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Saratoga Investment Corp. Announces Fiscal Year End and Fourth Quarter 2019 Financial Results

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NEW YORK, May 08, 2019 (GLOBE NEWSWIRE) -- Saratoga Investment Corp. (NYSE:SAR) ("Saratoga Investment" or "the Company"), a business development company, today announced financial results for its 2019 fiscal year end and fourth quarter.

Summary Financial Information

The Company's summarized financial information is as follows:

    For the year ended and as of February 28,
2019
    For the year ended and as of February 28,
2018
    For the year ended and as of February 28,
2017
 
    ($ thousands except per share)  
AUM     402,020       342,694       292,661  
NAV     180,875       143,691       127,295  
NAV per share     23.62       22.96       21.97  
Investment Income     47,708       38,615       33,157  
Net Investment Income per share     2.60       2.11       1.68  
Adjusted Net Investment Income per share     2.63       2.27       2.01  
Earnings per share     2.63       2.93       1.98  
Dividends per share (declared)     2.10       1.94       1.78  
Return on Equity – last twelve months     10.6 %     13.2 %     9.0 %
Originations     187,708       107,698       126,935  
Repayments     135,265       66,320       121,159  

  

    For the quarter ended February 28,
2019
    For the quarter ended November 30,
2018
    For the quarter ended February 28,
2018
 
    ($ thousands except per share)  
AUM     402,020       443,812       342,694  
NAV     180,875       173,269       143,691  
NAV per share     23.62       23.13       22.96  
Investment Income     12,984       12,833       10,128  
Net Investment Income per share     0.54       0.69       0.53  
Adjusted Net Investment Income per share     0.66       0.65       0.60  
Earnings per share     1.04       0.49       0.89  
Dividends per share (declared)     0.54       0.53       0.50  
Return on Equity – last twelve months     10.6 %     10.1 %     13.2 %
 – annualized quarter     17.7 %     8.5 %     15.7 %
Originations     29,340       73,732       20,820  
Repayments     77,042       23,365       20,742  

"Fiscal year 2019 continued the strong performance trend for Saratoga Investment Corp. with significant strengthening of our organizational and capital foundation," said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment. "We continued to make steady progress growing our high quality asset base while maintaining our industry leadership in key performance metrics and credit quality. We also took important steps to expand our capitalization and liquidity through equity and long-term debt issuances, raising over $90 million in the public capital markets. We increased our quarterly dividend for the 18th consecutive quarter to $0.54 per share, reflecting a 2% year-over-year increase while still overearning the dividend. Year-over-year, NAV grew by 26% and NAV per share by 3%. Our LTM ROE for the year was 10.6% is in the top tier of the BDC industry."

Michael J. Grisius, President and Chief Investment Officer, added, "In this fiscal year, our organization originated $167.7 million of new investments, excluding the CLO warehouse – a record amount for us. We continue to see steady year-over-year asset base expansion, with an increase in our investments at fair value of 17% compared to last year, despite some significant repayments in Q4 of $57.0 million, excluding the CLO warehouse. Furthermore, market headwinds have not impaired our exceptional underwriting standards and consistent ability to deploy capital in high quality credits. This continued post quarter-end as we closed investments in three new platforms. 99% of our investments continue to hold our highest quality rating. Our belief remains that successful investing rests on sound judgment and steady, continuous discipline, taken one decision at a time. It is our conviction that our commitment to a long-term strategy and focus on quality will continue to reap positive rewards." 

As of February 28, 2019, Saratoga Investment increased its assets under management ("AUM") to $402.0 million, an increase of 17.3% from $342.7 million as of February 28, 2018, and a decrease of 9.4% from $443.8 million as of November 30, 2018. The annual increase reflects originations of $187.7 million new investments during the year ended February 28, 2019, offset by repayments and amortizations of $135.7 million. These investments and repayments for the year are inclusive of the $29.3 million in originations and $77.0 million in repayments during the quarter ended February 28, 2019. Since Saratoga management has taken over the management of the BDC, $357.8 million of repayments and sales of investments originated by Saratoga have generated a gross unlevered IRR of 13.8%. Saratoga Investment's portfolio has remained strong, with a continued high level of investment quality in loan investments, with 98.6% of its loans at its highest internal rating for this quarter.

As a result, both the year and quarter ended February 28, 2019 benefitted from higher investment income as compared to the prior-year period – investment income increased to $47.7 million for the year ended February 28, 2019, up 23.5% from $38.6 million for the year ended February 28, 2018, and up to $13.0 million from $10.1 million for the same quarterly periods, a 28.2% increase. This increased investment income was generated from an investment base that has grown by 17.3% since last year, partially offset by the weighted average current yield decreasing from 11.1% to 10.7%. In addition, this quarter's investment income was also up 1.2% from $12.8 million for the quarter ended November 30, 2018.

As compared to the year ended February 28, 2018, the investment income increase was offset by (i) increased debt and financing expenses, as the growth in AUM this year was partially financed from increased SBA debentures and the $60.0 million baby bond issuance, (ii) increased base and incentive management fees generated from the management of this larger pool of investments, and (iii) increased total expenses, excluding interest and debt financing expenses, base management fees and incentive fees and income tax benefit, reflecting primarily higher administrator expenses, higher directors fees and expenses and higher professional and general and administrative expenses, partially due to increased Sarbanes-Oxley ("SOX") activities now that the Company has qualified as an accelerated filer. The increased expenses were offset by the recognition of a $1.0 million income tax benefit generated from net operating losses in Saratoga Investment's blocker subsidiaries. 

Net investment income on a weighted average per share basis was $2.60 and $0.54 for the year and quarter ended February 28, 2019, respectively. Adjusted for the incentive fee accrual related to net unrealized capital gains, the net investment income on a weighted average per share basis was $2.63 and $0.66, respectively. This compares to adjusted net investment income per share of $2.27 and $0.60 for the year and quarter ended February 28, 2018, reflecting an increase of $0.36 and $0.06 per share, respectively. This also compares to adjusted net investment income of $0.65 per share for the quarter ended November 30, 2018, an increase of $0.01 per share.

Net investment income yield as a percentage of average net asset value ("Net Investment Income Yield") was 10.5% and 9.2% for the year and quarter ended February 28, 2019, respectively. Adjusted for the incentive fee accrual related to net unrealized capital gains, the Net Investment Income Yield was 10.6% and 11.2%, respectively. In comparison, adjusted Net Investment Income Yield was 10.2% for the year ended February 28, 2018, and 11.2% and 10.7% for the quarters ended November 30, 2018, and February 28, 2018, respectively.

Net Asset Value ("NAV") was $180.9 million as of February 28, 2019, an increase of $37.2 million from $143.7 million as of February 28, 2018, and an increase of $7.6 million from $173.3 million as of November 30, 2018. 

  • For the year ended February 28, 2019, $18.3 million of net investment income and $2.0 million of net realized and unrealized gains were earned, offset by $1.8 million of deferred tax expense on net unrealized gains in Saratoga Investment's blocker subsidiaries, and $14.2 million of dividends declared. In addition, $30.8 million of common stock was issued, net of offering costs and $2.2 million of stock dividend distributions were made through the Company's dividend reinvestment plan ("DRIP"). 146,549 shares were sold through the Company's At-the-Market ("ATM") equity offering during the year.   

NAV per share was $23.62 as of February 28, 2019, compared to $22.96 as of February 28, 2018, and $23.13 as of November 30, 2018. 

  • During the past twelve months, NAV per share increased by $0.66 per share, primarily reflecting (i) the $4.3 million, or $0.57 per share increase in net assets resulting from operations (net of the $2.06 per share dividend paid during fiscal 2019) and (ii) the $0.09 accretive impact of the year's 1,400,127 share issuances, including the equity offering, the ATM and the DRIP. The Company made no purchases of common stock in the open market during the year.  

Return on equity for the year ended February 28, 2019, was 10.6%, compared to 13.2% for the comparable period last year.

Earnings per share for the year and quarter ended February 28, 2019, was $2.63 per share and $1.04 per share, respectively, compared to earnings per share of $2.93 per share and $0.89 per share for the year and quarter ended February 28, 2018, respectively, and $0.49 per share for the quarter ended November 30, 2018.

Investment portfolio activity for the year ended February 28, 2019:

  • Cost of investments made during the period: $187.7 million
  • Principal repayments and amortizations during the period: $135.7 million  

Investment portfolio activity for the quarter ended February 28, 2019:

  • Cost of investments made during the period: $29.3 million
  • Principal repayments and amortizations during the period: $77.0 million 

Additional Financial Information

For the fiscal year ended February 28, 2019, Saratoga Investment reported net investment income of $18.3 million, or $2.60 on a weighted average per share basis, and a net gain on investments of $0.2 million, or $0.03 on a weighted average per share basis, resulting in a net increase in net assets from operations of $18.5 million, or $2.63 on a weighted average per share basis. The $0.2 million net gain on investments was comprised of $4.9 million in net realized gain on investments offset by $2.9 million in net unrealized depreciation on investments and $1.8 million of net deferred tax expense on unrealized appreciation on investments in Saratoga Investment's blocker subsidiaries. The net realized gain primarily relates to the $4.7 million gain on the Company's Health Media Network investment realized in the fourth quarter. The $2.9 million unrealized depreciation primarily reflects (i) a reversal of the previously recognized appreciation following the realization of the Company's Health Media Network investment, (ii) $1.4 million unrealized depreciation on the Company's My Alarm Center investment, (iii) $1.6 million unrealized depreciation on the Company's legacy Elyria investment and (iv) $1.8 million unrealized depreciation on the Company's Roscoe Medical investment. These unrealized depreciations were partially offset by (i) $1.8 million unrealized appreciation on the Company's Easy Ice investment, most notably the participating preferred equity, (ii) $2.1 million unrealized appreciation on the Company's Netreo Holdings investment, and (iii) approximately $1.0 million of unrealized appreciation on each of the Company's Grey Heller, Censis and Vector investments. This compared to the fiscal year ended February 28, 2018, with net investment income of $12.7 million, or $2.11 on a weighted average per share basis, and a net gain on investments of $4.9 million, or $0.82 on a weighted average per share basis, resulting in a net increase in net assets from operations of $17.7 million, or $2.93 on a weighted average per share basis. The $4.9 million net gain on investments consisted of $5.9 million in net realized loss on investments offset by $10.8 million unrealized appreciation.

Adjusted for the incentive fee accrual related to net unrealized capital gains, the net investment income was $18.6 million and $13.7 million for the years ended February 28, 2019, and February 28, 2018, respectively – this is an increase of $4.9 million year-over-year, or 35.9%. 

For the quarter ended February 28, 2019, Saratoga Investment reported net investment income of $4.1 million, or $0.54 on a weighted average per share basis, and a net gain on investments of $3.8 million, or $0.50 on a weighted average per share basis, resulting in a net increase in net assets from operations of $7.9 million, or $1.04 on a weighted average per share basis. The $3.8 million net gain on investments was comprised of $4.7 million in net realized gain on investments offset by $0.4 million in net unrealized depreciation on investments and $0.6 million of net deferred tax expense on unrealized appreciation on investments in Saratoga Investment's blocker subsidiaries. The net realized gain relates to the $4.7 million gain on the Company's Health Media Network investment discussed above. The $0.4 million unrealized depreciation primarily reflects (i) a reversal of the previously recognized appreciation following the realization of the Company's Health Media Network investment, and (ii) $1.1 million unrealized depreciation on the Company's Roscoe Medical investment. These unrealized depreciations were partially offset by (i) $1.4 million unrealized appreciation on the Company's Netreo Holdings investment, (ii) $0.6 million unrealized appreciation on the Company's Ohio Medical investment, (iii) $0.6 million unrealized appreciation on Saratoga Investment's CLO equity investment, reflecting fourth quarter performance exceeding projections, and (iv) numerous smaller unrealized appreciations across the portfolio on various investments. This compared to the quarter ended February 28, 2018, with net investment income of $3.3 million, or $0.53 on a weighted average per share basis, and a net gain on investments of $2.2 million, or $0.36 on a weighted average per share basis, resulting in a net increase in net assets from operations of $5.5 million, or $0.89 on a weighted average per share basis. The $2.2 million net gain on investments consisted of $2.4 million unrealized appreciation offset by $0.2 million in net realized loss on investments.

Adjusted for the incentive fee accrual related to net unrealized capital gains, the net investment income was $4.9 million and $3.8 million for the quarters ended February 28, 2019, and February 28, 2018, respectively – this is an increase of $1.2 million year-over-year, or 31.1%.

Total expenses, excluding interest and debt financing expenses, base management fees and incentive management fees, decreased from $4.8 million for the year ended February 28, 2018 to $4.5 million for the year ended February 28, 2019, and decreased from 1.2% to 1.1% of average total assets. For the quarters ended February 28, 2019, and February 28, 2018, these total expenses decreased from $1.2 million to $1.0 million. 

Portfolio and Investment Activity

As of February 28, 2019, the fair value of Saratoga Investment's portfolio was $402.0 million (excluding $62.1 million in cash and cash equivalents), principally invested in 31 portfolio companies and one collateralized loan obligation fund ("CLO"). The overall portfolio composition consisted of 50.5% of first lien term loans, 31.3% of second lien term loans, 8.8% of CLO subordinated notes, 0.5% of unsecured term loans, and 8.9% of equity interests.

For the fiscal year ended February 28, 2019, Saratoga Investment invested $187.7 million in new or existing portfolio companies and had $135.7 million in aggregate amount of exits and repayments, resulting in net investments of $52.0 million for the year. For the quarter ended February 28, 2019, Saratoga Investment invested $29.3 million in new or existing portfolio companies, and had $77.0 million in aggregate amount of exits and repayments, resulting in $47.7 million of net exits and repayments for the quarter.

As of February 28, 2019, the weighted average current yield on Saratoga Investment's portfolio for the twelve months ended was 10.7%, which was comprised of a weighted average current yield of 10.9% on first lien term loans, 11.7% on second lien term loans, 14.6% on CLO subordinated notes, and 3.1% on equity interests.

As of February 28, 2019, 83.7% of Saratoga Investment's portfolio is in floating rate debt, with many of these investments having floors. For all of these investments, the relevant 1-month or 3-month LIBOR rate is currently above the floors. Saratoga Investment has analyzed the potential impact of changes in interest rates on interest income from investments, and assuming that the investments as of February 28, 2019, were to remain constant for a full fiscal year and no actions were taken to alter the existing interest rate terms, a hypothetical change of 1.0% in interest rates would cause a corresponding increase of approximately $2.8 million to interest income. 
  

Liquidity and Capital Resources

As of February 28, 2019, Saratoga Investment had $0.0 million in outstanding borrowings under its $45 million senior secured revolving credit facility with Madison Capital Funding LLC. At the same time, Saratoga Investment had $150.0 million outstanding of SBA debentures, $134.5 million of Baby Bonds (fair value of $136.3 million) and an aggregate of $62.1 million in cash and cash equivalents.

With the $45.0 million credit facility and the $62.1 million of cash and cash equivalents, Saratoga Investment has a total of $107.1 million of undrawn borrowing capacity and cash and cash equivalents available as of February 28, 2019. The net proceeds from the DRIP and ATM equity program totaled $32.9 million and $3.7 million of equity issuances for the year and quarter ended February 28, 2019, respectively. Saratoga Investment also has the ability to issue additional Baby Bonds through the existing shelf registration statement.

On March 16, 2017, we entered into an equity distribution agreement with Ladenburg Thalmann & Co. Inc., through which Saratoga may offer for sale, from time to time, up to $30.0 million of its common stock through an ATM offering. As of February 28, 2019, the Company sold 494,672 shares for gross proceeds of $11.2 million at an average price of $22.72 for aggregate net proceeds of $11.1 million (net of transaction costs).

On July 13, 2018, Saratoga Investment issued 1,150,000 shares of its common stock priced at $25.00 per share (par value $0.001 per share) at an aggregate total of $28.75 million. The net proceeds, after deducting underwriting commissions of $1.15 million and offering costs of approximately $0.2 million, amounted to approximately $27.4 million. The Company also granted the underwriters a 30-day option to purchase up to an additional 172,500 shares of its common stock, which was not exercised. 

On August 28, 2018, Saratoga Investment issued $40.0 million in aggregate principal amount of 6.25% fixed-rate notes due 2025 (the "2025 Notes") for net proceeds of $38.7 million after deducting underwriting commissions of approximately $1.25 million and offering costs of approximately $0.3 million. The issuance included the full exercise of the underwriters' option to purchase an additional $5.0 million aggregate principal amount of 2025 Notes within 30 days. Interest on the 2025 Notes is paid quarterly in arrears on February 28, May 31, August 31 and November 30, at a rate of 6.25% per year, beginning November 30, 2018. The 2025 Notes mature on August 31, 2025, and commencing August 28, 2021, may be redeemed in whole or in part, at any time or from time to time, at its option. The 2025 Notes are listed on the NYSE under the trading symbol "SAF" with a par value of $25.00 per share.

On February 5, 2019, Saratoga Investment completed a re-opening and up-sizing of its existing 2025 Notes by issuing an additional $20.0 million in aggregate principal amount for net proceeds of $19.2 million after deducting underwriting commissions of approximately $0.6 million and discount of $0.2 million. Offering costs incurred were approximately $0.2 million. The issuance included the full exercise of the underwriters' option to purchase an additional $2.5 million aggregate principal amount of 2025 Notes within 30 days. Interest rate, interest payment dates and maturity remain unchanged from the existing 2025 Notes issued in August 2018.

On September 27, 2018, the SBA issued a "green light" letter inviting Saratoga Investment to file a formal license application for a second SBIC license. If approved, the additional SBIC license would provide the Company with an incremental source of long-term capital by permitting us to issue, subject to SBA approval, up to $175.0 million of additional SBA-guaranteed debentures in addition to the $150.0 million already approved under the Company's first license. Receipt of a green light letter from the SBA does not assure an applicant that the SBA will ultimately issue an SBIC license and the Company has received no assurance or indication from the SBA that it will receive an additional SBIC license, or of the timeframe in which it would receive an additional license, should one ultimately be granted. 

Dividend

During fiscal year 2019, Saratoga Investment declared and paid quarterly cash dividends of $2.06 per share, including $0.50 per share for the quarter ended February 28, 2018, $0.51 per share for the quarter ended May 31, 2018, $0.52 per share for the quarter ended August 31, 2018 and $0.53 per share for the quarter ended November 30, 2018.

On February 26, 2019, our board of directors declared a dividend of $0.54 per share for the quarter ended February 28, 2019, which was paid on March 28, 2019. Shareholders have the option to receive payment of the dividend in cash, or receive shares of common stock, pursuant the Company's DRIP.

Share Repurchase Plan

In fiscal year 2015, the Company announced the approval of an open market share repurchase plan that allows it to repurchase up to 200,000 shares of its common stock at prices below its NAV as reported in its then most recently published financial statements. During fiscal year 2018, the share repurchase plan was increased to 600,000 shares of common stock, and during fiscal year 2019, this share repurchase plan was extended for another year, through January 2020, at the same level of approval. As of February 28, 2019, the Company purchased 218,491 shares of common stock, at the average price of $16.87 for approximately $3.7 million pursuant to this repurchase plan.

We made no purchases of common stock in the open market during the year ended February 28, 2019.

2019 Fiscal Year End and Fourth Quarter Conference Call/Webcast Information

When:     Thursday, May 9, 2018, 10:00 a.m. Eastern Daylight Time (EDT) 

Call:     Interested parties may participate by dialing (877) 312-9208 (U.S. and Canada) or (678) 224-7872 (outside U.S. and Canada). 

A replay of the call will be available from 1:00 p.m. EDT on Thursday, May 9, 2019, through 1:00 p.m. ET on Thursday, May 16, 2019, by dialing (855) 859-2056 (U.S. and Canada) or (404) 537-3406 (outside U.S. and Canada), passcode for both replay numbers: 3985768. 

Webcast:     Interested parties may access a simultaneous webcast of the call and find the FY and Q4 2019 presentation by going to the ?Events & Presentations? section of Saratoga Investment Corp.?s investor relations website, http://ir.saratogainvestmentcorp.com/events-presentations

About Saratoga Investment Corp.

Saratoga Investment is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses. The Company invests primarily in senior and unitranche leveraged loans and mezzanine debt, and, to a lesser extent, equity to provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors.  Saratoga Investment's objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments.  Saratoga Investment has elected to be regulated as a business development company under the Investment Company Act of 1940 and is externally-managed by Saratoga Investment Advisors, LLC, an SEC-registered investment advisor focusing on credit-driven strategies.  Saratoga Investment owns an SBIC-licensed subsidiary and manages a $500 million collateralized loan obligation ("CLO") fund.  It also owns 100% of the Class F-R-2, G-R-2 and subordinated notes of the CLO.  The Company's diverse funding sources, combined with a permanent capital base, enable Saratoga Investment to provide a broad range of financing solutions.

Forward-Looking Statements

This press release contains certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties and other factors enumerated in this press release that could cause our actual results to differ materially from those expressed or implied in such statements. Additional information is contained in the filings Saratoga Investment Corp. makes with the SEC. Saratoga Investment Corp. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 
  

Financials

Saratoga Investment Corp.
Consolidated Statements of Assets and Liabilities

    February 28,
2019
    February 28,
2018
 
             
ASSETS            
Investments at fair value            
Non-control/Non-affiliate investments (amortized cost of $307,136,188 and $281,534,277, respectively)   $ 306,511,427     $ 286,061,722  
Affiliate investments (amortized cost of $18,514,716 and $18,358,611, respectively)     11,463,081       12,160,564  
Control investments (amortized cost of $76,265,189 and $39,797,229, respectively)     84,045,212       44,471,767  
Total investments at fair value (amortized cost of $401,916,093 and $339,690,117, respectively)     402,019,720       342,694,053  
Cash and cash equivalents     30,799,068       3,927,579  
Cash and cash equivalents, reserve accounts     31,295,326       9,849,912  
Interest receivable (net of reserve of $647,210 and $1,768,021, respectively)     3,746,604       3,047,125  
Due from affiliate     1,673,747       -  
Management and incentive fee receivable     542,094       233,024  
Other assets     595,543       584,668  
Total assets   $ 470,672,102     $ 360,336,361  
                 
LIABILITIES                
Revolving credit facility   $ -     $ -  
Deferred debt financing costs, revolving credit facility     (605,189 )     (697,497 )
SBA debentures payable     150,000,000       137,660,000  
Deferred debt financing costs, SBA debentures payable     (2,396,931 )     (2,611,120 )
2023 Notes payable     74,450,500       74,450,500  
Deferred debt financing costs, 2023 notes payable     (1,919,620 )     (2,316,370 )
2025 Notes payable     60,000,000       -  
Deferred debt financing costs, 2025 notes payable     (2,377,551 )     -  
Base management and incentive fees payable     6,684,785       5,776,944  
Deferred tax liability     739,716       -  
Accounts payable and accrued expenses     1,615,443       924,312  
Interest and debt fees payable     3,224,671       3,004,354  
Directors fees payable     62,000       43,500  
Due to manager     319,091       410,371  
Total liabilities   $ 289,796,915     $ 216,644,994  
                 
Commitments and contingencies (See Note 8)                
                 
NET ASSETS                
Common stock, par value $.001, 100,000,000 common shares authorized, 7,657,156 and 6,257,029 common shares issued and outstanding, respectively   $ 7,657     $ 6,257  
Capital in excess of par value     203,552,800       188,975,590  
Total distributable earnings (loss)     (22,685,270 )     (45,290,480 )
Total net assets     180,875,187       143,691,367  
Total liabilities and net assets   $ 470,672,102     $ 360,336,361  
                 
NET ASSET VALUE PER SHARE   $ 23.62     $ 22.96  
                 
Asset Coverage Ratio     234.5 %     293.0 %

Certain prior year numbers have been adjusted to conform with the SEC final rules on disclosure updates and simplification effective November 5, 2018. 

Saratoga Investment Corp.
Consolidated Statements of Operations

    For the year ended  
    February 28,
2019
    February 28,
2018
    February 28,
2017
 
INVESTMENT INCOME                  
Interest from investments                  
Interest income:                  
Non-control/Non-affiliate investments   $ 33,329,539     $ 26,648,380     $ 26,167,951  
Affiliate investments     963,289       886,948       246,035  
Control investments     4,785,044       4,768,534       2,281,397  
Payment-in-kind interest income:                        
Non-control/Non-affiliate investments     780,112       984,305       652,847  
Affiliate investments     150,284       80,460       -  
Control investments     3,288,902       1,741,334       -  
Total interest from investments     43,297,170       35,109,961       29,348,230  
Interest from cash and cash equivalents     64,024       27,495       31,151  
Management fee income     1,722,180       1,509,317       1,499,001  
Incentive fee income     633,232       591,368       -  
Other income     1,991,357       1,376,837       2,278,770  
Total investment income     47,707,963       38,614,978       33,157,152  
                         
OPERATING EXPENSES                        
Interest and debt financing expenses     13,125,718       10,938,654       9,888,127  
Base management fees     6,879,324       5,846,400       4,898,657  
Incentive management fees     4,891,004       4,333,983       2,947,543  
Professional fees     1,849,424       1,590,798       1,243,400  
Administrator expenses     1,895,833       1,645,833       1,366,667  
Insurance     253,141       259,571       275,787  
Directors fees and expenses     290,500       197,500       235,422  
General & administrative     1,224,462       1,058,009       1,121,594  
Income tax benefit     (1,027,118 )     -       -  
Excise tax expense (credit)     -       (14,738 )     44,770  
Other expense     23,466       27,310       19,780  
Total operating expenses     29,405,754       25,883,320       22,041,747  
Loss on extinguishment of debt     -       -       1,454,595  
NET INVESTMENT INCOME     18,302,209       12,731,658       9,660,810  
                         
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS                        
Net realized gain (loss) from investments:                        
Non-control/Non-affiliate investments     4,874,305       (5,877,734 )     12,368,115  
Control investments     -       166       -  
Net realized gain (loss) from investments     4,874,305       (5,877,568 )     12,368,115  
Net change in unrealized appreciation (depreciation) on investments:                        
Non-control/Non-affiliate investments     (5,152,206 )     6,178,457       (11,687,337 )
Affiliate investments     (853,588 )     818,323       (3,141 )
Control investments     3,105,485       3,828,275       1,049,034  
Net change in unrealized appreciation (depreciation) on investments     (2,900,309 )     10,825,055       (10,641,444 )
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments     (1,766,835 )     -       -  
Net realized and unrealized gain (loss) on investments     207,161       4,947,487       1,726,671  
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS   $ 18,509,370     $ 17,679,145     $ 11,387,481  
                         
WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS PER COMMON SHARE   $ 2.63     $ 2.93     $ 1.98  
                         
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED     7,046,686       6,024,040       5,740,450  

Saratoga Investment Corp.
Consolidated Statements of Operations

    For the three months ended  
    February 28,
2019
    February 28,
2018
 
INVESTMENT INCOME            
Interest from investments            
Interest income:            
Non-control/Non-affiliate investments   $ 8,628,236     $ 7,168,988  
Affiliate investments     242,551       223,833  
Control investments     1,444,864       919,247  
Payment-in-kind interest income:                
Non-control/Non-affiliate investments     158,650       210,723  
Affiliate investments     39,386       32,173  
Control investments     1,017,543       736,570  
Total interest from investments     11,531,230       9,291,534  
Interest from cash and cash equivalents     22,619       7,144  
Management fee income     592,259       381,233  
Incentive fee income     139,386       114,281  
Other income     698,664       333,942  
Total investment income     12,984,158       10,128,134  
                 
OPERATING EXPENSES                
Interest and debt financing expenses     3,922,981       2,693,304  
Base management fees     1,851,983       1,488,170  
Incentive management fees     2,087,220       1,393,633  
Professional fees     430,952       410,885  
Administrator expenses     500,000       437,500  
Insurance     63,225       62,664  
Directors fees and expenses     60,000       43,500  
General & administrative     316,288       273,938  
Income tax benefit     (342,598 )     -  
Excise tax expense (credit)     270       -  
Other expense     2,445       3,893  
Total operating expenses     8,892,766       6,807,487  
NET INVESTMENT INCOME     4,091,392       3,320,647  
                 
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS                
Net realized gain (loss) from investments:                
Non-control/Non-affiliate investments     4,729,298       (155,685 )
Affiliate investments     -       -  
Control investments     -       (63,554 )
Net realized gain (loss) from investments     4,729,298       (219,239 )
Net change in unrealized appreciation (depreciation) on investments:                
Non-control/Non-affiliate investments     (2,724,083 )     1,401,934  
Affiliate investments     271,652       877,612  
Control investments     2,094,551       151,255  
Net change in unrealized appreciation (depreciation) on investments     (357,880 )     2,430,801  
Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments     (607,254 )     -  
Net realized and unrealized gain (loss) on investments     3,764,164       2,211,562  
                 
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS   $ 7,855,556     $ 5,532,209  
                 
WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS PER COMMON SHARE   $ 1.04     $ 0.89  
                 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED     7,534,235       6,243,896  

  

Saratoga Investment Corp.

Consolidated Schedule of Investments

February 28, 2019

Company   Industry   Investment Interest Rate/ Maturity   Original Acquisition Date   Principal/ Number of Shares     Cost     Fair Value (c)     % of Net Assets  
Non-control/Non-affiliate investments - 169.5% (b)                                    
Apex Holdings Software Technologies, LLC   Business Services   First Lien Term Loan (3M USD LIBOR+8.00%), 10.62% Cash, 9/21/2021   9/21/2016   $ 18,000,000     $ 17,922,851     $ 18,000,000       10.0 %
Apex Holdings Software Technologies, LLC   Business Services   Delayed Draw Term Loan  (3M USD LIBOR+8.00%), 10.62% Cash, 9/21/2021   10/1/2018   $ 1,000,000       992,183       1,000,000       0.6 %
Avionte Holdings, LLC (h)   Business Services   Class A Units   1/8/2014     100,000       100,000       635,781       0.4 %
CLEO Communications Holding, LLC   Business Services   First Lien Term Loan (3M USD LIBOR+8.00%), 10.62% Cash/2.00% PIK, 3/31/2022   3/31/2017   $ 13,514,320       13,437,153       13,514,320       7.5 %
CLEO Communications Holding, LLC   Business Services   Delayed Draw Term Loan (3M USD LIBOR+8.00%), 10.62% Cash/2.00% PIK, 3/31/2022   3/31/2017   $ 12,142,015       12,040,280       12,142,015       6.7 %
Destiny Solutions Inc. (a)   Business Services   First Lien Term Loan (3M USD LIBOR+7.00%), 9.62% Cash, 5/16/2023   5/16/2018   $ 8,500,000       8,426,441       8,489,800       4.7 %
Destiny Solutions Inc. (a), (j)   Business Services   Delayed Draw Term Loan (3M USD LIBOR+7.00%), 9.62% Cash, 5/16/2023   5/16/2018   $ -       -       -       0.0 %
Destiny Solutions Inc. (a), (h), (i)   Business Services   Limited Partner Interests   5/16/2018     999,000       999,000       1,062,440       0.6 %
Emily Street Enterprises, L.L.C.   Business Services   Senior Secured Note (3M USD LIBOR+8.50%), 11.12% Cash, 1/23/2020   12/28/2012   $ 3,300,000       3,299,122       3,314,520       1.8 %
Emily Street Enterprises, L.L.C. (h)   Business Services   Warrant Membership Interests Expires 12/28/2022   12/28/2012     49,318       400,000       505,509       0.3 %
Erwin, Inc. (d)   Business Services   Second Lien Term Loan (3M USD LIBOR+11.50%), 14.12% Cash/1.00% PIK, 8/28/2021   2/29/2016   $ 15,888,102       15,796,316       15,888,102       8.8 %
FMG Suite Holdings, LLC (d)   Business Services   Second Lien Term Loan (1M USD LIBOR+8.00%), 10.49% Cash, 11/16/2023   5/16/2018   $ 23,000,000       22,844,123       23,000,000       12.7 %
GDS Holdings US, LLC (d)   Business Services   First Lien Term Loan (3M USD LIBOR+7.00%), 9.62% Cash, 8/23/2023   8/23/2018   $ 7,500,000       7,430,649       7,495,500       4.0 %
GDS Holdings US, LLC (j)   Business Services   Delayed Draw Term Loan (3M USD LIBOR+7.00%), 9.62% Cash, 8/23/2023   8/23/2018   $ -       -       -       0.0 %
GDS Software Holdings, LLC (h)   Business Services   Common Stock Class A Units   8/23/2018     250,000       250,000       277,139       0.2 %
Identity Automation Systems (h)   Business Services   Common Stock Class A Units   8/25/2014     232,616       232,616       629,555       0.3 %
Identity Automation Systems (d)   Business Services   First Lien Term Loan (3M USD LIBOR+9.00%), 11.62% Cash, 3/31/2021   8/25/2014   $ 24,100,000       23,991,294       24,100,000       13.3 %
Knowland Group, LLC   Business Services   Second Lien Term Loan (3M USD LIBOR+8.00%), 10.62% Cash, 5/9/2024   11/9/2018   $ 15,000,000       15,000,000       15,000,000       8.3 %
Microsystems Company   Business Services   Second Lien Term Loan  (3M USD LIBOR+8.25%), 10.87% Cash, 7/1/2022   7/1/2016   $ 18,000,000       17,889,554       17,881,200       9.9 %
National Waste Partners (d)   Business Services   Second Lien Term Loan 10.00% Cash, 2/13/2022   2/13/2017   $ 9,000,000       8,942,155       8,864,100       4.9 %
Omatic Software, LLC   Business Services   First Lien Term Loan (3M USD LIBOR+8.00%), 10.62% Cash, 5/29/2023   5/29/2018   $ 5,500,000       5,451,758       5,537,400       3.1 %
Omatic Software, LLC (j)   Business Services   Delayed Draw Term Loan  (3M USD LIBOR+8.00%), 10.62% Cash, 5/29/2023   5/29/2018   $ -       -       -       0.0 %
Passageways, Inc.   Business Services   First Lien Term Loan (3M USD LIBOR+7.75%), 10.37% Cash, 7/5/2023   7/5/2018   $ 5,000,000       4,955,204       5,063,500       2.8 %
Passageways, Inc. (h)   Business Services   Series A Preferred Stock   7/5/2018     2,027,205       1,000,000       1,339,705       0.7 %

  

Saratoga Investment Corp.
Consolidated Schedule of Investments
February 28, 2019

Company   Industry   Investment Interest Rate/ Maturity   Original Acquisition Date   Principal/ Number of Shares     Cost     Fair Value (c)     % of Net Assets  
Vector Controls Holding Co., LLC (d)   Business Services   First Lien Term Loan  11.50% (9.75% Cash/1.75% PIK), 3/6/2022   3/6/2013   $ 9,311,956       9,310,703       9,371,929       5.2 %
Vector Controls Holding Co., LLC (h)   Business Services   Warrants to Purchase Limited Liability Company Interests, Expires 11/30/2027   5/31/2015     343       -       2,210,149       1.2 %
        Total Business Services                 190,711,402       195,322,664       108.0 %
Targus Holdings, Inc. (h)   Consumer Products   Common Stock   12/31/2009     210,456       1,713,605       505,094       0.3 %
        Total Consumer Products                 1,713,605       505,094       0.3 %
My Alarm Center, LLC (k)   Consumer Services   Preferred Equity Class A Units 8.00% PIK   7/14/2017     2,227       2,357,879       1,112,543       0.6 %
My Alarm Center, LLC (h)   Consumer Services   Preferred Equity Class B Units   7/14/2017     1,797       1,796,880       -       0.0 %
My Alarm Center, LLC   Consumer Services   Preferred Equity Class Z Units 25.00% PIK   9/12/2018     676       655,987       2,053,514       1.1 %
My Alarm Center, LLC (h)   Consumer Services   Common Stock   7/14/2017     96,224       -       -       0.0 %
        Total Consumer Services                 4,810,746       3,166,057       1.7 %
C2 Educational Systems (d)   Education   First Lien Term Loan (3M USD LIBOR+7.00%), 9.62% Cash, 5/31/2020   5/31/2017   $ 16,000,000       15,929,485       16,032,000       8.9 %
Kev Software Inc. (a),   Education   First Lien Term Loan (1M USD LIBOR+8.63%), 11.12% Cash, 9/13/2023   9/13/2018   $ 21,446,929       21,273,211       21,438,351       11.9 %
M/C Acquisition Corp., L.L.C. (h)   Education   Class A Common Stock   6/22/2009     544,761       30,241       -       0.0 %
M/C Acquisition Corp., L.L.C. (k)   Education   First Lien Term Loan 1.00% Cash, 3/31/2020   8/10/2004   $ 2,315,090       1,189,177       6,260       0.0 %
Texas Teachers of Tomorrow, LLC (h), (i)   Education   Common Stock   12/2/2015     750,000       750,000       792,165       0.4 %
Texas Teachers of Tomorrow, LLC   Education   Second Lien Term Loan (3M USD LIBOR+9.75%), 12.37% Cash, 6/2/2021   12/2/2015   $ 10,000,000       9,952,251       9,807,000       5.4 %
        Total Education                 49,124,365       48,075,776       26.6 %
TMAC Acquisition Co., LLC (k)   Food and Beverage   Unsecured Term Loan 8.00% PIK, 9/01/2023   3/1/2018   $ 2,216,427       2,216,427       2,100,286       1.2 %
        Total Food and Beverage                 2,216,427       2,100,286       1.2 %
Axiom Parent Holdings, LLC (h)   Healthcare Services   Common Stock Class A Units   6/19/2018     400,000       400,000       402,990       0.2 %
Axiom Purchaser, Inc. (d)   Healthcare Services   First Lien Term Loan (3M USD LIBOR+6.00%), 8.62% Cash, 6/19/2023   6/19/2018   $ 10,000,000       9,923,962       10,020,000       5.5 %
Axiom Purchaser, Inc. (j)   Healthcare Services   Delayed Draw Term Loan (3M USD LIBOR+6.00%), 8.62% Cash, 6/19/2023   6/19/2018   $ -       -       -       0.0 %
Censis Technologies, Inc.   Healthcare Services   First Lien Term Loan B (1M USD LIBOR+8.30%), 10.79% Cash, 9/27/2023   7/25/2014   $ 19,950,000       19,877,861       19,991,895       11.1 %
Censis Technologies, Inc. (h), (i)   Healthcare Services   Limited Partner Interests   7/25/2014     999       999,000       2,387,705       1.3 %
ComForCare Health Care   Healthcare Services   First Lien Term Loan (3M USD LIBOR+7.50%), 10.12% Cash, 1/31/2022   1/31/2017   $ 15,000,000       14,898,535       15,096,000       8.3 %
Ohio Medical, LLC (h)   Healthcare Services   Common Stock   1/15/2016     5,000       500,000       208,250       0.1 %
Ohio Medical, LLC   Healthcare Services   Senior Subordinated Note 12.00% Cash, 7/15/2021   1/15/2016   $ 7,300,000       7,263,114       6,735,710       3.8 %
Roscoe Medical, Inc. (h)   Healthcare Services   Common Stock   3/26/2014     5,081       508,077       -       0.0 %
Roscoe Medical, Inc. (k)   Healthcare Services   Second Lien Term Loan 11.25% Cash, 3/28/2021   3/26/2014   $ 4,200,000       4,189,094       2,499,000       1.4 %
        Total Healthcare Services                 58,559,643       57,341,550       31.7 %
Sub Total Non-control/Non-affiliate investments                         307,136,188       306,511,427       169.5 %

  

Saratoga Investment Corp. 
Consolidated Schedule of Investments 
February 28, 2019

Company   Industry   Investment Interest Rate/ Maturity   Original Acquisition Date   Principal/ Number of Shares     Cost     Fair Value (c)     % of Net Assets  
Affiliate investments - 6.4% (b)                                    
GreyHeller LLC (f)   Business Services   First Lien Term Loan (3M USD LIBOR+11.00%), 13.62% Cash, 11/16/2021   11/17/2016   $ 7,000,000       6,956,976       7,140,000       4.0 %
GreyHeller LLC (f), (h)   Business Services   Series A Preferred Units   11/17/2016     850,000       850,000       1,496,169       0.8 %
        Total Business Services                 7,806,976       8,636,169       4.8 %
Elyria Foundry Company, L.L.C. (f), (h)   Metals   Common Stock   7/30/2010     60,000       9,685,028       1,804,200       1.0 %
Elyria Foundry Company, L.L.C. (d), (f)   Metals   Second Lien Term Loan 15.00% PIK, 8/10/2022   7/30/2010   $ 1,022,712       1,022,712       1,022,712       0.6 %
        Total Metals                 10,707,740       2,826,912       1.6 %
Sub Total Affiliate investments                         18,514,716       11,463,081       6.4 %
                                             
Control investments - 46.5% (b)                                            
Easy Ice, LLC (g)   Business Services   Preferred Equity 10.00% PIK   2/3/2017     5,080,000       9,683,612       13,357,444       7.4 %
Easy Ice, LLC (d), (g)   Business Services   Second Lien Term Loan 7.03% Cash/5.97% PIK, 2/28/2023   3/29/2013   $ 21,184,063       21,126,021       21,268,799       11.8 %
Easy Ice Masters, LLC (d), (g)   Business Services   Second Lien Term Loan 7.03% Cash/5.97% PIK, 2/28/2023   10/31/2018   $ 3,804,244       3,768,025       3,819,461       2.1 %
Netreo Holdings, LLC (g)   Business Services   First Lien Term Loan (3M USD LIBOR +6.25%), 9.00% Cash/2.00% PIK, 7/3/2023   7/3/2018   $ 5,067,057       5,021,133       5,092,899       2.8 %
Netreo Holdings, LLC (g), (h)   Business Services   Common Stock Class A Unit   7/3/2018     3,150,000       3,150,000       5,179,101       2.9 %
        Total Business Services                 42,748,791       48,717,704       27.0 %
Saratoga Investment Corp. CLO 2013-1, Ltd. (a), (e), (g)   Structured Finance Securities   Other/Structured Finance Securities 16.67%, 1/20/2030   1/22/2008   $ 69,500,000       23,516,398       25,393,508       14.0 %
Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-R-2 Note (a), (g)   Structured Finance Securities   Other/Structured Finance Securities (3M USD LIBOR+8.75%), 11.37%, 1/20/2030   12/14/2018   $ 2,500,000       2,500,000       2,483,500       1.4 %
Saratoga Investment Corp. CLO 2013-1, Ltd. Class G-R-2 Note (a), (g)   Structured Finance Securities   Other/Structured Finance Securities (3M USD LIBOR+10.00%), 12.62%, 1/20/2030   12/14/2018   $ 7,500,000       7,500,000       7,450,500       4.1 %
        Total Structured Finance Securities                 33,516,398       35,327,508       19.5 %
Sub Total Control investments                         76,265,189       84,045,212       46.5 %
TOTAL INVESTMENTS - 222.4% (b)                       $ 401,916,093     $ 402,019,720       222.4 %


    Number of Shares     Cost     Fair Value     % of Net Assets  
Cash and cash equivalents and cash and cash equivalents, reserve accounts - 34.3% (b)                        
U.S. Bank Money Market (l)     62,094,394     $ 62,094,394     $ 62,094,394       34.3 %
Total cash and cash equivalents and cash and cash equivalents, reserve accounts     62,094,394     $ 62,094,394     $ 62,094,394       34.3 %

(a)       Represents a non-qualifying investment as defined under Section 55(a) of the Investment Company Act of 1940, as amended. As of February 28, 2019, non-qualifying assets represent 16.5% of the Company's portfolio at fair value. As a BDC, the Company can only invest 30% of its portfolio in non-qualifying assets.
(b)       Percentages are based on net assets of $180,875,187 as of February 28, 2019.
(c)       Because there is no readily available market value for these investments, the fair values of these investments were determined using significant unobservable inputs and approved in good faith by our board of directors.  These investments have been included as Level 3 in the Fair Value Hierarchy.
(d)       These securities are either fully or partially pledged as collateral under a senior secured revolving credit facility.
(e)       This investment does not have a stated interest rate that is payable thereon. As a result, the 16.67% interest rate in the table above represents the effective interest rate currently earned on the investment cost and is based on the current cash interest and other income generated by the investment. 
(f)       As defined in the Investment Company Act, this portfolio company is an Affiliate as we own between 5.0% and 25.0% of the voting securities. Transactions during the year ended February 28, 2019 in which the issuer was an Affiliate are as follows: 

Company   Purchases     Sales     Total Interest from Investments     Management and Incentive Fee Income     Net Realized  Gain (Loss) from Investments     Net Change in Unrealized Appreciation (Depreciation)  
GreyHeller LLC   $  -     $  -     $ 963,289     $  -     $  -     $ 776,012  
Elyria Foundry Company, L.L.C.     -       -       150,284       -       -       (1,629,600 )
Total   $ -     $ -     $ 1,113,573     $ -     $ -     $ (853,588 )

(g)       As defined in the Investment Company Act, we "Control" this portfolio company because we own more than 25% of the portfolio company's outstanding voting securities. Transactions during the year ended February 28, 2019 in which the issuer was both an Affiliate and a portfolio company that we Control are as follows:

Company   Purchases     Sales     Total Interest from Investments     Management and Incentive Fee Income     Net Realized  Gain (Loss) from Investments     Net Change in Unrealized Appreciation (Depreciation)  
Easy Ice, LLC   $ 1,684,448     $ -     $ 3,424,369     $ -     $  -     $ 1,720,004  
Easy Ice Masters, LLC     3,629,682       -       161,468       -       -       51,436  
Netreo Holdings, LLC     8,100,000       -       374,843       -       -       2,100,867  
Saratoga Investment Corp. CLO 2013-1, Ltd.     14,268,609       (48,083 )     2,922,372       2,355,412       -       (701,722 )
Saratoga Investment Corp. CLO 2013-1, Ltd. Class F Note     -       (4,500,000 )     412,069       -       -       900  
Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-R-2 Notes     2,500,000       -       61,761       -       -       (16,500 )
Saratoga Investment Corp. CLO 2013-1, Ltd. Class G-R-2 Notes     7,500,000       -       205,333       -       -       (49,500 )
Saratoga Investment Corp. CLO 2013-1 Warehouse, Ltd.     20,000,000       (20,000,000 )     511,731       -       -       -  
Total   $ 57,682,739     $ (24,548,083 )   $ 8,073,946     $ 2,355,412     $ -     $ 3,105,485  

  

(h)       Non-income producing at February 28, 2019.
(i)       Includes securities issued by an affiliate of the Company.
(j)       All or a portion of this investment has an unfunded commitment as of February 28, 2019.
(k)       As of February 28, 2019, the investment was on non-accrual status. The fair value of these investments was approximately $5.7 million, which represented 1.4% of the Company's portfolio.
(l)       Included within cash and cash equivalents and cash and cash equivalents, reserve accounts in the Company's consolidated statements of assets and liabilities as of February 28, 2019. 

LIBOR - London Interbank Offered Rate

1M USD LIBOR - The 1 month USD LIBOR rate as of February 28, 2019 was 2.49%.
3M USD LIBOR - The 3 month USD LIBOR rate as of February 28, 2019 was 2.62%.
PIK - Payment-in-Kind 

Supplemental Information Regarding Adjusted Net Investment Income, Adjusted Net Investment Income Yield and Adjusted Net Investment Income per share

On a supplemental basis, we provide information relating to adjusted net investment income, adjusted net investment income yield, and adjusted net investment income per share, which are non-GAAP measures. These measures are provided in addition to, but not as a substitute for, net investment income, net investment income yield, and net investment income per share. Adjusted net investment income represents net investment income excluding any capital gains incentive fee expense or reversal attributable to unrealized gains. The management agreement with Saratoga Investment's advisor provides that a capital gains incentive fee is determined and paid annually with respect to cumulative realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized losses for such year. In addition, we accrue, but do not pay, a capital gains incentive fee in connection with any unrealized capital appreciation, as appropriate. As such, we believe that adjusted net investment income, adjusted net investment income yield, and adjusted net income per share is a useful indicator of operations exclusive of any capital gains incentive fee expense or reversal attributable to unrealized gains. In addition, for fiscal 2017, adjusted net investment income also excludes the loss on extinguishment of Saratoga Investment's 2020 Notes, and the interest expense related to the 2020 Notes during the call notice period while the 2023 Notes were already issued and outstanding. Both these expenses are directly attributable to the issuance of the 2023 Notes and the subsequent repayment of the 2020 Notes, and are deemed to be non-recurring in nature and not representative of the operations of Saratoga Investment. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. The following table provides a reconciliation of net investment income to adjusted net investment income, net investment income yield to adjusted net investment income yield, and net investment income per share to adjusted net investment income per share for the years and quarters ended February 28, 2019 and February 28, 2018, and the year ended February 28, 2017. 

    For the years ended
February 28
 
    2019     2018     2017  
                   
Net Investment Income   $ 18,302,209     $ 12,731,658     $ 9,660,810  
Changes in accrued capital gains incentive fee expense/ reversal     251,090       919,806       133,937  
Loss on extinguishment of debt     -       -       1,454,595  
Interest on 2020 notes during call period(3)     -       -       268,895  
Adjusted net investment income     18,553,299       13,651,464       11,518,237  
                         
Net investment income yield     10.5 %     9.5 %     7.6 %
Changes in accrued capital gains incentive fee expense/ reversal     0.1 %     0.7 %     0.1 %
Loss on extinguishment of debt     -       -       1.2 %
Interest on 2020 notes during call period(3)     -       -       0.2 %
Adjusted net investment income yield (1)     10.6 %     10.2 %     9.1 %
                         
Net investment income per share   $ 2.60     $ 2.11     $ 1.68  
Changes in accrued capital gains incentive fee expense/ reversal     0.03       0.16       0.03  
Loss on extinguishment of debt     -       -       0.25  
Interest on 2020 notes during call period(3)     -       -       0.05  
Adjusted net investment income per share (2)   $ 2.63     $ 2.27     $ 2.01  

  
(1)       Adjusted net investment income is calculated as adjusted net investment income divided by average net asset value.
(2)       Adjusted net investment income per share is calculated as adjusted net investment income divided by weighted average common shares outstanding.
(3)       Interest on 2020 notes during call period is presented net of the incentive fee accrual
   

    For the quarters ended
February 28
 
    2019     2018  
             
Net Investment Income   $ 4,091,392     $ 3,320,647  
Changes in accrued capital gains incentive fee expense/ reversal     851,151       450,502  
Loss on extinguishment of debt     -       -  
Interest on 2020 notes during call period(3)     -       -  
Adjusted net investment income     4,942,543       3,771,149  
                 
Net investment income yield     9.2 %     9.4 %
Changes in accrued capital gains incentive fee expense/ reversal     2.0 %     1.3 %
Loss on extinguishment of debt     -       -  
Interest on 2020 notes during call period(3)     -       -  
Adjusted net investment income yield (1)     11.2 %     10.7 %
                 
Net investment income per share   $ 0.54     $ 0.53  
Changes in accrued capital gains incentive fee expense/ reversal     0.12       0.07  
Loss on extinguishment of debt     -       -  
Interest on 2020 notes during call period(3)     -       -  
Adjusted net investment income per share (2)   $ 0.66     $ 0.60  

    
(1)       Adjusted net investment income is calculated as adjusted net investment income divided by average net asset value.
(2)       Adjusted net investment income per share is calculated as adjusted net investment income divided by weighted average common shares outstanding.
(3)       Interest on 2020 notes during call period is presented net of the incentive fee accrual

Contact: Henri Steenkamp
Saratoga Investment Corp.
212-906-7800

Roland Tomforde
Broadgate Consultants
212-232-2222

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