<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QA-1
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1996
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ________ to ________
Commission File Number: 0-25174
SIRROM CAPITAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
TENNESSEE 62-1583116
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
500 CHURCH STREET, SUITE 200
NASHVILLE, TENNESSEE 37219
(Address of Principal (Zip Code)
Executive Offices)
(615) 256-0701
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last
Report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. The number of shares of
common stock, no par value per share, outstanding on May 15, 1995 was 9,153,836.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Page Number
-----------
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets as of December 31, 1995 and March 31, 1996. . . . . . . . . . . . . . . . . . . 3
Statements of Operations for the Three Months Ended March 31, 1995 and March 31, 1996. . . . . 4
Statements of Cash Flows for the Three Months Ended March 31, 1995 and March 31, 1996. . . . . 5
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Portfolio of Investments as of December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . 10
Portfolio of Investments as of March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Financial Condition, Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . 28
Impact of Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ITEM 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . 30
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
2
<PAGE> 3
SIRROM CAPITAL CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
------------ ------------
1995 1996
ASSETS ------------ ------------
(unaudited)
<S> <C> <C>
Investments, at fair value:
Loans $144,854,517 $166,936,281
Equity Interests $ 15,912,467 $ 22,548,818
Warrants $ 11,513,183 $ 11,198,843
------------ ------------
Total Investments (cost of $162,466,881 and
$188,430,081, respectively) $172,280,167 $200,683,942
Cash and cash equivalents $ 195,069 $ 78,283
Interest receivable $ 2,119,567 $ 2,534,774
Accounts receivable $ 0 $ 0
Debenture costs (less accumulated amortization of
$383,279 and $570,175, respectively) $ 2,020,030 $ 2,095,634
Furniture and equipment (less accumulated
depreciation of $18,565 and $29,273, respectively) $ 203,860 $ 214,734
Other assets $ 211,165 $ 598,473
------------ ------------
Total assets $177,029,858 $206,205,840
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Debentures payable to Small Business Administration $ 73,260,000 $ 83,260,000
Revolving credit facility $ 13,200,000 $ 24,916,000
Interest payable $ 936,818 $ 1,281,333
Accrued taxes payable $ 1,073,525 $ 2,310,268
Accounts payable and accrued expenses $ 213,901 $ 32,016
------------ ------------
Total liabilities $ 88,684,244 $111,799,617
------------ ------------
Shareholders' Equity:
Common stock $ 73,919,184 $ 73,919,184
Notes receivable from employees $ (1,980,000) $ (1,980,000)
Undistributed net realized earnings $ 6,593,144 $ 10,413,193
Unrealized appreciation of investments $ 9,813,286 $ 12,053,846
------------ ------------
Total shareholders' equity $ 88,345,614 $ 94,406,223
------------ ------------
Total liabilities and shareholders' equity $177,029,858 $206,205,840
============ ============
</TABLE>
See notes to financial statements.
3
<PAGE> 4
SIRROM CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Three
months ended months ended
March 31, March 31,
---------- ----------
1995 1996
---------- ----------
<S> <C> <C>
Operating Income:
Interest on investments $2,424,130 $4,862,463
Loan processing fees $ 540,992 $ 921,250
---------- ----------
Total operating income $2,965,122 $5,783,713
---------- ----------
Operating Expenses:
Interest expense $ 998,871 $1,789,982
Salaries and benefits $ 451,643 $ 739,020
Other operating expenses $ 221,620 $ 477,064
State income tax on interest $ 51,661 $ 0
Amortization expense $ 30,009 $ 188,397
---------- ----------
Total operating expenses $1,753,804 $3,194,463
---------- ----------
Net operating income $1,211,318 $2,589,250
Realized gain (loss) on investments $ 49,795 $5,756,489
Change in unrealized appreciation
(depreciation) of investment $1,602,920 $2,240,559
Provision for income taxes $ 0 ($2,134,960)
---------- ----------
Net increase in shareholders' equity
resulting from operations $2,864,033 $8,451,338
========== ==========
</TABLE>
See notes to financial statements.
4
<PAGE> 5
SIRROM CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 1995 March 31, 1996
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net increase in partners' capital and shareholders'
equity resulting from operations $ 2,864,033 $ 8,451,338
Adjustments to reconcile net increase to net cash provided
by operating activities:
Net unrealized (appreciation) depreciation of investments $ (1,602,920) $ (2,240,559)
Realized (gain) loss on investments $ (49,795) $ (5,756,489)
Amortization of debenture costs $ 28,509 $ 186,897
Increase in interest receivable $ (169,440) $ (415,185)
Increase (decrease) in accounts payable and
accrued expenses $ 119,135 $ (181,886)
Amortization of organization costs $ 1,500 $ 1,500
Depreciation of fixed assets $ 1,622 $ 10,709
(Increase) decrease in accounts receivable $ (587,400) $ 0
Increase in accrued taxes payable $ (441,804) $ 1,236,743
Increase in interest payable $ 121,831 $ 344,515
------------ ------------
Net cash provided by operating activities $ 285,271 $ 1,637,584
------------ ------------
INVESTING ACTIVITIES:
Proceeds from sale of investments $ 4,162,187 $ 12,506,905
Investments originated or acquired $(28,619,362) $(32,714,000)
Purchase of fixed assets $ (45,976) $ (21,237)
Increase in other assets $ 0 $ (588,808)
------------ ------------
Net cash used in investing activities $(24,503,151) $(20,817,140)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from debentures payable to Small
Business Administration $ 0 $ 10,000,000
Proceeds from revolving credit facilities $ 8,475,596 $ 29,703,000
Repayment of credit facility borrowings $(10,820,847) $(17,987,000)
Increase in debenture costs $ 110,351 $ (262,500)
Issuance of common stock $ 26,508,058 $ 0
Payment of dividends $ 0 $ (2,390,730)
Distribution of capital gains $ 0 $ 0
------------ ------------
Net cash provided by financing activities $ 24,273,158 $ 19,062,770
------------ ------------
Increase (decrease) in cash and cash equivalents $ 55,278 $ (116,786)
Cash and cash equivalents, beginning of period $ 137,247 $ 195,069
------------ ------------
Cash and cash equivalents, end of period $ 192,525 $ 78,283
============ ============
Supplemental disclosures of cash flow information:
Interest paid $ 877,041 $ 1,398,134
============ ============
Taxes paid $ 591,322 $ 951,116
============ ============
</TABLE>
5
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Sirrom Capital Corporation (the "Company"), a Tennessee Corporation, was
formed in November 1994 and Sirrom Capital, L.P. (the "Partnership") became a
partnership under the laws of the State of Tennessee in November 1991. The
accompanying financial statements have been prepared on a basis appropriate for
investment companies as enumerated in the American Institute of Certified
Public Accountants' Audit and Accounting Guide on Audits of Investment
Companies.
The Company is a non-diversified, closed-end investment company, which has
elected to be treated as a business development company under the Investment
Company Act of 1940. The Company is also a small business investment company
("SBIC") licensed under the Small Business Investment Act of 1958 (the "1958
Act"). The Company was licensed by the U.S. Small Business Administration (the
"SBA") on May 14, 1992. Under applicable SBA regulations, the Company is
restricted to investing only in qualified small business concerns in the manner
contemplated by the 1958 Act, as amended. Additionally, beginning in February
1995, the Company elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended.
The Company's objectives are to achieve both a high level of current
income from interest on loans and fees and long-term growth in the value of its
net assets through equity interests primarily in small, privately owned
companies. The Company targets small businesses that the Company believes meet
certain criteria, including the potential for significant growth, adequate
collateral coverage, experienced management teams, sophisticated outside equity
investors and profitable operations.
Effective February 1, 1995, the partners of the Partnership transferred,
in a tax free conversion, their partnership interests to the Company in
exchange for the issuance of 5,050,116 shares of common stock of the Company.
The common stock was received by each partner in proportion to the partner's
percentage interest in the Partnership. As a result of this exchange, the
Partnership was dissolved and liquidated, with all of the assets and
liabilities of the Partnership (including the SBIC license which was obtained
by the Partnership in May 1992) being thereby assigned and transferred to the
Company. This transaction was accounted for as a reorganization of entities
under common control, in a manner similar to a pooling of interests.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Valuation of Investments
Portfolio investments are stated at fair value as determined by the Board
of Directors.
Under the Company's valuation policy, the fair values of loans to small
business concerns are based on the Board of Director's evaluation of the
financial condition of the borrowers and/or the underlying collateral. The
values assigned are considered to be amounts which could be realized in the
normal course of business which anticipates the Company holding the loan to
maturity and realizing the face value of the loan. Fair value for loans
normally corresponds to cost unless the borrower's condition or external
factors lead to a determination of fair value at a lower amount.
6
<PAGE> 7
Equity interests and warrants for which there is not a public market are
valued based on factors such as significant equity financing by sophisticated,
unrelated investors, history of positive cash flow from operations, the market
value of comparable publicly traded companies (discounted for illiquidity) and
other pertinent factors. The Board of Directors also considers recent offers
to purchase a portfolio company's securities when valuing warrants. At March
31, 1996, the investment portfolio included investments totaling $192,409,978,
whose values had been estimated by the Board of Directors in the absence of
readily ascertainable market values. Because of the inherent uncertainty of
the valuations, the estimated fair values may differ significantly from the
values that would have been used had a ready market for the securities existed,
and the difference could be material.
The Company's investments in stocks of public companies that it is not
permitted to sell in the public market as a result of securities laws
restrictions, lock-up agreements or other similar restrictions are valued at
70% of market value at the balance sheet date. All other publicly traded
stocks are valued at 90% of market value at the balance sheet date.
Realized and Unrealized Gain or Loss on Investments
Realized gains or losses are recorded upon disposition of investments and
are calculated based upon the difference between the proceeds and the cost
basis determined using the specific identification method. All other changes
in the valuation of portfolio investments are included as changes in the
unrealized appreciation or depreciation of investments in the statement of
operations.
Description of Loans Terms
The loans to small business concerns included in investments bear interest
at rates ranging from 4.00% to 14.00%. Typically, interest is payable in
monthly or quarterly installments over five years with the entire principal
amounts due at maturity. These loans are generally collateralized by the assets
of the borrower, certain of which are subject to prior liens, and/or guarantees.
Loan Processing Fees
The Company recognizes loan processing fees as income when received.
Cash and Cash Equivalents
The Company defines cash and cash equivalents as cash on hand, cash in
interest bearing and non-interest bearing operating bank accounts and highly
liquid investments such as time deposits with an original maturity of three
months or less.
Debenture Costs
Debenture costs are amortized over ten years which represents the term of
the 11 SBA debentures, as discussed in Note 3.
7
<PAGE> 8
Income Taxes
Beginning in February 1995, the Company elected to be taxed as a regulated
investment company ("RIC") under Subchapter M of the Internal Revenue Code (the
"Code"). If the Company, as a RIC, satisfies certain requirements relating to
the source of its income, the diversification of its assets and the
distribution of its net income, the Company is generally taxed as a pass
through entity which acts as a partial conduit of income to its shareholders.
In order to maintain its RIC status, the Company must in general: a)
derive at least 90% of its gross income from dividends, interest and gains from
the sale or disposition of securities b) derive less than 30% of its gross
income from the sale or disposition of securities held for less than three
months, c) meet investment diversification requirements defined by the Code
and d) distribute to shareholders at least 90% of its net income (other than
long-term capital gains).
The Company currently intends to meet the RIC qualifications in future
years. Therefore, the Company has not provided for federal income taxes on the
unrealized appreciation of investments.
3. DEBENTURES PAYABLE TO SMALL BUSINESS ADMINISTRATION
As of March 31, 1996, the Company had 11 debentures totaling $83,260,000
payable to the SBA with semiannual interest only payments based upon rates
ranging from 6.12% to 8.20% per annum, with scheduled maturity dates as
follows:
<TABLE>
<CAPTION>
Date Amount
----------------------------------------
<S> <C>
2002 $10,000,000
2003 24,000,000
2004 17,000,000
2005 22,260,000
2006 10,000,000
-----------
$83,260,000
</TABLE>
The debentures are subject to a prepayment penalty if paid prior to five
years from maturity. Interest expense related to these debentures for the
period ended March 31, 1996 totaled $1,317,446.
4. REVOLVING CREDIT FACILITY
During December 1995, the Company entered into a new revolving credit
facility (the "Revolving Credit Facility") with a syndicate of banks, whereby
it may borrow up to $50,000,000 at LIBOR plus 1.75% (7.19% at March 31, 1996).
As of March 31, 1996, $24,916,000 was outstanding. This agreement expires on
December 27, 1998.
Interest expense related to the line of credit for the period ended March
31, 1996 was $472,536.
The Company entered into an interest rate swap agreement that effectively
converts the variable rate of $30,000,000 of borrowings on the revolving credit
facility to a fixed rate of 8.15%. Under the agreement, the Company has
exchanged the interest rate difference between the fixed and variable rates on
incremental amounts of $3,000,000 a month beginning in April 1996.
8
<PAGE> 9
5. INCOME TAXES
For the period ended March 31, 1996, the Company provided for taxes of
$2,134,960 on realized long-term capital gains not distributed to shareholders.
6. EMPLOYEE STOCK OPTION PLAN
In February 1996, the Company adopted the 1996 Incentive Stock Option Plan (the
"1996 Plan") that permits the issuance of options to purchase shares of the
Company's Common Stock to selected employees. The 1996 Plan reserves 390,000
shares of Common Stock for grant and provides that the terms of each award be
determined by a committee of the Board of Directors. Under the terms of the
1996 Plan, the options' exercise price may not be less than the fair market
value of a share of Common Stock on the date of grant. In February 1996, the
Company granted to George Miller, the Company's Chief Executive Officer,
and Kathy Harris, a Vice President of the Company, options to purhcase 56,966
and 50,000 shares, respectively, at $18.625 a share. The options vest 20% each
year from the date of grant. These options are expressly conditioned upon
shareholder approval and the exercise price approximates the fair market value
of a share of common stock on the date of grant.
9
<PAGE> 10
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- ------------------------------------------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Affinity Fund, Inc.............................. 06/29/98 12.50% $ 1,485,000 $ 1,494,932
Affinity Fund, Inc.............................. 03/10/00 14.00 1,000,000 1,000,000
Affinity Fund, Inc.............................. 12/28/98 12.50 495,000 495,083
Alpha West Partners I, L.P...................... 12/31/97 12.50 771,308 675,058
American Remedial Tech., Inc.................... 03/26/00 13.50 1,485,000 1,487,500
American Remedial Tech., Inc.................... 07/11/00 14.00 495,000 495,498
Amscot Holdings, Inc............................ 05/26/00 14.00 800,000 800,000
Amscot Holdings, Inc............................ 09/20/00 14.00 200,000 200,000
Ashe Industries, Inc............................ 12/28/97 12.50 990,000 646,178
Ashe Industries, Inc............................ 03/25/99 12.50 445,500 447,150
Ashe Industries, Inc............................ 05/18/99 12.50 544,500 546,340
Ashe Industries, Inc............................ 06/12/96 14.00 750,000 750,000
Ashe Industries, Inc............................ 06/12/96 14.00 285,546 285,546
Associated Response Services, Inc............... 06/20/99 12.50 1,386,000 1,390,427
Associated Response Services, Inc............... 02/15/00 12.50 335,000 335,000
Associated Response Services, Inc............... 01/06/00 12.50 300,000 300,000
Assured Power, Inc.............................. 10/01/00 13.50 700,000 700,000
B & N Company, Inc.............................. 08/08/00 12.50 2,970,000 2,972,500
BankCard Services Corporation................... 01/21/98 13.00 297,000 298,800
BiTec Southeast, Inc............................ 11/03/97 12.50 445,500 448,350
BiTec Southeast, Inc............................ 11/30/98 12.50 1,188,000 1,193,000
BiTec Southeast, Inc............................ 11/03/97 12.50 445,500 447,300
BiTec Southeast, Inc............................ 08/01/99 13.50 521,321 521,321
C.J. Spirits, Inc............................... 05/01/97 13.50 750,171 455,546
Capital Network System, Inc..................... 11/30/98 12.50 990,000 994,342
Capital Network System, Inc..................... 01/18/99 12.50 990,000 994,008
Cardiac Control Systems, Inc.................... 03/31/00 13.50 1,500,000 1,500,000
Carter Kaplan Holdings, L.L.C................... 06/22/00 14.00 594,000 594,300
CCS Technology Group, Inc....................... 05/01/97 13.00 990,000 997,288
CellCall, Inc................................... 11/04/97 12.75 990,000 996,345
CF Data Corp.................................... 03/16/00 13.75 1,732,500 1,735,420
Champion Glove Mfg. Co., Inc.................... 07/27/00 13.50 1,250,000 1,250,000
Clearidge, Inc.................................. 09/29/99 13.00 2,000,000 2,000,000
Clearidge, Inc.................................. 12/28/00 13.50 500,000 500,000
Colonial Investments, Inc....................... 10/16/00 13.75 800,000 800,000
Consumat Systems, Inc........................... 11/01/00 14.00 500,000 500,000
Consumer Credit Associates, Inc................. 12/06/00 13.50 2,000,000 2,000,000
Continental Diamond Cutting Co.................. 10/28/99 13.00 1,500,000 1,500,000
Continental Diamond Cutting Co.................. 12/28/99 13.00 200,000 200,000
Continental Diamond Cutting Co.................. 05/31/96 14.00 300,000 300,000
Corporate Flight Mgmt., Inc..................... 12/04/97 12.50 346,500 348,645
Cougar Power Products, Inc...................... 10/05/96 13.00 495,000 495,083
Cougar Power Products, Inc...................... 10/05/96 13.00 495,000 497,003
Cougar Power Products, Inc...................... 10/05/96 14.00 325,000 325,000
Dalcon International, Inc....................... 01/31/02 13.00 150,000 150,000
Dalcon International, Inc....................... 01/31/00 13.00 200,000 200,000
</TABLE>
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SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- ------------------------------------------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Dalt's, Inc..................................... 04/28/01 13.50% $ 2,000,000 $ 2,000,000
DentureCare, Inc................................ 07/29/99 11.50 990,000 993,006
DentureCare, Inc................................ 11/03/00 14.00 111,150 111,150
DentureCare, Inc................................ 08/31/00 14.00 800,000 800,000
Eastern Food Group LLC.......................... 08/30/00 8.00 500,000 500,000
Eastern Food Group LLC.......................... 12/20/00 8.00 200,000 200,000
Educational Medical, Inc........................ 03/31/00 14.00 2,200,000 2,200,000
Electronic Merchant Services.................... 02/27/00 13.50 1,237,500 1,239,788
Electronic Merchant Services.................... 12/31/95 14.00 242,450 242,450
Emerald Pointe Waterpark L.P.................... 04/29/99 12.50 594,000 596,000
Emerald Pointe Waterpark L.P.................... 03/09/00 13.50 400,000 400,000
Encore Orthopedics, Inc......................... 07/31/00 13.50 2,620,985 2,658,887
Express Shipping Centers, Inc................... 09/25/00 13.25 1,697,619 1,734,426
Factory Card Outlet Of America Ltd.............. 11/15/00 12.50 3,670,917 3,682,317
Front Royal, Inc................................ 10/01/99 13.00 1,550,000 1,550,000
Front Royal, Inc................................ 12/27/99 13.00 675,000 675,000
Fycon Technologies, Inc......................... 05/16/00 10.00 350,000 350,000
Fycon Technologies, Inc......................... 08/30/00 14.00 1,000,000 1,000,000
Fycon Technologies, Inc......................... 12/17/00 14.00 100,000 100,000
Gates Communications, L.P....................... 12/31/98 12.50 990,000 994,175
Gitman and Company.............................. 12/31/00 14.00 1,700,000 1,700,000
Global Finance and Leasing, Inc................. 01/03/00 13.00 1,500,000 1,500,000
Gold Medal Products, Inc........................ 11/19/00 13.50 1,250,000 1,250,000
Golf Corporation of America, Inc................ 09/16/99 11.00 300,000 300,000
Golf Corporation of America, Inc................ 12/28/00 14.00 200,000 200,000
Golf Corporation of America, Inc................ 12/29/00 10.00 455,589 455,589
Gulfstream International Airlines Inc........... 07/29/99 13.00 1,490,000 1,494,509
Gulfstream International Airlines Inc........... 09/25/00 14.00 1,000,000 1,000,000
Horizon Medical Products, Inc................... 09/22/00 13.75 1,500,000 1,500,000
Hoveround Corporation........................... 06/11/98 13.00 495,000 497,368
Hoveround Corporation........................... 11/08/99 13.50 250,000 250,000
Hoveround Corporation........................... 03/08/00 14.00 250,000 250,000
Hunt Incorporated............................... 03/31/00 14.00 3,300,000 3,300,000
In-Store Services, Inc.......................... 04/19/00 14.00 1,188,000 1,189,800
Innotech, Inc................................... 03/22/99 13.00 1,980,000 1,987,326
Intermed Healthcare Systems, Inc................ 06/29/99 12.00 742,500 744,875
Intermed Healthcare Systems, Inc................ 02/10/00 14.00 375,000 375,000
International Manufacturing and Trade, Inc...... 04/27/99 13.00 495,000 496,743
International Manufacturing and Trade, Inc...... 12/01/99 13.00 400,000 400,000
International Manufacturing and Trade, Inc...... 06/09/00 14.00 500,000 500,000
International Manufacturing and Trade, Inc...... 07/25/00 14.00 250,000 250,000
International Manufacturing and Trade, Inc...... 11/10/00 14.00 100,000 100,000
Johnston County Cable L.P....................... 08/31/00 14.00 1,990,000 1,990,668
Kentucky Kingdom, Inc........................... 04/04/99 8.50 250,000 250,000
Kentucky Kingdom, Inc........................... 01/05/98 12.50 1,980,000 1,991,989
Kentucky Kingdom, Inc........................... 09/26/99 10.50 1,200,000 1,200,000
</TABLE>
11
<PAGE> 12
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- ------------------------------------------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Kentucky Kingdom, Inc........................... 03/01/00 14.00% $ 835,000 $ 835,000
Kentucky Kingdom, Inc........................... 11/06/00 12.50 1,500,000 1,500,000
Kryptonics, Inc................................. 12/14/00 12.90 2,500,000 2,500,000
Lovett's Buffet, Inc............................ 04/01/00 13.00 2,250,000 2,250,000
MBA Marketing Corporation....................... 02/04/99 12.50 1,782,000 1,788,900
Medical Associates of America, Inc.............. 11/01/97 12.50 1,485,000 392,000
Money Transfer Systems, Inc..................... 07/24/00 14.00 247,500 247,752
Money Transfer Systems, Inc..................... 12/20/00 14.00 148,500 148,525
Moore Diversified Products, Inc................. 06/16/00 13.50 800,000 800,000
Moovies, Inc.................................... 04/18/00 13.50 1,485,000 1,487,250
Multimedia Learning, Inc........................ 05/08/00 14.00 1,500,000 1,500,000
Nationwide Engine Supply, Inc................... 01/12/99 12.00 2,475,000 2,485,008
Nelson Juvenile Products L.L.C.................. 10/31/00 14.00 2,000,000 2,000,000
NRI Service and Supply L.P...................... 02/13/00 14.00 2,475,000 2,479,587
OcuTec Corporation.............................. 06/21/99 10.00 1,000,000 1,000,000
OcuTec Corporation.............................. 06/21/00 10.00 350,000 350,000
OcuTec Corporation.............................. 10/16/00 10.00 100,000 100,000
OcuTec Corporation.............................. 12/04/01 10.00 351,500 351,500
Orchid Manufacturing Group, Inc................. 09/14/00 13.00 2,960,000 2,960,667
Orchid Manufacturing Group, Inc................. 12/28/00 13.50 1,000,000 1,000,000
Palco Telecom Service, Inc...................... 11/22/99 12.00 1,800,000 1,800,000
Patton Management Corporation................... 05/26/00 13.50 1,900,000 1,900,000
Pharmaceutical Research Assoc., Inc............. 08/10/00 13.50 1,980,000 1,981,665
Pipeliner Systems, Inc.......................... 09/30/98 13.00 980,000 989,324
Plymouth, Inc................................... 09/28/00 13.00 1,000,000 1,000,000
Precision Fixtures & Graphics, Inc.............. 07/31/10 6.50 1,100,000 889,976
Precision Fixtures & Graphics, Inc.............. 05/26/00 6.50 250,000 202,267
Precision Fixtures & Graphics, Inc.............. 11/07/00 6.50 200,000 161,814
Precision Fixtures & Graphics, Inc.............. 12/27/00 6.50 100,000 80,907
Precision Fixtures & Graphics, Inc.............. 07/10/00 6.50 135,000 109,224
Precision Fixtures & Graphics, Inc.............. 08/28/00 6.50 110,000 88,998
Precision Fixtures & Graphics, Inc.............. 12/12/00 6.50 200,000 161,814
Precision Panel Products, Inc................... 01/11/00 12.75 1,485,000 1,488,000
Premiere Technologies, Inc...................... 05/01/97 12.50 990,000 997,345
Premiere Technologies, Inc...................... 12/23/98 12.00 990,000 994,175
Pritchard Paint & Glass Co...................... 03/21/00 14.00 250,000 250,000
Quest Group International, Inc.................. 11/15/00 13.25 1,125,000 1,129,166
Radio Systems Corporation....................... 12/27/99 13.00 905,725 926,148
SkillSearch Corporation......................... 02/05/98 13.00 496,000 498,545
Summit Publishing Group, Inc.................... 03/17/99 12.00 1,485,000 1,490,500
Suncoast Medical Group, Inc..................... 09/14/99 13.50 485,000 489,498
Suncoast Medical Group, Inc..................... 06/07/00 14.00 495,000 495,083
TCOM Systems, Inc............................... 02/05/98 13.00 571,969 571,969
Tower Environmental, Inc........................ 11/30/98 10.00 2,440,000 2,201,990
</TABLE>
12
<PAGE> 13
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- ------------------------------------------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Tower Environmental, Inc........................ 05/30/95 12.50% $ 150,000 $ 150,000
Trade Am International, Inc..................... 09/30/00 12.75 4,000,000 4,000,000
Treasure Coast Pizza Co......................... 07/29/98 12.00 841,500 845,760
Truckload Management Services, Inc.............. 03/14/98 13.00 150,000 150,000
Unique Electronics, Inc......................... 11/30/99 10.70 600,000 600,000
Universal Marketing Corporation................. 01/31/00 13.50 500,000 500,000
Valdawn, L.L.C.................................. 04/13/00 13.50 2,399,974 2,400,000
Viking Moorings Acquisition, L.L.C.............. 12/15/00 13.00 1,655,500 1,661,242
WWR Technology, Inc............................. 11/01/97 13.00 524,700 528,128
Zahren Alternative Power Corp................... 01/30/00 13.00 495,000 495,083
Zahren Alternative Power Corp................... 11/27/99 13.00 1,980,000 1,985,679
------------ ------------
Total Loans................................... $147,018,924 $144,854,517
=========== ===========
</TABLE>
The accompanying notes are an integral part of this schedule.
13
<PAGE> 14
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF COST OR
SHARES/PERCENTAGE CONTRIBUTED
EQUITY INTERESTS OWNERSHIP VALUE FAIR VALUE
- ----------------------------------------------------- ----------------- ----------- -----------
<S> <C> <C> <C>
PUBLICLY TRADED INVESTMENTS
National Vision Associates, Ltd.
Common Stock -- restricted......................... 208,698 $ 1,771,149 $ 563,485
Concept Technologies Group, Inc. Common Stock --
restricted......................................... 23,408 5,300 30,723
Moovies Inc.
Common Stock....................................... 156,110 16,561 1,475,240
----------- -----------
Subtotal................................... 1,793,010 2,069,448
----------- -----------
EQUITY INVESTMENTS IN PRIVATE COMPANIES
National Recovery Technologies, Inc.
Preferred Stock -- Series A........................ 20,000 -- --
Premiere Technologies, Inc.
Common Stock....................................... 8,000 100,400 1,280,000
Medical Associates of America, Inc.
Preferred Stock -- Series A........................ 66,667 -- --
Viking Moorings Acquisition, L.L.C.
Membership interest in L.L.C....................... 6.50% 344,500 344,500
Nelson Juvenile Products, L.L.C.
Membership interest in L.L.C....................... 30.00% -- --
Skillsearch Corporation
Common Stock....................................... 2,241 250,035 250,035
Potomac Group, Inc.
Preferred Stock -- Series A........................ 800,000 1,000,000 1,232,966
Potomac Group, Inc.
Common Stock....................................... 240,000 60,000 370,504
Kentucky Kingdom, Inc.
Common Stock....................................... 11,671 258,300 1,539,603
Golf Corporation of America, Inc.
Common Stock....................................... 100,000 100,000 100,000
International Risk Control, Inc.
Preferred Stock -- Series A........................ 200,000 50,000 50,000
DentureCare, Inc.
Preferred Stock -- Series D........................ 49,342 300,000 300,000
Unique Electronics, Inc.
Preferred Stock -- Series A........................ 1,000,000 1,000,000 1,000,000
Pipeliner Systems, Inc.
Preferred Stock -- Series D........................ 5,000 1,000,000 1,000,000
Front Royal, Inc.
Common Stock....................................... 110,000 275,000 275,000
Ocutec Acquisition Corporation
Preferred Stock -- Series A........................ 1,539,867 1,539,867 1,539,867
Fycon Technologies, Inc.
Preferred Stock -- Series A........................ 800,000 800,000 800,000
Carter Kaplan Holdings, L.L.C.
Membership interest in LLC......................... 24.00% 6,100 6,100
</TABLE>
14
<PAGE> 15
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF COST OR
SHARES/PERCENTAGE CONTRIBUTED
EQUITY INTERESTS OWNERSHIP VALUE FAIR VALUE
- ----------------------------------------------------- ----------------- ----------- -----------
<S> <C> <C> <C>
Virginia Gas Company
Preferred Stock -- Series A........................ 2,000% $ 2,000,000 $ 2,000,000
Johnston County Cable, L.P.
Class A Interest in L.P............................ 11.11 100,000 100,000
Eastern Food Group, L.L.C.
Class B Preferred Stock............................ 7,500 754,444 754,444
Dalcon International, Inc.
Series B Preferred Stock........................... 850,000 850,000 490,000
Zahren Alternative Power Corporation
Common Stock....................................... 700 210,000 210,000
Zahren Alternative Power Corporation
Preferred Stock.................................... 200 200,000 200,000
----------- -----------
Subtotal................................... 11,198,646 13,843,020
----------- -----------
Total Equity Interests..................... $12,991,656 $15,912,467
=========== ===========
</TABLE>
The accompanying notes are an integral part of this schedule.
15
<PAGE> 16
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE
- ------------------------------------------ ------------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Affinity Fund, Inc........................ 1,725 8.62% $ 20,000 $ 600,000
Alpha West Partners I, L.P................ 2 units 20.00 7,500 --
American Remedial Tech., Inc.............. 244,168 17.05 20,000 230,000
Amscot Holdings, Inc...................... 1,121 18.10 -- --
Ashe Industries, Inc...................... 216 16.52 20,000 --
Associated Responses Services, Inc........ 343 24.27 14,000 400,000
Assured Power, Inc........................ 234 11.94 -- --
Auto Rental Systems, Inc.................. 144,869 8.00 -- 285,000
B & N Company, Inc........................ 18 2.14 30,000 30,000
BankCard Services Corporation............. 138,000 24.00 3,000 --
BiTec Southeast, Inc...................... 938 10.00 21,000 100,000
C.J. Spirits, Inc......................... 180,000 10.00 7,500 --
CF Data Corp.............................. 257 20.45 17,500 17,500
Capital Network System, Inc............... 173,409 3.50 20,000 --
Cardiac Control Systems, Inc.............. 100,000 3.51 -- 153,127
CCS Technology Group, Inc................. 30,000 2.68 10,000 10,000
CellCall, Inc............................. 31,836 1.25 10,000 125,000
Champion Glove Mfg. Co., Inc.............. 538,614 5.87 -- --
CLS Corporation........................... 126,997 4.22 -- --
Clearidge, Inc............................ 367,026 7.91 -- --
Colonial Investments, Inc................. 194 18.00 -- --
Consumer Credit Associates, Inc........... 3,669 15.78 -- --
Continental Diamond Cutting Co............ 112 10.00 -- --
Corporate Flight Mgmt., Inc............... 66,315 10.00 3,500 100,000
Cougar Power Products, Inc................ 336 16.29 10,000 --
Dalcon International, Inc................. 250,000 20.00 -- --
Dalt's, Inc............................... 125 25.00 -- --
DentureCare, Inc.......................... 396,724 11.30 10,000 375,000
Electronic Merchant Services.............. 430 12.50 12,500 12,500
Eastern Food Group LLC.................... 17,647 15.00 -- --
Educational Medical, Inc.................. 85,000 8.00 -- --
Emerald Pointe Waterpark L.P.............. 10 units 10.00 6,000 250,000
Encore Orthopedics, Inc................... 291,550 4.92 379,015 379,015
Express Shipping Centers, Inc............. 73,752 5.10 552,402 552,402
Factory Card Outlet of America Ltd........ 23,658 2.50 329,083 329,083
Front Royal, Inc.......................... 240,458 3.58 -- 420,000
Fycon Technologies, Inc................... 58,677 15.00 -- --
Gates Communication, L.P.................. 47% of LP 47.00 10,000 10,000
Gitman Bros............................... 1,518 20.50 -- --
Global Finance and Leasing, Inc........... 5,000 25.00 -- --
Gold Medal Products, Inc.................. 90,000 30.00 -- --
Golf Corporation of America, Inc.......... 390,000 11.48 -- --
Gulfstream International Airlines Inc..... 260 21.00 10,000 --
Horizon Medical Products, Inc............. 9,486 8.25 -- --
Hoveround Corporation..................... 1,963 27.00 5,000 325,000
Hunt Incorporated......................... 309 11.09 -- 200,000
</TABLE>
16
<PAGE> 17
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE
- ------------------------------------------ ------------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Innotech, Inc............................. 521,220 4.00% $ 20,000 $ 300,000
In-Store Service, Inc..................... 429 12.50 12,000 12,000
Intermed Healthcare Systems, Inc.......... 11,884 10.50 7,500 --
International Manufacturing and Trade,
Inc..................................... 482 29.94 5,000 --
Johnston County Cable, L.P................ 27.5% of LP 27.50 10,000 10,000
Kryptonics, Inc........................... 1,255 9.00 -- --
Lovett's Buffet, Inc...................... 204,219 5.00 -- --
MBA Marketing Corporation................. 26 4.00 18,000 --
Money Transfer Systems, Inc............... 45 4.31 4,000 4,000
Moore Diversified Products, Inc........... 12 10.68 -- --
Multimedia Learning, Inc.................. 202 6.09 -- --
Nationwide Engine Supply, Inc............. 882,353 15.00 25,000 25,000
NRI Service and Supply, L.P............... 27.5% of LP 27.50 25,000 25,000
OcuTec Corp............................... 222,222 6.13 -- --
One Stop Acquisitions, Inc................ 794 24.40 -- 500,000
Orchid Manufacturing Group, Inc........... 1,719,047 4.50 40,000 540,000
Palco Telecom Services, Inc............... 157,895 5.00 -- --
Patton Management Corporation............. 12 10.00 -- 300,000
Pharmaceutical Research Assoc., Inc....... 150,114 7.82 20,000 20,000
Pipeliner Systems, Inc.................... 2,080,000 20.38 20,000 20,000
Plymouth, Inc............................. 92,647 15.00 -- --
Potomac Group, Inc........................ 239,115 1.85 125,000 368,530
Precision Fixtures & Graphics, Inc........ 132 5.00 -- --
Precision Panel Products, Inc............. 122 8.25 15,000 15,000
Premiere Technologies, Inc................ 23,863 2.08 20,000 3,820,000
Quest Group International, Inc............ 44,444 10.00 125,000 125,000
Radio Systems Corporation................. 129,734 7.27 94,275 330,000
SkillSearch Corporation................... 2,381 7.59 254,000 119,000
Summit Publishing Group, Inc.............. 6,296 24.50 15,000 15,000
Suncoast Medical Group, Inc............... 330,245 13.82 20,000 20,000
Suprex Corporation........................ 1,058,179 3.45 -- 7,500
Tower Environmental, Inc.................. 82 10.07 20,000 --
Trade Am International, Inc............... 335,106 6.00 -- --
Treasure Coast Pizza Company.............. 51 10.00 8,500 8,500
Valdawn, L.L.C............................ 2,658 21.00 26 26
Unique Electronics, Inc................... 55,732 20.00 -- --
Universal Marketing Corporation........... 111 10.00 -- --
Virginia Gas Company...................... 525 6.00 -- --
Zahren Alternative Power Corp............. 1,108 5.00 25,000 25,000
------------ ------------
Total Warrants.................. 2,456,301 11,513,183
------------ ------------
Total Investments............... $162,466,881 $172,280,167
============ ============
</TABLE>
The accompanying notes are an integral part of this schedule.
17
<PAGE> 18
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS
AS OF MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- ------------------------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Affinity Fund, Inc......................... 06/29/98 12.50% $ 1,485,000 $ 1,495,682
Affinity Fund, Inc......................... 03/10/00 14.00 1,000,000 1,000,000
Affinity Fund, Inc......................... 12/28/98 12.50 495,000 495,332
Amscot Holdings, Inc....................... 05/26/00 14.00 800,000 800,000
Amscot Holdings, Inc....................... 09/20/00 14.00 200,000 200,000
Ashe Industries, Inc....................... 12/28/97 12.50 990,000 146,512
Ashe Industries, Inc....................... 03/25/99 12.50 445,500 197,300
Ashe Industries, Inc....................... 05/18/99 12.50 544,500 196,524
Ashe Industries, Inc....................... 06/12/96 14.00 750,000 100,000
Ashe Industries, Inc....................... 06/12/96 14.00 285,546 285,546
Associated Response Services, Inc.......... 06/20/99 12.50 1,386,000 1,391,126
Associated Response Services, Inc.......... 02/15/00 12.50 335,000 335,000
Associated Response Services, Inc.......... 01/06/00 12.50 300,000 300,000
Assured Power, Inc......................... 10/01/00 13.50 700,000 700,000
B & N Company, Inc......................... 08/08/00 12.50 2,970,000 2,974,000
B & N Company, Inc......................... 03/28/01 13.00 990,000 990,167
BankCard Services Corporation.............. 01/21/98 13.00 297,000 298,950
BiTec Southeast, Inc....................... 10/31/97 12.50 445,500 448,575
BiTec Southeast, Inc....................... 11/30/98 12.50 1,188,000 1,193,600
BiTec Southeast, Inc....................... 10/31/97 12.50 445,500 447,525
BiTec Southeast, Inc....................... 08/01/99 13.50 521,321 521,321
C.J. Spirits, Inc.......................... 05/01/97 13.50 750,171 455,796
Caldwell/VSR Inc........................... 02/28/01 4.00 1,500,000 1,500,000
Capital Network System, Inc................ 11/30/98 12.50 990,000 994,843
Capital Network System, Inc................ 01/18/99 12.50 990,000 994,509
Cardiac Control Systems, Inc............... 03/31/00 13.50 1,500,000 1,500,000
Carter Kaplan Holdings, L.L.C.............. 06/22/00 14.00 594,000 594,600
CCS Technology Group, Inc.................. 05/01/97 13.00 990,000 997,789
Cell Call, Inc............................. 11/04/97 12.75 990,000 996,846
CF Data Corp............................... 03/16/00 13.75 1,732,500 1,736,296
Champion Glove Manufacturing Co., Inc...... 07/27/00 13.50 1,250,000 1,250,000
Clearidge, Inc............................. 09/29/99 13.00 2,000,000 2,000,000
Clearidge, Inc............................. 12/28/00 13.50 500,000 500,000
Colonial Investments, Inc.................. 10/16/00 13.75 800,000 800,000
Consumat Systems, Inc...................... 11/01/00 14.00 500,000 500,000
Consumat Systems, Inc...................... 01/01/01 14.00 500,000 500,000
Consumat Systems, Inc...................... 03/11/01 14.00 500,000 500,000
Consumer Credit Associates, Inc............ 12/06/00 13.50 2,000,000 2,000,000
Consumer Credit Associates, Inc............ 03/28/01 13.50 1,000,000 1,000,000
Continental Diamond Cutting Co............. 10/28/99 13.00 1,500,000 1,500,000
Continental Diamond Cutting Co............. 12/28/99 13.00 200,000 200,000
Continental Diamond Cutting Co............. 05/31/96 14.00 200,000 200,000
Corporate Flight Mgmt, Inc................. 12/04/97 12.50 346,500 348,819
Cougar Power Products, Inc................. 10/05/96 13.00 495,000 372,169
Cougar Power Products, Inc................. 10/05/96 13.00 495,000 370,249
Cougar Power Products, Inc................. 10/05/96 14.00 325,000 325,000
Dalcon International, Inc.................. 01/31/02 13.00 150,000 150,000
Dalcon International, Inc.................. 01/31/00 13.00 200,000 200,000
Dalcon International, Inc.................. 05/15/96 13.00 45,000 45,000
</TABLE>
18
<PAGE> 19
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- ------------------------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Dalt's, Inc................................ 04/28/01 13.50% $ 2,000,000 $ 2,000,000
DentureCare, Inc........................... 07/29/99 11.50 990,000 993,507
DentureCare, Inc........................... 11/03/00 14.00 111,150 111,150
DentureCare, Inc........................... 08/31/00 14.00 800,000 800,000
DentureCare, Inc........................... 01/11/01 12.50 550,000 550,000
Eastern Food Group L.L.C................... 08/30/00 8.00 500,000 500,000
Eastern Food Group L.L.C................... 12/20/00 8.00 200,000 200,000
Eastern Food Group L.L.C................... 01/21/01 8.00 200,000 200,000
Eastern Food Group L.L.C................... 02/14/01 8.00 265,000 265,000
Educational Medical Inc.................... 03/31/00 14.00 2,200,000 2,200,000
Electronic Merchant Services............... 02/27/00 13.50 1,237,500 1,040,204
Electronic Merchant Services............... 02/29/96 14.00 272,450 272,450
Electronic Merchant Services............... 02/29/96 14.00 134,000 134,000
Emerald Pointe Waterpark, L.P.............. 04/29/99 12.50 594,000 596,300
Emerald Pointe Waterpark, L.P.............. 03/09/00 13.50 400,000 400,000
Encore Orthopedics, Inc.................... 07/31/00 13.50 2,620,985 2,677,838
Encore Orthopedics, Inc.................... 02/28/01 13.00 1,667,680 1,678,758
Express Shipping Centers, Inc.............. 09/22/00 13.25 1,697,598 1,762,047
Factory Card Outlet of America Ltd......... 11/15/00 12.50 3,670,917 3,698,772
Front Royal, Inc........................... 10/01/99 13.00 1,550,000 1,550,000
Front Royal, Inc........................... 12/27/99 13.00 675,000 675,000
Fycon Technologies, Inc.................... 05/16/00 10.00 450,000 450,000
Fycon Technologies, Inc.................... 08/30/00 14.00 1,000,000 800,000
Fycon Technologies, Inc.................... 12/17/00 14.00 100,000 100,000
Gardner Wallcovering, Inc.................. 03/28/01 13.50 1,485,000 1,485,250
Gates Communications, L.P.................. 12/31/98 12.50 990,000 994,676
Gitman and Company......................... 12/31/00 14.00 1,700,000 1,700,000
Global Finance and Leasing, Inc............ 01/03/00 13.00 1,500,000 1,500,000
Gold Medal Products, Inc................... 11/19/00 13.50 1,250,000 1,250,000
Gold Medal Products, Inc................... 02/15/01 13.00 25,000 25,000
Golf Corporation of America, Inc........... 09/16/99 11.00 300,000 300,000
Golf Corporation of America, Inc........... 12/28/00 14.00 200,000 200,000
Golf Corporation of America, Inc........... 12/29/00 10.00 455,589 455,589
Golf Video, Inc............................ 03/27/01 14.00 250,000 250,000
Gulfstream International Airlines, Inc..... 07/29/99 13.00 1,490,000 1,495,010
Gulfstream International Airlines, Inc..... 09/25/00 14.00 1,000,000 1,000,000
Horizon Medical Products, Inc.............. 09/22/00 13.75 1,500,000 1,500,000
Hoveround Corporation...................... 06/11/98 13.00 495,000 497,617
Hoveround Corporation...................... 11/08/99 13.50 250,000 250,000
Hoveround Corporation...................... 03/08/00 14.00 250,000 250,000
HSA International.......................... 01/04/01 14.00 1,485,000 1,485,750
Hunt Incorporated.......................... 03/31/00 14.00 3,300,000 3,300,000
I.S. Acquisition, LLC...................... 04/01/01 14.00 2,000,000 2,000,000
In Store Services, Inc..................... 04/19/00 14.00 1,188,000 1,190,400
Innotech, Inc.............................. 03/22/99 13.00 1,980,000 1,988,325
Intermed Healthcare Systems, Inc........... 06/29/99 12.00 742,500 745,250
Intermed Healthcare Systems, Inc........... 02/10/00 14.00 375,000 375,000
Johnston County Cable L.P.................. 08/31/00 14.00 1,990,000 1,991,169
Kentucky Kingdom, Inc...................... 04/04/99 8.75 250,000 250,000
</TABLE>
19
<PAGE> 20
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- ------------------------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Kentucky Kingdom, Inc...................... 01/05/98 12.50% $ 1,980,000 $ 1,992,988
Kentucky Kingdom, Inc...................... 09/26/99 10.50 1,200,000 1,200,000
Kentucky Kingdom, Inc...................... 03/01/00 14.00 835,000 835,000
Kentucky Kingdom, Inc...................... 11/06/00 12.50 1,500,000 1,500,000
Kentucky Kingdom, Inc...................... 09/15/96 14.00 2,000,000 2,000,000
Kryptonics, Inc............................ 12/14/00 12.90 2,500,000 2,500,000
Lovett's Buffet, Inc....................... 04/01/00 13.00 2,250,000 2,250,000
MBA Marketing Corporation.................. 02/04/99 12.50 1,782,000 1,789,800
Medical Associates of America, Inc......... 11/01/97 12.50 385,000 392,000
Midbrook Group, Inc........................ 02/28/01 13.50 3,600,000 3,613,334
Money Transfer Systems, Inc................ 07/24/00 14.00 247,500 247,878
Money Transfer Systems, Inc................ 12/20/00 14.00 148,500 148,600
Money Transfer Systems, Inc................ 03/01/01 14.00 148,500 148,525
Moore Diversified Products, Inc............ 06/16/00 13.50 800,000 800,000
Moovies Inc................................ 04/18/00 13.50 1,485,000 1,488,000
Moovies Inc................................ 01/04/01 13.00 1,980,000 1,980,999
Multicom Publishing, Inc................... 03/29/01 13.00 2,200,000 2,213,333
Multimedia Learning, Inc................... 05/08/00 14.00 1,500,000 1,500,000
Nationwide Engine Supply L.P............... 01/12/99 12.00 2,475,000 2,486,259
Nelson Juvenile Products L.L.C............. 10/31/00 14.00 2,000,000 2,000,000
Novavision Inc............................. 06/21/99 10.00 1,000,000 1,000,000
Novavision Inc............................. 06/21/00 10.00 350,000 350,000
Novavision Inc............................. 10/16/00 10.00 100,000 100,000
Novavision Inc............................. 12/04/01 10.00 386,500 386,500
NRI Service and Supply L.P................. 02/13/00 14.00 2,475,000 2,480,838
Orchid Manufacturing Group, Inc............ 09/14/00 13.00 2,960,000 2,962,668
Orchid Manufacturing Group, Inc............ 12/28/00 13.50 1,000,000 1,000,000
PFIC Corporation........................... 02/28/01 13.00 1,000,000 1,000,000
Palco Telecom Service, Inc................. 11/22/99 12.00 1,300,000 1,300,000
Patton Management Corporation.............. 05/26/00 13.50 1,900,000 1,900,000
Pharmaceutical Research Assoc., Inc........ 08/10/00 13.50 1,980,000 1,982,664
Pipeliner Systems, Inc..................... 09/30/98 13.00 980,000 990,323
P. A. Plymouth Inc......................... 09/28/00 13.00 1,000,000 1,000,000
Precision Fixtures & Graphics, Inc......... 07/31/10 7.76 1,100,000 700,000
Precision Fixtures & Graphics, Inc......... 05/26/00 7.76 250,000 250,000
Precision Fixtures & Graphics, Inc......... 11/07/00 7.76 200,000 200,000
Precision Fixtures & Graphics, Inc......... 12/27/00 7.76 100,000 100,000
Precision Fixtures & Graphics, Inc......... 07/10/00 7.76 135,000 135,000
Precision Fixtures & Graphics, Inc......... 08/28/00 7.76 110,000 110,000
Precision Fixtures & Graphics, Inc......... 12/12/00 7.76 200,000 200,000
Precision Fixtures & Graphics, Inc......... 01/28/01 7.76 200,000 200,000
Precision Fixtures & Graphics, Inc......... 02/15/01 7.76 100,000 100,000
Precision Fixtures & Graphics, Inc......... 02/19/01 7.76 100,000 100,000
Precision Fixtures & Graphics, Inc......... 03/07/01 7.76 100,000 100,000
Precision Panel Products, Inc.............. 01/11/00 12.75 1,485,000 1,488,750
Pritchard Paint & Glass Co................. 02/14/01 14.00 1,100,000 1,100,000
Quest Group International, Inc............. 11/15/00 13.25 1,125,000 1,135,415
Radio Systems Corporation.................. 12/27/99 13.00 905,725 930,861
SkillSearch Corporation.................... 02/05/98 13.00 496,000 498,746
</TABLE>
20
<PAGE> 21
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- ------------------------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Southern Specialty Group................... 06/30/01 14.00% $ 1,732,500 $ 1,733,376
Summit Publishing Group, Inc............... 03/17/99 12.00 1,485,000 1,491,250
Suncoast Medical Group, Inc................ 09/14/99 13.50 485,000 490,248
Suncoast Medical Group, Inc................ 06/07/00 14.00 495,000 495,332
Suncoast Medical Group, Inc................ 02/23/01 14.00 495,000 495,166
TCOM Systems, Inc.......................... 02/05/98 13.00 546,853 546,853
Tower Environmental, Inc................... 11/30/98 10.00 2,440,000 2,451,990
Tower Environmental, Inc................... 05/30/95 12.50 150,000 150,000
Trade Am International, Inc................ 09/30/00 12.75 4,000,000 4,000,000
Treasury Coast Pizza Company............... 07/29/98 12.00 841,500 846,186
Urethane Technologies, Inc................. 03/16/01 13.50 1,636,520 1,642,578
Unique Electronics, Inc.................... 11/30/99 10.70 600,000 600,000
Universal Marketing Corporation............ 01/31/00 13.50 500,000 500,000
Valdawn L.L.C.............................. 04/13/00 13.50 2,399,974 2,400,000
Viking Moorings Acquisition, LLC........... 12/15/00 13.00 1,655,500 1,678,468
Voice FX................................... 01/23/01 13.50 2,324,000 2,332,799
WWR Technology, Inc........................ 11/01/97 13.50 524,700 528,392
Zahren Alternative Power Corp.............. 01/30/00 13.00 495,000 495,328
Zahren Alternative Power Corp.............. 11/27/99 13.00 1,980,000 1,986,696
------------ ------------
Total Loans.............................. $169,895,679 $166,936,281
============ ============
</TABLE>
21
<PAGE> 22
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS
AS OF MARCH 31,1996
(UNAUDITED)
<TABLE>
<CAPTION>
Number of Cost or
EQUITY INTERESTS Shares/Percentage Contributed
Ownership Value Fair Value
--------- ----- ----------
<S> <C> <C> <C>
PUBLICLY TRADED INVESTMENTS
National Vision Associates, Ltd. (a)
Common Stock - restricted 208,698 $1,771,149 $563,485
Concept Technologies Group, Inc. (a)
Common Stock - restricted 23,408 $5,300 $22,792
Moovies Inc. (a)
Common Stock 156,110 $16,561 $1,529,878
Premiere Technologies, Inc. (a)
Common Stock 378,360 $0 $6,157,809
---------- ----------
Subtotal $1,793,010 $8,273,964
---------- ----------
EQUITY INVESTMENTS IN PRIVATE COMPANIES
National Recovery Technologies, Inc.
Preferred Stock - Series A 20,000 $0 $0
Medical Associates of America
Preferred Stock - Series A 66,667 $0 $0
Skillsearch Corporation
Common Stock 2,241 $250,035 $250,035
Potomac Group
Preferred Stock - Series A 800,000 $1,000,000 $2,000,000
Potomac Group
Common Stock 254,115 $63,529 $635,288
Kentucky Kingdom, Inc.
Common Stock 13,260 $258,316 $1,539,620
Golf Club of America
Common Stock 100,000 $100,000 $100,000
International Risk Control, Inc.
Preferred Stock - Series A 200,000 $50,000 $50,000
DentureCare, Inc.
Preferred Stock - Series D 49,342 $300,000 $300,000
Unique Electronics, Inc.
Preferred Stock - Series A 1,000,000 $1,000,000 $1,000,000
Pipeliners Systems, Inc.
Preferred Stock - Series D 5,000 $1,000,000 $1,000,000
Front Royal, Inc.
Common Stock 110,000 $275,000 $275,000
Ocutec Aquisition Corporation
Preferred Stock - Series A 1,539,867 $1,539,867 $1,539,867
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
Number of Cost or
EQUITY INTERESTS Shares/Percentage Contributed
Ownership Value Fair Value
-------- ----- ----------
<S> <C> <C> <C>
Fycon Technologies, Inc.
Preferred Stock - Series A 800,000 $800,000 $500,000
Carter Kaplan Holdings L.L.C.
Membership interest in L.L.C. 24.00% $6,100 $6,100
Virginia Gas Company
Preferred Stock - Series A 2,000 $2,000,000 $2,000,000
Johnston County Cable L.P.
Class A Interest in L.P. 11.11% of L.P. $100,000 $100,000
Eastern Food Group L.L.C.
Class B Preferred Units 7,500 $754,444 $654,444
Dalcon International, Inc.
Series B Preferred Stock 850,000 $850,000 $490,000
Zahren Alternative Power Corporation
Common Stock 700 $210,000 $210,000
Zahren Alternative Power Corporation
Preferred Stock 200 $200,000 $200,000
Viking Moorings Acquisition, L.L.C.
Membership interest in L.L.C. 6.50% $344,500 $344,500
Electronic Merchant Services
Series B Preferred Stock 163 $0 $0
Nelson Juvenile Products L.L.C.
Membership interest in LP 30.00% $0 $0
Pharmaceutical Research Associates Inc.
Class F Preferred Stock 29,195 $190,000 $190,000
Caldwell/VSR Inc.
Preferred Stock 890 $890,000 $890,000
----------- -----------
Subtotal $12,181,791 $14,274,854
----------- -----------
TOTAL EQUITY INTERESTS $13,974,801 $22,548,818
----------- -----------
</TABLE>
23
<PAGE> 24
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS
AS OF MARCH 31,1996
(UNAUDITED)
<TABLE>
<CAPTION>
Cost or
Number of Percentage Contributed
Shares/Units Ownership Value Fair Value
------ --------- ----- ----------
<S> <C> <C> <C> <C>
STOCK WARRANTS
Affinity Fund, Inc. 1,725 8.62% $20,000 $600,000
Amscot Holdings, Inc. 1,121 17.50% $0 $0
Ashe Industries, Inc. 216 16.52% $20,000 $0
Associated Response Services, Inc. 343 34.30% $14,000 $1,000,000
Assured Power, Inc. 374 16.00% $0 $0
Auto Rental Systems, Inc. 144,869 8.00% $0 $285,000
B & N Company, Inc. 33 4.00% $40,000 $40,000
BankCard Services Corporation 149,261 28.00% $3,000 $0
BiTec Southeast, Inc. 938 10.00% $21,000 $100,000
C.J. Spirits, Inc. 180,000 10.00% $7,500 $0
CF Data Corporation 257 20.50% $17,500 $17,500
Caldwell/VSR Inc. 159 15.93% $0 $0
Capital Network Systems, Inc. 173,409 3.50% $20,000 $250,000
Cardiac Control Systems, Inc. 100,000 2.90% $0 $150,000
CCS Technology Group, Inc. 30,000 2.00% $10,000 $10,000
CellCall, Inc. 332 1.23% $10,000 $125,000
Champion Glove Manufacturing Co., Inc. 538,614 6.88% $0 $0
CLS Corporation 126,997 4.90% $0 $0
Clearidge, Inc. 449,039 7.90% $0 $0
Colonial Investments 194 18.00% $0 $0
Consumat Systems, Inc. 250,000 20.00% $0 $0
Consumer Credit Associates, Inc. 3,669 15.50% $0 $0
Continental Diamond Cutting Co. 112 12.22% $0 $0
Corporate Flight Mgmt., Inc. 66,315 10.00% $3,500 $100,000
Cougar Power Products, Inc. 336 22.61% $10,000 $0
Dalcon International, Inc. 250,000 20.00% $0 $0
Dalt's, Inc. 125 25.00% $0 $0
DentureCare, Inc. 546,545 12.65% $10,000 $375,000
Electronic Merchant Services, Inc. 430 12.50% $12,500 $12,500
Eastern Food Group L.L.C. 17,647 15.00% $0 $0
Educational Medical, Inc. 85,000 8.00% $0 $400,000
Emerald Pointe Waterpark L.P. 10% of LP 10.00% $6,000 $250,000
Encore Orthopedics, Inc. 466,455 7.36% $711,335 $711,335
Express Shipping Centers, Inc. 73,752 3.00% $552,402 $552,402
Factory Card Outlet of America Ltd. 23,658 2.50% $329,083 $500,000
Front Royal, Inc. 240,458 3.59% $0 $420,000
Fycon Technologies, Inc. 58,677 15.00% $0 $0
FX Direct 233,112 8.00% $176,000 $176,000
Gardner Wallcovering, Inc. 2 2.00% $15,000 $15,000
Gates Communication, L.P. 47% of LP 47.00% $10,000 $10,000
Global Finance and Leasing, Inc. 5,000 25.00% $0 $0
Gold Medal Products, Inc. 90,000 30.00% $0 $0
Golf Corporation of America, Inc. 300,000 31.50% $0 $0
Golf Video, Inc. 98 49.50% $0 $0
Gulfstream International Airlines, Inc. 271 21.00% $10,000 $0
Horizon Medical Products, Inc. 9,486 8.25% $0 $0
Hoveround Corporation 1,963 27.00% $5,000 $325,000
HSA International 100,999 12.00% $15,000 $15,000
Hunt Incorporated 309 10.00% $0 $200,000
I. Schneid Holdings LLC 11% of LLC 11.00% $0 $0
Innotech, Inc. 65,995 3.79% $20,000 $268,100
</TABLE>
24
<PAGE> 25
<TABLE>
<CAPTION>
Cost or
Number of Percentage Contributed
Shares/Units Ownership Value Fair Value
------------ --------- ----- ----------
<S> <C> <C> <C> <C>
In Store Services, Inc. 429 12.50% $12,000 $12,000
Intermed Healthcare Systems, Inc. 11,884 10.25% $7,500 $0
Johnston County Cable, L.P. 27.5% of LP 27.50% $10,000 $10,000
Kryptonics, Inc. 1,255 9.00% $0 $0
Lovett's Buffet, Inc. 204,219 5.00% $0 $0
MBA Marketing Corporation 28 4.29% $18,000 $0
Midbrook Group Inc. 7.40% 7.40% $400,000 $400,000
Money Transfer Systems, Inc. 45 4.00% $5,500 $5,500
Moore Diversified Products, Inc. 12 11.00% $0 $0
Moovies, Inc. 20,000 0.20% $20,000 $20,000
Multicom Publishing, Inc. 335,423 6.00% $800,000 $800,000
Multimedia Learning, Inc. 202 6.00% $0 $0
Nationwide Engine Supply, Inc. 952,381 16.19% $25,000 $25,000
NRI Service and Supply L.P. 27.5% of LP 27.50% $25,000 $25,000
Novavision, Inc. 222,222 10.00% $0 $0
One Stop Acquisitions, Inc. 794 24.40% $0 $500,000
Orchid Manufacturing Group, Inc. 1,719,047 4.50% $40,000 $540,000
PFIC Corporation 5,917 6.00% $0 $0
Palco Telecom Service, Inc. 157,895 5.00% $0 $0
Patton Management Corporation 426 10.00% $0 $300,000
Pharmaceutical Research Associates, Inc. 259,848 6.00% $20,000 $20,000
Pipeliner Systems, Inc. 2,080,000 20.55% $20,000 $20,000
Plymouth 92,647 15.00% $0 $0
Potomac Group, Inc. 225,000 1.90% $125,000 $562,500
Precision Fixtures & Graphics Inc. 132 5.00% $0 $0
Precision Panel Products, Inc. 122 8.25% $15,000 $15,000
Pritchard Paint & Glass 12,500 25.00% $0 $0
Quest Group Int'l, Inc. 44,444 10.00% $125,000 $125,000
Radio Systems Corporation 129,734 7.27% $94,275 $330,000
SkillSearch Corporation 2,381 7.20% $254,000 $119,000
Southern Specialty Brands, Inc. 10,000 10.00% $17,500 $17,500
Summit Publishing Group, Inc. 6,296 24.50% $15,000 $15,000
Suncoast Medical 580,159 23.00% $25,000 $25,000
Suprex Corporation 1,058,179 3.45% $0 $7,500
The Ryland Co. 1,518 20.50% $0 $0
Tower Environmental, Inc. 82 10.07% $20,000 $0
Trade Am International, Inc. 335,106 6.00% $0 $0
Treasure Coast Pizza Company 51 10.00% $8,500 $8,500
Valdawn L.L.C. 2,658 21.00% $26 $26
Unique Electronics, Inc. 80.00% 20.00% $0 $0
Universal Marketing Corporation 111 10.00% $0 $0
Urethane Technologies, Inc. 484,640 4.66% $363,480 $363,480
Virginia Gas Company 525 6.00% $0 $0
Zahren Alternative Power Corp. 1,168 9.80% $25,000 $25,000
Total Warrants $4,559,601 $11,198,843
------------ ------------
TOTAL INVESTMENTS $188,430,081 $200,683,942
============ ============
</TABLE>
(a) All publicly traded stocks that may not be sold in the public market as a
result of securities laws restrictions, lock-up agreements or other
similar restrictions are valued each month at 70% of market value
at the balance sheet date. All other publicly traded stocks are valued
at 90% of market value at the balance sheet date.
25
<PAGE> 26
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's principal investment objectives are to achieve both a high
level of income from interest on loans and fees and long-term growth in its
shareholders' equity through the appreciation in value of equity interests in
its portfolio companies. Therefore, the Company's loans are typically made in
the form of secured debt with relatively high fixed interest rates and with
warrants to purchase equity securities of the borrower. In addition to interest
on investments, the Company also typically collects an up-front processing fee
on each loan it originates.
The Company's financial performance in the Statements of Operations is
composed of three primary elements. The first is "Net operating income," which
is the difference between the Company's income for interest, dividends and fees
and its total operating expenses, including interest expense. The second element
is "Realized gain (loss) on investments," which is the difference between the
proceeds received from the disposition of portfolio assets in the aggregate at
the end of the period and their stated costs at the beginning of the period. The
third element is the "Change in unrealized appreciation (depreciation) of
investments," which is the net change in the fair values of the Company's
portfolio assets compared with their fair values at the beginning of the period
or their stated costs, as appropriate. Generally, "Realized gain (loss) on
investments" and "Change in unrealized appreciation (depreciation) of
investments" are inversely related in that when an appreciated asset is sold to
realize a gain, a decrease in unrealized appreciation occurs when the gain
associated with the asset is transferred from the "unrealized" category to the
"realized" category. Conversely, when a loss is realized on a depreciated
portfolio asset, the reclassification of the loss from "unrealized" to
"realized" causes an increase in unrealized appreciation and an increase in
realized loss.
Net Operating Income. During the quarter ended March 31, 1996, interest
on investments was $4.9 million, a 104.2% increase over the $2.4 million earned
in the same quarter of 1995. During the first quarter of 1996, the Company
collected $921,000 in processing fees, a 70.2% increase over the $541,000
collected in the same quarter of 1995. This increase in interest income and
processing fees is a result of the increase both in the dollar amount of loans
outstanding during the quarter and of loans originated during the period and a
result of the recognition and collection of certain contingent processing fees
in the first quarter of 1996 for loans closed during the fourth quarter of 1995.
The Company's loan portfolio increased 71.4% to $166.9 million at March 31,
1996, from $97.4 million at March 31, 1995. The $32.3 million of loans
originated during the first quarter of 1996 was a 16.2% increase over the $27.8
million of loans originated in the same quarter of 1995. In addition, the
weighted average interest rate charged on the loan portfolio at March 31, 1996
was 12.9%, as compared to 12.6% at March 31, 1995.
26
<PAGE> 27
The most significant portion of the Company's total operating expenses is
interest expense. The Company's interest expense, most of which is related to
the SBA-guaranteed debentures of the Company and the Revolving Credit Facility,
increased to $1.8 million in the first quarter of 1996, an 80.2% increase over
the $999,000 paid in the first quarter of 1995. The increase in interest expense
from 1995 to 1996 is primarily attributable to increased borrowings from the SBA
and establishment of and borrowing under the Revolving Credit Facility.
Borrowings from the SBA were $83.3 million on March 31, 1996, and $51.0 million
on March 31, 1995. Amounts outstanding under the Revolving Credit Facility at
March 31, 1996, were $24.9 million.
The other significant components of total operating expenses are (i)
overhead, which relates to employee compensation, travel and marketing expenses,
office expenses and legal fees, (ii) amortization of borrowing costs and (iii)
state taxes. These expenses totaled $1.4 million in the first quarter of 1996,
an 85.4% increase over the $755,000 of such expenses in the same quarter of
1995. These increases can be largely attributed to the increase in the number of
employees from 10 in the first quarter of 1995 as compared to 16 in the first
quarter of 1996. Although the dollar amount of these expenses increased,
overhead expenses as a percentage of average assets decreased slightly from
2.6% to 2.5% from the first quarter of 1995 to the first quarter of 1996,
respectively. The first quarter overhead expenses for both years include the
accrual and payment of annual bonuses, and thus, first quarter overhead
expenses have historically been higher as a percentage of average assets than
in other quarters.
During the quarter ended March 31, 1996, the Company paid dividends of $2.4
million from net operating income. The Company paid no dividends in the first
quarter of 1995.
For the quarter ended March 31, 1996, the Statements of Operations include
a provision for taxes totaling $2.1 million for federal income tax at a 35% rate
on realized gains not distributed to shareholders. The majority of this tax
related to the retained long-term capital gain of $6.3 million on the Company's
sale of half of its equity position in Premiere Technologies, Inc.
Realized Gain (Loss) on Investments. The Company's net realized gain on
investments was $5.8 million during the quarter ended March 31, 1996, largely
resulting from gains of $6.7 million on the sale of equity positions in Premiere
Technologies, Inc. and American Remedial Technologies, Inc., which were
partially offset by a $1.1 million loan write-off of Medical Associates of
America, Inc. The net realized gain for the first quarter of 1995 was $50,000,
primarily resulting from $560,000 in gains on the sale of equity positions in
Republic Automotive Parts, Inc. and American Retirement Corporation, which were
largely offset by a write-off of $515,000 of equity positions in Medical
Associates of America, Inc. Management does not attempt to maintain a comparable
level of realized gains from year to year, but instead attempts to maximize
total investment portfolio appreciation.
Change in Unrealized Appreciation (Depreciation) of Investments. For the
quarters ended March 31, 1996, and 1995, the Company recorded net increases in
unrealized appreciation of investments before income taxes of $2.2 million and
$1.6 million, respectively. These increases are the result of the Company's
quarterly revaluation of its portfolio in accordance with its Valuation Policy
to reflect the fair value of each of its portfolio assets.
27
<PAGE> 28
The following table sets forth information regarding significant changes
in unrealized appreciation (depreciation) of assets in the Company's portfolio
made during the first quarter of 1995 and 1996.
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
-----------------------
1995 1996
- -----------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
LOANS:
Ashe Industries, Inc. $ $(1,750)
Tower Environmental, Inc. 250
Zortec Holdings, Inc. 100
Quality Care Networks (100)
Medical Associates of America, Inc. 1,100
Electronic Merchant Services, Inc. (200)
Cougar Power Products, Inc. (250)
WARRANTS AND EQUITY SECURITIES:
Educational Medical, Inc. 400
Associated Response Services, Inc. 600
Factory Card Outlet of America Ltd. 171
Potomac Group, Inc. 956
Capital Network System, Inc. 250
Premiere Technologies, Inc. 1,178
American Remedial Technologies, Inc. (230)
DentureCare, Inc. 100
Intermed Healthcare Systems, Inc. 492
TermNet Merchant Services, Inc. 587
National Vision Associates, Ltd. 183
PMT Services, Inc. 143
Medical Associates of America, Inc. 250
Republic Automotive Parts, Inc. (240)
</TABLE>
Provision for Income Taxes. Beginning in February 1995, the Company
elected to be taxed as a Regulated Investment Company ("RIC") under Subchapter
M of the Internal Revenue Code (the "Code"). If the Company, as a RIC,
satisfies certain requirements relating to the source of its income, the
diversification of its assets and the distribution of its net income, the
Company is generally taxed as a pass through entity which acts as a partial
conduit of income to its shareholders. In order to maintain its RIC status, the
Company must in general derive at least 90% of its gross income from dividends,
interest and gains from the sale or disposition of securities; derive less than
30% of its gross income from the sale or disposition of securities held for
less than three months; meet investment diversification requirements defined by
the Code; and distribute to shareholders at least 90% of its net income (other
than long-term capital gains). The Company presently intends to meet the RIC
qualifications in future years, and therefore, the Company has not provided for
federal income taxes on the unrealized appreciation of investments. However,
no assurance can be given that the Company will continue to elect such
treatment.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had $78,000 in cash and cash equivalents,
and approximately $8.3 million of the Company's investment portfolio consisted
of publicly-traded securities, which have an ascertainable market value and
represent an additional source of liquidity. However, the Company's ability to
realize such values on a short-term basis is limited by market conditions and
various securities law restrictions. See "Summary of Significant Accounting
Policies" in the Notes to Financial Statements.
The Company's principal sources of capital to fund its portfolio growth
have been borrowings through the SBA sponsored SBIC debenture program, sales of
the Company's equity securities, both privately and publicly, and funds borrowed
from banking institutions. In February 1995, the Company consummated an initial
public offering of 2,645,000 shares of Common Stock resulting in net proceeds of
$26.5 million. In August 1995, the Company consummated a second public offering
of 1,500,000 shares of Common Stock generating net proceeds to the Company of
approximately $21.2 million. The Company used $32.6 million of these proceeds to
originate new loans and $15.1 million to repay indebtedness outstanding on the
Company's Revolving Credit Facility, which was subsequently reborrowed to
originate additional loans.
During the first quarter of 1996, the Company borrowed an additional $10.0
million from the SBA, bringing total SBA borrowings to $83.3 million at March
31, 1996. Each borrowing from the SBA has a term of ten years and can be prepaid
without penalty after five years. The interest rate on these borrowings was
7.02% as of March 31, 1996, and none of these borrowings mature prior to 2002.
Based on the Company's leverageable capital, it is eligible to borrow up to a
total of $90.0 million from the SBA, the maximum amount of SBA loans available
to an SBIC. The Company intends to request the remaining $6.7 million of SBA
funding available to it during May 1996. Given the increased demand for
borrowings under the SBA sponsored SBIC debenture program and concurrent
decrease in funds appropriated by Congress to the SBA, no assurances can be
given as to the amount of additional SBA borrowing that will be granted to the
Company.
As of March 31, 1996, the Company had $24.9 million outstanding under its
$50.0 million Revolving Credit Facility, which is secured by all of the
Company's assets. The interest rate on these borrowings was 7.43% at March 31,
1996. The Revolving Credit Facility matures on December 27, 1998. The Revolving
Credit Facility requires that the Company obtain the lenders' consent prior to,
among other things, encumbering its assets, merging or consolidating with
another entity and making investments other than those permitted by the SBA. In
addition, the Revolving Credit Facility provides that the repayment of any
amounts outstanding can be accelerated if either George M. Miller, II or David
M. Resha ceases to be employed by the Company.
28
<PAGE> 29
In order to manage the interest rate risk associated with the variable
interest rate provided for under the Revolving Credit Facility, the Company
entered into an interest rate swap agreement that effectively converts the
variable rate on a portion of the Revolving Credit Facility to a fixed rate of
8.15% per annum. Under this agreement, the Company will convert $30.0 million to
this fixed rate in $3.0 million increments per month beginning April 1996.
The Company has signed an engagement letter and preliminary term sheet with
a financial institution to establish a credit facility (the "Special Purpose
Facility") in the amount of $100.0 million. Under the Special Purpose
Facility, it is anticipated that the Company would form a special purpose,
bankruptcy remote subsidiary ("Newco"), that would buy new loans originated by
the Company and the related warrants and use the loans and warrants purchased
as collateral to secure the issuance of commercial paper by the financial
institution. Newco would pay a spread to the financial institution over the
rate paid on the commercial paper issued, along with other fees to originate
and administer the Special Purpose Facility. It is anticipated that Newco would
enter into appropriate swap agreements to attempt to hedge the interest rate
risk inherent in the maturing and reissuing of commercial paper at market
rates. Based on current commercial paper rates, the total cost of the debt is
anticipated to be approximately 8.25%. The Special Purpose Facility will
require Newco to be capitalized with a minimum of $20.0 million in equity, so
it is anticipated that some or all of the new loans originated from the
proceeds of this Offering will be contributed as equity to Newco. The financial
institution has not issued a commitment letter for the Special Purpose Facility
nor has definitive documentation with respect thereto been executed, and no
assurance can be given that such commitment or definitive documentation will be
negotiated on terms satisfactory to the Company.
The Company believes that anticipated borrowings from the SBA and under
the Company's Revolving Credit Facility, together with cash flow from
operations (after distributions to shareholders), will be adequate to fund the
continuing growth of the Company's investment portfolio through the middle of
1996. In order to provide the funds necessary for the Company to continue its
growth strategy beyond that period, the Company expects to incur, from time to
time, additional short and long-term borrowings from the SBA (to the extent
allowed) and other sources, and to issue, in public or private transactions,
its equity and debt securities. The availability and terms of any such
borrowings will depend upon interest rate, market and other conditions. There
can be no assurance that such additional funding will be available on terms
acceptable to the Company.
IMPACT OF INFLATION
The Company does not believe that its business is materially affected by
inflation, other than the impact which inflation may have on the securities
markets, the valuations of business enterprises and the relationship of such
valuations to underlying earnings, all of which will influence the value of the
Company's investments.
RISKS
The significant risks inherent in the Company's business, which primarily
consists of making loans to small businesses, are set forth in part in the
Company's 1995 Annual Report and should be kept in mind when evaluating the
Company's financial performance.
PORTFOLIO TURNOVER
During the quarter ended March 31, 1996, the Company made loans to 29
companies totaling approximately $32.3 million and experienced five repayments
(either partial or full) aggregating $4.8 million. During the quarter ended
March 31, 1995, the Company made loans to 26 companies totaling approximately
$27.8 million and experienced two repayments (either partial or full)
aggregating approximately $1.6 million. The Company can not control all
changes in its portfolio of investments, as borrowers have the right to prepay
loans made by the Company without penalty and the first loans made by the
Company begin maturing in May 1997.
29
<PAGE> 30
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K.
None.
30
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIRROM CAPITAL CORPORATION
Date: May 28, 1996 By: /s/ Carl W. Stratton
-------------------------
Carl W. Stratton
Chief Financial Officer
31
<PAGE> 32
EXHIBIT INDEX
Exhibit No. Description
- ----------- ------------------------------------------
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule (for SEC use only).
<PAGE> 1
EXHIBIT 11
SIRROM CAPITAL CORPORATION
Per share data
For the quarter ending March 31, 1996
<TABLE>
<S> <C>
Net asset value, beginning of period $9.61
---------
Net operating income $0.28
Net realized and unrealized gains and
losses on investments $0.64
---------
Total from investments operations $0.92
Less: Dividend on net investment income $0.26
Distribution on realized capital gains $0.00
---------
Total distributions $0.26
Net asset value, end of period $10.27
Per share market value, end of period $22.88
Shares outstanding, end of period 9,195,116
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data: December 31, March 31, March 31,
1995 1995 1996
--------------------------------------
<S> <C> <C> <C>
Net assets, end of period (in thousands) $88,346 $61,628 $94,406
Ratio of operating expenses to average
net assets (1) 12.60% 2.58% 13.9%(2)
Ratio of net operating income to average
net assets 13.20% 3.73% 11.3%(2)
</TABLE>
(1) Operating expenses include overhead expenses, amortization expense, state
income taxes, and interest expense.
(2) Represents annualized ratios based on the three months ended March 31, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 188,430,081
<INVESTMENTS-AT-VALUE> 200,683,942
<RECEIVABLES> 2,534,774
<ASSETS-OTHER> 2,987,124
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 206,205,840
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 108,176,000
<OTHER-ITEMS-LIABILITIES> 3,623,617
<TOTAL-LIABILITIES> 111,799,617
<SENIOR-EQUITY> 73,919,184
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 9,195,116
<SHARES-COMMON-PRIOR> 7,695,116
<ACCUMULATED-NII-CURRENT> 5,405,838
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,376,760
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,053,860
<NET-ASSETS> 94,406,223
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,862,483
<OTHER-INCOME> 921,250
<EXPENSES-NET> 3,194,463
<NET-INVESTMENT-INCOME> 2,589,250
<REALIZED-GAINS-CURRENT> 5,756,489
<APPREC-INCREASE-CURRENT> 2,240,559
<NET-CHANGE-FROM-OPS> 8,451,338
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,390,730
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 5,396,959
<ACCUMULATED-GAINS-PRIOR> (1,089,447)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 1,789,982
<GROSS-EXPENSE> 3,194,463
<AVERAGE-NET-ASSETS> 91,375,919
<PER-SHARE-NAV-BEGIN> 9.61
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 0.64
<PER-SHARE-DIVIDEND> 0.26
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.27
<EXPENSE-RATIO> 0.035
<AVG-DEBT-OUTSTANDING> 97,318,000
<AVG-DEBT-PER-SHARE> 10.58
</TABLE>
