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SARATOGA INVESTMENT CORP.

(SAR)
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SARATOGA INVESTMENT CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

10/04/2022 | 04:09pm EST
The following discussion should be read in conjunction with our consolidated
financial statements and related notes and other financial information appearing
elsewhere in this Quarterly Report on Form 10-Q. In addition to historical
information, the following discussion and other parts of this Quarterly Report
contain forward-looking information that involves risks and uncertainties. Our
actual results could differ materially from those anticipated by such
forward-looking information due to the factors discussed under "Note about
Forward-Looking Statements" and Part I, Item 1A. "Risk Factors" in our Annual
Report on Form 10-K for the fiscal year ended February 28, 2022.



The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or are within our control. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements.

The forward-looking statements contained in this Quarterly Report on Form 10-Q involve risks and uncertainties, including statements as to:

? our future operating results and the continued impact of coronavirus

("COVID-19") pandemic thereon;

? the introduction, withdrawal, success and timing of business initiatives and

   strategies;




? changes in political, economic or industry conditions, the interest rate

environment or financial and capital markets, which could result in changes in

the value of our assets;

? the impact of geopolitical conditions, including the ongoing conflict between

Ukraine and Russia and its impact on financial market volatility, global

economic markets, and various sectors, industries and markets for commodities

globally, such as oil and natural gas;

? the relative and absolute investment performance and operations of our Manager;

? the impact of increased competition;

? our ability to turn potential investment opportunities into transactions and

thereafter into completed and successful investments;

? the unfavorable resolution of any future legal proceedings;

? our business prospects and the operational and financial performance of our

portfolio companies, including their ability to achieve our respective

objectives as a result of the current COVID-19 pandemic and the effects of the

disruptions caused by the COVID-19 pandemic on our ability to continue to

effectively manage our business;

? the impact of investments that we expect to make and future acquisitions and

   divestitures;




? our contractual arrangements and relationships with third parties;

? the dependence of our future success on the general economy and its impact on

the industries in which we invest and the impact of the COVID-19 pandemic

   thereon;




? the ability of our portfolio companies to achieve their objectives;




                                       86




? our expected financings and investments;

? our regulatory structure and tax treatment, including our ability to operate as

a business development company ("BDC"), or to operate our small business

investment company ("SBIC") subsidiaries, and to continue to qualify to be

taxed as a regulated investment company ("RIC");

? the adequacy of our cash resources and working capital;

? the timing of cash flows, if any, from the operations of our portfolio

companies and the impact of the COVID-19 pandemic thereon;

? the impact of interest rate volatility, including the decommissioning of LIBOR

and the rising interest rate environment, on our results, particularly because

we use leverage as part of our investment strategy;

? the impact of supply chain constraints and labor difficulties on our portfolio

companies and the global economy;

? the elevated level of inflation, and its impact on our portfolio companies and

on the industries in which we invest;

? the impact of legislative and regulatory actions and reforms and regulatory,

supervisory or enforcement actions of government agencies relating to us or our

   Manager;




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

? our ability to access capital and any future financings by us;

? the ability of our Manager to attract and retain highly talented professionals;

   and



? the ability of our Manager to locate suitable investments for us and to monitor

   and effectively administer our investments and the impacts of the COVID-19
   pandemic thereon.




                                       87





The following statements are not guarantees of future performance and are
subject to risks, uncertainties, and other factors, some of which are beyond our
control and difficult to predict and could cause actual results to differ
materially from those expressed or forecasted in the forward-looking statements,
including without limitation:


? changes in laws and regulations, changes in political, economic, geopolitical

or industry conditions, and changes in the interest rate environment, including

with respect to the decommissioning of LIBOR and interest rate hikes by the

U.S. Federal Reserve, or other conditions affecting the financial and capital

markets, including with respect to changes resulting from or in response to, or

potentially even the absence of changes as a result of, the impact of the

   COVID-19 pandemic;




? the length and duration of the COVID-19 pandemic in the United States as well

as worldwide, and the magnitude of its impact and time required for economic

recovery, including with respect to the impact of travel restrictions, business

closures and other restrictions on the ability of the Manager's investment

professionals to conduct in-person diligence on, and otherwise monitor,

existing and future investments;

? an economic downturn and the time period required for robust economic recovery

therefrom, including from increasing inflation, a shifting interest rate

environment, geopolitical events (including the war in Ukraine), and the

ongoing impact of the COVID-19 pandemic, which may have a material impact on

our portfolio companies' results of operations and financial condition, which

could lead to the loss of some or all of our investments in certain portfolio

companies and have a material adverse effect on our results of operations and

   financial condition;




? a contraction of available credit, an inability or unwillingness of our lenders

to fund their commitments to us and/or an inability to access capital markets

or additional sources of liquidity, including as a result of the impact and

duration of the COVID-19 pandemic, could have a material adverse effect on our

results of operations and financial condition and impair our lending and

   investment activities;



? risks associated with possible disruption in our portfolio companies'

operations due to wars and other forms of conflict, terrorist acts, security

operations and catastrophic events such as fires, floods, earthquakes,

tornadoes, hurricanes and global health epidemics; and

? the risks, uncertainties and other factors we identify in "Risk Factors" in our

most recent Annual Report on Form 10-K under Part I, Item 1A, in our quarterly

reports on Form 10-Q, including this report, and in our other filings with the

   SEC that we make from time to time.




Such forward-looking statements may include statements preceded by, followed by
or that otherwise include terms such as "anticipate," "believe," "could,"
"estimate," "expect," "intend," "may," "plan," "potential," "project," "should,"
"will" and "would" or the negative of these terms or other comparable
terminology.



We have based the forward-looking statements included in this Quarterly Report
on Form 10-Q on information available to us on the date of this Quarterly Report
on Form 10-Q, and we assume no obligation to update any such forward-looking
statements. Actual results could differ materially from those anticipated in our
forward-looking statements, and future results could differ materially from
historical performance. We undertake no obligation to revise or update any
forward-looking statements, whether as a result of new information, future
events or otherwise, unless required by law or SEC rule or regulation. You are
advised to consult any additional disclosures that we may make directly to you
or through reports that we in the future may file with the SEC, including annual
reports on Form 10-K, quarterly reports on Form 10-Q and current reports on
Form
8-K.


The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this Quarterly Report on Form 10-Q.



                                       88





OVERVIEW



We are a Maryland corporation that has elected to be treated as a BDC under the
Investment Company Act of 1940, as amended (the "1940 Act"). Our investment
objective is to create attractive risk-adjusted returns by generating current
income and long-term capital appreciation from our investments. We invest
primarily in senior and unitranche leveraged loans and mezzanine debt issued by
private U.S. middle market companies, which we define as companies having
earnings before interest, tax, depreciation and amortization ("EBITDA") of
between $2 million and $50 million, both through direct lending and through
participation in loan syndicates. We may also invest up to 30.0% of the
portfolio in opportunistic investments in order to seek to enhance returns to
stockholders. Such investments may include investments in distressed debt, which
may include securities of companies in bankruptcy, foreign debt, private equity,
securities of public companies that are not thinly traded and structured finance
vehicles such as collateralized loan obligation funds. Although we have no
current intention to do so, to the extent we invest in private equity funds, we
will limit our investments in entities that are excluded from the definition of
"investment company" under Section 3(c)(1) or Section 3(c)(7) of the 1940 Act,
which includes private equity funds, to no more than 15.0% of its net assets. We
have elected, and intend to qualify annually, to be treated for U.S. federal
income tax purposes as a RIC under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code").



Corporate History



We commenced operations, at the time known as GSC Investment Corp., on March 23,
2007 and completed an initial public offering of shares of common stock on March
28, 2007. Prior to July 30, 2010, we were externally managed and advised by GSCP
(NJ), L.P., an entity affiliated with GSC Group, Inc. In connection with the
consummation of a recapitalization transaction on July 30, 2010, as described
below we engaged Saratoga Investment Advisors to replace GSCP (NJ), L.P. as our
investment adviser and changed our name to Saratoga Investment Corp.



As a result of the event of default under a revolving securitized credit
facility with Deutsche Bank we previously had in place, in December 2008 we
engaged the investment banking firm of Stifel, Nicolaus & Company to evaluate
strategic transaction opportunities and consider alternatives for us. On April
14, 2010, GSC Investment Corp. entered into a stock purchase agreement with
Saratoga Investment Advisors and certain of its affiliates and an assignment,
assumption and novation agreement with Saratoga Investment Advisors, pursuant to
which GSC Investment Corp. assumed certain rights and obligations of Saratoga
Investment Advisors under a debt commitment letter Saratoga Investment Advisors
received from Madison Capital Funding LLC, which indicated Madison Capital
Funding's willingness to provide GSC Investment Corp. with a $40.0 million
senior secured revolving credit facility, subject to the satisfaction of certain
terms and conditions. In addition, GSC Investment Corp. and GSCP (NJ), L.P.
entered into a termination and release agreement, to be effective as of the
closing of the transaction contemplated by the stock purchase agreement,
pursuant to which GSCP (NJ), L.P., among other things, agreed to waive any and
all accrued and unpaid deferred incentive management fees up to and as of the
closing of the transaction contemplated by the stock purchase agreement but
continued to be entitled to receive the base management fees earned through the
date of the closing of the transaction contemplated by the stock purchase
agreement.



On July 30, 2010, the transactions contemplated by the stock purchase agreement
with Saratoga Investment Advisors and certain of its affiliates were completed,
the private sale of 986,842 shares of our common stock for $15.0 million in
aggregate purchase price to Saratoga Investment Advisors and certain of its
affiliates closed, the Company entered into the Madison Credit Facility, and the
Company began doing business as Saratoga Investment Corp.



We used the net proceeds from the private sale transaction and a portion of the
funds available to us under the Madison Credit Facility to pay the full amount
of principal and accrued interest, including default interest, outstanding under
our revolving securitized credit facility with Deutsche Bank. The revolving
securitized credit facility with Deutsche Bank was terminated in connection with
our payment of all amounts outstanding thereunder on July 30, 2010.



On August 12, 2010, we effected a one-for-ten reverse stock split of our
outstanding common stock. As a result of the reverse stock split, every ten
shares of our common stock were converted into one share of our common stock.
Any fractional shares received as a result of the reverse stock split were
redeemed for cash. The total cash payment in lieu of shares was $230.
Immediately after the reverse stock split, we had 2,680,842 shares of our common
stock outstanding.



                                       89




In January 2011, we registered for public resale of the 986,842 shares of our common stock issued to Saratoga Investment Advisors and certain of its affiliates.




On March 28, 2012, our wholly-owned subsidiary, Saratoga Investment Corp. SBIC,
LP ("SBIC LP"), received an SBIC license from the Small Business Administration
("SBA"). On August 14, 2019, our wholly-owned subsidiary, Saratoga Investment
Corp. SBIC II LP ("SBIC II LP"), also received an SBIC license from the SBA.



In May 2013, we issued $48.3 million in aggregate principal amount of our 7.50%
fixed-rate unsecured notes due 2020 (the "2020 Notes") for net proceeds of $46.1
million after deducting underwriting commissions of $1.9 million and offering
costs of $0.3 million. The proceeds included the underwriters' full exercise of
their overallotment option. The 2020 Notes were listed on the New York Stock
Exchange ("NYSE") under the trading symbol "SAQ" with a par value of $25.00 per
share. The 2020 Notes were redeemed in full on January 13, 2017 and are no
longer listed on the NYSE.



On September 24, 2014, the Company announced the approval of an open market
share repurchase plan that allowed 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 consolidated financial statements (the "Share Repurchase Plan"). On
October 7, 2015, our board of directors extended the Share Repurchase Plan for
another year and increased the number of shares the Company was permitted to
repurchase at prices below its NAV, as reported in its then most recently
published consolidated financial statements, to 400,000 shares of its common
stock. On October 5, 2016, our board of directors extended the Share Repurchase
Plan for another year to October 15, 2017 and increased the number of shares the
Company was permitted to repurchase at prices below its NAV, as reported in its
then most recently published consolidated financial statements, to 600,000
shares of its common stock. On October 10, 2017, January 8, 2019 and January 7,
2020, our board of directors extended the Share Repurchase Plan for another year
to October 15, 2018, January 15, 2020 and January 15, 2021, respectively, each
time leaving the number of shares the Company was permitted to repurchase
unchanged at 600,000 shares of its common stock. On May 4, 2020, our board of
directors increased the Share Repurchase Plan to permit the Company to
repurchase 1.3 million shares of its common stock. On January 5, 2021, our board
of directors extended the Share Repurchase Plan for another year to January 15,
2022, leaving the number of shares the Company was permitted to repurchase
unchanged at 1.3 million shares of common stock. On January 4, 2022, our board
of directors extended the Shares Repurchase Plan for another year to January 15,
2023, leaving the number of shares the Company is permitted to repurchase
unchanged at 1.3 million shares of common stock. As of August 31, 2022, the
Company purchased 803,962 shares of common stock, at the average price of $21.47
for approximately $17.3 million pursuant to the Share Repurchase Plan. During
the three months ended August 31, 2022 the Company purchased 153,350 shares of
common stock, at the average price of $24.04 for approximately $3.7 million
pursuant to the Share Repurchase Plan. During the six months ended August 31,
2022 the Company purchased 295,527 shares of common stock, at the average price
of $25.11 for approximately $7.4 million pursuant to the Share Repurchase Plan.



                                       90





On May 29, 2015, we entered into a Debt Distribution Agreement with Ladenburg
Thalmann & Co. Inc. through which we may offer for sale, from time to time, up
to $20.0 million in aggregate principal amount of the 2020 Notes through an
At-the-Market ("ATM") offering. Prior to the 2020 Notes being redeemed in full,
the Company had sold 539,725 2022 Notes with a principal of $13.5 million at an
average price of $25.31 for aggregate net proceeds of $13.4 million (net of
transaction costs).



On December 21, 2016, we issued $74.5 million in aggregate principal amount of
our 6.75% fixed-rate notes due 2023 (the "2023 Notes") for net proceeds of $71.7
million after deducting underwriting commissions of approximately $2.3 million
and offering costs of approximately $0.5 million. The issuance included the
partial exercise of the underwriters' option to purchase an additional $9.8
million in aggregate principal amount of 2023 Notes within 30 days. The 2023
Notes were listed on the NYSE under the trading symbol "SAB" with a par value of
$25.00 per share. On December 21, 2019 and February 7, 2020, the Company
redeemed $50.0 million and $24.5 million, respectively, in aggregate principal
amount of the $74.5 million in aggregate principal amount of the issued and
outstanding 2023 Notes and are no longer listed on the NYSE.



On March 16, 2017, we entered into an equity distribution agreement with
Ladenburg Thalmann & Co. Inc., through which we may offer for sale, from time to
time, up to $30.0 million of our common stock through an ATM offering.
Subsequent to this, BB&T Capital Markets and B. Riley FBR, Inc. were added to
the equity ATM program. On July 11, 2019, the amount of the common stock to be
offered was increased to $70.0 million, and on October 8, 2019, the amount of
the common stock to be offered was increased to $130.0 million. This agreement
was terminated as of July 29, 2021, and as of that date, the Company had sold
3,922,018 shares for gross proceeds of $97.1 million at an average price of
$24.77 for aggregate net proceeds of $95.9 million (net of transaction costs).



On July 13, 2018, the Company 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, the Company issued $40.0 million in aggregate principal
amount of our 6.25% fixed-rate notes due 2025 (the "6.25% 2025 Notes") for net
proceeds of $38.7 million after deducting underwriting commissions of
approximately $1.3 million. Offering costs incurred were approximately $0.3
million. The issuance included the full exercise of the underwriters' option to
purchase an additional $5.0 million in aggregate principal amount of 6.25% 2025
Notes within 30 days. The net proceeds from the offering were used for general
corporate purposes in accordance with our investment objective and strategies.
Financing costs of $1.6 million related to the 6.25% 2025 Notes have been
capitalized and were amortized over the term of the 6.25% 2025 Notes.



On February 5, 2019, the Company issued  an additional $20.0 million in
aggregate principal amount of the 6.25% 2025 Notes for net proceeds of $19.2
million after deducting underwriting commissions of approximately $0.6 million
and discount of $0.2 million. The additional 6.25% 2025 Notes were treated as a
single series with the existing 6.25% 2025 Notes under the indenture and had the
same terms as the existing 6.25% 2025 Notes. 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 in aggregate
principal amount of 6.25% 2025 Notes within 30 days. The net proceeds from this
offering were used for general corporate purposes in accordance with our
investment objective and strategies. The financing costs and discount of $1.0
million related to the 6.25% 2025 Notes have been capitalized and were amortized
over the term of the 6.25% 2025 Notes. On August 31, 2021, the 6.25% 2025 Notes
were redeemed and are no longer listed on the NYSE.



On December 14, 2018, the Company completed the third refinancing of the
Saratoga CLO (the "2013-1 Reset CLO Notes"). This refinancing, among other
things, extended the Saratoga CLO reinvestment period to January 2021, and
extended its legal maturity to January 2030. A non-call period of January 2020
was also added. In addition to and as part of the refinancing, the Saratoga CLO
was also upsized from $300 million in assets to approximately $500 million. As
part of this refinancing and upsizing, the Company invested an additional $13.8
million in all of the newly issued subordinated notes of the Saratoga CLO, and
purchased $2.5 million in aggregate principal amount of the Class F-R-2 Notes
tranche and $7.5 million in aggregate principal amount of the Class G-R-2 Notes
tranche at par. Concurrently, the existing $4.5 million of Class F notes were
repaid.



                                       91




On August 14, 2019, our wholly owned subsidiary, Saratoga Investment Corp. SBIC
II LP ("SBIC II LP"), also received an SBIC license from the SBA. SBIC II LP's
SBIC license provides up to $175.0 million in additional long-term capital in
the form of SBA debentures.



On June 24, 2020, the Company issued $37.5 million in aggregate principal amount
of our 7.25% fixed-rate notes due 2025 (the "7.25% 2025 Notes") for net proceeds
of $36.3 million after deducting underwriting commissions of approximately $1.2
million. Offering costs incurred were approximately $0.3 million. On July 6,
2020, the underwriters exercised their option in full to purchase an additional
$5.625 million in aggregate principal amount of its 7.25% unsecured notes due
2025. Net proceeds to the Company were $5.4 million after deducting underwriting
commissions of approximately $0.2 million. The net proceeds from the offering
were used for general corporate purposes in accordance with our investment
objective and strategies. Financing costs of $1.6 million related to the 7.25%
2025 Notes have been capitalized and are being amortized over the term of the
7.25% 2025 Notes. On July 14, 2022, the 7.25% 2025 Notes were redeemed and are
no longer listed on the NYSE.



On July 9, 2020, the Company issued $5.0 million in aggregate principal amount
of our 7.75% fixed-rate notes due in 2025 (the "7.75% Notes 2025 ") for net
proceeds of $4.8 million after deducting underwriting commissions of
approximately $0.2 million. Offering costs incurred were approximately $0.1
million. Interest on the 7.75% Notes 2025 is paid quarterly in arrears on
February 28, May 31, August 31 and November 30, at a rate of 7.75% per year,
beginning August 31, 2020. The 7.75% Notes 2025 mature on July 9, 2025 and may
be redeemed in whole or in part at any time or from time to time at our option,
subject to a fee depending on the date of repayment. The net proceeds from the
offering were used for general corporate purposes in accordance with our
investment objective and strategies. Financing costs of $0.3 million related to
the 7.75% Notes 2025 have been capitalized and are being amortized over the term
of the 7.75% Notes 2025. As of August 31, 2022, the total 7.25% 2025 Notes
outstanding was $5.0 million. The 7.75% Notes 2025 are not listed and has a
par
value of $25.00 per share.



On December 29, 2020, the Company issued $5.0 million in aggregate principal
amount of our 6.25% fixed-rate notes due in 2027 (the "6.25% Notes 2027").
Offering costs incurred were approximately $0.1 million. Interest on the 6.25%
Notes 2027 is paid quarterly in arrears on February 28, May 31, August 31 and
November 30, at a rate of 6.25% per year. The 6.25% Notes 2027 mature on
December 29, 2027 and may be redeemed in whole or in part at any time or from
time to time at our option on or after December 29, 2024. The net proceeds from
the offering were used for general corporate purposes in accordance with our
investment objective and strategies. Financing costs of $0.1 million related to
the 6.25% Notes 2027 have been capitalized and are being amortized over the term
of the 6.25% Notes 2027. The 6.25% 2027 Notes are not listed and have a par
value of $25.00 per share.



On January 28, 2021, the Company issued $10.0 million in aggregate principal
amount of our 6.25% fixed rate notes due in 2027 (the "Second 6.25% Notes 2027")
for net proceeds of $9.7 million after deducting underwriting commissions of
approximately $0.3 million. Offering costs incurred were approximately $0.0
million. Interest on the Second 6.25% Notes 2027 is paid quarterly in arrears on
February 28, May 31, August 31 and November 30, at a rate of 6.25% per year.
The Second 6.25% Notes 2027 mature on January 28, 2027 and commencing January
28, 2023, may be redeemed in whole or in part at any time or from time to time
at our option. The net proceeds from the offering were used for general
corporate purposes in accordance with our investment objective and strategies.
Financing costs of $0.3 million related to the Second 6.25% Notes 2027 have been
capitalized and are being amortized over the term of the Second 6.25% Notes. The
Second 6.25% 2027 Notes are unlisted and have a par value of $25.00 per share.



On February 26, 2021, the Company completed the fourth refinancing of the
Saratoga CLO. This refinancing, among other things, extended the Saratoga CLO
reinvestment period to April 2024, and extended its legal maturity to April
2033. A non-call period ending February 2022 was also added. In addition, and as
part of the refinancing, the Saratoga CLO has also been upsized from $500
million in assets to approximately $650 million. As part of this refinancing and
upsizing, the Company invested an additional $14.0 million in all of the newly
issued subordinated notes of the Saratoga CLO, and purchased $17.9 million in
aggregate principal amount of the Class F-R-3 Notes tranche at par.
Concurrently, the existing $2.5 million of Class F-R-2 Notes, $7.5 million of
Class G-R-2 Notes and $25.0 million CLO 2013-1 Warehouse 2 Loan were repaid. The
Company also paid $2.6 million of transaction costs related to the refinancing
and upsizing on behalf of the Saratoga CLO, to be reimbursed from future equity
distributions. At August 31, 2021, the outstanding receivable of $2.6 million
was paid in full.


On March 10, 2021, the Company issued $50.0 million in aggregate principal
amount of our 4.375% fixed-rate Notes due in 2026 (the "4.375% Notes 2026") for
net proceeds of $49.0 million after deducting underwriting commissions of
approximately $1.0 million. Offering costs incurred were approximately
$0.2 million. Interest on the 4.375% Notes 2026 is paid semi-annually in arrears
on February 28 and August 28, at a rate of 4.375% per year, beginning August 28,
2021. The 4.375% Notes 2026 mature on February 28, 2026 and may be redeemed in
whole or in part at any time on or after November 28, 2025 at par plus a
"make-whole" premium, and thereafter at par. The net proceeds from the offering
were used for general corporate purposes in accordance with our investment
objective and strategies. Financing costs of $1.2 million related to the 4.375%
Notes 2026 have been capitalized and are being amortized over the term of the
4.375% Notes 2026.



                                       92





On July 15, 2021, the Company issued an additional $125.0 million in aggregate
principal amount of the Company's 4.375% Notes 2026 (the "Additional 4.375% 2026
Notes") for net proceeds for approximately $123.5 million, based on the public
offering price of 101.00% of the aggregate principal amount of the Additional
4.375% 2026 Notes, after deducting the underwriting discount of $2.5 million and
the offering expenses payable by the Company . The net proceeds from the
offering were used redeem all of the outstanding 6.25% 2025 Notes (as described
above), and for general corporate purposes in accordance with our investment
objective and strategies. The Additional 4.375% 2026 Notes were treated as a
single series with the existing 4.375% 2026 Notes under the indenture and had
the same terms as the existing 4.375% 2026 Notes.



On July 30, 2021, we entered into an equity distribution agreement with
Ladenburg Thalmann & Co. Inc. and Compass Point Research and Trading, LLC (the
"Agents"), through which we may offer for sale, from time to time, up to $150.0
million of our common stock through the Agents, or to them, as principal for
their account. As of August 31, 2022, the Company sold 4,840,361 shares for
gross proceeds of $124.0 million at an average price of $25.61 for aggregate net
proceeds of $122.4 million (net of transaction costs). During the three and six
months ended August 31, 2022, there were no shares sold pursuant to the equity
distribution agreement with the Agents.



On August 9, 2021, the Company exchanged its existing $17.9 million Class F-R-3
Notes for $8.5 million Class F-1-R-3 Notes and $9.4 million Class F-2-R-3 Notes
at par. On August 11, 2021, the Company sold its Class F-1-R-3 Notes to third
parties, resulting in a realized loss of $0.1 million.



The Company has formed a wholly owned special purpose entity, Saratoga
Investment Funding II LLC, a Delaware limited liability company ("SIF II"), for
the purpose of entering into a $50.0 million senior secured revolving credit
facility with Encina Lender Finance, LLC (the "Lender"), supported by loans held
by SIF II and pledged to the Lender under the credit facility (the "Encina
Credit Facility). The Encina Credit Facility closed on October 4, 2021. During
the first two years following the closing date, SIF II may request an increase
in the commitment amount under the Encina Credit Facility to up to $75.0
million. The terms of the Encina Credit Facility require a minimum drawn amount
of $12.5 million at all times during the first six months following the closing
date, which increases to the greater of $25.0 million or 50% of the commitment
amount in effect at any time thereafter. The term of the Encina Credit Facility
is three years. Advances under the Encina Credit Facility bear interest at a
floating rate per annum equal to LIBOR plus 4.0%, with LIBOR having a floor of
0.75%, with customary provisions related to the selection by the Lender and the
Company of a replacement benchmark rate. Concurrently with the closing of the
Encina Credit Facility, all remaining amounts outstanding on the Company's
existing revolving credit facility with Madison Capital Funding, LLC were repaid
and the facility terminated.


On October 26, 2021, the Company and TJHA JV I LLC ("TJHA") entered into a
Limited Liability Company Agreement (the "LLC Agreement") to co-manage Saratoga
Senior Loan Fund I JV LLC ("SLF JV"). SLF JV is invested in Saratoga Investment
Corp Senior Loan Fund 2021-1 Ltd ("SLF 2021"), which is a wholly owned
subsidiary of SLF JV. SLF 2021 was formed for the purpose of making investments
in a diversified portfolio of broadly syndicated first lien and second lien term
loans or bonds in the primary and secondary markets.



The Company and TJHA have equal voting interest on all material decisions with
respect to SLF JV, including those involving its investment portfolio, and equal
control of corporate governance. No management fee is charged to SLF JV as
control and management of SLF JV is shared equally.



The Company and TJHA have committed to provide up to a combined $50.0 million of
financing to SLF JV through cash contributions, with the Company providing
$43.75 million and TJHA providing $6.25 million, resulting in an 87.5% and 12.5%
ownership between the two parties. The financing is issued in the form of an
unsecured note and equity. The unsecured note will pay a fixed rate of 10.0% per
annum and is due and payable in full on June 15, 2023. As of August 31, 2022,
the Company and TJHA's investment in SLF JV consisted of an unsecured note of
$14.1 million and $2.0million, respectively; and membership interest of $14.1
million and $6.7 million, respectively.



As of August 31, 2022, the Company earned $0.7 million of interest income related to SLF JV, which is included in interest income.




SLF JV's investment in SLF 2021 is in the form of an unsecured loan. The
unsecured note will pay a floating rate of LIBOR plus 7.00% per annum and is due
and payable in full on June 9, 2023. As of August 31, 2022, SLF JV's investment
in SLF 2021 had an aggregate fair value of approximately $23.7 million.



The Company has determined that SLF JV is an investment company under ASC 946;
however, in accordance with such guidance the Company will generally not
consolidate its investment in a company other than a wholly-owned investment
company subsidiary. SLF JV is not a wholly-owned investment company subsidiary
as the Company and TJHA each have an equal 50% voting interest in SLF JV and
thus neither party has a controlling financial interest. Furthermore, ASC 810
concludes that in a joint venture where both members have equal decision making
authority, it is not appropriate for one member to consolidate the joint venture
since neither has control. Accordingly, the Company does not consolidate SLF JV.



                                       93





On January 19, 2022, the Company issued $75.0 million in aggregate principal
amount of our 4.35% fixed-rate Notes due in 2027 (the "4.35% Notes 2027") for
net proceeds of $73.0 million, based on the public offering price of 99.317% of
the aggregate principal amount of the 4.35% Notes 2027, after deducting the
underwriting commissions of approximately $1.5 million. Offering costs incurred
were approximately $0.2 million. Interest on the 4.35% Notes 2027 is paid
semi-annually in arrears on February 28 and August 28, at a rate of 4.35% per
year, beginning August 28, 2022. The 4.35% Notes 2027 mature on February 28,
2027 and may be redeemed in whole or in part at the Company's option at any time
prior to November 28, 2026, at par plus a "make-whole" premium, and thereafter
at par. The net proceeds from the offering were used for general corporate
purposes in accordance with our investment objective and strategies. Financing
costs of $1.7 million related to the 4.35% Notes 2027 have been capitalized and
are being amortized over the term of the 4.35% Notes 2027.



On April 27, 2022, the Company issued $87.5 million in aggregate principal
amount of our 6.00% fixed-rate notes due 2027 (the "6.00% 2027 Notes") for net
proceeds of $84.8 million after deducting underwriting commissions of
approximately $2.7 million. Offering costs incurred were approximately $0.1
million. On May 10, 2022, the underwriters partially exercised their option to
purchase an additional $10.0 million in aggregate principal amount of the 6.00%
2027 Notes. Net proceeds to the Company were $9.7 million after deducting
underwriting commissions of approximately $0.3 million. Interest on the 6.00%
2027 Notes is paid quarterly in arrears on February 28, May 31, August 31 and
November 30, at a rate of 6.00% per year, beginning August 31, 2022. The 6.00%
2027 Notes mature on April 30, 2027 and commencing April 27, 2024, may be
redeemed in whole or in part at any time or from time to time at our option.
Financing costs of $3.3 million related to the 6.00% 2027 Notes have been
capitalized and are being amortized over the term of the 6.00% 2027 Notes. The
6.00% 2027 Notes are listed on the NYSE under the trading symbol "SAT" with a
par value of $25.00 per share.



On August 15, 2022, the Company issued $8.0 million in aggregate principal
amount of the 6.00% 2027 Notes for net proceeds of $7.8 million, based on the
public offering price of 97.80% of the aggregate principal amount of the 6.00%
Notes 2027. Additional offering costs incurred were approximately $0.03 million.
Additional financing costs of $0.03 million related to the 6.00% 2027 Notes have
been capitalized and are being amortized over the term of the 6.00% 2027 Notes.



Recent COVID-19 Developments



We have been closely monitoring, and will continue to monitor, the impact of the
COVID-19 pandemic (including new variants of COVID-19) and its impact on all
aspects of our business, including how it will impact our portfolio companies,
employees, due diligence and underwriting processes, and financial markets.
Given the continued fluidity of the pandemic, we cannot estimate the long-term
impact of COVID-19 on our business, future results of operations, financial
position or cash flows at this time. Further, the operational and financial
performance of the portfolio companies in which we make investments may be
significantly impacted by COVID-19, which may in turn impact the valuation of
our investments. We believe our portfolio companies have taken, and continue to
take, immediate actions to effectively and efficiently respond to the challenges
posed by COVID-19 and related restrictions imposed by state and local
governments and other private businesses, including developing liquidity plans
supported by internal cash reserves, and shareholder support. The COVID-19
pandemic and preventative measures taken to contain or mitigate its spread have
caused, and are continuing to cause, business shutdowns, cancellations of events
and restrictions on travel, significant reductions in demand for certain goods
and services, reductions in business activity and financial transactions, supply
chain disruptions, labor difficulties and shortages, commodity inflation and
elements of economic and financial market instability in the United States and
globally. Such effects will likely continue for the duration of the pandemic,
which is uncertain, and for some period thereafter.



Critical Accounting Policies and Use of Estimates



Basis of Presentation



The preparation of financial statements in accordance with U.S. generally
accepted accounting principles ("U.S. GAAP") requires management to make certain
estimates and assumptions affecting amounts reported in the Company's
consolidated financial statements. We have identified investment valuation,
revenue recognition and the recognition of capital gains incentive fee expense
as our most critical accounting estimates. We continuously evaluate our
estimates, including those related to the matters described below. These
estimates are based on the information that is currently available to us and on
various other assumptions that we believe to be reasonable under the
circumstances. Actual results could differ materially from those estimates under
different assumptions or conditions. A discussion of our critical accounting
policies and estimates follows.



Investment Valuation



The Company accounts for its investments at fair value in accordance with the
Financial Accounting Standards Board ("FASB") Accounting Standards Codification
("ASC") Topic 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820
defines fair value, establishes a framework for measuring fair value,
establishes a fair value hierarchy based on the quality of inputs used to
measure fair value and enhances disclosure requirements for fair value
measurements. ASC 820 requires the Company to assume that its investments are to
be sold or its liabilities are to be transferred at the measurement date in the
principal market to independent market participants, or in the absence of a
principal market, in the most advantageous market, which may be a hypothetical
market. Market participants are defined as buyers and sellers in the principal
or most advantageous market that are independent, knowledgeable, and willing and
able to transact.



                                       94





Investments for which market quotations are readily available are fair valued at
such market quotations obtained from independent third-party pricing services
and market makers subject to any decision by our board of directors to approve a
fair value determination to reflect significant events affecting the value of
these investments. We value investments for which market quotations are not
readily available at fair value as approved, in good faith, by our board of
directors based on input from Saratoga Investment Advisors, the audit committee
of our board of directors and a third party independent valuation firm. We use
multiple techniques for determining fair value based on the nature of the
investment and experience with those types of investments and specific portfolio
companies. The selections of the valuation techniques and the inputs and
assumptions used within those techniques often require subjective judgements and
estimates. These techniques include market comparables, discounted cash flows
and enterprise value waterfalls. Fair value is best expressed as a range of
values from which the Company determines a single best estimate. The types of
inputs and assumptions that may be considered in determining the range of values
of our investments include the nature and realizable value of any collateral,
the portfolio company's ability to make payments, market yield trend analysis
and volatility in future interest rates, call and put features, the markets in
which the portfolio company does business, comparison to publicly traded
companies, discounted cash flows and other relevant factors.



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



  ? Each investment is initially valued by the responsible investment
    professionals of Saratoga Investment Advisors and preliminary valuation

conclusions are documented and discussed with our senior management; and

? An independent valuation firm engaged by our board of directors independently

reviews a selection of these preliminary valuations each quarter so that the

valuation of each investment for which market quotes are not readily available

is reviewed by the independent valuation firm at least once each fiscal year.

We use a third-party independent valuation firm to value our investment in the

subordinated notes of Saratoga CLO and the Class F-2-R-3 Notes tranche of the

    Saratoga CLO every quarter.



In addition, all our investments are subject to the following valuation process:

? The audit committee of our board of directors reviews and approves each

preliminary valuation and Saratoga Investment Advisors and an independent

valuation firm (if applicable) will supplement the preliminary valuation to

    reflect any comments provided by the audit committee; and



? Our board of directors discusses the valuations and approves the fair value of

each investment, in good faith, based on the input of Saratoga Investment

Advisors, independent valuation firm (to the extent applicable) and the audit

    committee of our board of directors.



Our investment in Saratoga CLO is carried at fair value, which is based on a
discounted cash flows that utilizes prepayment, re-investment and loss
assumptions based on historical experience and projected performance, economic
factors, the characteristics of the underlying cash flow, and market comparables
for equity interests in collateralized loan obligation funds similar to Saratoga
CLO, when available, as determined by Saratoga Investment Advisors and
recommended to our board of directors. Specifically, we use Intex cash flows, or
an appropriate substitute, to form the basis for the valuation of our investment
in Saratoga CLO. The cash flows use a set of inputs including projected default
rates, recovery rates, reinvestment rates and prepayment rates in order to
arrive at estimated valuations. The inputs are based on available market data
and projections provided by third parties as well as management estimates. We
use the output from the Intex models (i.e., the estimated cash flows) to perform
a discounted cash flow analysis on expected future cash flows to determine the
valuation for our investment in Saratoga CLO.



In December 2020, the U.S. Securities and Exchange Commission (the "SEC")
adopted a new rule providing a framework for fund valuation practices. New Rule
2a-5 under the 1940 Act ("Rule 2a-5") establishes requirements for determining
fair value in good faith for purposes of the 1940 Act. Rule 2a-5 will permit
boards, subject to board oversight and certain other conditions, to designate
certain parties to perform fair value determinations. Rule 2a-5 also defines
when market quotations are "readily available" for purposes of the 1940 Act and
the threshold for determining whether a fund must determine the fair value of a
security. The SEC also adopted new Rule 31a-4 under the 1940 Act ("Rule 31a-4"),
which provides the recordkeeping requirements associated with fair value
determinations. Finally, the SEC is rescinding previously issued guidance on
related issues, including the role of the board in determining fair value and
the accounting and auditing of fund investments. Rule 2a-5 and Rule 31a-4 became
effective on March 8, 2021, and have a compliance date of September 8, 2022.
While our board of directors has not elected to designate Saratoga Investment
Advisors as the valuation designee, the Company has adopted certain revisions to
its valuation policies and procedures in order comply with the applicable
requirements of Rule 2a-5 and Rule 31a-4.



                                       95





Revenue Recognition



Income Recognition



Interest income, adjusted for amortization of premium and accretion of discount,
is recorded on an accrual basis to the extent that such amounts are expected to
be collected. The Company stops accruing interest on its investments when it is
determined that interest is no longer collectible. Discounts and premiums on
investments purchased are accreted/amortized over the life of the respective
investment using the effective yield method. The amortized cost of investments
represents the original cost adjusted for the accretion of discounts and
amortization of premiums on investments.



Loans are generally placed on non-accrual status when there is reasonable doubt
that principal or interest will be collected. Accrued interest is generally
reserved when a loan is placed on non-accrual status. Interest payments received
on non-accrual loans may be recognized as a reduction in 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.



Payment-in-Kind Interest



The Company holds debt and preferred equity investments in its portfolio that
contain a payment-in-kind ("PIK") interest provision. The PIK interest, which
represents contractually deferred interest added to the investment balance that
is generally due at maturity, is generally recorded on the accrual basis to the
extent such amounts are expected to be collected. We stop accruing PIK interest
if we do not expect the issuer to be able to pay all principal and interest
when
due.



Revenues


We generate revenue in the form of interest income and capital gains on the debt
investments that we hold and capital gains, if any, on equity interests that we
may acquire. We expect our debt investments, whether in the form of leveraged
loans or mezzanine debt, to have terms of up to ten years, and to bear interest
at either a fixed or floating rate. Interest on debt will be payable generally
either quarterly or semi-annually. In some cases, our debt or preferred equity
investments may provide for a portion or all of the interest to be PIK. To the
extent interest is PIK, it will be payable through the increase of the principal
amount of the obligation by the amount of interest due on the then-outstanding
aggregate principal amount of such obligation. The principal amount of the debt
and any accrued but unpaid interest will generally become due at the maturity
date. In addition, we may generate revenue in the form of commitment,
origination, structuring or diligence fees, fees for providing managerial
assistance or investment management services and possibly consulting fees. Any
such fees will be generated in connection with our investments and recognized as
earned. We may also invest in preferred equity or common equity securities that
pay dividends on a current basis.



On January 22, 2008, we entered into a collateral management agreement with
Saratoga CLO, pursuant to which we act as its collateral manager. The Saratoga
CLO was initially refinanced in October 2013 with its reinvestment period
extended to October 2016. On November 15, 2016, we completed a second
refinancing of the Saratoga CLO with its reinvestment period extended to October
2018.



On December 14, 2018, we completed a third refinancing and upsize of the
Saratoga CLO. The third Saratoga CLO refinancing, among other things, extended
its reinvestment period to January 2021, and extended its legal maturity date to
January 2030. A non-call period of January 2020 was also added. Following this
refinancing, the Saratoga CLO portfolio increased from approximately $300.0
million in aggregate principal amount to approximately $500.0 million of
predominantly senior secured first lien term loans. In addition to refinancing
its liabilities, we invested an additional $13.8 million in all of the newly
issued subordinated notes of the Saratoga CLO and also purchased $2.5 million in
aggregate principal amount of the Class F-R-2 and $7.5 million in aggregate
principal amount of the Class G-R-2 notes tranches at par, with a coupon of 3M
USD LIBOR plus 8.75% and 3M USD LIBOR plus 10.00%, respectively. As part of this
refinancing, we also redeemed our existing $4.5 million in aggregate amount of
the Class F notes tranche at par and the $20.0 million CLO 2013-1 Warehouse
Loan
was repaid.



                                       96




On February 11, 2020, the Company entered into an unsecured loan agreement with
Saratoga Investment Corp. CLO 2013-1 Warehouse 2, Ltd. ("CLO 2013-1 Warehouse
2"), a wholly owned subsidiary Saratoga CLO.



On February 26, 2021, the Company completed the fourth refinancing of the
Saratoga CLO. This fourth Saratoga CLO refinancing, among other things, extended
the Saratoga CLO reinvestment period to April 2024, and extended its legal
maturity to April 2033. The non-call period was extended to February 2022. In
addition, and as part of the refinancing, the Saratoga CLO has also been upsized
from $500 million in assets to approximately $650 million. As part of this
refinancing and upsizing, the Company invested an additional $14.0 million in
all of the newly issued subordinated notes of the Saratoga CLO, and purchased
$17.9 million in aggregate principal amount of the Class F-R-3 Notes tranche at
par. Concurrently, the existing $2.5 million of Class F-R-2 Notes, $7.5 million
of Class G-R-2 Notes and $25.0 million of the CLO 2013-1 Warehouse 2 Loan were
repaid. The Company also paid $2.6 million of transaction costs related to the
refinancing and upsizing on behalf of the Saratoga CLO, to be reimbursed from
future equity distributions. At August 31, 2021, the outstanding receivable of
$2.6 million was repaid in full.



On August 9, 2021, the Company exchanged its existing $17.9 million Class F-R-3
Notes for $8.5 million Class F-1-R-3 Notes and $9.4 million Class F-2-R-3 Notes
at par. On August 11, 2021, the Company sold its Class F-1-R-3 Notes to third
parties, resulting in a realized loss of $0.1 million.



The Saratoga CLO remains effectively 100% owned and managed by Saratoga Investment Corp. We receive a base management fee of 0.10% per annum and a subordinated management fee of 0.40% per annum of the outstanding principal amount of Saratoga CLO's assets, paid quarterly to the extent of available proceeds. Prior to the second refinancing and the issuance of the 2013-1 Amended CLO Notes, we received a base management fee of 0.25% per annum and a subordinated management fee of 0.25% per annum of the outstanding principal amount of Saratoga CLO's assets, paid quarterly to the extent of available proceeds.




Following the third refinancing and the issuance of the 2013-1 Reset CLO Notes
on December 14, 2018, we are no longer entitled to an incentive management fee
equal to 20.0% of excess cash flow to the extent the Saratoga CLO subordinated
notes receive an internal rate of return paid in cash equal to or greater than
12.0%.



Interest income on our investment in Saratoga CLO is recorded using the
effective interest method in accordance with the provisions of ASC Topic 325-40,
Investments-Other, Beneficial Interests in Securitized Financial Assets ("ASC
325-40"), based on the anticipated yield and the estimated cash flows over the
projected life of the investment. Yields are revised when there are changes in
actual or estimated cash flows due to changes in prepayments and/or
re-investments, credit losses or asset pricing. Changes in estimated yield are
recognized as an adjustment to the estimated yield over the remaining life of
the investment from the date the estimated yield was changed.



                                       97





Expenses



Our primary operating expenses include the payment of investment advisory and
management fees, professional fees, directors and officers insurance, fees paid
to directors who are not "interested persons" (as defined in Section 2(a)(19) of
the 1940 Act) of the Company ("independent directors") and administrator
expenses, including our allocable portion of our administrator's overhead. Our
investment advisory and management fees compensate our Manager for its work in
identifying, evaluating, negotiating, closing and monitoring our investments. We
bear all other costs and expenses of our operations and transactions, including
those relating to:



 ? organization;



? calculating our net asset value (including the cost and expenses of any

independent valuation firm);

? expenses incurred by our Manager payable to third parties, including agents,

consultants or other advisers, in monitoring our financial and legal affairs

and in monitoring our investments and performing due diligence on our

prospective portfolio companies;

? expenses incurred by our Manager payable for travel and due diligence on our

prospective portfolio companies;

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

? offerings of our common stock and other securities;

? investment advisory and management fees;

? fees payable to third parties, including agents, consultants or other advisers,

relating to, or associated with, evaluating and making investments;

? transfer agent and custodial fees;

? federal and state registration fees;

? all costs of registration and listing our common stock on any securities

   exchange;



? federal, state and local taxes;

? independent directors' fees and expenses;

? costs of preparing and filing reports or other documents required by

governmental bodies (including the SEC and the SBA);

? costs of any reports, proxy statements or other notices to common stockholders

   including printing costs;




? our fidelity bond, directors and officers errors and omissions liability

insurance, and any other insurance premiums;

? direct costs and expenses of administration, including printing, mailing, long

distance telephone, copying, secretarial and other staff, independent auditors

and outside legal costs; and

? administration fees and all other expenses incurred by us or, if applicable,

the administrator in connection with administering our business (including

payments under the Administration Agreement based upon our allocable portion of

the administrator's overhead in performing its obligations under an

Administration Agreement, including rent and the allocable portion of the cost

of our officers and their respective staffs (including travel expenses)).




                                       98





Pursuant to the investment advisory and management agreement that we had with
GSCP (NJ), L.P., our former investment adviser and administrator, we had agreed
to pay GSCP (NJ), L.P. as investment adviser a quarterly base management fee of
1.75% of the average value of our total assets (other than cash or cash
equivalents but including assets purchased with borrowed funds) at the end of
the two most recently completed fiscal quarters and an incentive fee.



The incentive fee had two parts:

? A fee, payable quarterly in arrears, equal to 20.0% of our pre-incentive fee

net investment income, expressed as a rate of return on the value of the net

assets at the end of the immediately preceding quarter, that exceeded a 1.875%

quarterly hurdle rate measured as of the end of each fiscal quarter. Under this

provision, in any fiscal quarter, our investment adviser received no incentive

fee unless our pre-incentive fee net investment income exceeded the hurdle rate

of 1.875%. Amounts received as a return of capital were not included in

calculating this portion of the incentive fee. Since the hurdle rate was based

on net assets, a return of less than the hurdle rate on total assets could

still have resulted in an incentive fee.

? A fee, payable at the end of each fiscal year, equal to 20.0% of our net

realized capital gains, if any, computed net of all realized capital losses and

unrealized capital depreciation, in each case on a cumulative basis on each

investment in the Company's portfolio, less the aggregate amount of capital

   gains incentive fees paid to the investment adviser through such date.




We deferred cash payment of any incentive fee otherwise earned by our former
investment adviser if, during the then most recent four full fiscal quarters
ending on or prior to the date such payment was to be made, the sum of (a) our
aggregate distributions to our stockholders and (b) our change in net assets
(defined as total assets less liabilities) (before taking into account any
incentive fees payable during that period) was less than 7.5% of our net assets
at the beginning of such period. These calculations were appropriately pro-rated
for the first three fiscal quarters of operation and adjusted for any share
issuances or repurchases during the applicable period. Such incentive fee would
become payable on the next date on which such test had been satisfied for the
most recent four full fiscal quarters or upon certain terminations of the
investment advisory and management agreement. We commenced deferring cash
payment of incentive fees during the quarterly period ended August 31, 2007 and
continued to defer such payments through the quarterly period ended May 31,
2010. As of July 30, 2010, the date on which GSCP (NJ), L.P. ceased to be our
investment adviser and administrator, we owed GSCP (NJ), L.P. $2.9 million in
fees for services previously provided to us; of which $0.3 million has been paid
by us. GSCP (NJ), L.P. agreed to waive payment by us of the remaining $2.6
million in connection with the consummation of the stock purchase transaction
with Saratoga Investment Advisors and certain of its affiliates described
elsewhere in this Quarterly Report.



The terms of the investment advisory and management agreement with Saratoga
Investment Advisors, our current investment adviser, are substantially similar
to the terms of the investment advisory and management agreement we had entered
into with GSCP (NJ), L.P., our former investment adviser, except for the
following material distinctions in the fee terms:



? The capital gains portion of the incentive fee was reset with respect to gains

and losses from May 31, 2010, and therefore losses and gains incurred prior to

such time will not be taken into account when calculating the capital gains fee

payable to Saratoga Investment Advisors and, as a result, Saratoga Investment

Advisors will be entitled to 20.0% of net gains that arise after May 31, 2010.

In addition, the cost basis for computing realized gains and losses on

investments held by us as of May 31, 2010 equal the fair value of such

investment as of such date. Under the investment advisory and management

agreement with our former investment adviser, GSCP (NJ), L.P., the capital

gains fee was calculated from March 21, 2007, and the gains were substantially

   outweighed by losses.

? Under the "catch up" provision, 100.0% of our pre-incentive fee net investment

income with respect to that portion of such pre-incentive fee net investment

income that exceeds 1.875% but is less than or equal to 2.344% in any fiscal

quarter is payable to Saratoga Investment Advisors. This will enable Saratoga

Investment Advisors to receive 20.0% of all net investment income as such

amount approaches 2.344% in any quarter, and Saratoga Investment Advisors will

receive 20.0% of any additional net investment income. Under the investment

advisory and management agreement with our former investment adviser, GSCP

(NJ), L.P. only received 20.0% of the excess net investment income over 1.875%.

? We will no longer have deferral rights regarding incentive fees in the event

that the distributions to stockholders and change in net assets is less than

   7.5% for the preceding four fiscal quarters.




Capital Gains Incentive Fee



The Company records an expense accrual relating to the capital gains incentive
fee payable by the Company to its Manager when the unrealized gains on its
investments exceed all realized capital losses on its investments given the fact
that a capital gains incentive fee would be owed to the Manager if the Company
were to liquidate its investment portfolio at such time. The actual incentive
fee payable to the Company's Manager related to capital gains will be determined
and payable in arrears at the end of each fiscal year and will include only
realized capital gains for the period.



                                       99




Recent Accounting Pronouncements




In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform ("ASU
2020-04"). The amendments in ASU 2020-04 provide optional expedients and
exceptions for applying GAAP to contracts, hedging relationships, and other
transactions affected by reference rate reform if certain criteria are met. The
Company has agreements that have LIBOR as a reference rate with certain
portfolio companies and under the Encina Credit Facility. Many of these
agreements (including the credit agreements relating to the Encina Credit
Facility) include an alternative successor rate or language for choosing an
alternative successor rate when LIBOR reference is no longer considered to be
appropriate. With respect to other agreements, the Company intends to work with
its portfolio companies to modify agreements to choose an alternative successor
rate. 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. Management does not believe this optional
guidance has a material impact on the Company's consolidated financial
statements and disclosures.



Portfolio and Investment Activity




                         Investment Portfolio Overview

                                                                 August 31,       February 28,
                                                                    2022              2022
                                                                        ($ in millions)
Number of investments(1)                                                116                94
Number of portfolio companies(2)                                         52                45
Average investment per portfolio company(2)                    $       17.7
     $       17.3
Average investment size(1)                                     $        8.0      $        8.4
Weighted average maturity(3)                                        2.9 yrs           2.9 yrs
Number of industries (5)                                                 44                38
Non-performing or delinquent investments (fair value)          $        9.7      $          -
Fixed rate debt (% of interest earning portfolio)(3)           $   16.7(2.0 )%   $   16.9(2.5 )%
Fixed rate debt (weighted average current coupon)(3)                   11.4 %            10.0 %

Floating rate debt (% of interest earning portfolio)(3) $ 811.7(98.0 )% $ 671.2(97.5 )% Floating rate debt (weighted average current spread over LIBOR)(3)(4)

                                                            6.0 %             7.1 %



(1) Excludes our investment in the subordinated notes of Saratoga CLO.

(2) Excludes our investment in the subordinated notes of Saratoga CLO and Class

F-R-3 Note tranche, as well as the unsecured notes and equity interests in

    the SLF JV.



(3) Excludes our investment in the subordinated notes of Saratoga CLO and equity

interests, as well as the unsecured notes and equity interests in the SLF JV.

(4) Calculation uses either 1-month or 3-month LIBOR, depending on the

contractual terms, and after factoring in any existing LIBOR floors.

(5) Our investment in the subordinated notes of Saratoga CLO and Class F-R-3 Note

    tranche, as well as the unsecured notes and equity interests in the SLF JV
    are included in Structured Finance Securities industry.



During the three months ended August 31, 2022, we invested $140.5 million  in
new or existing portfolio companies and had $75.1 million in aggregate amount of
exits and repayments resulting in net investment of $65.5 million for the
period. During the three months ended August 31, 2021, we invested $133.9
million in new or existing portfolio companies and had $152.7 million in
aggregate amount of exits and repayments resulting in net repayments of $18.8
million for the period.


During the six months ended August 31, 2022, we invested $237.7 million  in new
or existing portfolio companies and had $85.1 million in aggregate amount of
exits and repayments resulting in net investment of $152.6 million for the
period. During the six months ended August 31, 2021, we invested $235.2 million
in new or existing portfolio companies and had $149.8 million in aggregate
amount of exits and repayments resulting in net investment of $85.4 million
for
the period.



                                      100





                             Portfolio Composition



Our portfolio composition at August 31, 2022 and February 28, 2022 at fair value
was as follows:



                                                 August 31, 2022                   February 28, 2022
                                                              Weighted                           Weighted
                                            Percentage        Average        Percentage          Average
                                             of Total         Current         of Total           Current
                                             Portfolio         Yield          Portfolio           Yield
First lien term loans                               83.0 %         10.1 %            77.3 %             8.3 %
Second lien term loans                               2.5            7.9               5.4              11.1
Unsecured term loans                                 1.8            9.8               1.9               9.7
Structured finance securities                        3.4            8.9    
          4.7              10.5
Equity interests                                     9.3              -              10.7                 -
Total                                              100.0 %          9.0 %           100.0 %             7.7 %




At August 31, 2022, our investment in the subordinated notes of Saratoga CLO, a
collateralized loan obligation fund, had a fair value of $23.4 million and
constituted 2.5% of our portfolio. This investment constitutes a first loss
position in a portfolio that, as of August 31, 2022 and February 28, 2022, was
composed of $653.4 million and $660.2 million, respectively, in aggregate
principal amount of primarily senior secured first lien term loans. In addition,
as of August 31, 2022, we also own $9.4 million in aggregate principal of the
F-2-R-3 Notes in the Saratoga CLO, which only rank senior to the subordinated
notes.



This investment is subject to unique risks. (See Part 1. Item 1A. Risk
Factors-"Our investment in Saratoga CLO constitutes a leveraged investment in a
portfolio of predominantly senior secured first lien term loans and is subject
to additional risks and volatility" in our Annual Report on Form 10-K for the
fiscal year ended February 28, 2022).



We do not consolidate the Saratoga CLO portfolio in our consolidated financial
statements. Accordingly, the metrics below do not include the underlying
Saratoga CLO portfolio investments. However, at August 31, 2022, $591.7 million
or 98.0% of the Saratoga CLO portfolio investments in terms of market value had
a CMR (as defined below) color rating of green or yellow. At February 28, 2022,
$630.3 million or 98.7% of the Saratoga CLO portfolio investments in terms of
market value had a CMR color rating of green or yellow and four Saratoga CLO
portfolio investments were in default with a fair value of $2.8 million. For
more information relating to the Saratoga CLO, see the audited financial
statements for Saratoga in our Annual Report on Form 10-K for the fiscal year
ended February 28, 2022.


Saratoga Investment Advisors normally grades all of our investments using a credit and monitoring rating system ("CMR"). The CMR consists of a single component: a color rating. The color rating is based on several criteria, including financial and operating strength, probability of default, and restructuring risk. The color ratings are characterized as follows: (Green)-performing credit; (Yellow)-underperforming credit; (Red)-in principal payment default and/or expected loss of principal.



                                      101





                           Portfolio CMR distribution



The CMR distribution for our investments at August 31, 2022 and February 28,
2022 was as follows:



Saratoga Investment Corp.



                                                   August 31, 2022                      February 28, 2022
                                                                Percentage                             Percentage
                                           Investments at        of Total        Investments at         of Total
Color Score                                  Fair Value         Portfolio          Fair Value          Portfolio
                                                                      ($ in thousands)
Green                                      $       805,740             84.4 %   $         690,672             84.5 %
Yellow                                              36,704              3.8                10,593              1.3
Red                                                      -              0.0                     -              0.0
N/A(1)                                             112,220             11.8               116,302             14.2
Total                                      $       954,664            100.0 %   $         817,567            100.0 %




(1) Comprised of our investment in the subordinated notes of Saratoga CLO and

    equity interests.




The change in reserve from $0.0 million as of February 28, 2022 to $1.2 million
as of August 31, 2022 was related to the non-accrual of interest income related
to the Knowland Group.



The CMR distribution of Saratoga CLO investments at August 31, 2022 and February
28, 2022 was as follows:



Saratoga CLO
                                                    August 31, 2022                        February 28, 2022
                                                               Percentage of                            Percentage of
                                           Investments at          Total           Investments at           Total
Color Score                                  Fair Value          Portfolio           Fair Value           Portfolio
                                                                        ($ in thousands)
Green                                      $       558,144               92.4 %   $         595,324               93.2 %
Yellow                                              33,580                5.6                34,983                5.5
Red                                                 12,307                2.0                 8,622                1.3
N/A(1)                                                   -                0.0                    34                0.0
Total                                      $       604,031              100.0 %   $         638,963              100.0 %




(1) Comprised of Saratoga CLO's equity interests.




                                      102




            Portfolio composition by industry grouping at fair value


The following table shows our portfolio composition by industry grouping at fair value at August 31, 2022 and February 28, 2022:

Saratoga Investment Corp.

                                                      August 31, 2022                      February 28, 2022
                                                                  Percentage                            Percentage
                                               Investments         of Total          Investments         of Total
                                              At Fair Value        

Portfolio At Fair Value Portfolio

                                                                        ($ in thousands)
Healthcare Software                          $        92,467               9.7 %   $        90,126              11.0 %
IT Services                                           83,506               8.7              80,804               9.9
HVAC Services and Sales                               64,701               6.8              29,976               3.7
Education Software                                    61,262               6.4              33,656               4.1
Consumer Services                                     58,657               6.1              38,234               4.7
Real Estate Services                                  53,105               5.6              53,506               6.6
Education Services                                    34,372               3.6              35,309               4.3
Structured Finance Securities(1)                      32,327               3.4              38,030               4.7
Marketing Orchestration Software                      28,544              
3.0              28,777               3.5
Specialty Food Retailer                               26,992               2.8              34,013               4.2
Sports Management                                     26,549               2.8              26,654               3.3
Healthcare Services                                   26,169               2.7              42,054               5.1
Talent Acquisition Software                           25,940               2.7              19,652               2.4
Direct Selling Software                               25,936               2.7                   -               0.0
Financial Services                                    24,906               2.6              23,540               2.9
Restaurant                                            24,808               2.6              15,686               1.9
Hospitality/Hotel                                     21,833               2.3              19,925               2.4
Mentoring Software                                    20,937               2.2              18,321               2.2
Legal Software                                        20,930               2.2               7,425               0.9
Investment Fund                                       20,799               2.2              25,140               3.1
Marketing Services                                    17,200               1.8              17,327               2.1
Payroll Services                                      15,423               1.6              17,000               2.1
Insurance Software                                    14,907               1.6              10,921               1.3
Corporate Education Software                          14,880               1.6                   -               0.0
Employee Collaboration Software                       12,086              
1.3              10,000               1.2
Lead Management Software                              11,896               1.2                   -               0.0
Research Software                                     10,493               1.1                   -               0.0
Non-profit Services                                   10,000               1.0              10,039               1.2
Alternative Investment Management Software             9,920              
1.0                   -               0.0
Waste Services                                         9,000               0.9               9,000               1.1
Dental Practice Management                             8,626               0.9               8,403               1.0
Mental Healthcare Services                             8,419               0.9                   -               0.0
Industrial Products                                    8,263               0.9               8,427               1.0
Financial Services Software                            8,040               0.8               5,940               0.7
Field Service Management                               6,888               0.7               6,981               0.9
Corporate Education Software                           3,653               0.4               3,306               0.4
Office Supplies                                        3,628               0.4               3,726               0.5
Cyber Security                                         2,418               0.3               1,636               0.2
Staffing Services                                      2,061               0.2               1,912               0.2
Consumer Products                                        921               0.1                 693               0.1
Facilities Maintenance                                   617               0.1                 482               0.1
Healthcare Products Manufacturing                        585               0.1                 714               0.1
Healthcare Supply                                          -               0.0               5,194               0.6
Dental Practice Management Software                        -              
0.0              35,038               4.3
Total                                        $       954,664             100.0 %   $       817,567             100.0 %



(1) As of August 31, 2022 and February 28, 2022, comprised of our investment in

the subordinated notes and F-2-R-3 Notes of Saratoga CLO, as well as the

    unsecured notes and equity interests in the SLF JV.




                                      103




The following table shows Saratoga CLO's portfolio composition by industry grouping at fair value at August 31, 2022 and February 28, 2022:




Saratoga CLO
                                                     August 31, 2022                      February 28, 2022
                                                                 Percentage                             Percentage
                                            Investments at        of Total         Investments at        of Total
                                              Fair Value          Portfolio          Fair Value          Portfolio
                                                                        ($ in thousands)
Banking, Finance, Insurance & Real Estate   $       112,361              18.6 %   $        123,124              19.4 %
Services: Business                                   58,705               9.7               69,491              10.9
High Tech Industries                                 58,162               9.6               60,048               9.4
Healthcare & Pharmaceuticals                         38,153               6.3               43,136               6.9
Services: Consumer                                   34,169               5.7               41,393               6.5
Telecommunications                                   24,895               4.1               27,058               4.2
Consumer goods: Durable                              24,604               4.1               21,085               3.2
Retail                                               22,691               3.8               16,050               2.5
Chemicals, Plastics, & Rubber                        21,604               3.6               22,669               3.5
Automotive                                           21,069               3.5               24,207               3.7
Media: Advertising, Printing & Publishing            20,087               3.3               19,660               3.1
Containers, Packaging & Glass                        18,478               3.1               15,253               2.4
Beverage, Food & Tobacco                             17,748               2.9               22,086               3.4
Aerospace & Defense                                  13,459               2.2               14,369               2.2
Consumer goods: Non-durable                          13,308               2.2               14,359               2.2
Media: Broadcasting & Subscription                   11,628               1.9               11,539               1.8
Construction & Building                              11,279               1.9               11,102               1.7
Hotel, Gaming & Leisure                              11,156               1.8               16,572               2.6
Capital Equipment                                     9,876               1.6               10,062               1.6
Utilities: Oil & Gas                                  8,048               1.3                8,095               1.3
Health Care Equipment & Supplies                      7,215               1.2                    -               0.0
Media: Diversified & Production                       6,949               1.2                9,203               1.4
Transportation: Consumer                              6,755               1.1                4,891               0.8
Transportation: Cargo                                 4,397               0.7                3,752               0.6
Wholesale                                             3,833               0.6                4,155               0.7
Forest Products & Paper                               3,560               0.6                9,367               1.5
Energy: Electricity                                   3,376               0.6                3,660               0.6
Metals & Mining                                       3,336               0.6                6,846               1.1
Diversified Financial Services                        2,903               0.5                    -               0.0
Software                                              2,613               0.4                    -               0.0
Utilities: Electric                                   2,325               0.4                4,026               0.6
Media                                                 1,861               0.3                    -               0.0
Environmental Industries                                967               0.2                1,550               0.2
Diversified Telecommunication Services                  935               0.2                    -               0.0
Real Estate Investment Trusts (REITs)                   872               0.1                    -               0.0
Leisure Products                                        483               0.1                    -               0.0
Energy: Oil & Gas                                       171               0.0                  155               0.0
Total                                       $       604,031             100.0 %   $        638,963     $         100 %




                                      104





           Portfolio composition by geographic location at fair value


The following table shows our portfolio composition by geographic location at
fair value at August 31, 2022 and February 28, 2022. The geographic composition
is determined by the location of the corporate headquarters of the portfolio
company.



                                                   August 31, 2022                       February 28, 2022
                                           Investments at      Percentage                                 Percentage
                                                Fair            of Total        Investments at Fair        of Total
                                               Value           Portfolio               Value              Portfolio
                                                                        ($ in thousands)
Southeast                                  $      280,946             29.4 %   $             257,199             31.5 %
West                                              168,044             17.6                   183,643             22.5
Midwest                                           180,607             18.9                   160,718             19.7
Northwestt                                          2,418              0.3                    62,475              7.6
Northeast                                         134,643             14.1                    85,414             10.4
Southwest                                         114,628             12.0                     1,636              0.2
Other(1)                                           73,378              7.7                    66,482              8.1
Total                                      $      954,664            100.0 %   $             817,567            100.0 %





(1) Comprised of our investment in the subordinated notes and F-2-R-3 Notes of

Saratoga CLO, as well as the unsecured notes and equity interests in the SLF

    JV.




Results of operations


Operating results for the three and six months ended August 31, 2022 and August
31, 2021 was as follows:



                                               For the three months ended             For the six months ended
                                             August 31,          August 31,        August 31,          August 31,
                                                2022                2021              2022                2021
                                                                       ($ in thousands)
Total investment income                    $       21,853       $      18,441     $      40,532       $      35,257
Total operating expenses                           14,155              12,048            24,858              26,308
Net investment income                               7,698               6,393            15,674               8,949
Net realized gain (loss) from
investments                                         7,944               1,502             8,106               3,412
Income tax (provision) benefit from
realized gain on investments                            -                (449 )              69                (449 )
Net change in unrealized appreciation
(depreciation) on investments                     (13,259 )             3,377           (22,591 )            20,189
Net change in provision for deferred
taxes on unrealized (appreciation)
depreciation on investments                          (230 )            (1,329 )            (592 )            (1,559 )
Realized losses on extinguishment of
debt                                               (1,205 )            (1,552 )          (1,205 )            (1,552 )
Net increase (decrease) in net assets
resulting from operations                  $          948       $       7,942     $        (539 )     $      28,990




Investment income

The composition of our investment income for three and six months ended August 31, 2022 and August 31, 2021 was as follows:



                                              For the three months ended            For the six months ended
                                            August 31,          August 31,        August 31,         August 31,
                                               2022                2021              2022               2021
                                                                     ($ in thousands)
Interest from investments                  $      19,233       $      15,114     $     35,839       $     28,801
Interest from cash and cash equivalents               34                  
1               35                  2
Management fee income                                817                 814            1,633              1,633
Dividend Income                                      213                 659              513              1,057
Structuring and advisory fee income                1,408               1,038            2,260              2,340
Other income                                         148                 815              252              1,425
Total investment income                    $      21,853       $      18,441     $     40,532       $     35,258




                                      105





For the three months ended August 31, 2022, total investment income increased
$3.4 million, or 18.5%, to $21.9 million from $18.4 million for the three months
ended August 31, 2021. Interest income from investments increased $4.1 million,
or 27.3%, to $19.2 million for the three months ended August 31, 2022 from $15.1
million for the three months ended August 31, 2021. Interest income from
investment increased due to the increase of $288.6 million, or 43.3%, in total
investments at August 31, 2022 from $666.1 million at August 31, 2021 to $954.7
million as of August 31, 2022, combined with the increase in the weighted
average current yield on investments to 9.0%, up from 8.2% at August 31, 2021.



For the six months ended August 31, 2022, total investment income increased $5.3
million, or 15.0%, to $40.5 million from $35.3 million for the six months ended
August 31, 2021. Interest income from investments increased $7.0 million, or
24.4%, to $35.8 million for the six months ended August 31, 2022 from $28.8
million for the six months ended August 31, 2021. Interest income from
investment increased due to the increase of $288.6 million, or 30.2%, in total
investments at August 31, 2022 from $666.1 million at August 31, 2021 to $954.7
million as of August 31, 2022.



For the three and six months ended August 31, 2022 and August 31, 2021, total
PIK income was $0.2 million and $0.8 million, respectively and $0.4 million
and
$1.1 million respectively.



Management fee income reflects the fee income received for managing the Saratoga
CLO. For the three months ended August 31, 2022 and August 31, 2021, total
management fee income was $0.8 million and $0.8 million, respectively. For the
six months ended August 31, 2022 and August 31, 2021, total management fee
income was $1.6 million and $1.6 million, respectively.



For the three and six months ended August 31, 2022 and August 31, 2021, total
dividend income was $0.2 million and $0.7 million, respectively, and $0.5
million and $1.1 million, respectively. Dividends received is recorded in the
consolidated statements of operations when earned, and the decrease primarily
reflects dividend income received on various preferred equity investments last
year that were not received this year.



For the three and six months ended August 31, 2022 and August 31, 2021, total
structuring and advisory fee income was $1.4 million and $1.0 million,
respectively, and $2.3 million and $2.3 million, respectively. Structuring and
advisory fee income represents fee income earned and received performing certain
investment and advisory activities during the closing of new investments.



For the three and six months ended August 31, 2022 and August 31, 2021, other
income was $0.2 million and $0.8 million, respectively, and $0.3 million and
$1.4 million, respectively. Other income includes origination fees and
prepayment income fees and is recorded in the consolidated statements of
operations when earned. The decrease was driven primarily by prepayment
penalties earned from certain redemptions in the prior year that did not recur
this year.



Operating expenses

The composition of our operating expenses for the three and six months ended August 31, 2022 and August 31, 2021 was as follows:



                                                 For the three months ended            For the three months ended
                                               August 31,          August 31,        August 31,          August 31,
                                                  2022                2021              2022                2021
                                                                         ($ in thousands)
Interest and debt financing expenses          $       7,922       $       5,184     $      14,794       $       9,525
Base management fees                                  4,104               3,002             7,906               5,761
Incentive management fees expense (benefit)             590               2,018            (1,314 )             7,281
Professional fees                                       368                 461               785                 968
Administrator expenses                                  773                 713             1,523               1,406
Insurance                                                90                  86               178                 173
Directors fees and expenses                             110                 101               220                 192
General & administrative and other expenses             300                
453               967                 944
Income tax expense (benefit)                           (102 )                30              (201 )                58
Total operating expenses                      $      14,155       $      12,048     $      24,858       $      26,308




                                      106





For the three months ended August 31, 2022, total operating expenses increased
$2.1 million, or 17.5%, compared to the three months ended August 31, 2021. For
the six months ended August 31, 2022, total operating expenses decreased $1.5
million, or 5.5%, compared to the six months ended August 31, 2021.



For the three months ended August 31, 2022, interest and debt financing expenses
increased $2.7 million, or 52.8%, compared to the three months ended August 31,
2021. The increase is primarily attributable to an increase in average
outstanding debt from $425.9 million for the three months ended August 31, 2021
to $626.7 million for the three months ended August 31, 2022, primarily
reflecting (i) the issuance of the 4.375% 2026 Notes and the 4.35% 2027 Notes
during the year ended February 28, 2022, and (ii) the issuance of the 6.00% 2027
Notes during the three months ended August 31, 2022.



For the six months ended August 31, 2022, interest and debt financing expenses
increased $5.3 million, or 55.3%, compared to the six months ended August 31,
2021. The increase is primarily attributable to an increase in average
outstanding debt from $378.3 million for the six months ended August 31, 2021 to
$609.0 million for the six months ended August 31, 2022, primarily reflecting
(i) the issuance of the 4.375% 2026 Notes and the 4.35% 2027 Notes during the
year ended February 28, 2022, and (ii) the issuance of the 6.00% 2027 Notes
during the six months ended August 31, 2022.



For the three and six months ended August 31, 2022 and August 31, 2021, the
weighted average interest rate on our outstanding indebtedness was 4.46% and
4.26%, respectively and 4.45% and 4.39%, respectively. The decrease in weighted
average interest rate was primarily driven by the issuance of the lower-rate
4.375% 2026 Notes and 4.35% 2026 Notes, the redemption of the 6.25% 2025 Notes,
the redemption of the 7.25% 2027 Notes and the issuance of lower cost SBA
debentures over the past year.



As of August 31, 2022 and February 28, 2022, the SBA debentures represented 36.8% and 36.2% of overall debt, respectively.

For the three months ended August 31, 2022, base management fees increased $1.1
million, or 36.7%, from $3.0 million to $4.1 million compared to the three
months ended August 31, 2021. The increase in base management fees results from
the 36.7% increase in the average value of our total assets, less cash and cash
equivalents, from $680.6 million for the three months ended August 31, 2021 to
$930.4 million  for the three months ended August 31, 2022. For the six months
ended August 31, 2022, base management fees increased $2.1 million, or 37.2%,
from $5.8 million to $7.9 million compared to the six months ended August 31,
2021. The increase in base management fees results from the 37.2% increase in
the average value of our total assets, less cash and cash equivalents, from
$653.0 million for the three months ended August 31, 2021 to $896.2 million

for

the three months ended August 31, 2022.




For the three months ended August 31, 2022, incentive management fees decreased
$1.4 million, or 70.8%, compared to the three months ended August 31, 2021. The
incentive fee on income remained relatively unchanged at $1.7 million for the
three months ended August 31, 2021and 2022. The incentive fee on capital gains
decreased from a $0.3 million expense for the three months ended August 31, 2021
to a $(1.1) million benefit for the three months ended August 31, 2022, both
reflecting the incentive fee income on net unrealized appreciation and
depreciation recognized during both these periods.



For the six months ended August 31, 2022, incentive management fees decreased
$8.6 million, or 118.0%, compared to the six months ended August 31, 2021. The
incentive fee on income decreased from $3.2 million for the three months ended
August 31, 2021 to $1.7 million for the three months ended August 31, 2022,
reflecting the Company's net investment income being below the hurdle based on
net asset value for incentive fee purposes for part of the six months. The
incentive fee on capital gains decreased from a $4.0 million expense for the
three months ended August 31, 2021 to a $(3.0) million benefit for the three
months ended August 31, 2022, both reflecting the incentive fee income on net
unrealized appreciation and depreciation recognized during both these periods.



For the three and six months ended August 31, 2022, professional fees decreased $0.1 million, or 20.1%, and decreased $0.2 million, or 18.8%, respectively, compared to the three and six months ended August 31, 2021.

For the three and six months ended August 31, 2022, administrator expenses increased $0.1 million, or 8.5%, and increased $0.1 million or 8.3% compared to the three and six months ended August 31, 2022.



                                      107





As discussed above, the increase in interest and debt financing expenses for the
three months ended August 31, 2022 compared to the three months ended August 31,
2021 is primarily attributable to an increase in the average dollar amount of
outstanding debt. During the three months ended August 31, 2022 and August 31,
2021, the average borrowings outstanding under the Encina Credit Facility and
the Madison Credit Facility was $25.0 million and $23.8 million, respectively,
and the average weighted average interest rate on the outstanding borrowing
under the Credit Facility was 5.83% and 6.37%, respectively. For the three
months ended August 31, 2022 and August 31, 2021, the average borrowings
outstanding of SBA debentures was $222.0 million and $181.1 million,
respectively. For the three months ended August 31, 2022 and August 31, 2021,
the weighted average interest rate on the outstanding borrowings of the SBA
debentures was 2.75% and 2.65%, respectively. During the three months ended
August 31, 2022 and August 31, 2021, the average dollar amount of our 6.25%
fixed-rate 2025 Notes outstanding was $0.0 million and $60.0 million,
respectively. During the three months ended August 31, 2022 and August 31, 2021,
the weighted average dollar amount of our 7.25% fixed-rate 2025 Notes
outstanding was $10.8 million and $43.1 million, respectively. During the three
months ended August 31, 2022 and August 31, 2021, the weighted average dollar
amount of our 7.75% fixed-rate 2025 Notes outstanding was $5.0 million and $5.0
million, respectively. During the three months ended August 31, 2022 and August
31, 2021, the average dollar amount of our 6.25% fixed-rate 2027 Notes
outstanding was $15.0 million and $15.0 million, respectively. During the three
months ended August 31, 2022 and August 31, 2021, the average dollar amount of
our 4.375% fixed-rate 2026 Notes outstanding was $175.0 million and
$115.2 million, respectively. During the three months ended August 31, 2022 and
August 31, 2021, the average dollar amount of our 4.35% fixed-rate 2027 Notes
outstanding was $75.0 million and $0.0 million, respectively. During the three
months ended August 31, 2022 and August 31, 2021, the average dollar amount of
our 6.00% fixed-rate 2027 Notes outstanding was $99.0 million and $0.0 million,
respectively.



As discussed above, the increase in interest and debt financing expenses for the
six months ended August 31, 2022 compared to the six months ended August 31,
2021 is primarily attributable to an increase in the average dollar amount of
outstanding debt. During the six months ended August 31, 2022 and August 31,
2021, the average borrowings outstanding under the Encina Credit Facility and
the Madison Credit Facility was $22.5 million and $9.5 million, respectively,
and the average weighted average interest rate on the outstanding borrowing
under the Credit Facility was 5.40% and 4.02%, respectively. For the six months
ended August 31, 2022 and August 31, 2021, the average borrowings outstanding of
SBA debentures was $218.4 million and $169.8 million, respectively. For the six
months ended August 31, 2022 and August 31, 2021, the weighted average interest
rate on the outstanding borrowings of the SBA debentures was 2.67% and 2.78%,
respectively. During the six months ended August 31, 2022 and August 31, 2021,
the average dollar amount of our 6.25% fixed-rate 2025 Notes outstanding was
$0.0 million and $58.7 million, respectively. During the six months ended August
31, 2022 and August 31, 2021, the weighted average dollar amount of our 7.25%
fixed-rate 2025 Notes outstanding was $27.0 million and $43.1 million,
respectively. During the six months ended August 31, 2022 and August 31, 2021,
the weighted average dollar amount of our 7.75% fixed-rate 2025 Notes
outstanding was $5.0 million and $5.0 million, respectively. During the six
months ended August 31, 2022 and August 31, 2021, the average dollar amount of
our 6.25% fixed-rate 2027 Notes outstanding was $15.0 million and $15.0 million,
respectively. During the six months ended August 31, 2022 and August 31, 2021,
the average dollar amount of our 4.375% fixed-rate 2026 Notes outstanding was
$175.0 million and $84.3 million, respectively. During the six months ended
August 31, 2022 and August 31, 2021, the average dollar amount of our 4.35%
fixed-rate 2027 Notes outstanding was $75.0 million and $0.0 million,
respectively. During the six months ended August 31, 2022 and August 31, 2021,
the average dollar amount of our 6.00% fixed-rate 2027 Notes outstanding was
$44.0 million and $60.0 million, respectively



For the three months ended August 31, 2022 and August 31, 2021, there were
income tax expense (benefits) of $(0.1) million and $0.03 million, respectively.
For the six months ended August 31, 2022 and August 31, 2021, there were income
tax expense (benefits) of $(0.2) million and $0.06 million, respectively. This
relates to net deferred federal and state income tax expense (benefit) with
respect to operating gains and losses and income derived from equity investments
held in the taxable blockers, as well as current federal and state income taxes
on those operating gains and losses when realized.



Net realized gains (losses) on sales of investments

For the three months ended August 31, 2022, the Company had $75.1 million of sales, repayments, exits or restructurings resulting in $7.9 million of net realized gains. For the six months ended August 31, 2022, the Company had $85.2 million of sales, repayments, exits or restructurings resulting in $8.1 million of net realized gains.



                                     Six Months ended August 31, 2022
                                                                                                 Net
                                                                                               Realized
Issuer                                 Asset Type        Gross Proceeds         Cost         Gain (Loss)
PDDS Buyer, LLC                    Equity Interests     $      9,943,838     $ 2,000,000     $  7,943,838
Censis Technologies                Equity Interests                    -               -           68,731
Texas Teachers of Tomorrow, LLC    Equity Interests                    -   
           -           24,977
V Rental Holdings LLC              Equity Interests                    -               -           68,800



The $7.9 million of net realized gains was from the sale of the equity position in the Company's PPDS Buyer investment.

The Company received escrow payments from the prior sales of its investments in Censis Technologies, Texas Teachers of Tomorrow, LLC and V Rental Holdings, LLC.



                                      108





For the six months ended August 31, 2021, the Company had $149.8 million of
sales, repayments, exits or restructurings resulting in $3.4 million of net
realized gains.



                                     Six Months ended August 31, 2021
                                                                                                 Net
                                                                                               Realized
Issuer                                 Asset Type        Gross Proceeds         Cost             Gain
My Alarm Center, LLC               Equity Interests     $              -     $ 4,867,102     $ (4,837,102 )
Passageways, Inc.                  Equity Interests            7,439,802   

1,000,000 6,439,802 Saratoga Investment Corp. CLO Structured Finance 2013-1, Ltd. Class F-1-R-3 Note Securities

                  8,360,133       8,500,000         (139,867 )
V Rental Holdings LLC              Equity Interests            2,344,817   
     365,814        1,978,903



The $4.9 million of net realized loss was from the Company's My Alarm Center, LLC investment that was deemed worthless during this period.

The $6.4 million of net realized gains was from the sales of the equity position in the Company's Passageways Inc. investment.

The $0.1 million of net realized loss was from the repayment of the structured finance securities in the Saratoga Investment Corp. CLO 2013-1, Ltd. Class F-1-R-3 Note.

The $1.9 million of net realized gains was from the sales of the equity position in the Company's V Rental Holdings LLC investment.

Net change in unrealized appreciation (depreciation) on investments

For the six months ended August 31, 2022, our investments had a net change in
unrealized depreciation of $22.6 million versus a net change in unrealized
appreciation of $20.2 million for the six months ended August 31, 2021. The most
significant cumulative net change in unrealized appreciation (depreciation) for
the six months ended August 31, 2022 were the following (dollars in thousands):



                                         Six Months ended August 31, 2022
                                                                                                       YTD
                                                                                  Total             Change in
                                                                               Unrealized          Unrealized
                                                                              Appreciation        Appreciation
Issuer                        Asset Type        Cost         Fair Value      (Depreciation)      (Depreciation)
                           First Lien Term
                           Loan & Equity
Artemis Wax Corp.          Interests          $  55,023     $     58,657     $         3,634     $         2,174
                           First Lien Term
                           Loan & Equity
Netreo Holdings, LLC       Interests             31,330           40,506               9,176              (1,468 )
                           First Lien Term
                           Loan & Equity
PDDS Buyer, LLC            Interests                  -                -                   -              (5,094 )
                           First Lien Term
                           Loan & Equity
Pepper Palace, Inc.        Interests             34,383           26,992              (7,391 )            (6,872 )
                           Structured
Saratoga Investment        Finance
Corp. CLO 2013-1, Ltd.     Securities            39,489           32,327              (7,162 )            (3,543 )
Saratoga Senior Loan
Fund I JV, LLC             Equity Interests      14,072            6,727              (7,345 )            (6,236 )
                           First Lien Term
                           Loan & Equity
Zollege PBC                Interests             16,635           15,211              (1,424 )            (1,289 )




                                      109




The $2.2 million of unrealized appreciation in our investment in Artemis Wax Corp. was driven by growth and improved financial performance.

The $1.5 million of unrealized depreciation in our investment Netreo Holdings, LLC was driven by increased company leverage.




The $5.1 million of unrealized depreciation in our investment PDDS Buyer, LLC
was driven by the sale of that investment, resulting in a reversal of previously
recognized unrealized appreciation reclassified to realized gains.



The $6.9 million of unrealized depreciation in our investment Pepper Palace, Inc. was driven by overall company performance.

The $3.5 million of unrealized depreciation in our investment Saratoga Investment Corp. CLO 2013-1, Ltd was driven by the increase in discount rates, impact of LIBOR changes and overall market conditions.

The $6.2 million of unrealized depreciation in our investment Saratoga Senior Loan Fund I, JV, LLC was driven by the decrease in market prices of the underlying CLO warehouse assets.

The $1.3 million of unrealized depreciation in our investment in Zollege PBC was driven by overall company performance.




The most significant cumulative net change in unrealized appreciation
(depreciation) for the six months ended August 31, 2021 were the following
(dollars in thousands):



                                       Six Months ended August 31, 2021
                                                                                                    YTD
                                                                                 Total           Change in
                                                                              Unrealized         Unrealized
         Issuer               Asset Type        Cost         Fair Value      Appreciation       Appreciation
My Alarm Center, LLC       Equity Interests   $       -     $          -     $           -     $        4,686
GreyHeller LLC             First Lien Term
                           Loan & Equity
                           Interests             14,034           21,816             7,782              4,680
Netreo Holdings, LLC       First Lien Term
                           Loan & Equity
                           Interests             23,942           33,770             9,828              4,240
Saratoga Investment        Structured
Corp. CLO 2013-1, Ltd.     Finance
                           Securities            34,505           35,061               556              2,953
Schoox, Inc.               Equity Interests         476            3,258             2,783              2,783
Texas Teachers of          First Lien Term
Tomorrow, LLC              Loan & Equity
                           Interests             26,274           29,324             3,050              2,663
Destiny Solutions Inc.     First Lien Term
                           Loan & Equity
                           Interests              3,969            6,217             2,248              1,221
Village Realty Holdings
LLC                        Equity Interests         366            2,209             1,843             (1,843 )
Passageways, Inc.          First Lien Term
                           Loan & Equity
                           Interests             10,953           17,598             6,645             (2,311 )



The $4.7 million net change in unrealized appreciation in our investment in My
Alarm Center, LLC was primarily driven by the reversal of previously recognized
unrealized depreciation reclassified to realized losses.



The $4.7 million net change in unrealized appreciation in our investment in GreyHeller LLC was primarily driven by improved financial performance.

The $4.2 million net change in unrealized appreciation in our investment in Netreo Holdings, LLC was primarily driven by growth and improved financial performance.

The $3.0 million of unrealized appreciation in our investment in Saratoga Investment Corp. CLO 2013-1, Ltd. was primarily driven by improved market performance, combined with outperformance achieved from the assets in the CLO.

The $2.8 million net change in unrealized appreciation in our investment in Schoox, Inc. was primarily driven by overall company performance.

The $2.7 million net change in unrealized appreciation in our investment in Texas Teachers of Tomorrow, LLC was primarily driven by improved financial performance.

The $1.2 million net change in unrealized appreciation in our investment in Destiny Solutions Inc. was primarily driven by improved financial performance.

The $1.8 million net change in unrealized depreciation in our investment in Village Realty Holdings, LLC was primarily driven by the sale of that investment, resulting in a reversal of previously recognized unrealized appreciation reclassified to realized gains.

The $2.3 million net change in unrealized depreciation in our investment in
Passageways, Inc. was primarily driven by the sale of that investment, resulting
in a reversal of previously recognized unrealized appreciation reclassified
to
realized gains.



                                      110




Changes in net assets resulting from operations




For the three months ended August 31, 2022, we recorded a net increase in net
assets resulting from operations of $1.0 million. Based on 11,963,276 weighted
average common shares outstanding as of August 31, 2022, our per share net
increase in net assets resulting from operations was $0.08 for the three months
ended August 31, 2022. For the three months ended August 31, 2021, we recorded a
net increase in net assets resulting from operations of $7.9 million. Based on
11,175,436 weighted average common shares outstanding as of August 31, 2021, our
per share net increase in net assets resulting from operations was $0.71 for the
three months ended August 31, 2021.



For the six months ended August 31, 2022, we recorded a net decrease in net
assets resulting from operations of $0.5 million. Based on 12,037,855 weighted
average common shares outstanding as of August 31, 2022, our per share net
decrease in net assets resulting from operations was $0.04 for the six months
ended August 31, 2022. For the six months ended August 31, 2021, we recorded a
net increase in net assets resulting from operations of $29.0 million. Based on
11,172,787 weighted average common shares outstanding as of August 31, 2021, our
per share net decrease in net assets resulting from operations was $2.59 for the
six months ended August 31, 2021.



FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES




We intend to continue to generate cash primarily from cash flows from
operations, including interest earned from our investments in debt in middle
market companies, interest earned from the temporary investment of cash in U.S.
government securities and other high- quality debt investments that mature in
one year or less, the Encina Credit Facility, our continued access to the SBA
debentures, future borrowings and future offerings of debt and equity
securities.



Although we expect to fund the growth of our investment portfolio through the
net proceeds from future equity offerings, including our dividend reinvestment
plan ("DRIP") and our equity ATM program, and issuances of senior securities or
future borrowings, to the extent permitted by the 1940 Act, we cannot assure you
that our plans to raise capital will be successful. In this regard, because our
common stock has historically traded at a price below our current net asset
value per share and we are limited in our ability to sell our common stock at a
price below net asset value per share, we have been and may continue to be
limited in our ability to raise equity capital.



In addition, we intend to distribute to our stockholders substantially all of
our operating taxable income in order to satisfy the distribution requirement
applicable to RICs under the Code. In satisfying this distribution requirement,
in accordance with certain applicable provisions of the Code and the Treasury
regulations and a revenue procedure issued by the Internal Revenue Service
("IRS"), a RIC may treat a distribution of its own stock as fulfilling its RIC
distribution requirements if each stockholder may elect to receive his or her
entire distribution in either cash or stock of the RIC subject to a limitation
that the aggregate amount of cash to be distributed to all stockholders must be
at least 20% of the aggregate declared distribution. We may rely on the revenue
procedure in future periods to satisfy our RIC distribution requirement.



Also, as a BDC, we generally are required to meet a coverage ratio of total
assets, less liabilities and indebtedness not represented by senior securities,
to total senior securities, which include all of our borrowings and any
outstanding preferred stock, of at least 200.0%, reduced to 150.0% effective
April 16, 2019 following the approval received from the board of directors,
including a majority of our independent directors, on April 16, 2018. This
requirement limits the amount that we may borrow. Our asset coverage ratio, as
defined in the 1940 Act, was 184.2% as of August 31, 2022 and 209.2% as of
February 28, 2022. To fund growth in our investment portfolio in the future, we
anticipate needing to raise additional capital from various sources, including
the equity markets and other debt-related markets, which may or may not be
available on favorable terms, if at all.



Consequently, we may not have the funds or the ability to fund new investments,
to make additional investments in our portfolio companies, to fund our unfunded
commitments to portfolio companies, to pay dividends or to repay borrowings.
Also, the illiquidity of our portfolio investments may make it difficult for us
to sell these investments when desired and, if we are required to sell these
investments, we may realize significantly less than their recorded value.

Due to the diverse capital sources available to us at this time, we believe we
have adequate liquidity to support our near-term capital requirements. As the
impact of COVID-19 continues to evolve, we will continually evaluate our overall
liquidity position and take proactive steps to maintain that position based on
the current circumstances. This "Financial Condition, Liquidity and Capital
Resources" section should be read in conjunction with "Recent COVID-19
Developments" above, as well as with the notes of our consolidated financial
statements.



                                      111




Madison Revolving Credit Facility




The senior secured revolving credit facility we entered into with Madison
Capital Funding LLC (the "Madison Credit Facility") on June 30, 2010, was most
recently amended on September 3, 2021 and then fully repaid and terminated
on
October 4, 2021.



Encina Credit Facility


Below is a summary of the terms of the senior secured revolving credit facility we entered into with Encina Lender Finance, LLC on October 4, 2021.




Commitment. The Company entered into a senior secured revolving credit facility
in the initial facility amount of $50.0 million (the "Facility Amount"). The
Company has the ability to request an increase in the Facility Amount during the
first two years following the closing date to up to $75.0 million. The
commitment termination date is October 4, 2024.



Availability. The Company can draw up to the lesser of (i) the Facility Amount
and (ii) the Borrowing Base. The Borrowing Base is an amount equal to (i) the
difference of (A) the product of the applicable advance rate which varies from
50.0% to 75.0% depending on the type of loan asset (Defaulted Loans being
excluded in that they carry an advance rate of 0%) and the value, determined in
accordance with the Encina Credit Facility (the "Adjusted Borrowing Value"), of
certain "eligible" loan assets pledged as security for the loan (the "Borrowing
Base Value") and (B) the Excess Concentration Amount, as calculated in
accordance with the Encina Credit Facility, plus (ii) any amounts held in the
Prefunding Account and, without duplication, Excess Cash held in the Collection
Account, less (iii) the product of (a) the amount of any undrawn funding
commitments the Company has under any loan asset and (b) the Unfunded Exposure
Haircut Percentage, and less (iv) $100,000. Each loan asset held by the Company
as of the date on which the Encina Credit Facility was closed was valued as of
that date and each loan asset that the Company acquires after such date will be
valued at the lowest of its fair value, its face value (excluding accrued
interest) and the purchase price paid for such loan asset. Adjustments to the
value of a loan asset will be made to reflect, among other things and under
certain circumstances, changes in its fair value, a default by the obligor on
the loan asset, insolvency of the obligor, acceleration of the loan asset, and
certain modifications to the terms of the loan asset.



The Encina Credit Facility contains limitations on the type of loan assets that
are "eligible" to be included in the Borrowing Base and as to the concentration
level of certain categories of loan assets in the Borrowing Base such as
restrictions on geographic and industry concentrations, asset size and quality,
payment frequency, status and terms, average life, and collateral interests. In
addition, if an asset is to remain an "eligible" loan asset, the Company may not
make changes to the payment, amortization, collateral and certain other terms of
the loan assets without the consent of the administrative agent that will either
result in subordination of the loan asset or be materially adverse to the
lenders.



The Encina Credit Facility requires certain minimum drawn amounts. For the period beginning on the closing date and ended April 4, 2022, the minimum funding amount was $12.5 million. For the period beginning on April 5, 2022 through maturity, the minimum funding amount is the greater of $25.0 million and 50% of the Facility Amount in effect from time to time.




Collateral. The Encina Credit Facility is secured by assets of Saratoga
Investment Funding II LLC ("SIF II") and pledged to the lender under the credit
facility. SIF II is a wholly owned special purpose entity formed by the Company
for the purpose of entering into the Encina Credit Facility.



Interest Rate and Fees. Under the Encina Credit Facility, funds are borrowed
from or through certain lenders at the greater of the prevailing LIBOR rate and
0.75%, plus an applicable margin of 4.00%. The Encina Credit Facility includes
benchmark replacement provisions which permit the Administrative Agent and the
Borrower to select a replacement rate upon the unavailability of LIBOR. In
addition, the Company pays the lenders a commitment fee of 0.75% per year (or
0.50% if the ratio of advances outstanding to aggregate commitments is greater
than or equal to 50%) on the unused amount of the Encina Credit Facility for the
duration of the term of the credit facility. Accrued interest and commitment
fees are payable monthly in arrears. The Company was also obligated to pay
certain other fees to the lenders in connection with the closing of the Encina
Credit Facility.



Collateral Tests. It is a condition precedent to any borrowing under the Encina
Credit Facility that the principal amount outstanding under the Encina Credit
Facility, after giving effect to the proposed borrowings, not exceed the
Borrowing Base (the "Borrowing Base Test"). In addition to satisfying the
Borrowing Base Test, the following tests must also be satisfied (together with
Borrowing Base Test, the "Collateral Tests"):



o Interest Coverage Ratio. The ratio (expressed as a percentage) of interest

collections with respect to pledged loan assets, less certain fees and expenses

relating to the Encina Credit Facility, to accrued interest and commitment fees

payable to the lenders under the Encina Credit Facility for the last 6 payment

periods must equal at least 175.0%.




                                      112




o Overcollateralization Ratio. The ratio (expressed as a percentage) of the

aggregate Adjusted Borrowing Value of "eligible" pledged loan assets plus the

fair value of certain ineligible pledged loan assets (in each case, subject to

certain adjustments) to outstanding borrowings under the Encina Credit Facility

   plus the Unfunded Exposure Amount must equal at least 200.0%.




The Encina Credit Facility also may require payment of outstanding borrowings or
replacement of pledged loan assets upon the Company's breach of its
representation and warranty that pledged loan assets included in the Borrowing
Base are "eligible" loan assets. Such ineligible collateral loans will be
excluded from the calculation of the Borrowing Base and may lead to a Borrowing
Base Deficiency, which may be cured by effecting one or more (or any combination
thereof) of the following actions: (A) deposit into or credit to the collection
account cash and eligible investments, (B) repay outstanding borrowings
(together with certain costs and expenses), (C) sell or substitute loan assets
in accordance with the Encina Credit Facility, or (D) pledge additional loan
assets as collateral. Compliance with the Collateral Tests is also a condition
to the discretionary sale of pledged loan assets by the Company.



Priority of Payments. The priority of payments provisions of the Encina Credit
Facility require, after payment of specified fees and expenses, that collections
of interest from the loan assets and, to the extent that these are insufficient,
collections of principal from the loan assets, be applied on each payment date
to payment of outstanding borrowings if the Borrowing Base Test, the
Overcollateralization Ratio and the Interest Coverage Ratio would not otherwise
be met.


Operating Expenses. The priority of payments provision of the Encina Credit
Facility provides for the payment of certain operating expenses of the Company
out of collections on interest and principal in accordance with the priority
established in such provision. The operating expenses payable pursuant to the
priority of payment provisions is limited to $200,000 per annum.



Covenants; Representations and Warranties; Events of Default. The Encina Credit
Facility contains customary representations and warranties, affirmative
covenants, negative covenants and events of default. The Encina Credit Facility
does not contain grace periods for breach by the Company of any negative
covenants or of certain of the affirmative covenants, including, without
limitation, those related to preservation of the existence and separateness of
the Company. Other events of default under the Encina Credit Facility include,
among other things, the following:



o failure of the Company to maintain an Interest Coverage Ratio of less than

   175.0%;




o failure of the Company to maintain an Overcollateralization Ratio of less than

   200.0%;




o the filing of certain ERISA or tax liens on assets of the Company or the

   Equityholder;



o failure by Specified Holders to collectively, directly or indirectly, own and

control at least 51% of the outstanding equity interests of Saratoga Investment

Advisor, or (y) possess the right to elect (through contract, ownership of

voting securities or otherwise) at all times a majority of the board of

directors (or similar governing body) of Saratoga Investment Advisor and to

direct the management policies and decisions of Saratoga Investment Advisor, or

(ii) the dissolution, termination or liquidation in whole or in part, transfer

or other disposition, in each case, of all or substantially all of the assets

of, Saratoga Investment Advisor;

o indictment or conviction of Saratoga Investment Advisors or any "key person"

for a felony offense, or any fraud, embezzlement or misappropriation of funds

by Saratoga Investment Advisors or any "key person" and, in the case of "key

persons," without a reputable, experienced individual reasonably satisfactory

to Encina Lender Finance appointed to replace such key person within 30 days;

o resignation, termination, disability or death of a "key person" or failure of

any "key person" to provide active participation in Saratoga Investment

Advisors' daily activities, all without a reputable, experienced individual

reasonably satisfactory to Encina Lender Finance appointed within 30 days.





Fees and Expenses. The Company paid certain fees and reimbursed Encina Lender
Finance, LLC for the aggregate amount of all documented, out-of-pocket costs and
expenses, including the reasonable fees and expenses of lawyers, incurred by
Encina Lender Finance, LLC in connection with the Encina Credit Facility and the
carrying out of any and all acts contemplated thereunder up to and as of the
date of closing. These amounts totaled $1.4 million.



As of August 31, 2022, we had $25.0 million outstanding borrowings under the Encina Credit Facility and $233.6 million of SBA- guaranteed debentures outstanding (which are discussed below).



                                      113





SBA-guaranteed debentures


In addition, we, through two wholly owned subsidiaries, sought and obtained
licenses from the SBA to operate an SBIC. In this regard, on March 28, 2012, our
wholly owned subsidiary, Saratoga Investment Corp. SBIC LP, received a license
from the SBA to operate as an SBIC under Section 301(c) of the Small Business
Investment Act of 1958 and on August 14, 2019, our wholly owned subsidiary,
Saratoga Investment Corp. SBIC II LP, also received a license. SBICs are
designated to stimulate the flow of private equity capital to eligible small
businesses. Under SBA regulations, SBICs may make loans to eligible small
businesses and invest in the equity securities of small businesses.



The SBIC licenses allows our SBIC subsidiaries to obtain leverage by issuing
SBA-guaranteed debentures. SBA-guaranteed debentures are non-recourse, interest
only debentures with interest payable semi-annually and have a ten-year
maturity. The principal amount of SBA-guaranteed debentures is not required to
be paid prior to maturity but may be prepaid at any time without penalty. The
interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis at a
market-driven spread over U.S. Treasury Notes with 10-year maturities.



SBA regulations previously limited the amount that our SBIC subsidiary may
borrow to a maximum of $150.0 million when it has at least $75.0 million in
regulatory capital, receives a capital commitment from the SBA and has been
through an examination by the SBA subsequent to licensing. This maximum has been
increased by SBA regulators for new licenses to $175.0 million of SBA debentures
when it has at least $87.5 million in regulatory capital. SBIC II LP's SBIC
license provides up to $175.0 million in additional long-term capital in the
form of SBA-guaranteed debentures. The SBIC LP and SBIC II LP are regulated by
the SBA. As a result of the 2016 omnibus spending bill signed into law in
December 2015, the maximum amount of SBA-guaranteed debentures that affiliated
SBIC funds can have outstanding was increased from $225.0 million to $350.0
million, subject to SBA approval. Our wholly owned SBIC subsidiaries are able to
borrow funds from the SBA against regulatory capital (which generally
approximates equity capital in the respective SBIC) and is subject to customary
regulatory requirements, including, but not limited to, a periodic examination
by the SBA. With this license approval, Saratoga can grow its SBA relationship
from $150.0 million to $325.0 million of committed capital.



We received exemptive relief from the SEC to permit us to exclude the senior
securities issued by of our SBIC subsidiaries from the definition of senior
securities in the asset coverage requirement applicable to the Company under the
1940 Act. This allows us increased flexibility under the asset coverage
requirement by permitting us to borrow up to $325.0 million more than we would
otherwise be able to absent the receipt of this exemptive relief. On April 16,
2018, as permitted by the Small Business Credit Availability Act, which was
signed into law on March 23, 2018, our independent directors approved of our
becoming subject to a reduced minimum asset coverage ratio of 150.0% from 200%
under Sections 18(a)(1) and 18(a)(2) of the 1940 Act. The 150% asset coverage
ratio became effective on April 16, 2019.



                                      114





As of August 31, 2022, our SBIC LP subsidiary had $75.0 million in regulatory
capital and $67.7 million in SBA-guaranteed debentures outstanding and our SBIC
II LP subsidiary had $87.5 million in regulatory capital and $166.0 million in
SBA-guaranteed debentures outstanding.



Unsecured notes


In May 2013, the Company issued $48.3 million in aggregate principal amount of
7.50% fixed-rate notes due 2020 (the "2020 Notes"). The 2020 Notes were redeemed
in full on January 13, 2017 and are no longer listed on the NYSE.



On May 29, 2015, we entered into a Debt Distribution Agreement with Ladenburg
Thalmann & Co Inc. through which we may offer for sale, from time to time, up to
$20.0 million in aggregate principal amount of the 2020 Notes through an ATM
offering. Prior to the 2020 Notes being redeemed in full, the Company had sold
539,725 bonds with a principal of $13.5 million at an average price of $25.31
for aggregate net proceeds of $13.4 million (net of transaction costs).



On December 21, 2016, we issued $74.5 million in aggregate principal amount of
our 2023 Notes for net proceeds of $71.7 million after deducting underwriting
commissions of approximately $2.3 million and offering costs of approximately
$0.5 million. The net proceeds from the offering were used to repay all of the
outstanding indebtedness under the 2020 Notes (as described above), and for
general corporate purposes in accordance with our investment objective and
strategies. On December 21, 2019 and February 7, 2020, the Company redeemed
$50.0 million and $24.5 million, respectively, in aggregate principal amount of
the $74.5 million in aggregate principal amount of the issued and outstanding
2023 Notes and are no longer listed on the NYSE.



On August 28, 2018, the Company issued $40.0 million in aggregate principal
amount of the 6.25% 2025 Notes for net proceeds of $38.7 million after deducting
underwriting commissions of approximately $1.3 million. Offering costs incurred
were approximately $0.3 million. The issuance included the full exercise of the
underwriters' option to purchase an additional $5.0 million in aggregate
principal amount of 6.25% 2025 Notes within 30 days. The net proceeds from the
offering were used for general corporate purposes in accordance with our
investment objective and strategies. Financing costs of $1.6 million related to
the 6.25% 2025 Notes have been capitalized and were amortized over the term
of
the 6.25% 2025 Notes.



On February 5, 2019, the Company issued an additional $20.0 million in aggregate
principal amount of the 6.25% 2025 Notes for net proceeds of $19.2 million after
deducting underwriting commissions of approximately $0.6 million and discount of
$0.2 million. The additional 6.25% 2025 Notes were treated as a single series
with the existing 6.25% 2025 Notes under the indenture and had the same terms as
the existing 6.25% 2025 Notes. 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 in aggregate principal amount of 6.25% 2025
Notes within 30 days. The net proceeds from this offering were used for general
corporate purposes in accordance with our investment objective and strategies.
The financing costs and discount of $1.0 million related to the 6.25% 2025 Notes
have been capitalized and were amortized over the term of the 6.25% 2025 Notes.



On August 31, 2021, the Company redeemed $60.0 million in aggregate principal
amount of the issued and outstanding 6.25% 2025 Notes at par. The 6.25% 2025
Notes were listed on the NYSE under the trading symbol of "SAF" with a par value
of $25.00 per share and have been delisted following the full redemption on
August 31, 2021.



On June 24, 2020, the Company issued $37.5 million in aggregate principal amount
of our 7.25% fixed-rate notes due 2025 (the "7.25% 2025 Notes") for net proceeds
of $36.3 million after deducting underwriting commissions of approximately $1.2
million. Offering costs incurred were approximately $0.3 million. On July 6,
2020, the underwriters exercised their option in full to purchase an additional
$5.625 million in aggregate principal amount of its 7.25% unsecured notes due
2025. Net proceeds to the Company were $5.4 million after deducting underwriting
commissions of approximately $0.2 million.  The net proceeds from the offering
were used for general corporate purposes in accordance with our investment
objective and strategies. Financing costs of $1.6 million related to the 7.25%
2025 Notes have been capitalized and were amortized over the term of the 7.25%
2025 Notes.



                                      115




On July 14, 2022, the Company redeemed $43.1 million in aggregate principal
amount of the issued and outstanding 7.25% 2025 Notes. The 7.25% 2025 Notes were
listed on the NYSE under the trading symbol of "SAK", and have been delisted
following the full redemption on July 14, 2022.



On July 9, 2020, the Company issued $5.0 million in aggregate principal amount
of our 7.75% fixed-rate Notes due in 2025 (the "7.75% 2025 Notes") for net
proceeds of $4.8 million after deducting underwriting commissions of
approximately $0.2 million. Offering costs incurred were approximately $0.1
million. Interest on the 7.75% Notes 2025 is paid quarterly in arrears on
February 28, May 31, August 31 and November 30, at a rate of 7.75% per year,
beginning August 31, 2020. The 7.75% Notes 2025 mature on July 9, 2025 and may
be redeemed in whole or in part at any time or from time to time at our option.
The net proceeds from the offering were used for general corporate purposes in
accordance with our investment objective and strategies. Financing costs of $0.3
million related to the 7.75% Notes 2025 have been capitalized and are being
amortized over the term of the 7.75% 2025 Notes. The 7.75% 2025 Notes are
unlisted and have a par value of $25.00 per share.



At August 31, 2022, the total 7.75% 2025 Notes outstanding was $5.0 million.




On December 29, 2020, the Company issued $5.0 million in aggregate principal
amount of our 6.25% fixed-rate notes due in 2027 (the "6.25% Notes 2027").
Offering costs incurred were approximately $0.1 million.  Interest on the 6.25%
Notes 2027 is paid quarterly in arrears on February 28, May 31, August 31 and
November 30, at a rate of 6.25% per year, beginning February 28, 2021. The 6.25%
Notes 2027 mature on December 29, 2027 and may be redeemed in whole or in part
at any time or from time to time at our option, on or after December 29, 2024.
The net proceeds from the offering were used for general corporate purposes in
accordance with our investment objective and strategies. Financing costs of
$0.1 million related to the 6.25% Notes 2027 have been capitalized and are being
amortized over the term of the 6.25% Notes 2027.



On January 28, 2021, the Company issued $10.0 million in aggregate principal
amount of the 6.25% Notes 2027 for net proceeds of $9.7 million after deducting
underwriting commissions of approximately $0.3 million. Offering costs incurred
were approximately $0.0 million. Interest on the 6.25% Notes 2027 is paid
quarterly in arrears on February 28, May 31, August 31 and November 30, at a
rate of 6.25% per year. The 6.25% Notes 2027 mature on January 28, 2027 and
commencing January 28, 2023, may be redeemed in whole or in part at any time or
from time to time at our option on or after December 29, 2024. The net proceeds
from the offering were used for general corporate purposes in accordance with
our investment objective and strategies. Financing costs of $0.3 million related
to the 6.25% Notes 2027 have been capitalized and are being amortized over the
term of the 6.25% Notes 2027.



At August 31, 2022, the total 6.25% 2027 Notes outstanding was $15.0 million.

On March 10, 2021, the Company issued $50.0 million in aggregate principal
amount of the 4.375% Notes 2026 for net proceeds of $49.0 million after
deducting underwriting commissions of approximately $1.0 million. Offering costs
incurred were approximately $0.2 million.  Interest on the 4.375% Notes 2026 is
paid semi-annually in arrears on February 28 and August 28, at a rate of 4.375%
per year. The 4.375% Notes 2026 mature on February 28, 2026 and may be redeemed
in whole or in part at any time on or after November 28, 2025 at par plus a
"make-whole" premium, and thereafter at par. The net proceeds from the offering
were used for general corporate purposes in accordance with our investment
objective and strategies. Financing costs of $1.2 million related to the 4.375%
Notes 2026 have been capitalized and are being amortized over the term of the
4.375% Notes 2026.



On July 15, 2021, the Company issued an additional $125.0 million in aggregate
principal amount of the Company's 4.375% Notes 2026 (the "Additional 4.375% 2026
Notes") for net proceeds for approximately $123.5 million, based on the public
offering price of 101.00% of the aggregate principal amount of the Additional
4.375% 2026 Notes, after deducting the underwriting discount of $2.5 million and
offering expenses of $0.2 million payable by the Company. The net proceeds from
the offering were used to redeem all of the outstanding 6.25% 2025 Notes (as
described above), and for general corporate purposes in accordance with our
investment objective and strategies. The Additional 4.375% 2026 Notes were
treated as a single series with the existing 4.375% 2026 Notes under the
indenture and had the same terms as the existing 4.375% 2026 Notes.



At August 31, 2022, the total 4.375% Notes 2026 outstanding was $175.0 million.




On January 19, 2022, the Company issued $75.0 million in aggregate principal
amount of our 4.35% fixed-rate Notes due in 2027 (the "4.35% Notes 2027") for
net proceeds of $73.0 million, based on the public offering price of 99.317% of
the aggregate principal amount of the 4.35% Notes 2027, after deducting the
underwriting commissions of approximately $1.5 million. Offering costs incurred
were approximately $0.2 million.  Interest on the 4.35% Notes 2027 is paid
semi-annually in arrears on February 28 and August 28, at a rate of 4.35% per
year, beginning August 28, 2022. The 4.35% Notes 2027 mature on February 28,
2027 and may be redeemed in whole or in part at the Company's option at any time
prior to November 28, 2026, at par plus a "make-whole" premium, and thereafter
at par. The net proceeds from the offering were used for general corporate
purposes in accordance with our investment objective and strategies. Financing
costs of $1.7 million related to the 4.35% Notes 2027 have been capitalized and
are being amortized over the term of the Notes.



                                      116




At August 31, 2022 the total 4.35% Notes 2027 outstanding was $75.0 million.

On April 27, 2022, the Company issued $87.5 million in aggregate principal
amount of our 6.00% fixed-rate notes due 2027 (the "6.00% Notes 2027") for net
proceeds of $84.8 million after deducting underwriting commissions of
approximately $2.7 million. Offering costs incurred were approximately $0.1
million. On May 10, 2022, the underwriters partially exercised their option to
purchase an additional $10.0 million in aggregate principal amount of its 6.00%
Notes 2027. Net proceeds to the Company were $9.7 million after deducting
underwriting commissions of approximately $0.3 million. Interest on the 6.00%
Notes 2027 is paid quarterly in arrears on February 28, May 31, August 31 and
November 30, at a rate of 6.00% per year, beginning August 31, 2022. The 6.00%
Notes 2027 mature on April 30, 2027 and commencing April 27, 2024, may be
redeemed in whole or in part at any time or from time to time at our option.
Financing costs of $3.0 million related to the 6.00% Notes 2027 have been
capitalized and are being amortized over the term of the 6.00% 2027 Notes. The
6.00% 2027 Notes are listed on the NYSE under the trading symbol "SAT" with a
par value of $25.00 per share.



On August 15, 2022, the Company issued $8.0 million in aggregate principal
amount of our 6.00% fixed-rate notes due 2027 (the "6.00% 2027 Notes") for net
proceeds of $7.8 million, based on the public offering price of 97.80% of the
aggregate principal amount of the 6.00% Notes 2027. Additional offering costs
incurred were approximately $0.03 million. Additional financing costs of $0.03
million related to the 6.00% 2027 Notes have been capitalized and are being
amortized over the term of the 6.00% 2027 Notes.



At August 31, 2022 the total 6.00% Notes 2027 outstanding was $105.5 million.




At August 31, 2022 and February 28, 2022, the fair value of investments, cash
and cash equivalents and cash and cash equivalents, reserve accounts were as
follows:



                                                     August 31, 2022                 February 28, 2022
                                                                Percentage                       Percentage
                                               Fair Value        of Total       Fair Value        of Total
                                                                     ($ in

thousands)

Cash and cash equivalents                     $      3,068              0.3 %   $    47,258              5.4 %
Cash and cash equivalents, reserve accounts          9,579              1.0
          5,613              0.6
First lien term loans                              793,011             80.5         631,573             72.6
Second lien term loans                              23,662              4.5          44,385              5.1
Unsecured term loans                                16,841              1.8          38,030              4.4
Structured finance securities                       32,327              3.4
         15,931              1.8
Equity interests                                    82,096              8.5          87,648             10.1
Total                                         $    960,584            100.0 %   $   870,438            100.0 %




On July 13, 2018, the Company 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 March 16, 2017, we entered into an equity distribution agreement with
Ladenburg Thalmann & Co. Inc., through which we may offer for sale, from time to
time, up to $30.0 million of our common stock through an ATM offering.
Subsequent to this, BB&T Capital Markets and B. Riley FBR, Inc. were added to
the equity ATM program. On July 11, 2019, the amount of the common stock to be
offered was increased to $70.0 million, and on October 8, 2019, the amount of
the common stock to be offered was increased to $130.0 million. This agreement
was terminated as of July 29, 2021, and as of that date, the Company had sold
3,922,018 shares for gross proceeds of $97.1 million at an average price of
$24.77 for aggregate net proceeds of $95.9 million (net of transaction costs).



On July 30, 2021, we entered into an equity distribution agreement with
Ladenburg Thalmann & Co. Inc. and Compass Point Research and Trading, LLC (the
"Agents"), through which we may offer for sale, from time to time, up to $150.0
million of our common stock through the Agents, or to them, as principal for
their account. As of August 31, 2022, the Company sold 4,840,361 shares for
gross proceeds of $124.0 million at an average price of $25.61 for aggregate net
proceeds of $122.4 million (net of transaction costs). During the three and six
months ended August 31, 2022, there were no shares sold pursuant to the equity
distribution agreement with the Agents.



                                      117




On September 24, 2014, the Company announced the approval of an open market
share repurchase plan that allowed 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 consolidated financial statements (the "Share Repurchase Plan"). On
October 7, 2015, our board of directors extended the Share Repurchase Plan for
another year and increased the number of shares the Company is permitted to
repurchase at prices below its NAV, as reported in its then most recently
published consolidated financial statements, to 400,000 shares of its common
stock. On October 5, 2016, our board of directors extended the Share Repurchase
Plan for another year to October 15, 2017 and increased the number of shares the
Company is permitted to repurchase at prices below its NAV, as reported in its
then most recently published consolidated financial statements, to 600,000
shares of its common stock. On October 10, 2017, January 8, 2019 and January 7,
2020, our board of directors extended the Share Repurchase Plan for another year
to October 15, 2018, January 15, 2020 and January 15, 2021, respectively, each
time leaving the number of shares unchanged at 600,000 shares of its common
stock. On May 4, 2020, our board of directors increased the Share Repurchase
Plan to 1.3 million shares of common stock. On January 5, 2021, our board of
directors extended the Shares Repurchase Plan for another year to January 15,
2022, leaving the number of shares unchanged at 1.3 million shares of common
stock. On January 4, 2022, our board of directors extended the Shares Repurchase
Plan for another year to January 15, 2023, leaving the number of shares
unchanged at 1.3 million shares of common stock. As of August 31, 2022, the
Company purchased 803,963 shares of common stock, at the average price of $21.47
for approximately $17.3 million pursuant to the Share Repurchase Plan. During
the three months ended August 31, 2022, the Company purchased 153,350 shares of
common stock, at the average price of $24.04 for approximately $3.7 million
pursuant to the Share Repurchase Plan. During the six months ended August 31,
2022, the Company purchased 295,527 shares of common stock, at the average price
of $25.11 for approximately $7.4 million pursuant to the Share Repurchase Plan.



On August 29, 2022, the Company declared a dividend of $0.54 per share payable
on September 29, 2022, to common stockholders of record on September 14, 2022.
Shareholders have the option to receive payment of the dividend in cash, or
receive shares of common stock, pursuant to the Company's DRIP. Based on
shareholder elections, the dividend consisted of approximately $5.3 million in
cash and 52,313 newly issued shares of common stock, or 0.4% of our outstanding
common stock prior to the dividend payment. The number of shares of common stock
comprising the stock portion was calculated based on a price of $22.00 per
share, which equaled 95% of the volume weighted average trading price per share
of the common stock on September 16, 19, 20, 21, 22, 23, 26, 27, 28 and 29,
2022.



On May 26, 2022, the Company declared a dividend of $0.53 per share payable on
June 29, 2022, to common stockholders of record on June 14, 2022. Shareholders
have the option to receive payment of the dividend in cash, or receive shares of
common stock, pursuant to the Company's DRIP. Based on shareholder elections,
the dividend consisted of approximately $5.1 million in cash and 48,590 newly
issued shares of common stock, or 0.4% of our outstanding common stock prior to
the dividend payment. The number of shares of common stock comprising the stock
portion was calculated based on a price of $22.40 per share, which equaled 95%
of the volume weighted average trading price per share of the common stock on
June 15, 16, 17, 21, 22, 23, 24, 27, 28 and 29, 2022.



On February 24, 2022, the Company declared a dividend of $0.53 per share payable
on March 28, 2022, to common stockholders of record on March 14, 2022.
Shareholders have the option to receive payment of the dividend in cash, or
receive shares of common stock, pursuant to the Company's DRIP. Based on
shareholder elections, the dividend consisted of approximately $5.3 million in
cash and 42,825 newly issued shares of common stock, or 0.4% of our outstanding
common stock prior to the dividend payment. The number of shares of common stock
comprising the stock portion was calculated based on a price of $25.89 per
share, which equaled 95% of the volume weighted average trading price per share
of the common stock on March 15, 16, 17, 18, 21, 22, 23, 24, 25 and 28, 2022.



On November 30, 2021, the Company declared a dividend of $0.53 per share payable
on January 19, 2022, to common stockholders of record on January 4, 2021.
Shareholders have the option to receive payment of the dividend in cash, or
receive shares of common stock, pursuant to the Company's DRIP. Based on
shareholder elections, the dividend consisted of approximately $5.3 million in
cash and 41,520 newly issued shares of common stock, or 0.3% of our outstanding
common stock prior to the dividend payment. The number of shares of common stock
comprising the stock portion was calculated based on a price of $26.85 per
share, which equaled 95% of the volume weighted average trading price per share
of the common stock on January 5, 6, 7, 10, 11, 12, 13, 14, 18 and 19, 2022.



On August 26, 2021, the Company declared a dividend of $0.52 per share payable
on September 28, 2021, to common stockholders of record on September 14, 2021.
Shareholders have the option to receive payment of the dividend in cash, or
receive shares of common stock, pursuant to the Company's DRIP. Based on
shareholder elections, the dividend consisted of approximately $4.9 million in
cash and 38,016 newly issued shares of common stock, or 0.3% of our outstanding
common stock prior to the dividend payment. The number of shares of common stock
comprising the stock portion was calculated based on a price of $26.76 per
share, which equaled 95% of the volume weighted average trading price per share
of the common stock on September 15, 16, 17, 20, 21, 22, 23, 24, 27 and 28,
2021.



On May 27, 2021, the Company declared a dividend of $0.44 per share payable on
June 29, 2021, to common stockholders of record on June 15, 2021. Shareholders
have the option to receive payment of the dividend in cash, or receive shares of
common stock, pursuant to the Company's DRIP. Based on shareholder elections,
the dividend consisted of approximately $4.1 million in cash and 33,100 newly
issued shares of common stock, or 0.3% of our outstanding common stock prior to
the dividend payment. The number of shares of common stock comprising the stock
portion was calculated based on a price of $25.03 per share, which equaled 95%
of the volume weighted average trading price per share of the common stock on
June 16, 17, 18, 21, 22, 23, 24, 25, 28 and 29, 2021.



                                      118





On March 22, 2021, the Company declared a dividend of $0.43 per share payable on
April 22, 2021, to common stockholders of record on April 8, 2021. Shareholders
have the option to receive payment of the dividend in cash, or receive shares of
common stock, pursuant to the Company's DRIP. Based on shareholder elections,
the dividend consisted of approximately $3.9 million in cash and 38,580 newly
issued shares of common stock, or 0.3% of our outstanding common stock prior to
the dividend payment. The number of shares of common stock comprising the stock
portion was calculated based on a price of $23.69 per share, which equaled 95%
of the volume weighted average trading price per share of the common stock on
April 9,12, 13, 14, 15, 16, 19, 20, 21 and 22, 2021.



On January 5, 2021, our board of directors declared a dividend of $0.42 per
share, which was paid on February 10, 2021, to common stockholders of record as
of January 26, 2021. Shareholders had the option to receive payment of the
dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based
on shareholder elections, the dividend consisted of approximately $3.8 million
in cash and 41,388 newly issued shares of common stock, or 0.4% of our
outstanding common stock prior to the dividend payment. The number of shares of
common stock comprising the stock portion was calculated based on a price of
$21.75 per share, which equaled 95% of the volume weighted average trading price
per share of the common stock on January 28, 29 and February 1, 2, 3, 4, 5,
8, 9
and 10, 2021.


On October 7, 2020, our board of directors declared a dividend of $0.41 per
share, which was paid on November 10, 2020, to common stockholders of record as
of October 26, 2020. Shareholders had the option to receive payment of the
dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based
on shareholder elections, the dividend consisted of approximately $3.8 million
in cash and 45,706 newly issued shares of common stock, or 0.4% of our
outstanding common stock prior to the dividend payment. The number of shares of
common stock comprising the stock portion was calculated based on a price of
$17.63 per share, which equaled 95% of the volume weighted average trading price
per share of the common stock on October 28, 29, 30 and November 2, 3, 4, 5, 6,
9 and 10, 2020.


On July 7, 2020, the Company declared a dividend of $0.40 per share payable on
August 12, 2020, to common stockholders of record on July 27, 2020. Shareholders
have the option to receive payment of the dividend in cash, or receive shares of
common stock, pursuant to the Company's DRIP. Based on shareholder elections,
the dividend consisted of approximately $3.7 million in cash and 47,098 newly
issued shares of common stock, or 0.4% of our outstanding common stock prior to
the dividend payment. The number of shares of common stock comprising the stock
portion was calculated based on a price of $16.45 per share, which equaled 95.0%
of the volume weighted average trading price per share of the common stock on
July 30, 31 and August 3, 4, 5, 6, 7, 10, 11 and 12, 2020.



On January 8, 2020, the Company declared a dividend of $0.56 per share, which
was paid on February 6, 2020, to common stockholders of record on January 24,
2020. Shareholders had the option to receive payment of the dividend in cash, or
receive shares of common stock, pursuant to the Company's DRIP. Based on
shareholder elections, the dividend consisted of approximately $5.4 million in
cash and 35,682 newly issued shares of common stock, or 0.3% of our outstanding
common stock prior to the dividend payment. The number of shares of common stock
comprising the stock portion was calculated based on a price of $25.44 per
share, which equaled 95.0% of the volume weighted average trading price per
share of the common stock on January 24, 27, 28, 29, 30, 31 and February 3,
4, 5
and 6, 2020.



On August 27, 2019, the Company declared a dividend of $0.56 per share, which
was paid on September 26, 2019, to common stockholders of record on September
13, 2019. Shareholders had the option to receive payment of the dividend in
cash, or receive shares of common stock, pursuant to the Company's DRIP. Based
on shareholder elections, the dividend consisted of approximately $4.5 million
in cash and 34,575 newly issued shares of common stock, or 0.4% of our
outstanding common stock prior to the dividend payment. The number of shares of
common stock comprising the stock portion was calculated based on a price of
$23.34 per share, which equaled 95.0% of the volume weighted average trading
price per share of the common stock on September 13, 16, 17, 18, 19, 20, 23, 24,
25 and 26, 2019.



On May 28, 2019, our board of directors declared a dividend of $0.55 per share,
which was paid on June 27, 2019, to common stockholders of record as of June 13,
2019. Shareholders had the option to receive payment of the dividend in cash, or
receive shares of common stock, pursuant to the DRIP. Based on shareholder
elections, the dividend consisted of approximately $3.6 million in cash and
31,545 newly issued shares of common stock, or 0.4% of our outstanding common
stock prior to the dividend payment. The number of shares of common stock
comprising the stock portion was calculated based on a price of $22.65 per
share, which equaled 95% of the volume weighted average trading price per share
of the common stock on June 14, 17, 18, 19, 20, 21, 24, 25, 26 and 27, 2019.



On February 26, 2019, our board of directors declared a dividend of $0.54 per
share, which was paid on March 28, 2019, to common stockholders of record as of
March 14, 2019. Shareholders had the option to receive payment of the dividend
in cash, or receive shares of common stock, pursuant to the DRIP. Based on
shareholder elections, the dividend consisted of approximately $3.5 million in
cash and 31,240 newly issued shares of common stock, or 0.4% of our outstanding
common stock prior to the dividend payment. The number of shares of common stock
comprising the stock portion was calculated based on a price of $21.36 per
share, which equaled 95% of the volume weighted average trading price per share
of the common stock on March 15, 18, 19, 20, 21, 22, 25, 26, 27 and 28, 2019.



                                      119





On November 27, 2018, our board of directors declared a dividend of $0.53 per
share, which was paid on January 2, 2019, to common stockholders of record on
December 17, 2018. Shareholders had the option to receive payment of the
dividend in cash, or receive shares of common stock, pursuant to the Company's
DRIP. Based on shareholder elections, the dividend consisted of approximately
$3.4 million in cash and 30,796 newly issued shares of common stock, or 0.4% of
our outstanding common stock prior to the dividend payment. The number of shares
of common stock comprising the stock portion was calculated based on a price of
$18.88 per share, which equaled 95.0% of the volume weighted average trading
price per share of the common stock on December 18, 19, 20, 21, 24, 26, 27, 28,
31, 2018 and January 2, 2019.



On August 28, 2018, our board of directors declared a dividend of $0.52 per
share, which was paid on September 27, 2018, to common stockholders of record as
of September 17, 2018. Shareholders had the option to receive payment of the
dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based
on shareholder elections, the dividend consisted of approximately $3.3 million
in cash and 25,862 newly issued shares of common stock, or 0.3% of our
outstanding common stock prior to the dividend payment. The number of shares of
common stock comprising the stock portion was calculated based on a price of
$22.35 per share, which equaled 95.0% of the volume weighted average trading
price per share of the common stock on September 14, 17, 18, 19, 20, 21, 24, 25,
26 and 27, 2018.



On May 30, 2018, our board of directors declared a dividend of $0.51 per share,
which was paid on June 27, 2018, to common stockholders of record as of June 15,
2018. Shareholders had the option to receive payment of the dividend in cash, or
receive shares of common stock, pursuant to the DRIP. Based on shareholder
elections, the dividend consisted of approximately $2.7 million in cash and
21,562 newly issued shares of common stock, or 0.3% of our outstanding common
stock prior to the dividend payment. The number of shares of common stock
comprising the stock portion was calculated based on a price of $23.72 per
share, which equaled 95.0% of the volume weighted average trading price per
share of the common stock on June 14, 15, 18, 19, 20, 21, 22, 25, 26 and 27,
2018.



On February 26, 2018, our board of directors declared a dividend of $0.50 per
share, which was paid on March 26, 2018, to common stockholders of record as of
March 14, 2018. Shareholders had the option to receive payment of the dividend
in cash, or receive shares of common stock, pursuant to the DRIP. Based on
shareholder elections, the dividend consisted of approximately $2.6 million in
cash and 25,354 newly issued shares of common stock, or 0.4% of our outstanding
common stock prior to the dividend payment. The number of shares of common stock
comprising the stock portion was calculated based on a price of $19.91 per
share, which equaled 95% of the volume weighted average trading price per share
of the common stock on March 13, 14, 15, 16, 19, 20, 21, 22, 23 and 26, 2018.



On November 29, 2017, our board of directors declared a dividend of $0.49 per
share, which was paid on December 27, 2017, to common stockholders of record on
December 15, 2017. Shareholders had the option to receive payment of the
dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based
on shareholder elections, the dividend consisted of approximately $2.5 million
in cash and 25,435 newly issued shares of common stock, or 0.4% of our
outstanding common stock prior to the dividend payment. The number of shares of
common stock comprising the stock portion was calculated based on a price of
$21.14 per share, which equaled 95% of the volume weighted average trading price
per share of the common stock on December 13, 14, 15, 18, 19, 20, 21, 22, 26 and
27, 2017.


On August 28, 2017, our board of directors declared a dividend of $0.48 per
share, which was paid on September 26, 2017, to common stockholders of record on
September 15, 2017. Shareholders had the option to receive payment of the
dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based
on shareholder elections, the dividend consisted of approximately $2.2 million
in cash and 33,551 newly issued shares of common stock, or 0.6% of our
outstanding common stock prior to the dividend payment. The number of shares of
common stock comprising the stock portion was calculated based on a price of
$20.19 per share, which equaled 95% of the volume weighted average trading price
per share of the common stock on September 13, 14, 15, 18, 19, 20, 21, 22,
25
and 26, 2017.



On May 30, 2017, our board of directors declared a dividend of $0.47 per share,
which was paid on June 27, 2017, to common stockholders of record on June 15,
2017. Shareholders had the option to receive payment of the dividend in cash, or
receive shares of common stock, pursuant to the DRIP. Based on shareholder
elections, the dividend consisted of approximately $2.3 million in cash and
26,222 newly issued shares of common stock, or 0.4% of our outstanding common
stock prior to the dividend payment. The number of shares of common stock
comprising the stock portion was calculated based on a price of $20.04 per
share, which equaled 95% of the volume weighted average trading price per share
of the common stock on June 14, 15, 16, 19, 20, 21, 22, 23, 26 and 27, 2017.



On February 28, 2017, our board of directors declared a dividend of $0.46 per
share, which was paid on March 28, 2017, to common stockholders of record as of
March 15, 2017. Shareholders had the option to receive payment of the dividend
in cash, or receive shares of common stock, pursuant to the DRIP. Based on
shareholder elections, the dividend consisted of approximately $2.0 million in
cash and 29,096 newly issued shares of common stock, or 0.5% of our outstanding
common stock prior to the dividend payment. The number of shares of common stock
comprising the stock portion was calculated based on a price of $21.38 per
share, which equaled 95% of the volume weighted average trading price per share
of the common stock on March 15, 16, 17, 20, 21, 22, 23, 24, 27 and 28, 2017.



                                      120





On January 12, 2017, our board of directors declared a dividend of $0.45 per
share, which was paid on February 9, 2017, to common stockholders of record as
of January 31, 2017. Shareholders had the option to receive payment of the
dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based
on shareholder elections, the dividend consisted of approximately $1.6 million
in cash and 50,453 newly issued shares of common stock, or 0.9% of our
outstanding common stock prior to the dividend payment. The number of shares of
common stock comprising the stock portion was calculated based on a price of
$20.25 per share, which equaled 95% of the volume weighted average trading price
per share of the common stock on January 27, 30, 31 and February 1, 2, 3, 6, 7,
8 and 9, 2017.


On October 5, 2016, our board of directors declared a dividend of $0.44 per
share, which was paid on November 9, 2016, to common stockholders of record as
of October 31, 2016. Shareholders had the option to receive payment of the
dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based
on shareholder elections, the dividend consisted of approximately $1.5 million
in cash and 58,548 newly issued shares of common stock, or 1.0% of our
outstanding common stock prior to the dividend payment. The number of shares of
common stock comprising the stock portion was calculated based on a price of
$17.12 per share, which equaled 95% of the volume weighted average trading price
per share of the common stock on October 27, 28, 31 and November 1, 2, 3, 4, 7,
8 and 9, 2016.



On August 8, 2016, our board of directors declared a special dividend of $0.20
per share, which was paid on September 5, 2016, to common stockholders of record
as of August 24, 2016. Shareholders had the option to receive payment of the
dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based
on shareholder elections, the dividend consisted of approximately $0.7 million
in cash and 24,786 newly issued shares of common stock, or 0.4% of our
outstanding common stock prior to the dividend payment. The number of shares of
common stock comprising the stock portion was calculated based on a price of
$17.06 per share, which equaled 95% of the volume weighted average trading price
per share of the common stock on August 22, 23, 24, 25, 26, 29, 30, 31 and
September 1 and 2, 2016.



On July 7, 2016, our board of directors declared a dividend of $0.43 per share,
which was paid on August 9, 2016, to common stockholders of record as of July
29, 2016. Shareholders had the option to receive payment of the dividend in
cash, or receive shares of common stock, pursuant to the DRIP. Based on
shareholder elections, the dividend consisted of approximately $1.5 million in
cash and 58,167 newly issued shares of common stock, or 1.0% of our outstanding
common stock prior to the dividend payment. The number of shares of common stock
comprising the stock portion was calculated based on a price of $16.32 per
share, which equaled 95% of the volume weighted average trading price per share
of the common stock on July 27, 28, 29 and August 1, 2, 3, 4, 5, 8 and 9, 2016.



On March 31, 2016, our board of directors declared a dividend of $0.41 per
share, which was paid on April 27, 2016, to common stockholders of record as of
April 15, 2016. Shareholders had the option to receive payment of the dividend
in cash, or receive shares of common stock, pursuant to the DRIP. Based on
shareholder elections, the dividend consisted of approximately $1.5 million in
cash and 56,728 newly issued shares of common stock, or 1.0% of our outstanding
common stock prior to the dividend payment. The number of shares of common stock
comprising the stock portion was calculated based on a price of $15.43 per
share, which equaled 95% of the volume weighted average trading price per share
of the common stock on April 14, 15, 18, 19, 20, 21, 22, 25, 26 and 27, 2016.



On January 12, 2016, our board of directors declared a dividend of $0.40 per
share, which was paid on February 29, 2016, to common stockholders of record as
of February 1, 2016. Shareholders had the option to receive payment of the
dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based
on shareholder elections, the dividend consisted of approximately $1.4 million
in cash and 66,765 newly issued shares of common stock, or 1.2% of our
outstanding common stock prior to the dividend payment. The number of shares of
common stock comprising the stock portion was calculated based on a price of
$13.11 per share, which equaled 95% of the volume weighted average trading price
per share of the common stock on February 16, 17, 18, 19, 22, 23, 24, 25, 26 and
29, 2016.


On October 7, 2015, our board of directors declared a dividend of $0.36 per
share, which was paid on November 30, 2015, to common stockholders of record as
of November 2, 2015. Shareholders had the option to receive payment of the
dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based
on shareholder elections, the dividend consisted of approximately $1.1 million
in cash and 61,029 newly issued shares of common stock, or 1.1% of our
outstanding common stock prior to the dividend payment. The number of shares of
common stock comprising the stock portion was calculated based on a price of
$14.53 per share, which equaled 95% of the volume weighted average trading price
per share of the common stock on November 16, 17, 18, 19, 20, 23, 24, 25, 27 and
30, 2015.



On July 8, 2015, our board of directors declared a dividend of $0.33 per share,
which was paid on August 31, 2015, to common stockholders of record as of August
3, 2015. Shareholders had the option to receive payment of the dividend in cash,
or receive shares of common stock, pursuant to the DRIP. Based on shareholder
elections, the dividend consisted of approximately $1.1 million in cash and
47,861 newly issued shares of common stock, or 0.9% of our outstanding common
stock prior to the dividend payment. The number of shares of common stock
comprising the stock portion was calculated based on a price of $15.28 per
share, which equaled 95% of the volume weighted average trading price per share
of the common stock on August 18, 19, 20, 21, 24, 25, 26, 27, 28 and 31, 2015.



                                      121





On May 14, 2015, our board of directors declared a special dividend of $1.00 per
share, which was paid on June 5, 2015, to common stockholders of record on as of
May 26, 2015. Shareholders had the option to receive payment of the dividend in
cash, or receive shares of common stock, pursuant to the DRIP. Based on
shareholder elections, the dividend consisted of approximately $3.4 million in
cash and 126,230 newly issued shares of common stock, or 2.3% of our outstanding
common stock prior to the dividend payment. The number of shares of common stock
comprising the stock portion was calculated based on a price of $16.47 per
share, which equaled 95% of the volume weighted average trading price per share
of the common stock on May 22, 26, 27, 28, 29 and June 1, 2, 3, 4 and 5, 2015.



On April 9, 2015, our board of directors declared a dividend of $0.27 per share,
which was paid on May 29, 2015, to common stockholders of record as of May 4,
2015. Shareholders had the option to receive payment of the dividend in cash, or
receive shares of common stock, pursuant to the DRIP. Based on shareholder
elections, the dividend consisted of approximately $0.9 million in cash and
33,766 newly issued shares of common stock, or 0.6% of our outstanding common
stock prior to the dividend payment. The number of shares of common stock
comprising the stock portion was calculated based on a price of $16.78 per
share, which equaled 95% of the volume weighted average trading price per share
of the common stock on May 15, 18, 19, 20, 21, 22, 26, 27, 28 and 29, 2015.



On September 24, 2014, our board of directors declared a dividend of $0.22 per
share, which was paid on February 27, 2015, to common stockholders of record on
February 2, 2015. Shareholders have the option to receive payment of the
dividend in cash, or receive shares of common stock, pursuant to the DRIP. Based
on shareholder elections, the dividend consisted of approximately $0.8 million
in cash and 26,858 newly issued shares of common stock, or 0.5% of our
outstanding common stock prior to the dividend payment. The number of shares of
common stock comprising the stock portion was calculated based on a price of
$14.97 per share, which equaled 95% of the volume weighted average trading price
per share of the common stock on February 13, 17, 18, 19, 20, 23, 24, 25, 26 and
27, 2015.


Also, on September 24, 2014, our board of directors declared a dividend of $0.18
per share, which was paid on November 28, 2014, to common stockholders of record
on November 3, 2014. Shareholders had the option to receive payment of the
dividend in cash or receive shares of common stock pursuant to the DRIP. Based
on shareholder elections, the dividend consisted of approximately $0.6 million
in cash and 22,283 newly issued shares of common stock, or 0.4% of our
outstanding common stock prior to the dividend payment. The number of shares of
common stock comprising the stock portion was calculated based on a price of
$14.37 per share, which equaled 95% of the volume weighted average trading price
per share of the common stock on November 14, 17, 18, 19, 20, 21, 24, 25, 26 and
28, 2014.



On October 30, 2013, our board of directors declared a dividend of $2.65 per
share, which was paid on December 27, 2013, to common stockholders of record as
of November 13, 2013. Shareholders had the option to receive payment of the
dividend in cash, shares of common stock, or a combination of cash and shares of
common stock, provided that the aggregate cash payable to all shareholders was
limited to approximately $2.5 million or $0.53 per share. This dividend was
declared in reliance on certain private letter rulings issued by the IRS
concluding that a RIC may treat a distribution of its own stock as fulfilling
its RIC distribution requirements if each stockholder may elect to receive his
or her entire distribution in either cash or stock of the RIC subject to a
limitation on the aggregate amount of cash to be distributed to all
stockholders, which limitation must be at least 20.0% of the aggregate declared
distribution. Based on shareholder elections, the dividend consisted of
approximately $2.5 million in cash and 649,500 shares of common stock, or 13.7%
of our outstanding common stock prior to the dividend payment. The amount of
cash elected to be received was greater than the cash limit of 20.0% of the
aggregate dividend amount, thus resulting in the payment of a combination of
cash and stock to shareholders who elected to receive cash. The number of shares
of common stock comprising the stock portion was calculated based on a price of
$15.439 per share, which 95% of equaled the volume weighted average trading
price per share of the common stock on December 11, 13, and 16, 2013.



On November 9, 2012, our board of directors declared a dividend of $4.25 per
share, which was paid on December 31, 2012, to common stockholders of record as
of November 20, 2012. Shareholders had the option to receive payment of the
dividend in cash, shares of common stock, or a combination of cash and shares of
common stock, provided that the aggregate cash payable to all shareholders was
limited to approximately $3.3 million or $0.85 per share. Based on shareholder
elections, the dividend consisted of $3.3 million in cash and 853,455 shares of
common stock, or 22.0% of our outstanding common stock prior to the dividend
payment. The amount of cash elected to be received was greater than the cash
limit of 20.0% of the aggregate dividend amount, thus resulting in the payment
of a combination of cash and stock to shareholders who elected to receive cash.
The number of shares of common stock comprising the stock portion was calculated
based on a price of $15.444 per share, which equaled 95% of the volume weighted
average trading price per share of the common stock on December 14, 17 and
19,
2012.



On November 15, 2011, our board of directors declared a dividend of $3.00 per
share, which was paid on December 30, 2011, to common stockholders of record as
of November 25, 2011. Shareholders had the option to receive payment of the
dividend in cash, shares of common stock, or a combination of cash and shares of
common stock, provided that the aggregate cash payable to all shareholders was
limited to $2.0 million or $0.60 per share. Based on shareholder elections, the
dividend consisted of $2.0 million in cash and 599,584 shares of common stock,
or 18.0% of our outstanding common stock prior to the dividend payment. The
amount of cash elected to be received was greater than the cash limit of 20.0%
of the aggregate dividend amount, thus resulting in the payment of a combination
of cash and stock to shareholders who elected to receive cash. The number of
shares of common stock comprising the stock portion was calculated based on a
price of $13.117067 per share, which equaled 95% of the volume weighted average
trading price per share of the common stock on December 20, 21 and 22, 2011.



                                      122





On November 12, 2010, our board of directors declared a dividend of $4.40 per
share to shareholders payable in cash or shares of our common stock, in
accordance with the provisions of the IRS Revenue Procedure 2010-12, which
allows a publicly-traded regulated investment company to satisfy its
distribution requirements with a distribution paid partly in common stock
provided that at least 10.0% of the distribution is payable in cash. The
dividend was paid on December 29, 2010 to common shareholders of record on
November 19, 2010. Based on shareholder elections, the dividend consisted of
$1.2 million in cash and 596,235 shares of common stock, or 22.0% of our
outstanding common stock prior to the dividend payment. The amount of cash
elected to be received was greater than the cash limit of 10.0% of the aggregate
dividend amount, thus resulting in the payment of a combination of cash and
stock to shareholders who elected to receive cash. The number of shares of
common stock comprising the stock portion was calculated based on a price of
$17.8049 per share, which equaled 95% of the volume weighted average trading
price per share of the common stock on December 20, 21 and 22, 2010.



On November 13, 2009, our board of directors declared a dividend of $18.25 per
share, which was paid on December 31, 2009, to common stockholders of record as
of November 25, 2009. Shareholders had the option to receive payment of the
dividend in cash, shares of common stock, or a combination of cash and shares of
common stock, provided that the aggregate cash payable to all shareholders was
limited to $2.1 million or $0.25 per share. Based on shareholder elections, the
dividend consisted of $2.1 million in cash and 864,872.5 shares of common stock,
or 104.0% of our outstanding common stock prior to the dividend payment. The
amount of cash elected to be received was greater than the cash limit of 13.7%
of the aggregate dividend amount, thus resulting in the payment of a combination
of cash and stock to shareholders who elected to receive cash. The number of
shares of common stock comprising the stock portion was calculated based on a
price of $1.5099 per share, which equaled 95% of the volume weighted average
trading price per share of the common stock on December 24 and 28, 2009.



We cannot provide any assurance that these measures will provide sufficient sources of liquidity to support our operations and growth.

Our asset coverage ratio, as defined in the 1940 Act, was 184.2% as of August 31, 2022 and 209.3% as of February 28, 2022.



Subsequent Events


On July 9, 2020, the Company entered into the Notes Purchase Agreement (the
"Notes Purchase Agreement") governing the issuance of its 7.75% Notes due 2025
in the aggregate principal amount of $5.0 million to an institutional investor
(the "Purchaser") in a private placement. Pursuant to the terms of the Notes
Purchase Agreement, upon the mutual agreement of the Company and the Purchaser,
the Company may issue additional notes with modified pricing terms, in the
aggregate, up to a maximum of $50.0 million in one or more private offerings. On
January 28, 2021, the Company entered into the First Supplemental Notes Purchase
Agreement (the "First Supplemental Agreement") governing the issuance of its
6.25% Notes due 2027 in the aggregate principal amount of $10.0 million to the
Purchaser in a private placement. On September 8, 2022, the Company entered into
the Second Supplemental Notes Purchase Agreement (the "Second Supplemental
Agreement") governing the issuance of its 7.00% Notes due 2025 (the "7.00% 2025
Notes") in the aggregate principal amount of $12.0 million to the Purchaser in a
private placement. In addition, pursuant to the Second Supplement Agreement,
upon the mutual agreement of the Company and the Purchaser, the Purchaser may
purchase from the Company up to an additional $8.0 million in aggregate
principal amount of the 7.00% 2025 Notes by September 30, 2022, which did not
occur. The 7.00% 2025 Notes were delivered and paid for on September 8, 2022.
Upon the issuance of the 7.00% 2025 Notes, the outstanding aggregate principal
amount of the Company's unsecured notes held by the Purchaser under the Notes
Purchase Agreement, the First Supplemental Agreement and the Second Supplemental
Agreement, collectively, is $27.0 million.



On September 29, 2022, the Company announced that it received notification from
the Small Business Administration (the "SBA") that the Company's application for
a third Small Business Investment Company ("SBIC") license has been approved.
The new SBIC license will provide up to $175 million in additional long-term
capital in the form of SBA-guaranteed debentures, subject to the issuance of a
leverage commitment by the SBA. Under current SBIC regulations, for two or more
SBICs under common control, the maximum amount of outstanding SBA debentures
cannot exceed $350.0 million with at least $175.0 million in combined regulatory
capital.



Contractual obligations


The following table shows our payment obligations for repayment of debt and other contractual obligations at August 31, 2022:



                                                                     Payment Due by Period
                                                  Less Than                                          More Than
Long-Term Debt Obligations           Total         1 Year         1 - 3 Years       3 - 5 Years       5 Years
                                                                 ($ in thousands)
Revolving credit facility          $  25,000     $         -     $      25,000     $           -     $        -
SBA debentures                       233,660               -            15,000            33,660        185,000
7.75% 2025 Notes                       5,000               -             5,000                 -              -
4.375% 2026 Notes                    175,000               -                 -           175,000              -
4.35% 2027 Notes                      75,000               -                 -            75,000              -
6.25% 2027 Notes                      15,000               -                 -                 -         15,000
6.00% 2027 Notes                     105,500               -                 -           105,500              -

Total Long-Term Debt Obligations $ 634,160 $ - $ 45,000 $ 389,160 $ 200,000




                                      123




Off-balance sheet arrangements




As of August 31, 2022 and February 28, 2022, the Company's off-balance sheet
arrangements consisted of $90.7 million and $83.4 million, respectively, of
unfunded commitments outstanding to provide debt financing to its portfolio
companies or to fund limited partnership interests. Such commitments are
generally up to the Company's discretion to approve, or the satisfaction of
certain financial and nonfinancial covenants and involve, to varying degrees,
elements of credit risk in excess of the amount recognized in the Company's
consolidated statements of assets and liabilities and are not reflected in the
Company's consolidated statements of assets and liabilities.



A summary of the unfunded commitments outstanding as of August 31, 2022 and February 28, 2022 is shown in the table below (dollars in thousands):



                                                                August 31,       February 28,
                                                                   2022              2022
At Company's discretion
ActiveProspect, Inc.                                           $     10,000     $            -
Artemis Wax                                                           3,000              3,700
Ascend Software LLC                                                   5,000              5,000
Axero Holdings                                                            -              3,000
Davisware                                                             2,000              2,000
Granite Comfort                                                       5,000                  -
JDXpert                                                               5,000                  -
Lee's Famous Recipe Chicken                                           4,000
            10,000
Netreo Holdings, LLC                                                      -              4,000
Pepper Palace                                                         3,000              3,000
Procrement Partners                                                       -              2,800
Saratoga Senior Loan Fund I JV LLC                                   15,606             17,500
Sceptre Hospitality Resources                                           250
             1,000
Book4Time, Inc.                                                           -              2,000
Total                                                          $     52,856     $       54,000

At portfolio company's discretion - satisfaction of certain
financial and nonfinancial covenants required
Ascend Software LLC                                            $      4,200     $        6,500
ARC Health                                                            8,500                  -
Axero Holdings                                                            -              2,000
Axero Holdings - Revolver                                               500                500
Davisware, LLC                                                        1,000              1,000
Exigo - DDTL                                                          4,167                  -
Exigo - Revolver                                                        833                  -
GDS Holdings US, Inc.                                                 1,036              2,786
Granite Comfort                                                       5,000                  -
GoReact                                                                 500              2,500
JDXpert                                                               1,000                  -
Madison Logic - Revolver                                              1,084              1,084
New England Dental Partners                                           4,500              4,500
Pepper Palace - DDTL                                                  2,000              2,000
Pepper Palace - Revolver                                              2,500              2,500
Zollege                                                               1,000              1,000
Lee's Famous Recipe Chicken                                               -              3,000
                                                                     37,820             29,370
Total                                                          $     90,676     $       83,370




The Company believes its assets will provide adequate coverage to satisfy these
unfunded commitments. As of August 31, 2022, the Company had cash and cash
equivalents of $12.6 million and $25.0 million in available borrowings under the
Encina Credit Facility.



                                      124

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Financials (USD)
Sales 2023 88,6 M - -
Net income 2023 14,1 M - -
Net Debt 2023 - - -
P/E ratio 2023 21,6x
Yield 2023 8,36%
Capitalization 305 M 305 M -
Capi. / Sales 2023 3,44x
Capi. / Sales 2024 3,05x
Nbr of Employees -
Free-Float 73,2%
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Managers and Directors
Chris Long Oberbeck Chairman & Chief Executive Officer
Henri Johann Steenkamp CFO, Secretary, Treasurer & Director
Rochelle Kracoff Assistant Chief Compliance Officer
Mike Grisius Chief Investment Officer
Steven M. Looney Independent Director
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