incentive fee on net investment income for each quarter is determined as follows:

•No incentive fee on net investment income is payable to MCC Advisors for any calendar quarter for which there is no Excess Income Amount;

•100% of the Ordinary Income, if any, that exceeds the hurdle amount, but is less than or equal to an amount, which we refer to as the “Catch-up Amount,” determined as the sum of 1.8182% multiplied by the Company’s net assets at the beginning of each applicable calendar quarter, as adjusted as noted above, comprising the relevant Trailing Twelve Quarters is included in the calculation of the incentive fee on net investment income; and

•17.5% of the Ordinary Income that exceeds the Catch-up Amount is included in the calculation of the incentive fee on net investment income.

The amount of the incentive fee on net investment income that will be paid to MCC Advisors for a particular quarter will equal the excess of the incentive fee so calculated minus the aggregate incentive fees on net investment income that were paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant Trailing Twelve Quarters but not in excess of the Incentive Fee Cap (as described below).

The incentive fee on net investment income that is paid to MCC Advisors for a particular quarter is subject to a cap (the “Incentive Fee Cap”). The Incentive Fee Cap for any quarter is an amount equal to (a) 17.5% of the Cumulative Net Return (as defined below) during the relevant Trailing Twelve Quarters minus (b) the aggregate incentive fees on net investment income that were paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant Trailing Twelve Quarters.

“Cumulative Net Return” means (x) the Ordinary Income in respect of the relevant Trailing Twelve Quarters minus (y) any Net Capital Loss (as described below), if any, in respect of the relevant Trailing Twelve Quarters. If, in any quarter, the Incentive Fee Cap is zero or a negative value, the Company will pay no incentive fee on net investment income to MCC Advisors for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is a positive value but is less than the incentive fee on net investment income that is payable to MCC Advisors for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company will pay an incentive fee on net investment income to MCC Advisors equal to the Incentive Fee Cap for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is equal to or greater than the incentive fee on net investment income that is payable to MCC Advisors for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company will pay an incentive fee on net investment income to MCC Advisors, calculated as described above, for such quarter without regard to the Incentive Fee Cap.

“Net Capital Loss” in respect of a particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or unrealized, and dilution to the Company’s net assets due to capital raising or capital actions, in such period and (ii) aggregate capital gains, whether realized or unrealized and accretion to the Company’s net assets due to capital raising or capital action, in such period.
F-51







Dilution to the Company’s net assets due to capital raising is calculated, in the case of issuances of common stock, as the amount by which the net asset value per share was adjusted over the transaction price per share, multiplied by the number of shares issued. Accretion to the Company’s net assets due to capital raising is calculated, in the case of issuances of common stock (including issuances pursuant to our dividend reinvestment plan), as the excess of the transaction price per share over the amount by which the net asset value per share was adjusted, multiplied by the number of shares issued. Accretion to the Company’s net assets due to other capital action is calculated, in the case of repurchases by the Company of its own common stock, as the excess of the amount by which the net asset value per share was adjusted over the transaction price per share multiplied by the number of shares repurchased by the Company.

Incentive Fee Based on Capital Gains

The second component of the incentive fee iswas 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 equalsequaled 20.0% of our cumulative aggregate realized capital gains less cumulative realized capital losses, unrealized capital depreciation (unrealized depreciation on a gross investment-by-investment basis at the end of each calendar year) and all capital gains upon which prior performance-based capital gains incentive fee payments were previously made to the investment adviser.


Under GAAP, the Company calculates the second component of the incentive fee as if the Company had realized all assets at their fair values as of the reporting date. Accordingly, when applicable, the Company accrues a provisional capital gains incentive fee taking into account any unrealized gains or losses. As the provisional capital gains incentive fee is subject to the performance of investments until there is a realization event, the amount of the provisional capital gains incentive fee accrued at a reporting date may vary from the capital gains incentive that is ultimately realized and the differences could be material.

Base Management Fee - Prior to Fee Waiver Agreement

Prior to January 1, 2016, the base management fee was calculated at an annual rate of 1.75% of our gross assets (which is defined as all the assets of the Company, including those acquired using borrowings for investment purposes), and was payable quarterly in arrears. The base management fee was based on the average value of our gross assets at the end of the two most recently completed calendar quarters.

Incentive Fee - Prior to Fee Waiver Agreement

Prior to January 1, 2016, the incentive fee based on net investment income was calculated as 20.0% of the amount, if any, by which our pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets calculated as of the end of the calendar quarter immediately preceding the calendar quarter for which the incentive fee is being calculated, exceeds a 2.0% (which is 8.0% annualized) hurdle rate but also includes a “catch-up” provision. Under this provision, in any calendar quarter, our investment adviser receives no incentive fee until our net investment income equals the hurdle rate of 2.0%, but then receives, as a “catch-up”, 100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5%. The effect of this provision is that, if pre-incentive fee net investment income exceeds 2.5% in any calendar quarter, our investment adviser will receive 20% of our pre-incentive fee net investment income as if the hurdle rate did not apply. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies accrued during the calendar quarter, minus our operating expenses for the quarter including the base management fee, expenses payable under the administration agreement, and any interest expense and any dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee. Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash.

For the avoidance of doubt, the purpose of the new incentive fee calculation under the Fee Waiver Agreement is to permanently reduce aggregate fees payable to MCC Advisors by the Company, effective as of January 1, 2016. In order to ensure that the Company will pay MCC Advisors lesser aggregate fees on a cumulative basis, as calculated beginning January 1, 2016, we will, at the end of each quarter, also calculate the base management fee and incentive fee on net investment income owed by the Company to MCC Advisors based on the formula in place prior to January 1, 2016. If, at any time beginning January 1, 2016, the aggregate fees on a cumulative basis, as calculated based on the formula in place after January 1, 2016, would be greater than the aggregate fees on a cumulative basis, as calculated based on the formula in place prior to January 1, 2016, MCC Advisors shall only be entitled to the lesser of those two amounts.

For the years ended September 30, 2020, 2019 and 2018, the Company incurred base management fees to MCC Advisors of $6.4 million, $11.2 million, and $14.7 million, respectively.


For the years ended September 30,2021, 2020, and 2019, the Company did not waive any management fees under the Fee Waiver Agreement. For the year ended September 30, 2018, base management fees, net of the voluntary $0.4 million waiver, was $14.3 million.

The incentive fees shown in the Consolidated Statements of Operations are calculated using the fee structure set forth in the Investment Management Agreement, and then adjusted to reflect the terms of the Fee Waiver Agreement. Pursuant to the Investment Management Agreement, pre-incentive fee net investment income is compared to a hurdle rate of 2.0% of the net asset value at the beginning of the period and is calculated as follows:

1)No incentive fee is recorded during the quarter in which our pre-incentive fee net investment income does not exceed the hurdle rate;

2)100% of pre-incentive fee net investment income that exceeds the hurdle rate but is less than 2.5% in the quarter; and

3)20.0% of the amount of pre-incentive fee net investment income, if any, that exceeds 2.5% of the hurdle rate.

F-52






For purposes of implementing the fee waiver under the Fee Waiver Agreement, we calculate the incentive fee based upon the formula that exists under the Investment Management Agreement, and then apply the terms of waiver set forth in the Fee Waiver Agreement, if applicable.

For the years ended September 30, 2020, 2019 and 2018, 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.

As of September 30, 2021 and 2020, $0 and $1.4 million, respectively, were included in “management and incentive fees payable” in the accompanying Consolidated Statements of Assets and Liabilities.

As of September 30, 2020 and 2019, $1.4 million and $2.2 million, respectively, were included in “management and incentive fees payable” in the accompanying Consolidated Statements of Assets and Liabilities.


Administration Agreement

On January 19, 2011, the Company entered into an administration agreement with MCC Advisors. Pursuant to the administration agreement, MCC Advisors furnishesfurnished us with office facilities and equipment, clerical, bookkeeping, recordkeeping and other administrative services related to the operations of the Company. We reimbursereimbursed 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 maywas able to pay amounts owed by us to third-party service providers and we willwould 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”). The administration agreement with MCC Advisors terminated by its terms on December 31, 2020. Effective January 1, 2021, US Bancorp serves as custodian and provides us with fund accounting and financial reporting services pursuant to the Fund Accounting Servicing Agreement and Administration Servicing Agreement. For the years ended September 30, 2021, 2020 2019 and 2018,2019, we incurred $0.6 million, $2.2 million, $3.3 million, and $3.6$3.3 million in administrator expenses, respectively.


As of September 30, 2021 and 2020, and 2019, $0.2$0.1 million and $0.9$0.2 million, respectively, were included in “administrator expenses payable” in the accompanying Consolidated Statements of Assets and Liabilities.



PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2021

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, 2020 and expires on September 30, 2020. On September 29, 2020, the board of directors, including all of the independent directors, extended the term of the Expense Support Agreement through the end of quarter ending December 31, 2020.


For The Expense Support Agreement expired by its terms at the year ended September 30,close of business on December 31, 2020, in connection with the totaladoption of the internalized management fee andstructure by the other operating expenses subject to the Cap (as described above) were $3.1 million, which resulted in $0.7 millionboard of expense support due from MCC Advisors. The $0.7 million of expense support due has been netted against Administrator expenses payable in the accompanying Consolidated Statements of Assets and Liabilities. See "Note 15" for more information.

directors.

Note 7. Related Party Transactions


Due to Affiliate

Due to affiliate consists of certain general and administrative expenses paid by an affiliate on behalf of the Company.


Other Related Party Transactions

Opportunities for co-investments may arise when MCC Advisors or an affiliated investment adviser becomes aware of investment opportunities that may be appropriate for the Company, other clients, or affiliated funds. On November 25, 2013, the Company obtained an exemptive order from the SEC that permits us to participate in negotiated co-investment transactions with certain affiliates, each of whose investment adviser is Medley, LLC or an investment adviser controlled by Medley, LLC in a manner consistent with our investment objective, strategies and restrictions, as well as regulatory requirements and other pertinent factors (the “Prior Exemptive Order”). On March 29, 2017, the Company, MCC Advisors and certain other affiliated funds and investment advisers received an exemptive order (the “Exemptive Order”) that supersedes the Prior Exemptive Order and allows affiliated registered investment companies to participate in co-investment transactions with us that would otherwise have been prohibited under Section 17(d) and 57(a)(4) of the 1940 Act and Rule 17d-1 thereunder. On October 4, 2017, the Company, MCC Advisors and certain of our affiliates received an exemptive order that supersedes the Exemptive Order (the “Current Exemptive Order”) and allows, in addition to the entities already covered by the Exemptive Order, Medley LLC and its subsidiary, Medley Capital LLC, to the extent they hold financial assets in a principal capacity, and any direct or indirect, wholly or majority owned subsidiary of Medley LLC that is formed in the future, to participate in co-investment transactions with us that would otherwise be prohibited by either or both of Sections 17(d) and 57(a)(4) of the 1940 Act. Co-investment under the Current Exemptive Order is subject to certain conditions therein, including the condition that, in the case of each co-investment transaction, the board of directors determines that it would be in the Company’s best interest to participate in the transaction. However, neither we nor the affiliated funds are obligated to invest or co-invest when investment opportunities are referred to us or them.

Note 8. Commitments
Guarantees


The Company has a guarantee to issue up to $5.7 million in standby letters of credit through a financial intermediary on behalf of a certain portfolio company. Under this arrangement, if the standby letters of credit were to be issued, the Company would be required to make payments to third parties if the portfolio company was to default on its related payment obligations. The guarantee will renew annually until cancellation. As of September 30, 2020 and 2019, the Company had not issued any standby letters of credit under the commitment on behalf of the portfolio company.

Insurance Reimbursements Related to Professional Fees
F-53







During the year ended September 30, 2020, the

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. v Brook Taube et al. During the year ended September 30, 2021, the Company received $2.1 million of insurance proceeds. During the year ended September 30, 2020, the Company received $6.1 million of insurance proceeds. The reimbursement hasreimbursements have been recorded as an offset or reduction in professional fees and expenses on the Consolidated Statements of Operations.


Unfunded commitments

As of September 30, 20202021 and 2019,2020, we had commitments under loan and financing agreements to fund up to $4.9 million to six portfolio companies and $3.9 million to five portfolio companies and $8.9 million to seven 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, 20202021 and 20192020 is shown in the table below (dollars in thousands):

  September 30,
2021		  September 30,
2020		 
Redwood Services Group, LLC - Revolver $1,575  $1,050 
1888 Industrial Services, LLC - Revolver  1,078   1,078 
Alpine SG - Revolver  1,000   - 
Kemmerer Operations, LLC - Delayed Draw Term Loan  908   908 
NVTN LLC - DDTL  220   220 
Black Angus Steakhouses, LLC - Super Priority DDTL  167   - 
DataOnline Corp. - Revolver  -   179 
NVTN LLC - Super Priority DDTL  -   500 
Total unfunded commitments $4,948  $3,935 


 September 30, 2020September 30, 2019
1888 Industrial Services, LLC - Revolver$1,078 $— 
Kemmerer Operations, LLC - Delayed Draw Term Loan908 908 
NVTN LLC - DDTL220 — 
NVTN LLC - Super Priority DDTL500 — 
Redwood Services Group, LLC - Revolver1,050 875 
DataOnline Corp. - Revolver179 1,890 
Access Media Holdings, LLC - Series AAA Preferred Equity— 101 
Dynamic Energy Services International LLC - Revolver— 3,255 
Alpine SG, LLC - Revolver— 1,000 
Black Angus Steakhouses, LLC - Delayed Draw Term Loan— 893 
Total$3,935 $8,922 


PHENIXFIN CORPORATION


Notes to Consolidated Financial Statements (continued)

September 30, 2021

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. PhenixFIN identified one operating lease for its office space. 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, 2021 was $84,000. As of September 30, 2021, the asset related to the operating lease was $613,500 and is included in the Other assets balance on the Consolidated Balance Sheet. The lease liability was $(613,500) and is included in the Other liabilities balance on the Consolidated Balance Sheet. As of September 30, 2021, the remaining lease term was five years and the implied borrowing rate was 5.25%.

The following table shows future minimum payments under PhenixFIN’s operating lease as of September 30, 2021:

For the Years Ended September 30, Amount 
2022 $84,000 
2023  144,000 
2024  144,000 
2025  144,000 
2026  144,000 
Thereafter  24,000 
   684,000 
Difference between undiscounted and discounted cash flows  (70,466)
  $613,534 

Note 9. Fee Income


Fee income consists of origination/closing fee,fees, amendment fee,fees, prepayment penalty administrative agent fee, and other miscellaneous fees which are non-recurring in nature, as well as administrative agent fees, which are recurring in nature. The following tables summarizetable summarizes the Company’s fee income for the years ended September 30, 2021, 2020 2019 and 20182019 (dollars in thousands):

  For the Years Ended September 30 
  2021  2020  2019 
Administrative agent fee $414  $192  $316 
Prepayment fee  -   139   1,281 
Amendment fee  94   171   306 
Other fees  2,059   90   56 
Origination fee  -   101   345 
Fee income $2,567  $693  $2,304 


 For the years ended September 30
 202020192018
Prepayment fee$139 $1,281 $220 
Origination fee101 345 2,780 
Administrative agent fee192 316 610 
Amendment fee171 306 579 
Other fees90 56 285 
Fee income$693 $2,304 $4,474 


PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2021

Note 10. Directors Fees


The Company's

During calendar year 2021, 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. The Company’s independent directors also receive a fee of $3,000 for each board meeting and $2,500 for each committee meeting that they attend. Prior to calendar year 2021, the Company’s independent directors each received an annual fee of $90,000. They also receivereceived $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 receivesreceived an annual fee of $25,000 and the chair of the Nominating and Corporate Governance Committee and the Compensation Committee receivesreceived an annual fee of $10,000 for their additional services in these capacities. In addition, other members of the Audit Committee receivereceived an annual fee of $12,500, and other members of the Nominating and Corporate Governance Committee and the Compensation Committee receivereceived an annual fee of $6,000.


On January 26, 2018, the board of directors established the special committee of the Board, comprised solely of directors who are not “interested persons” of the Company as such term is defined in Section 2(a)(19) of the 1940 Act (the “Special Committee”), for the purpose of assessing the merits of various proposed strategic transactions. As compensation for serving on the Special Committee, each independent director received a one-time retainer of $25,000 plus reimbursement of out-of-pocket expenses, consistent with the Company’s policies for reimbursement of members of the board of directors. In addition, the chairman of the Special Committee receivesreceived a monthly fee of $15,000 and other members receivereceived a monthly fee of $10,000.


Pursuant to the Settlement Term Sheet, on April 15, 2019, the board of directors appointed David A. Lorber and Lowell W. Robinson to the Board to fill the vacancies on the Board created by the resignations of Mark Lerdal and John E. Mack, respectively. In addition, the board of directors added: (i) Messrs. Lorber and Robinson to the The Special Committee with Mr. Lorber serving as Chair ofwell as the Special Committee; (ii) Mr. Lorber to the NominatingTransition Committee have each been dissolved and Corporate Governance Committee and the Compensation Committee; and Mr. Robinson to the Audit Committee. In addition to the compensation
F-54






described above,are each of Mr. Lorber and Mr. Robinson received the one-time retainer of $25,000 plus reimbursement of out-of-pocket expenses, consistent with the Company's policies for reimbursement of members of theno longer in operation.

No board of directors.


On August 19, 2020, Jeffrey Tonkel notified the Board that he was resigning voluntarily from the Board, effective August 19, 2020. On August 19, 2020, the Board appointed Howard Amster to the Board to fill the vacancy created by the resignation of Mr. Tonkel, effective August 19, 2020. In addition to the compensation described above, Mr. Amster received the one-time retainer of $25,000 plus reimbursement of out-of-pocket expenses, consistent with the Company's policies for reimbursement of independent members of the board of directors.

Noservice compensation is paid to directors who are ‘‘interested persons’’“interested persons” of the Company (as such term is defined in the 1940 Act). For the years ended September 30, 2021, 2020 2019 and 2018,2019, we accrued $1.5$1.0 million, $1.3$1.5 million, and $1.3 million for independent directors’ fees expense, respectively.

Note 11. 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, 2020.


2021, 2020 and 2019.

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, 2021, 2020 2019 and 20182019 (dollars in thousands, except share and per share amounts):

  For the Years Ended September 30 
  2021  2020  2019 
Basic and diluted:         
Net increase (decrease) in net assets resulting from operations $1,278  $(65,813) $(96,575)
Weighted average shares of common stock outstanding - basic and diluted  2,677,891   2,723,709   2,723,709 
Earnings (loss) per share of common stock - basic and diluted $0.48  $(24.16) $(35.46)


 For the years ended September 30
 202020192018
Basic and diluted:   
Net increase/(decrease) in net assets from operations$(65,813)$(96,575)$(110,924)
Weighted average common shares outstanding2,723,709 2,723,709 2,723,709 
Earnings per common share-basic and diluted$(24.16)$(35.46)$(40.73)


PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2021

Note 12. Financial Highlights

The following is a schedule of financial highlights for the years ended September 30, 2021, 2020, 2019, 2018 2017 and 2016:2017:

  For the Years Ended September 30 
  2021  2020  2019  2018  2017 
Per share data               
Net Asset Value per share at Beginning of Period $55.30  $79.46  $117.92  $169.04  $189.78 
                     
Results of Operations:                    
Net Investment Income/(Loss)(1)  6.92   (1.00)  (7.66)  4.55   13.35 
Net Realized Gain/(Loss) on Investments  (15.86)  (18.35)  (41.18)  (32.76)  (26.83)
Net Unrealized Gain/(Loss) on Investments  9.47   (3.90)  14.13   (11.82)  7.95 
Change in provision for deferred taxes on unrealized appreciation/(depreciation) on investments  -   -   -   0.17   0.40 
Net loss on extinguishment of debt  (0.05)  (0.91)  (0.75)  (0.87)  (0.40)
Net Increase (Decrease) in Net Assets Resulting from Operations  0.48   (24.16)  (35.46)  (40.73)  (5.53)
                     
Capital Share Transactions                    
Distributions from net investment income  -   -   (3.00)  (10.40)  (15.20)
Repurchase of common stock under stock repurchase program  1.30   -   -   -   - 
Other(4)  -   -   -   0.01   (0.01)
Net Increase (Decrease) Resulting from Capital Share Transactions  1.30   -   (3.00)  (10.39)  (15.21)
Net Asset Value per share at End of Period $57.08  $55.30  $79.46  $117.92  $169.04 
                     
Net Assets at End of Period  143,693,981  $150,619,517  $216,432,530  $321,178,727  $460,429,317 
Shares Outstanding at End of Period  2,517,221   2,723,709   2,723,709   2,723,709   2,723,709 
                     
Per share market value at end of period $42.90  $17.83  $51.80  $76.40  $119.40 
Total return based on market value(2)  140.61%  (65.58%)  (29.91%)  (27.82%)  (12.73%)
Total return based on net asset value(3)  (4.60%)  (30.41%)  (29.47%)  (21.29%)  (0.68%)
Portfolio turnover rate  24.97%  5.66%  11.93%  26.46%  26.01%


 For the years ended September 30
20202019201820172016
Per share data(1)(15):
Net asset value per share at beginning of year$79.46 $117.92 $169.04 $189.78 $220.08 
Net investment income/(loss)(2)
(1.00)(7.66)4.55 13.35 19.35 
Net realized gains/(losses) on investments(18.35)(41.18)(32.76)(26.83)(14.22)
Net unrealized appreciation/(depreciation) on investments(3.90)14.13 (11.82)7.95 (15.26)
Change in provision for deferred taxes on unrealized appreciation/(depreciation) on investments— — 0.17 0.40 0.03 
Loss on extinguishment of debt(0.91)(0.75)(0.87)(0.40)— 
Net increase/(decrease) in net assets(24.16)(35.46)(40.73)(5.53)(10.10)
Distributions from net investment income— (3.00)(10.40)(15.20)(22.40)
Repurchase of common stock under stock repurchase program— — — — 2.20 
Other(5)
— — 0.01 (0.01)— 
Net asset value per share at end of year$55.30 $79.46 $117.92 $169.04 $189.78 
Net assets at end of year$150,619,517 $216,432,530 $321,178,727 $460,429,317 $516,919,142 
Shares outstanding at end of year2,723,709 2,723,709 2,723,709 2,723,709 2,723,709 
Per share market value at end of year$17.83 $51.80 $76.40 $119.40 $152.60 
Total return based on market value(3)
(65.58)%(29.91)%(27.82)%(12.73)%19.37 %
Total return based on net asset value(4)
(30.41)%(29.47)%(21.29)%(0.68)%0.42 %
Portfolio turnover rate5.66 %11.93 %26.46 %26.01 %8.86 %


PHENIXFIN CORPORATION

F-55


Notes to Consolidated Financial Statements (continued)


September 30, 2021





The following is a schedule of ratios and supplemental data for the years ended September 30, 2021, 2020, 2019, 2018 2017, and 2016:2017:

  For the Years Ended September 30 
  2021  2020  2019  2018  2017 
Ratios:               
Ratio of net investment/(loss) income to average net assets after waivers, discounts and reimbursements(5)  12.44%  (1.64%)  (7.96%)  3.37%  7.50%
Ratio of total expenses to average net assets after waivers, discounts and reimbursements(5)  9.26%  14.64%  25.62%  14.77%  12.35%
Ratio of incentive fees to average net assets after waivers(5)  0.00%  0.00%  0.00%  0.00%  0.18%
                     
Supplemental Data:                    
Ratio of net operating expenses and credit facility related expenses to average net assets(5)(12)  9.26%  15.07%  25.62%  14.77%  12.17%
Percentage of non-recurring fee income(6)  7.94%  2.33%  4.29%  5.78%  6.23%
Average debt outstanding(7)  82,930,098   189,038,998   347,991,878   451,590,779   514,726,703 
Average debt outstanding per common share  30.97   69.40   127.76   165.80   188.98 
Asset coverage ratio per unit(8)  2,856   1,992   1,842   2,126   2,327 
Total Debt Outstanding(13)                    
Revolving Credit Facility  -   -   -   -   68,000,000 
Term Loan Facility  -   -   -   -   102,000,000 
2021 Notes(11)  -  74,012,825   74,012,825   74,012,825   74,012,825 
2023 Notes  77,846,800   77,846,800   77,846,800   89,846,800   102,846,800 
Israeli Notes(10)  -   -   105,136,927   121,275,690   - 
SBA Debentures  -   -   -   135,000,000   150,000,000 
                     
Average market value per unit:                    
2019 Notes(9)   N/A    N/A    N/A    N/A   25.39 
2021 Notes(11)   N/A   23.61   24.82   25.48   25.80 
2023 Notes  24.94   21.68   24.28   25.02   25.18 
Israeli Notes(10)   N/A    N/A   254.43   273.95    N/A 


 For the years ended September 30
 20202019201820172016
Ratios:     
Ratio of net investment/(loss) income to average net assets after waivers(6)
(1.64)%(7.96)%3.37 %7.50 %9.97 %
Ratio of total expenses to average net assets after waivers(6)
14.64 %25.62 %14.77 %12.35 %12.49 %
Ratio of incentive fees to average net assets after waivers(6)
— %— %— %0.18 %1.49 %
Supplemental Data:
Ratio of net operating expenses and credit facility related expenses to average net assets(6)(13)
15.07 %25.62 %14.77 %12.17 %11.00 %
Percentage of non-recurring fee income(7)
2.33 %4.29 %5.78 %6.23 %5.61 %
Average debt outstanding(8)
$189,038,998 $347,991,878 $451,590,779 $514,726,703 $553,012,824 
Average debt outstanding per common share$69.40 $127.76 $165.80 $188.98 $203.04 
Asset coverage ratio per unit(9)
1,992 1,842 2,126 2,327 2,414 
Total Debt Outstanding(14):
Revolving Credit Facility$— $— $— $68,000,000 $14,000,000 
Term Loan Facility$— $— $— $102,000,000 $174,000,000 
2019 Notes$— $— $— $— $40,000,000 
2021 Notes$74,012,825 $74,012,825 $74,012,825 $74,012,825 $74,012,825 
2023 Notes$77,846,800 $77,846,800 $89,846,800 $102,846,800 $63,500,000 
Israeli Notes(12)
$— $105,136,927 $121,275,690 $— $— 
SBA Debentures$— $— $135,000,000 $150,000,000 $150,000,000 
Average market value per unit:
Facilities(10)
N/AN/AN/AN/AN/A
SBA debentures(10)
N/AN/AN/AN/AN/A
2019 Notes(11)
N/AN/AN/A$25.39 $25.44 
2021 Notes$23.61 $24.82 $25.48 $25.80 $25.48 
2023 Notes(12)
$21.68 $24.28 $25.02 $25.18 $25.19 
Israeli NotesN/A$254.43 $273.95 N/AN/A

(1)PHENIXFIN CORPORATION

Table may not foot dueNotes to rounding.Consolidated Financial Statements (continued)

(2)Net investment income/(loss) excluding management and incentive fee waivers based on total weighted average common stock outstanding equals $(3.35), $(7.66), $4.41, $13.32, and $18.03 per share for the years ended September 30, 2020, 2019, 2018, 2017 and 2016, respectively.2021

(3)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.
(4)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.
(5)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.
(6)

(1)Net investment income/(loss) excluding management and incentive fee waivers, discounts and reimbursements based on total weighted average common stock outstanding equals $6.92, $(3.35), $(7.66), $4.41, and $13.32 per share for the years ended September 30, 2021, 2020, 2019, 2018, and 2017, respectively.
(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)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.
(5)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.   

(6)Represents the impact of the non-recurring fees as a percentage of total investment income.
(7)Based on daily weighted average carrying value of debt outstanding during the period.
(8)Asset coverage per unit is the ratio of the carrying value of our total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness.
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 above 200%, the minimum asset coverage requirement under the 1940 Act.
(9)During the year ended September 30, 2017, the 2019 Notes were redeemed in full and ceased trading on February 17, 2017. The average price for the year ended September 30, 2017 reflects the period from October 1, 2016 through February 17, 2017.
(10)During the year ended September 30, 2020, the Israeli Notes were redeemed in full and ceased trading on the TASE on April 14, 2020.
(11)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.
(12)Excludes incentive fees.
(13)Total amount of each class of senior securities outstanding at the end of the period excluding debt issuance costs.


PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

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. For the year ended September 30, 2016, 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 9.29%, 13.17%, 2.14%, and 11.03%, respectively.2021

(7)Represents the impact of the non-recurring fees as a percentage of total investment income.

(8)Based on daily weighted average carrying value of debt outstanding during the period.
(9)Asset coverage per unit is the ratio of the carrying value of our total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness. As of September 30, 2020, the Company’s asset coverage was 199.2% after giving effect to leverage and therefore the Company’s asset coverage was below 200%, the minimum asset coverage requirement under the 1940 Act. As a
F-56






result, the Company is prohibited from making distributions to stockholders, including the payment of any dividend, and may not employ further leverage until the Company’s asset coverage is at least 200% after giving effect to such leverage.
(10)The Facilities and SBA Debentures were not registered for public trading.
(11)During the year ended September 30, 2017, the 2019 Notes were redeemed in full and ceased trading on February 17, 2017. The average price for the year ended September 30, 2017 reflects the period from October 1, 2016 through February 17, 2017.
(12)During the year ended September 30, 2020, the Israeli Notes were redeemed in full and ceased trading on the TASE on April 14, 2020.
(13)Excludes incentive fees.
(14)Total amount of each class of senior securities outstanding at the end of the period excluding debt issuance costs.
(15)Per share data has been adjusted for the periods shown to reflect the one-for-twenty reverse stock split effected on July 24, 2020 on a retroactive basis, as described in Note 1.

Note 13. Dividends

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” 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.


The Company did not make any distributions during the yearyears ended September 30, 2021 and 2020.


Note 14. Share Transactions

On January 11, 2021, the Company announced that its board of directors approved a share repurchase program.

The following table summarizessets forth the Company’s distributions duringnumber of shares of common stock repurchased by the year endedCompany at an average price of $33.94 per share under its share repurchase program from February 10, 2021 through September 30, 2019:

Date DeclaredRecord DatePayment Date
Amount Per Share(1)
During the year ended September 30, 2019
11/16/201812/5/201812/20/2018$2.00 
2/10/20192/22/20193/12/20191.00 
$3.00 
(1) Amount2021: 

Month Ended Shares Repurchased Repurchase Price Per Share Aggregate Consideration for Repurchased Shares 
 February 2021    13,082 $30.25 - $30.96  $397,384 
 March 2021    12,241 $30.25 - $34.42   393,938 
 April 2021    14,390 $33.11 - $34.89   491,469 
 May 2021    25,075 $34.56 - $39.93   976,440 
 August 2021    141,700 $41.03 - $42.28   5,944,213 
 Total    206,488   $8,203,444 

The Company’s net asset value per share has been adjusted forwas increased by approximately $1.31 as a result of the periods shown to reflect the one-for-twenty reverse stock split effected on July 24, 2020 on a retroactive bases, as described in share repurchases.

Note 1.


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Note 14.15. Selected Quarterly Financial Data (Unaudited)

The following tables represent selected unaudited quarterly financial data for the Company during the years ended September 30, 2020, 2019,2021 and 20182020 (dollars in thousands, except per share amounts):

  September 30,
2021		  June 30,
2021		  March 31,
2021		  December 31,
2020		 
Consolidated Statement of Operations data:                
Total investment income $4,368  $8,684  $6,454  $12,801 
Net investment income  1,076   5,430   3,687   8,330 
Total realized and unrealized gains/(losses)  (37,529)  1,539   4,100   14,768 
Loss on extinguishment of debt  -   -   -   (122)
Net increase/(decrease) in net assets resulting from operations  (7,040)  6,969   7,787   (6,438)
Earnings per share  (2.63)  2.60   2.87   (2.36)
Net asset value per common share at period end $57.08  $58.49  $55.91  $52.94 


 September 30, 2020June 30, 2020March 31, 2020December 31, 2019
Consolidated Statement of Operations data:    
Total investment income$4,420 $4,309 $5,301 $7,491 
Net investment income/(loss)(858)(719)(4,216)3,073 
Net realized and unrealized gain/(loss)2,082 8,984 (73,663)1,986 
Change in provision for deferred taxes on unrealized gain/(loss) on investments50 36 (86)— 
Loss on extinguishment of debt— (697)(895)(889)
Net increase/(decrease) in net assets resulting from operations1,274 7,604 (78,860)4,170 
Earnings per share(1)
0.47 2.79 (28.95)1.53 
Net asset value per common share at period end(1)
$55.30 $54.83 $52.04 $80.99 
 September 30, 2019June 30, 2019March 31, 2019December 31, 2018
Consolidated Statement of Operations data:    
Total investment income$8,116 $11,394 $12,587 $14,202 
Net investment income/(loss)(8,209)(3,823)(10,595)1,759 
Net realized and unrealized gain/(loss)(23,335)(24,612)(14,014)(11,714)
Change in provision for deferred taxes on unrealized gain/(loss) on investments— — — — 
Loss on extinguishment of debt(104)(1,806)— (123)
Net increase/(decrease) in net assets resulting from operations(31,648)(30,241)(24,609)(10,078)
Earnings per share(1)
(11.62)(11.10)(9.04)(3.70)
Net asset value per common share at period end(1)
$79.40 $91.00 $102.20 $112.20 
 September 30, 2018June 30, 2018March 31, 2018December 31, 2017
Consolidated Statement of Operations data:    
Total investment income$15,210 $13,945 $17,035 $20,631 
Net investment income741 904 3,580 7,179 
Net realized and unrealized gain/(loss)(23,059)(27,753)(31,391)(39,213)
Change in provision for deferred taxes on unrealized gain/(loss) on investments— 194 190 90 
Loss on extinguishment of debt(1,218)(11)(1,158)— 
Net increase/(decrease) in net assets resulting from operations(23,536)(26,666)(28,779)(31,944)
Earnings per share(1)
(8.64)(9.79)(10.57)(11.73)
Net asset value per common share at period end(1)
$118.00 $128.60 $140.40 $154.20 


PHENIXFIN CORPORATION

(1) Amount per share has been adjusted for the periods shown

Notes to reflect the one-for-twenty reverse stock split effected on July 24, 2020 on a retroactive bases, as described in Note 1.

Consolidated Financial Statements (continued)


September 30, 2021

  September 30,
2020		  June 30,
2020		  March 31,
2020		  December 31,
2019		 
Consolidated Statement of Operations data:            
Total investment income $         4,420  $4,309  $5,301  $       7,491 
Net investment income/(loss)  (858)  (719)  (4,216)  3,073 
Net realized and unrealized gain/(loss)  2,082   8,984   (73,663)  1,986 
Change in provision for deferred taxes on unrealized gain/(loss) on investments  50   36   (86)  — 
Loss on extinguishment of debt  —   (697)  (895)  (889)
Net increase/(decrease) in net assets resulting from operations  1,274   7,604   (78,860)  4,170 
Earnings per share  0.47   2.79   (28.95)  1.53 
Net asset value per common share at period end $55.30  $54.83  $52.04  $80.99 

Note 15.16. Subsequent Events


Management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. ThereOther 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, 2020, except as disclosed below.


Subsequent to year ended September 30, 2020, the global outbreak of the COVID-19 pandemic has adversely affected some of the Company’s investments and continues to have adverse consequences on the U.S. and global economies. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual portfolio companies, remains uncertain. At the time of this filing, there is no indication of a reportable subsequent event impacting the Company’s financial statements for the year ended September 30, 2020. The Company cannot predict the extent to which its financial condition and results of operations will be adversely affected at this time. The potential impact to our results will depend to a large extent on future developments and new information that may emerge regarding the duration and severity of COVID-19. The Company continues to observe and respond to the evolving COVID-19 environment and its potential impact on areas across its business.

2021.

On October 8, 2020,November 9, 2021, the Company GALIC, MCC JV, and an affiliate of Golub Capital LLC (“Golub”) entered into a Membership Interest Purchase Agreement (the “Agreement”) pursuant to which a fund affiliated withan underwriting agreement, by 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

F-58






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 forbetween the Company and GALIC, respectively, on the terms and subject to the conditions set forth in the Agreement, including the representations, warranties, covenants and indemnities contained therein. The Company estimates that transaction expenses will be approximately $1.6 million resulting in net proceeds (including estimated transaction expenses) of $39.5 million. The Company is expected to record a realized loss for the quarter ending December 31, 2020 of approximately $40.3 million on its investment in MCC JV and a corresponding change in unrealized appreciation/depreciation of $38.9 million in order to reverse the previously recorded unrealized depreciation with respect to the investment. In connection with the closingOppenheimer & Co. Inc., as representative of the transaction on October 8, 2020, MCC JV repaid in full all outstanding borrowings under, and terminated, the JV Facility.

On November 18, 2020, the board of directors approved adoption of an internalized management structure effective January 1, 2021. The new management structure will replace the current Investment Management Agreement and the Administration Agreement, each of which expire on December 31, 2020. In further connection with the adoption by the board of directors of an internalized management structure, the board of directors appointed David Lorber as interim Chief Executive Officer of the Company, effective January 1, 2021, and Ellida McMillan as Chief Financial Officer of the Company, effective January 1, 2021. David Lorber’s base annual salary will be $425,000, with a discretionary annual bonus of up to 100% of the base annual salary. Ellida McMillan’s base annual salary will be $300,000, with a discretionary annual bonus of up to $200,000.

Also,several underwriters, in connection with the adoptionissuance and sale (the “Offering”) of an internalized management structure,$57,500,000 (including the underwriters’ option to purchase up to $7,500,000 aggregate principal amount) in aggregate principal amount of its 5.25% Notes due 2028 (the “2028 Notes”). The Offering occurred on November 15, 2021, pursuant to the Company’s effective shelf registration statement on Form N-2 previously filed with the SEC, as supplemented by a preliminary prospectus supplement dated November 8, 2021, the pricing term sheet dated November 9, 2021 and a final prospectus supplement dated November 9, 2021. Effective November 16, 2021, the 2028 Notes began trading on the NASDAQ Global Market under the trading symbol “PFXNZ.”

On November 15, 2021, the Company and U.S. Bank National Association, as trustee entered into a Fund Accounting Servicing AgreementFourth Supplemental Indenture to its base Indenture, dated February 7, 2012, between the Company and an Administration Servicing Agreement on customary terms with U.S. Bancorp Fund Services, LLC d/b/a U.S. Bank Global Fund Services. In addition, effective January 1,the Trustee. The Fourth Supplemental Indenture relates to the Offering of the 2028 Notes.

On November 15, 2021, the nameCompany caused notices to be issued to the holders of the Company will be changed2023 Notes regarding the Company’s exercise of its option to PhenixFIN Corporation.


On November 20, 2020 (the “Redemption Date”), the Company redeemed $74,012,825redeem $55,325,000 in aggregate principal amount of the issued and outstanding 2021 Notes. The 20212023 Notes were redeemed at 100% of their principal amount ($25 per 2021 Note), plus accrued and unpaid interest thereon from October 31, 2020, through, but excluding, the Redemption Date. The redemption will be accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments.on December 16, 2021.




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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures


(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2020.2021. The term “disclosure controls and procedures” is defined under Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended. Based on the evaluation of our disclosure controls and procedures as of September 30, 2020,2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.


(b) Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Under the supervision of our Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the criteria established in Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our management’s evaluation under the framework in Internal Control—Integrated Framework, management concluded that our internal controls over financial reporting were effective as of September 30, 2020.2021.


Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


(c) Changes in Internal Controls Over Financial Reporting

There has not been any change

On November 18, 2020, the board of directors of the Company approved the adoption of an internalized management structure, effective January 1, 2021. In connection with the adoption of the 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. Prior to the internalization of the management structure, we historically relied on MCC Advisors for our business functions, including investment origination, monitoring, portfolio servicing, accounting and management functions. These functions are now performed by the internal management team and U.S. Bancorp. We consider the changes described above to be material changes in our internal controls over financial reporting.

Other than as described above, there were no changes in our internal controls over financial reporting (as defined in Rule 13a-15 (f)13a-15(f) under the Exchange Act) that occurred during the period covered by this report that hashave materially affected, or isare reasonably likely to materially affect, our internal controls over financial reporting.


Item 9B. Other Information

None.

75

Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing


The Company's shares are currently listed on the NYSE. On December 7, 2020, the board of directors authorized the Company to submit an application to list its shares on the NASDAQ Global Market tier of the NASDAQ Stock Market, followed by an application to delist from the NYSE.



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PART III

Item 10. Directors, Executive Officers and Corporate Governance


The information required by Item 10 is hereby incorporated by reference from our definitive Proxy Statement relating to our 20212022 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal year ended September 30, 2020.


2021.

Item 11. Executive Compensation


The information required by Item 11 is hereby incorporated by reference from our definitive Proxy Statement relating to our 20212022 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal year ended September 30, 2020.


2021.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


The information required by Item 12 is hereby incorporated by reference from our definitive Proxy Statement relating to our 20212022 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal year ended September 30, 2020.


2021.

Item 13. Certain Relationships and Related Transactions, and Director Independence


The information required by Item 13 is hereby incorporated by reference from our definitive Proxy Statement relating to our 20212022 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal year ended September 30, 2020.


2021.

Item 14. Principal Accountant Fees and Services


The information required by Item 14 is hereby incorporated by reference from our definitive Proxy Statement relating to our 20212022 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal year ended September 30, 2020.2021.




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PART IV

Item 15. Exhibits and Financial Statement Schedules


(a) The following documents are filed as part of this Annual Report:


The following financial statements are set forth in Item 8:

 Page
F-1
F-1
F-2
F-3
F-3
F-4
F-5
F-5
F-6
F-6
F-7
F-7
F-18
F-18

(b) Exhibits:

3.1
Certificate of Incorporation (Incorporated by reference to Exhibit 99.A.3 to the Registrant’s Pre-effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-166491), filed on November 23, 2010).
3.2
Certificate of Amendment to the Certificate of Incorporation (Incorporated by reference to the Current Report on Form 8-K filed on July 13, 2020).
3.3
Certificate of Amendment to Certificate of Incorporation (Incorporated by reference to the Current Report on Form 8-K filed December 28, 2020).
3.4Form of Bylaws (Incorporated by reference to Exhibit 99.B.3 to the Registrant’s Pre-effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-166491), filed on November 23, 2010).
3.43.5
Amendment No. 1 to Bylaws (Incorporated by reference to the Current Report on Form 8-K filed February 7, 2019).
3.6Amendment No. 2 to Bylaws (Incorporated by reference to the Current Report on Form 8-K filed December 28, 2020).
3.7Amendment No. 3 to the Bylaws (Incorporated by reference to the Current Report on Form 8-K filed February 16, 2021.)
4.1
Form of Stock Certificate (Incorporated by reference to Exhibit 99.D to the Registrant’s Pre-effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-166491), filed on November 23, 2010).
4.2
Indenture, dated February 7, 2012, between Medley Capital Corporation and U.S. Bank National Association, as Trustee (Incorporated by reference to Exhibit 99.D.2 to the Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-179237), filed on February 13, 2012).
4.3
First Supplemental Indenture, dated March 21, 2012, between Medley Capital Corporation and U.S. Bank National Association, as Trustee (Incorporated by reference to Exhibit 99.D.4 to the Registrant’s Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 (File No. 333-179237), filed on March 21, 2012).
4.4
Second Supplemental Indenture, dated March 18, 2013, between Medley Capital Corporation and U.S. Bank National Association, as Trustee (Incorporated by reference to Exhibit 99.D.4 to the Registrant’s Post-Effective Amendment No. 7 to the Registration Statement on Form N-2 (File No. 333-179237), filed on March 15, 2013).
4.5
Third Supplemental Indenture, dated December 17, 2015, between Medley Capital Corporation and U.S. Bank National Association, as Trustee (Incorporated by reference to Exhibit 99.D.6 to the Registrant’s Post-Effective Amendment No. 11 to the Registration Statement on Form N-2 (File No. 333-187324), filed December 17, 2015).
4.6
10.1
Form of Amended and Restated Investment Management Agreement by and between Medley Capital Corporation and MCC Advisors LLC1934 (Incorporated by reference to Exhibit 99.G to Registrant’s Post-Effective Amendment No. 3 to the Registration Statement on N-2 (File No. 333-187324), filed on December 10, 2013).
10.2
Amendment No. 1 to Amended and Restated Investment Management Agreement, dated June 12, 2020, by and between Medley Capital Corporation and MCC Advisors LLC (Incorporated by reference to the Current Report on Form 8-K filed on June 15, 2020).
10.3
Letter from MCC Advisors LLC re: Waiver of Base Management Fee and Incentive Fee on Net Investment Income, dated February 8, 2016 (Incorporated by reference to Exhibit 99.K.5 to Registrant’s Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-208746)333-258913), filed on March 25, 2016).October 15, 2021.
10.410.1
Expense Support Agreement, dated June 12, 2020, between Medley Capital Corporation, Medley LLC, and MCC Advisors LLC (Incorporated by reference to the Current Report on Form 8-K filed on June 15, 2020).
10.5
Form of Custody Agreement (Incorporated by reference to Exhibit 99.J.1 to the Registrant’s Pre-effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-166491), filed on November 23, 2010).
10.6
Form of Administration Agreement (Incorporated by reference to Exhibit 99.K.2 to the Registrant’s Pre-effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-166491), filed on June 9, 2010).


73






10.2
10.7
Amendment No. 1 to Administration Agreement, dated June 12, 2020, by and between Medley Capital Corporation and MCC Advisors LLC (Incorporated by reference to the Current Report on Form 8-K filed on June 15, 2020).
10.8
Form of Sub-Administration Agreement (Incorporated by reference to Exhibit 99.K.4 to the Registrant’s Pre-effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-166491), filed on November 23, 2010).
10.9
Trademark License Agreement (Incorporated by reference to Exhibit 99.K.3 to the Registrant’s Pre-effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-166491), filed on June 9, 2010).
10.10
Form of Dividend Reinvestment Plan (Incorporated by reference to Exhibit 99.E to the Registrant’s Pre-effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-166491), filed on November 23, 2010).
10.1110.3
Limited Liability Company Operating Agreement of MCC Senior Loan Strategy JV I LLC, a Delaware Limited Liability Company, dated as of March 27, 2015 (Incorporated by reference to the Current Report on Form 8-K filed on March 30, 2015).
10.12
Settlement Term Sheet, dated April 15, 2019 (Incorporated by reference to the Current Report on Form 8-K, filed on April 17, 2019).
10.1310.4
Stipulation of Settlement, dated July 29, 2019, by and among Medley Capital Corporation, Brook Taube, Seth Taube, Jeff Tonkel, Mark Lerdal, Karin Hirtler-Garvey, John E. Mack, Arthur S. Ainsberg, Medley Management Inc., MCC Advisors LLC, Medley LLC and Medley Group LLC, on the one hand, and FrontFour Capital Group LLC and FrontFour Master Fund, Ltd., on behalf of themselves and a class of similarly situated stockholders of Medley Capital Corporation, on the other hand, in connection with the action styled In re Medley Capital Corporation Stockholder Litigation, Cons. C.A. No. 2019-0100-KSJM (Incorporated by reference to the Current Report on Form 8-K, filed on August 2, 2019).
10.1410.5
Governance Agreement, dated July 29, 2019, by and among, Medley Capital Corporation, on the one hand, and FrontFour Capital Group LLC, FrontFour Master Fund, Ltd., FrontFour Capital Corp., FrontFour Opportunity Fund, David A. Lorber, Stephen E. Loukas and Zachary R. George, on the other hand (Incorporated by reference to the Current Report on Form 8-K, filed on August 2, 2019).
10.1510.6
Standstill Agreement, dated as of August 19, 2020, by and between the Medley Capital Corporation and Howard Amster and the other persons and entities identified therein (Incorporated by reference to the Current Report on Form 8-K filed on August 21, 2020).
10.1610.7
10.1710.8
14.1
Code of Business Conduct and Ethics & Insider Trading Policy of the Registrant (Incorporated by reference to Exhibit 14.199.R to the Registrant’s 10-Q for the period ended June 30, 2011, filed on August 4, 2011).
14.2
Code of Business Ethics of MCC Advisors (Incorporated by reference to Exhibit 99.R.2 to the Registrant’s Pre-effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-166491)333-258913), filed on June 9, 2010).August 19, 2021.
21.1
List of Subsidiaries*Subsidiaries*
24.0Power of attorney (included on the signature page hereto).
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.*
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002.*

*Filed herewith.



SIGNATURES

74






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:

December 20, 2021

Dated:
December 11, 2020		Medley CapitalPhenixFIN Corporation
  
 By/s/ Brook TaubeDavid Lorber
  Brook TaubeDavid Lorber
  Chief Executive Officer
  (Principal Executive Officer)
   
 By/s/ Richard T. Allorto, Jr.Ellida McMillan
  Richard T. Allorto, Jr.Ellida McMillan
  Chief Financial Officer
  (Principal Accounting and Financial Officer)

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the following capacities on December 11, 2020.

20, 2021.

/s/ Brook TaubeDavid LorberChief Executive Officer and Chairman of the
Brook TaubeDavid LorberBoard of Directors (Principal Executive Officer)
  
/s/ Richard T. Allorto, Jr.Ellida McMillanChief Financial Officer
Richard T. Allorto, Jr.Ellida McMillan(Principal FinancialAccounting and AccountingFinancial Officer)
/s/ Seth TaubeDirector
Seth Taube
  
/s/ Arthur S. AinsbergDirector
Arthur S. Ainsberg
/s/ Karin Hirtler-GarveyDirector
Karin Hirtler-Garvey
/s/ David LorberDirector
David Lorber
/s/ Lowell RobinsonDirector
Lowell Robinson
  
/s/ Howard AmsterDirector
Howard Amster 

79

 


75