PhenixFIN Corp - FORM 10-Q - February 16, 2021

Attached files

file	filename
EX-32.1 - CERTIFICATION - PhenixFIN Corp	f10q1220ex32-1_phenixfincorp.htm
EX-31.2 - CERTIFICATION - PhenixFIN Corp	f10q1220ex31-2_phenixfincorp.htm
EX-31.1 - CERTIFICATION - PhenixFIN Corp	f10q1220ex31-1_phenixfincorp.htm
EX-21.1 - LIST OF SUBSIDIARIES - PhenixFIN Corp	f10q1220ex21-1_phenixfincorp.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

Form 10-Q

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

For the Quarterly Period Ended December 31, 2020

☐ 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

(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, 9^th Floor, New York, NY		10022
(Address of Principal Executive Offices)		(Zip Code)

(212) 859-0390

(Registrant’s Telephone Number, Including Area Code)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	PFX	The NASDAQ Global Market
6.125% Notes due 2023	PFXNL	The NASDAQ Global Market

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

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 ☒ 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 ☒

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 is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ☐ No ☒

The Registrant had 2,723,709 shares of common stock, $0.001 par value, outstanding as of February 16, 2021.

PHENIXFIN CORPORATION
(f/k/a Medley Capital Corporation)

TABLE OF CONTENTS

Part I. Financial Information

Item 1. Financial Statements

Consolidated Statements of Assets and Liabilities as of December 31, 2020 (unaudited) and September 30, 2020	1

Consolidated Statements of Operations for the three months ended December 31, 2020 and 2019 (unaudited)	2

Consolidated Statements of Changes in Net Assets for the three months ended December 31, 2020 and 2019 (unaudited)	3

Consolidated Statements of Cash Flows for the three months ended December 31, 2020 and 2019 (unaudited)	4

Consolidated Schedules of Investments as of December 31, 2020 (unaudited) and September 30, 2020	5

Notes to Consolidated Financial Statements (unaudited)	14

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	49

Item 3. Quantitative and Qualitative Disclosures About Market Risk	66

Item 4. Controls and Procedures	66

Part II. Other Information

Item 1. Legal Proceedings	67

Item 1A. Risk Factors	68

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	72

Item 3. Defaults Upon Senior Securities	72

Item 4. Mine Safety Disclosures	72

Item 5. Other Information	72

Item 6. Exhibits	73

SIGNATURES	77

PHENIXFIN CORPORATION (f/k/a Medley Capital Corporation)

Consolidated Statements of Assets and Liabilities

	December 31, 2020 (Unaudited)			September 30, 2020
Assets:
Investments at fair value
Non-controlled, non-affiliated investments (amortized cost of $90,542,838 and $117,360,954, respectively)	$	83,446,768		$	114,321,948
Affiliated investments (amortized cost of $80,340,191 and $92,898,755, respectively)		70,196,136			84,873,023
Controlled investments (amortized cost of $37,987,321 and $117,874,821, respectively)		5,898,013			47,548,578
Total Investments at fair value		159,540,917			246,743,549
Cash and cash equivalents		62,414,223			56,522,148
Receivables:
Interest receivable		238,814			624,524
Fees receivable		106,528			119,028
Other assets		1,675,933			2,093,559
Total Assets	$	223,976,415		$	306,102,808

Liabilities:
Notes payable (net of debt issuance costs of $619,167 and $905,624, respectively)	$	77,227,633		$	150,960,662
Interest and fees payable		-			801,805
Due to affiliates		-			53,083
Management and incentive fees payable (see Note 6)		1,146,403			1,392,022
Administrator expenses payable (see Note 6)		484,412			156,965
Accounts payable and accrued expenses		900,851			2,108,225
Deferred revenue		35,450			10,529
Total Liabilities		79,794,749			155,483,291

Guarantees and Commitments (see Note 8)

Net Assets:
Common Shares, $0.001 par value; 5,000,000 shares authorized; 2,723,709 and 2,723,709
common shares issued and outstanding, respectively		2,724			2,724
Capital in excess of par value		672,381,617			672,381,617
Total distributable earnings/(loss)		(528,202,675	)		(521,764,824	)
Total Net Assets		144,181,666			150,619,517
Total Liabilities and Net Assets	$	223,976,415		$	306,102,808

Net Asset Value Per Common Share	$	52.94		$	55.30

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

PHENIXFIN CORPORATION (f/k/a Medley Capital Corporation)

Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended
	December 31, 2020			December 31, 2019
Interest Income:
Interest from investments
Non-controlled, non-affiliated investments:
Cash	$	1,671,813		$	3,217,709
Payment in-kind		170,029			199,012
Affiliated investments:
Cash		352,291			209,248
Payment in-kind		-			947,473
Controlled investments:
Cash		1,190			83,208
Payment in-kind		-			495,382
Total interest income		2,195,323			5,152,032
Dividend income		10,263,501			1,837,500
Interest from cash and cash equivalents		940			218,138
Fee income (see Note 9)		341,464			283,540
Total Investment Income		12,801,228			7,491,210

Expenses:
Base management fees (see Note 6)		1,146,403			2,008,234
Incentive fees (see Note 6)		-			-
Interest and financing expenses		2,017,641			5,143,929
General and administrative expenses		377,934			516,842
Administrator expenses (see Note 6)		484,412			551,522
Insurance expenses		485,012			297,998
Directors fees		475,717			316,000
Professional fees, net (see Note 8)		(515,622	)		(4,416,075	)
Total expenses net of expense support reimbursement		4,471,497			4,418,450
Net Investment Income		8,329,731			3,072,760

Realized and unrealized gains (losses) on investments
Net realized gains/(losses):
Non-controlled, non-affiliated investments		3,893,722			(57,799	)
Affiliated investments		(10,452,928	)		-
Controlled investments		(40,147,570	)		(1,686,837	)
Total net realized gains/(losses)		(46,706,776	)		(1,744,636	)
Net change in unrealized gains/(losses):
Non-controlled, non-affiliated investments		(4,057,063	)		3,747,374
Affiliated investments		(2,118,324	)		9,440,599
Controlled investments		38,236,935			(9,457,114	)
Total net change in unrealized gains/(losses)		32,061,548			3,730,859
Loss on extinguishment of debt (see Note 5)		(122,354	)		(889,150	)
Total realized and unrealized gains/(losses)		(14,767,582	)		1,097,073

Net Increase/(Decrease) in Net Assets Resulting from Operations	$	(6,437,851	)	$	4,169,833

Weighted Average Basic and diluted earnings per common share	$	(2.36	)	$	1.53
Weighted Average Basic and diluted net investment income/(loss) per common share	$	3.06		$	1.13
Weighted Average Common Shares Outstanding - Basic and Diluted (see Note 11)		2,723,709			2,723,709	⁽¹⁾

(1)

Basic and diluted shares has been adjusted for 2019 to reflect the one-for-twenty reverse stock split effected on July 24, 2020 on a retroactive basis, as described in Note 1.

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

PHENIXFIN CORPORATION (f/k/a Medley Capital Corporation)

Consolidated Statements of Changes in Net Assets

(Unaudited)

	Common Stock
	Shares		Par Amount		Capital in Excess of Par Value		Total Distributable Earnings/(Loss)			Total Net Assets
Balance at September 30, 2020		2,723,709	$	2,724	$	672,381,617	$	(521,764,824	)	$	150,619,517

OPERATIONS
Net investment income (loss)		-		-		-		8,329,731			8,329,731
Net realized gains (losses) on investments		-		-		-		(46,706,776	)		(46,706,776	)
Net change in unrealized appreciation (depreciation) on investments		-		-		-		32,061,548			32,061,548
Net loss on extinguishment of debt		-		-		-		(122,354	)		(122,354	)
Total Increase (Decrease) in Net Assets		-		-		-		(6,437,851	)		(6,437,851	)

Balance at December 31, 2020		2,723,709	$	2,724	$	672,381,617	$	(528,202,675	)	$	144,181,666

	Common Stock
					Capital in Excess of		Total Distributable			Total Net
	Shares⁽¹⁾		Par Amount		Par Value		Earnings/(Loss)			Assets

Balance at September 30, 2019		2,723,709	$	54,474	$	673,532,717	$	(457,154,661	)	$	216,432,530

OPERATIONS
Net investment income/(loss)		—		—		—		3,072,760			3,072,760
Net realized gain/(loss) from investments		—		—		—		(1,744,636	)		(1,744,636	)
Net unrealized appreciation/(depreciation) on investments		—		—		—		3,730,859			3,730,859
Net loss on extinguishment of debt		—		—		—		(889,150	)		(889,150	)
Total increase/(decrease) in net assets		—		—		—		4,169,833			4,169,833

Balance at December 31, 2019		2,723,709	$	54,474	$	673,532,717	$	(452,984,828	)	$	220,602,363

(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.

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

PHENIXFIN CORPORATION (f/k/a Medley Capital Corporation)

Consolidated Statements of Cash Flows

(Unaudited)

	For the Three Months Ended
	December 31, 2020			December 31, 2019

Cash Flows from Operating Activities:
Net increase/(decrease) in net assets resulting from operations	$	(6,437,851	)	$	4,169,833
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		(170,029	)		(564,730	)
Net amortization of premium/(discount) on investments		-			(31,158	)
Amortization of debt issuance cost		157,441			1,249,907
Net realized (gains)/losses on investments		46,706,776			1,744,636
Net unrealized (gains)/losses on investments		(32,061,548	)		(3,730,859	)
Proceeds from sale and settlements of investments		74,062,744			64,999,855
Purchases, originations and participations		(1,335,311	)		(7,532,846	)
Loss on extinguishment of debt		122,354			889,150
(Increase)/decrease in operating assets:
Other assets		417,626			(3,163,613	)
Interest receivable		385,710			371,543
Receivable for dispositions and investments sold		-			(212,517	)
Fees receivable		12,500			56,543
Increase/(decrease) in operating liabilities:
Accounts payable and accrued expenses		(1,207,374	)		(8,890,759	)
Interest and fees payable		(801,805	)		(2,102,943	)
Management and incentive fees payable, net		(245,619	)		(222,941	)
Administrator expenses payable		327,447			(310,263	)
Deferred revenue		24,921			(25,593	)
Due to affiliate		(53,083	)		167,743
Net cash provided by/(used in) operating activities		79,904,899			46,860,988
Cash Flows from Financing Activities:
Paydowns on debt		(74,151,822	)		(49,407,674	)
Debt issuance costs paid		138,998			-
Net cash provided by/(used in) financing activities		(74,012,824	)		(49,407,674	)
Net increase/(decrease) in cash and cash equivalents		5,892,075			(2,546,686	)
Cash and cash equivalents, beginning of period		56,522,148			84,283,903
Cash and cash equivalents, end of period	$	62,414,223		$	81,737,217

Supplemental information:
Interest paid during the period	$	2,819,446		$	5,996,965

Supplemental non-cash information:
Payment-in-kind interest income	$	170,029		$	1,641,867

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

PHENIXFIN CORPORATION (f/k/a Medley Capital Corporation)

Consolidated Schedule of Investments

As of December 31, 2020

(Unaudited)

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	High Tech Industries	Senior Secured First Lien Term Loan (LIBOR + 5.75% Cash, 1.00% LIBOR Floor)⁽¹³⁾	11/16/2022	$	4,715,809	$	4,715,808	$	4,680,440		3.25	%
		Senior Secured Incremental First Lien Term Loan (LIBOR + 8.50% Cash, 1.00% LIBOR Floor)⁽¹³⁾	11/16/2022		472,087		472,087		472,086		0.33	%
		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		2,260,212		1.57	%
		Revolving Credit Facility (LIBOR + 5.75% Cash, 1.00% LIBOR Floor)^(13)(15)	11/15/2022		1,000,000		1,000,000		992,500		0.69	%
					8,465,189		8,465,188		8,405,238		5.83	%

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		4,212,000		2.92	%
					4,387,500		4,387,500		4,212,000		2.92	%

Autosplice, Inc.	High Tech Industries	Senior Secured First Lien Term Loan (LIBOR + 8.00% Cash, 1.00% LIBOR Floor)⁽¹³⁾	12/17/2021		12,409,903		12,409,903		10,151,301		7.04	%
					12,409,903		12,409,903		10,151,301		7.04	%

Avantor, Inc.⁽¹¹⁾	Wholesale	Equity - 545,931 Common Units⁽¹⁶⁾			13,695		239,663		385,514		0.27	%
					13,695		239,663		385,514		0.27	%

Be Green Packaging, LLC	Containers, Packaging & Glass	Equity - 417 Common Units			1		416,250		-		0.00	%
					1		416,250		-		0.00	%

CM Finance SPV, LLC	Banking, Finance, Insurance & Real Estate	Unsecured Debt			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)⁽¹²⁾	7/28/2025		2,607,062		2,598,252		2,447,510		1.70	%
					2,607,062		2,598,252		2,447,510		1.70	%

Crow Precision Components, LLC	Aerospace & Defense	Equity - 350 Common Units			350		700,000		370,941		0.26	%
					350		700,000		370,941		0.26	%

DataOnline Corp.⁽⁸⁾	High Tech Industries	Senior Secured First Lien Term Loan (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)⁽¹³⁾	11/13/2025		4,950,000		4,950,000		4,801,500		3.33	%
		Revolving Credit Facility (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)^(13)(15)	11/13/2025		607,143		607,143		501,325		0.35	%
					5,557,143		5,557,143		5,302,825		3.68	%

Dream Finders Homes, LLC⁽¹¹⁾	Construction & Building	Preferred Equity (8.00% PIK)			4,622,101		4,622,101		4,252,333		2.95	%
					4,622,101		4,622,101		4,252,333		2.95	%

Footprint Acquisition, LLC	Services: Business	Preferred Equity (8.75% PIK)⁽¹⁰⁾			4,049,398		4,049,398		2,024,699		1.40	%
		Equity - 150 Common Units			150		-		-		0.00	%
					4,049,548		4,049,398		2,024,699		1.40	%

Global Accessories Group, LLC	Consumer goods: Non-durable	Equity - 3.8% Membership Interest⁽¹²⁾			380		151,337		-		0.00	%
					380		151,337		-		0.00	%

Company⁽¹⁾	Industry	Type of Investment	Maturity	Par Amount⁽²⁾		Cost⁽³⁾		Fair Value⁽⁴⁾		% of Net Assets⁽⁵⁾
Impact Group, LLC	Services: Business	Senior Secured First Lien Term Loan (LIBOR + 7.37% Cash, 1.00% LIBOR Floor)⁽¹³⁾	6/27/2023		3,211,299		3,211,299		3,118,171		2.16	%
		Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 7.37% Cash, 1.00% LIBOR Floor)⁽¹³⁾	6/27/2023		9,305,067		9,305,067		9,035,220		6.27	%
					12,516,366		12,516,366		12,153,391		8.43	%

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		11,910,906		11,910,906		11,910,906		8.26	%
					11,910,906		11,910,906		11,910,906		8.26	%

Lighting Science Group Corporation	Containers, Packaging & Glass	Warrants - 0.62% of Outstanding Equity			5,000,000		955,680		-		0.00	%
					5,000,000		955,680		-		0.00	%

Point.360	Services: Business	Senior Secured First Lien Term Loan (LIBOR + 6.00% PIK)^(10)(14)(20)	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^(10)(19)	12/31/2021		704,106		704,106		-		0.00	%
		Unsecured Debt^(10)(19)	6/30/2022		761,905		761,905		-		0.00	%
					1,466,011		1,466,011		-		0.00	%

Redwood Services Group, LLC⁽⁸⁾	Services: Business	Revolving Credit Facility (LIBOR + 6.00% Cash, 1.00% LIBOR Floor)⁽¹⁵⁾	6/6/2023		175,000		175,000		169,750		0.12	%
					175,000		175,000		169,750		0.12	%

Sendero Drilling Company, LLC	Energy: Oil & Gas	Unsecured Debt (8.00% Cash)⁽¹⁰⁾	8/31/2021		403,750		384,394		-		0.00	%
					403,750		384,394		-		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	%

SFP Holding, Inc.	Construction & Building	Senior Secured First Lien Term Loan (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)⁽¹³⁾	9/1/2022		4,766,041		4,766,041		4,718,381		3.27	%
		Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 6.25% Cash, 1.00% LIBOR Floor)⁽¹³⁾	9/1/2022		1,847,843		1,847,843		1,829,365		1.27	%
		Equity - 101,165.93 Common Units in CI (Summit) Investment Holdings LLC			101,166		1,067,547		708,264		0.49	%
					6,715,050		7,681,431		7,256,010		5.03	%

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		168,703		0.12	%
					263,814		263,814		168,703		0.12	%

Starfish Holdco, LLC	High Tech Industries	Senior Secured Second Lien Term Loan (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)^(12)(17)	8/18/2025		1,000,000		989,936		926,500		0.64	%
					1,000,000		989,936		926,500		0.64	%


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		951,629		1,014,440		0.70	%
		Equity - 5,441 Class A Units			5,441		302,464		21,262		0.01	%
		Warrants - 0.65% of Outstanding Equity	3/30/2028		6,506		361,667		25,423		0.02	%
					1,026,387		1,615,760		1,061,125		0.74	%

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		3,496,872		3,496,872		3,496,872		2.43	%
		Equity - 1,500 Common Units			1,500		1,500,000		8,751,150		6.07	%
					3,498,372		4,996,872		12,248,022		8.49	%

Watermill-QMC Midco, Inc.	Automotive	Equity - 1.3% Partnership Interest⁽⁹⁾			518,283		518,283		-		0.00	%
					518,283		518,283		-		0.00	%

Subtotal Non-Controlled/Non-Affiliated Investments				$	93,619,810	$	90,542,838	$	83,446,768		57.88	%

Company⁽¹⁾	Industry	Type of Investment	Maturity	Par Amount⁽²⁾		Cost⁽³⁾		Fair Value⁽⁴⁾		% of Net Assets⁽⁵⁾
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)(13)	9/30/2021		9,946,740		9,473,066		-		0.00	%
		Senior Secured First Lien Term Loan B (LIBOR + 8.00% PIK, 1.00% LIBOR Floor)^(10)(13)	9/30/2021		25,937,520		19,468,870		-		0.00	%
		Senior Secured First Lien Term Loan C (LIBOR + 5.00%, 1.00% LIBOR Floor)^(10)(13)	9/30/2021		1,231,932		1,191,257		1,231,932		0.85	%
		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		2.46	%
		Equity - 17,493.63 Class A Units			21,562		-		-		0.00	%
					40,691,823		33,687,262		4,786,001		3.32	%

Black Angus Steakhouses, LLC⁽⁸⁾	Hotel, Gaming & Leisure	Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)⁽¹²⁾	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)(12)	6/30/2022		8,412,596		7,767,533		2,355,527		1.63	%
		Senior Secured First Lien Super Priority DDTL (LIBOR + 9.00% Cash, 1.00% LIBOR Floor)^(10)(12)(15)	6/30/2022		1,222,222		1,222,222		1,222,222		0.85	%
					10,393,747		9,748,684		4,336,678		3.01	%

Caddo Investors Holdings 1 LLC⁽¹¹⁾	Forest Products & Paper	Equity - 6.15% Membership Interest⁽¹⁸⁾			2,528,826		2,528,826		3,197,865		2.22	%
					2,528,826		2,528,826		3,197,865		2.22	%

Dynamic Energy Services International LLC	Energy: Oil & Gas	Senior Secured First Lien Term Loan (LIBOR + 13.50% PIK)^(10)(14)	12/31/2021		12,930,235		7,824,975		129,302		0.09	%
		Equity - 12,350,000 Class A Units			12,350,000		-		-		0.00	%
					25,280,235		7,824,975		129,302		0.09	%

JFL-NGS Partners, LLC	Construction & Building	Equity - 57,300 Class B Units			57,300		57,300		34,311,462		23.80	%
					57,300		57,300		34,311,462		23.80	%

JFL-WCS Partners, LLC	Environmental Industries	Preferred Equity - Class A Preferred (6.00% PIK)			1,310,649		1,310,649		1,290,857		0.90	%
		Equity - 129,588 Class B Units			129,588		129,588		5,308,937		3.68	%
					1,440,237		1,440,237		6,599,794		4.58	%

Kemmerer Operations, LLC⁽⁸⁾	Metals & Mining	Senior Secured First Lien Term Loan (15.00% PIK)	6/21/2023		2,051,705		2,051,705		2,051,705		1.42	%
		Senior Secured First Lien Delayed Draw Term Loan (15.00% PIK)⁽¹⁵⁾	6/21/2023		380,106		380,106		380,106		0.26	%
		Equity - 6.7797 Common Units			7		962,717		26,465		0.02	%
					2,431,818		3,394,528		2,458,276		1.70	%

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		5,792,883		4.02	%
		Senior Secured First Lien Term Loan B (LIBOR + 13% PIK, 1.00% LIBOR Floor)^(10)(12)	10/11/2021		7,783,840		6,599,918		2,319,584		1.61	%
		Warrants - 7.68% of Outstanding Equity			123,867		499,751		-		0.00	%
					13,812,787		13,004,749		8,112,467		5.63	%

URT Acquisition Holdings Corporation	Services: Business	Unsecured Debt (10.00% PIK) Warrants	12/4/2024		2,109,589		2,109,589		2,119,627		1.47	%
					28,912		-		-		0.00	%
					2,138,501		2,109,589		2,119,627		1.47	%

US Multifamily, LLC	Banking, Finance, Insurance & Real Estate	Senior Secured First Lien Term Loan (10.00% Cash)	6/17/2021		3,214,041		3,214,041		3,214,041		2.23	%
		Equity - 33,300 Preferred Units⁽¹¹⁾			33,300		3,330,000		930,623		0.65	%
					3,247,341		6,544,041		4,144,664		2.87	%

Subtotal Affiliated Investments				$	102,022,615	$	80,340,191	$	70,196,136		48.69	%

Company⁽¹⁾	Industry	Type of Investment	Maturity	Par Amount⁽²⁾		Cost⁽³⁾		Fair Value⁽⁴⁾		% of Net Assets⁽⁵⁾
Controlled Investments:⁽⁷⁾

NVTN LLC⁽⁸⁾	Hotel, Gaming & Leisure	Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 4.00%Cash, 1.00% LIBOR Floor)^(10)(12)(15)	11/9/2021		6,565,875		6,565,875		4,038,013		2.80	%
		Senior Secured First Lien Super Priority DDTL (LIBOR + 4.00% Cash, 1.00% LIBOR Floor)^(12)(15)	12/31/2024		2,000,000		1,995,374		1,860,000		1.29	%
		Senior Secured First Lien Term Loan B (LIBOR + 9.25% PIK, 1.00% LIBOR Floor)^(10)(12)	11/9/2021		14,963,195		12,305,096		-		0.00	%
		Senior Secured First Lien Term Loan C (LIBOR + 12.00% PIK, 1.00% LIBOR Floor)^(10)(12)	11/9/2021		10,014,223		7,570,054		-		0.00	%
		Equity - 787.4 Class A Units			9,550,922		9,550,922		-		0.00	%
					43,094,215		37,987,321		5,898,013		4.09	%
Subtotal Control Investments				$	43,094,215	$	37,987,321	$	5,898,013		4.09	%

	Total Investments, December 31, 2020			$	238,736,640	$	208,870,350	$	159,540,917		110.65	%

(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 $47,613,076, $96,942,509, and $49,329,433, respectively.

The tax cost basis of investments is $208,870,350 as of December 31, 2020.

(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 $144,181,666 as of December 31, 2020.

(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 December 31, 2020 (see Note 8), and includes an analysis of 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 December 31, 2020.

(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 December 31, 2020, 5.49% of the Company’s portfolio investments were non-qualifying assets.

(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 December 31, 2020 was 0.14%.

(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 December 31, 2020 was 0.24%.

(14)

The interest rate on these loans is subject to 3 month LIBOR plus a base rate. The 3 month LIBOR as of December 31, 2020 was 0.24%.

(15)

This investment earns 0.50% commitment fee on all unused commitment as of December 31, 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 December 31, 2020 (see Note 4).

(17)

This investment represents a Level 2 security in the ASC 820 table as of December 31, 2020 (see Note 4).

(18)

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

(19)

Security is non-income producing.

(20)

The investment was past due as of December 31, 2020.

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

PHENIXFIN CORPORATION (f/k/a Medley Capital 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, 1.00% LIBOR Floor)^(9)(13)	9/30/2021		9,946,741		9,473,067		—		0.0	%
		Senior Secured First Lien Term Loan B (LIBOR + 8.00% PIK, 1.00% LIBOR Floor)^(9)(13)	9/30/2021		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

Company⁽¹⁾	Industry	Type of Investment	Maturity	Par Amount⁽²⁾		Cost⁽³⁾		Fair Value⁽⁶⁾		% of Net Assets⁽⁴⁾

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

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

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% PIK, 1.00% LIBOR Floor)^(9)(12)	12/31/2024		10,014,223		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)

(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)

(21)

The investment was past due as of September 30, 2020.

See accompanying notes to consolidated financial statements.

PHENIXFIN CORPORATION
(f/k/a Medley Capital Corporation)

Notes to Consolidated Financial Statements

December 31, 2020

(unaudited)

Note 1. Organization

PhenixFIN Corporation (f/k/a Medley Capital Corporation) (“PhenixFIN”, the “Company,” “we” and “us”) is a non-diversified closed-end management investment company incorporated in Delaware that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). We completed our initial public offering (“IPO”) and commenced operations on January 20, 2011. The Company has elected, and intends to qualify annually, to be treated, for U.S. federal income tax purposes, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). On November 18, 2020, the board of directors of the Company approved the adoption of an internalized management structure, effective January 1, 2021. Until close of business on December 31, 2020 we were externally managed and advised by MCC Advisors LLC (“MCC Advisors”), pursuant to an investment management agreement. MCC Advisors is a wholly owned subsidiary of Medley LLC, which is controlled by Medley Management Inc. (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.

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. 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 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 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 primarily through loans to privately-held middle market companies. The portfolio generally consists of senior secured first lien term loans, senior secured second lien term loans, 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. These 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 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.

Note 1. Organization (continued)

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).

On December 21, 2020, the Company announced that it completed the application process for and was authorized to transfer the listing of its shares of common stock to the NASDAQ Global Market. The listing and trading of the common stock on the NYSE ceased at the close of trading on December 31, 2020. Effective January 4, 2021, the common stock trades on the NASDAQ Global Market under the trading symbol “PFX.”

Sale of MCC JV

On October 8, 2020, the Company, Great American Life Insurance Company (“GALIC”), MCC Senior Loan Strategy JV I LLC (the “MCC JV”), and an affiliate of Golub Capital LLC (“Golub”) entered into a Membership Interest Purchase Agreement pursuant to which a fund affiliated with and managed by Golub concurrently purchased all of the Company’s interest in the MCC JV and all of GALIC’s interest in the MCC JV for a pre-adjusted gross purchase price of $156.4 million and an adjusted gross purchase price (which constitutes the aggregate consideration for the membership interests) of $145.3 million (giving effect to adjustments primarily for principal and interest payments from portfolio companies of MCC JV from July 1, 2020 through October 7, 2020), resulting in net proceeds (before transaction expenses) of $41.0 million and $6.6 million for the Company and GALIC, respectively, 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.

COVID-19 Developments

The global outbreak of the COVID-19 pandemic continues to have adverse consequences on the U.S. and global economies, as well as on the Company (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 operations and the performance 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 performance could depend to a large extent on future developments and actions taken by authorities and other entities to contain COVID-19 and its economic impact. The impacts, as well as the uncertainty over impacts to come, of COVID-19 have adversely affected the performance of the Company (including certain portfolio companies) and may continue to do so in the future.

Note 2. Significant Accounting Policies

Basis of Presentation

The Company is an investment company following the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services – Investment Companies. The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“GAAP”) and include the consolidated accounts of the Company and its wholly owned subsidiaries PhenixFIN Small Business Fund, LP (f/k/a Medley Small Business Fund, LP) (“PhenixFIN Small Business Fund”) and PhenixFIN SLF Funding I LLC (f/k/a Medley SLF Funding I LLC) (“PhenixFIN SLF”), and its wholly owned Taxable Subsidiaries. All references made to the “Company,” “we,” and “us” herein include PhenixFIN Corporation (f/k/a Medley Capital 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-Q and Article 10 of Regulation S-X of the Securities Act of 1933. In the opinion of management, the consolidated financial statements reflect all adjustments and reclassifications, which are of a normal recurring nature, that are necessary for the fair presentation of financial results as of and for the periods presented. Therefore, this Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended September 30, 2020. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending September 30, 2021.

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.

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.

Debt Issuance Costs

Debt issuance costs, incurred in connection with any credit facilities, unsecured notes and SBA-guaranteed debentures (“SBA Debentures”) (see Note 5) are deferred and amortized over the life of the respective credit facility or instrument.

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.

Revenue Recognition

Interest income, adjusted for amortization of premiums and accretion of discounts, is recorded on an accrual basis. Dividend income, which represents dividends from equity investments and distributions from Taxable Subsidiaries, is recorded on the ex-dividend date and when the distribution is received, respectively.

The Company holds debt investments in its portfolio that contain a payment-in-kind (“PIK”) interest provision. PIK interest, which represents contractually deferred interest added to the investment balance that is generally due at maturity, is recorded on the accrual basis to the extent such amounts are expected to be collected. PIK interest is not accrued if the Company does not expect the issuer to be able to pay all principal and interest when due. For the three months ended December 31, 2020, the Company earned approximately $0.2 million in PIK interest. For the three months ended December 31, 2019, the Company earned approximately $1.6 million in PIK interest.

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 three months ended December 31, 2020 and 2019, fee income was approximately $0.3 million in each period (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. There were no realized gains or losses related to non-cash restructuring transactions during the three months ended December 31, 2020 and 2019. 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.

Note 2. Significant Accounting Policies (continued)

Revenue Recognition (continued)

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 uncollectible. 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 December 31, 2020, certain investments in nine portfolio companies held by the Company were on non-accrual status with a combined fair value of approximately $13.3 million, or 8.3% 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.

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-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 their financial statements and offering memorandum. If the Company is in the process of the sale of an investment fund, fair value will be determined by actual or estimated sale proceeds.

The methodologies utilized by the Company in estimating the fair value of its investments categorized as Level 3 generally fall into the following two categories:

●

The “Market Approach” uses prices and other relevant information generated by market transactions involving identical or comparable (that is, similar) assets, liabilities, or a group of assets and liabilities, such as a business.

●

The “Income Approach” converts future amounts (for example, cash flows or income and expenses) to a single current (that is, discounted) amount. When the Income Approach is used, the fair value measurement reflects current market expectations about those future amounts.

The Company has engaged third-party valuation firms (the “Valuation Firms”) to assist it and its board of directors in the valuation of its portfolio investments. The valuation reports generated by the Valuation Firms consider the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information, including comparable transactions, performance multiples, and movement in yields of debt instruments, among other factors. The Company uses a market yield analysis under the Income Approach or an enterprise model of valuation under the Market Approach, or a combination thereof. In applying the market yield analysis, the value of the Company’s loans is determined based upon inputs such as the coupon rate, current market yield, interest rate spreads of similar securities, the stated value of the loan, and the length to maturity. In applying the enterprise model, the Company uses a waterfall analysis, which takes into account the specific capital structure of the borrower and the related seniority of the instruments within the borrower’s capital structure into consideration. To estimate the enterprise value of the portfolio company, we weigh some or all of the traditional market valuation methods and factors based on the individual circumstances of the portfolio company in order to estimate the enterprise value.

Note 2. Significant Accounting Policies (continued)

Valuation of Investments (continued)

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.

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.

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 initially valued by one or more Valuation Firms;

●

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; 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 financial markets), portfolio company performance, and other events may occur over the lives of the investments that may cause the gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned.

Fair Value of Financial Instruments

The carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts payable and accrued expenses, approximate fair value due to their short-term nature. The carrying amounts and fair values of our long-term obligations are discussed in Note 5.

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The primary focus of ASU 2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. In general, the amendments in ASU 2018-13 are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. After evaluating ASU 2018-13, the Company found no material changes to its fair value disclosures in the notes to the consolidated financial statements were necessary to comply with the pronouncement.

In March 2020, the FASB issued ASU 2020-04, “Reference rate reform (Topic 848)—Facilitation of the effects of reference rate reform on financial reporting.” The amendments in this update provide optional expedients and exceptions for applying U.S. GAAP to certain contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform and became effective upon issuance for all entities. The Company has agreements that have LIBOR as a reference rate with certain portfolio companies and also with certain lenders. 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 is effective as of March 12, 2020 through December 31, 2022 and 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 it will have a material impact on its consolidated financial statements and disclosures.

Note 2. Significant Accounting Policies (continued)

Recently Adopted Accounting Pronouncements (continued)

In May 2020, the SEC adopted rule amendments that impacted 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 became effective January 1, 2021. The Company evaluated the impact of the Final Rules and determined its impact not to be material, and began voluntary compliance with the Final Rules for 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”), 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. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year dividend distributions into the next tax year. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.

The Company is subject to a nondeductible U.S. federal excise tax of 4% on undistributed income if it does not distribute at least 98% of its ordinary income in any calendar year and 98.2% of its capital gain net income for each one-year period ending on October 31 of such calendar year and any income realized, but not distributed, in preceding years and on which it did not pay federal income tax. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions for excise tax purposes, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. There was no provision for federal excise tax at December 31, 2020 and December 31, 2019.

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 December 31, 2020 and 2019, 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 three months ended December 31, 2020 and 2019, the Company did not record a change in provision for deferred taxes on the unrealized (appreciation)/depreciation on investments.

As of December 31, 2020 and September 30, 2020, the Company had a deferred tax asset of $23.8 million and $22.8 million, respectively, consisting primarily of net operating losses and net unrealized losses on the investments held within its Taxable Subsidiaries. As of December 31, 2020 and September 30, 2020, the Company has booked a valuation allowance of $23.8 million and $22.8 million, respectively, against its deferred tax asset.

ICTI generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. The Company may be required to recognize ICTI in certain circumstances in which it does not receive cash. For example, if the Company holds debt obligations that are treated under applicable tax rules as having original issue discount, the Company must include in ICTI each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by the Company in the same taxable year. The Company may also have to include in ICTI other amounts that it has not yet received in cash, such as 1) PIK interest income and 2) interest income from investments that have been classified as non-accrual for financial reporting 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.

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 December 31, 2020. Although we file federal and state tax returns, our major tax jurisdiction is federal. The Company’s federal and state tax returns for the prior three fiscal years remain open, subject to examination by the Internal Revenue Service and applicable state tax authorities.

Note 2. Significant Accounting Policies (continued)

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 unaudited 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

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 segment. All applicable segment disclosures are included in or can be derived from the Company’s financial statements. See Note 3 for further information.

Company Investment Risk, Concentration of Credit Risk, and Liquidity Risk

The Company has broad discretion in making investments. Investments generally consist of debt instruments that may be affected by business, financial market or legal uncertainties. 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.

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 will likely continue and may change in unforeseen ways for an indeterminate period. The pandemic has also adversely affected various businesses, including some in which we are invested. The COVID-19 pandemic may exacerbate pre-existing business performance, political, social and economic risks affecting certain companies and countries generally. The impacts, as well as the uncertainty over impacts to come, of COVID-19 have adversely affected the performance of the Company (including certain portfolio companies) and may continue to do so in the future.

Note 3. Investments

The composition of our investments as of December 31, 2020 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	$	162,049		77.6	%	$	88,061		55.2	%
Senior Secured Second Lien Term Loans		7,976		3.8			7,586		4.8
Unsecured Debt		4,061		1.9			2,120		1.3
Equity/Warrants		34,784		16.7			61,774		38.7
Total Investments	$	208,870		100.0	%	$	159,541		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 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	%

Note 3. Investments (continued)

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 December 31, 2020 and September 30, 2020, the total fair value of warrants was $25,423 and $15,354, respectively, and were included in investments at fair value on the Consolidated Statements of Assets and Liabilities. During the three months ended December 31, 2020, the Company acquired warrants in one existing portfolio company. During the three months ended December 31, 2019, the Company had no warrant activity.

For the three months ended December 31, 2020, there was $10,069 of unrealized appreciation related to warrants, which was recorded on the Consolidated Statements of Operations as net unrealized appreciation/(depreciation) on investments. For the three months ended December 31, 2019, there was no unrealized appreciation or depreciation related to warrants. The warrants are received in connection with individual investments and are not subject to master netting arrangements.

The following table shows the portfolio composition by industry grouping at fair value at December 31, 2020 (dollars in thousands):

	Fair Value		Percentage

Construction & Building	$	45,820		28.7	%
High Tech Industries		24,786		15.5
Services: Business		16,636		10.4
Healthcare & Pharmaceuticals		12,324		7.8
Consumer goods: Durable		12,248		7.7
Containers, Packaging & Glass		11,911		7.5
Hotel, Gaming & Leisure		10,235		6.4
Environmental Industries		6,600		4.1
Energy: Oil & Gas		4,915		3.1
Banking, Finance, Insurance & Real Estate		4,145		2.6
Forest Products & Paper		3,198		2.0
Aerospace & Defense		2,818		1.8
Metals & Mining		2,458		1.5
Automotive		1,061		0.7
Wholesale		386		0.2
Total	$	159,541		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	%

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.

Note 3. Investments (continued)

The following table shows the portfolio composition by geographic location at fair value at December 31, 2020 (dollars in thousands):

	Fair Value		Percentage

West	$	54,697		34.3	%
Northeast		48,897		30.6
Southeast		30,174		18.9
Midwest		14,920		9.4
Southwest		10,169		6.4
Mid-Atlantic		684		0.4
Total	$	159,541		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	<