<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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 November 11, 1996 was 12,338,567.
1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 1995 and September 30, 1996 3
Consolidated Statements of Operations for the Three Months Ended
September 30, 1995 and 1996 and for the Nine Months Ended
September 30, 1995 and 1996 4
Consolidated Statements of Cash Flows for the Three Months Ended
September 30, 1995 and 1996 and for the Nine Months Ended
September 30, 1995 and 1996 5
Notes to Financial Statements 7
Portfolio of Investments as of December 31, 1995 11
Consolidated Portfolio of Investments as of September 30, 1996 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General 28
Results of Operations 28
Financial Condition, Liquidity and Capital Resources 31
Impact of Inflation 32
Risks 32
Portfolio Turnover 32
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 33
ITEM 2. CHANGES IN SECURITIES 33
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 33
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 33
ITEM 5. OTHER INFORMATION 33
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 33
SIGNATURES 36
</TABLE>
2
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SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Assets (audited) (unaudited)
Investments, at fair value
Loans $144,854,517 $220,049,964
Equity interests 15,912,467 25,578,037
Warrants 11,513,183 15,087,636
------------ ------------
Total investments 172,280,167 260,715,637
Investment in unconsolidated subsidiary 840,110 427,743
Cash 195,069 20,789,140
Interest receivable 2,119,567 2,455,789
Debenture costs (less accumulated amortization
of $383,279 and $728,040, respectively) 2,020,030 $ 2,420,030
Furniture, equipment and leasehold
improvements (less accumulated depreciation of
$18,565 and $53,523, respectively) 203,860 220,648
Other assets 211,165 232,708
------------ ------------
Total Assets $177,869,968 $287,261,695
============ ============
Liabilities and Shareholders' Equity
Liabilities:
Debentures payable to Small Business
Administration $ 73,260,000 $ 83,260,000
Revolving credit facility 13,200,000 41,811,000
Interest payable 936,818 1,392,778
Accrued taxes payable 1,073,525 3,035,160
Accounts payable and accrued expenses 213,901 1,171,201
Other liabilities ----- 52,500
------------ ------------
Total Liabilities 88,684,244 130,722,639
------------ ------------
Shareholders' Equity:
Common stock 73,979,967 132,407,465
Notes receivable from employees (1,980,000) (1,539,858)
Undistributed net realized earnings 7,372,471 13,064,204
Unrealized appreciation of investments 9,813,286 12,607,245
------------ ------------
Total Shareholders' Equity 89,185,724 156,539,056
------------ ------------
Total Liabilities and Shareholders'
Equity $177,869,968 $287,261,695
============ ============
</TABLE>
See notes to financial statements.
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SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Three Nine Nine
Months Ended Months Ended Months Ended Months Ended
September 30, September 30, September 30, September 30,
1995 1996 1995 1996
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating Income:
Interest on investments $3,374,739 $ 6,388,837 $ 9,029,397 $16,837,156
Loan processing fees 706,646 796,800 1,561,138 2,369,850
Other income 0 28,530 0 90,585
---------- ----------- ----------- -----------
Total Operating
Income 4,081,385 7,214,167 10,590,535 19,297,591
Operating Expenses:
Interest expense 1,191,484 2,138,079 3,360,701 5,979,355
Salaries and benefits 366,522 770,919 1,035,415 2,180,154
Other operating expenses 253,684 499,127 693,931 1,477,737
State income tax on
interest
Amortization expense 0 0 62,426 0
45,315 100,867 113,424 378,510
---------- ----------- ----------- -----------
Total Operating
Expenses $1,857,005 $ 3,508,992 $ 5,265,897 $10,015,756
Equity in pretax
income of unconsolidated
subsidiary (before taxes of
$0,$0,$0, and $0) $ 407,837 1,150,571 $ 609,193 2,573,197
---------- ----------- ----------- -----------
Net Operating Income 2,632,217 4,855,746 5,933,831 11,855,032
Realized gain (loss) on
investments 433,757 1,250,000 445,618 7,206,489
Change in unrealized
appreciation
(depreciation) of
investments 1,806,188 (1,701,483) 4,146,091 2,793,944
Provision for income
taxes (221,000) (560,000) (316,880) (2,764,960)
---------- ----------- ----------- -----------
Net increase in
shareholders' equity
resulting from operations $4,651,162 $ 3,844,263 $10,208,660 $19,090,505
========== =========== =========== ===========
</TABLE>
4
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SIRROM CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE THREE NINE NINE
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1995 1996
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net increase in partners'
capital and shareholders'
equity resulting from
operations $ 4,651,162 $ 3,844,263 $ 10,208,660 $ 19,090,505
Adjustments to reconcile net
increase to net cash
provided by operating
activities:
Net unrealized (appreciation)
depreciation of investments (1,806,188) 1,701,483 (4,146,091) (2,793,944)
Realized (gain) loss on
investments (433,757) (1,250,000) (445,618) (7,206,489)
(Increase) decrease in
investment in
unconsolidated subsidiary (407,837) (1,164,572) (609,193) (2,587,199)
Amortization of debenture
costs 43,507 99,367 108,616 374,009
Increase in interest
receivable (157,720) 248,571 (735,812) (336,222)
Increase (decrease) in
accounts payable and
accrued expenses 100,000 150,946 71,624 1,009,800
Amortization of
organization costs 1,500 1,500 4,500 4,500
Depreciation of fixed
assets 5,005 12,287 9,160 34,957
(Increase) decrease in
accounts receivable (764,286) (154,787) (964,286) (162,944)
Increase (decrease) in
accrued taxes payable 221,000 681,792 (164,318) 1,961,635
Increase (decrease) in
interest payable 344,638 125,803 382,632 455,960
----------- ----------- ------------ ------------
Net cash provided by
operating activities 1,797,024 4,296,653 3,719,874 9,844,568
----------- ----------- ------------ ------------
</TABLE>
5
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<TABLE>
<CAPTION>
THREE THREE NINE NINE
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1995 1996
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
INVESTING ACTIVITIES:
Proceeds from sale of
investments 5,272,206 7,619,451 13,873,850 24,873,391
Investments originated
or acquired (31,056,208) (41,943,125) (72,703,559) (103,687,232)
Purchase of fixed assets (138,131) (12,844) (195,526) (51,745)
Increase in other assets (9,165) (42,899) (9,165) (13,101)
Disposition of other assets 0 528,808 0 528,808
------------ ------------ ------------ ------------
Net cash used in
investing activities (25,931,298) (33,850,609) (59,034,400) (78,349,879)
------------ ------------ ------------ ------------
FINANCING ACTIVITIES:
Proceeds from debentures
payable to Small
Business Administration 7,660,000 0 22,260,000 10,000,000
Proceeds from revolving
credit facilities 7,198,000 23,022,000 32,171,594 73,200,766
Repayment of credit
facility borrowings (7,198,000) (17,098,767) (38,560,845) (44,589,766)
Increase in debenture costs (201,075) (261,510) (619,976) (774,009)
Issuance of common stock 21,252,023 7,834,521 47,749,695 59,237,143
Employee shares repurchased 0 0 0 (809,645)
Repayment of employee notes 0 0 0 440,142
Payment of dividends (1,272,236) (2,971,830) (2,349,552) (7,605,249)
Distribution of capital
gains (690,788) 0 (690,788) 0
------------ ------------ ------------ ------------
Net cash provided by
financing activities 26,747,924 10,524,414 59,960,128 89,099,382
------------ ------------ ------------ ------------
Increase (decrease) in
cash and cash equivalents 2,613,650 (19,029,542) 4,645,602 20,594,071
Cash and cash equivalents,
beginning of period 2,169,199 39,818,682 137,247 195,069
------------ ------------ ------------ ------------
Cash and cash equivalents,
end of period $ 4,782,849 $ 20,789,140 $ 4,782,849 $ 20,789,140
============ ============ ============ ============
Supplemental disclosures
of cash flow information:
Interest paid $ 846,810 $ 2,018,473 $ 2,978,033 $ 5,529,590
============ ============ ============ ============
Taxes paid $ 10,719 $ 12,828 $ 396,037 $ 976,894
============ ============ ============ ============
</TABLE>
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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 "1940 Act"). Prior to August 1996, the Company was
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. In August
1996, the Company transferred its SBIC operations, including its SBIC license,
assets and liabilities, to its wholly-owned subsidiary, Sirrom Investments,
Inc., a Tennessee corporation ("SII"). Under applicable SBA regulations, SII
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,
and in August 1996, SII elected the same tax treatment.
In August 1996, the Company acquired Harris Williams & Co., L.P. ("Harris
Williams"), for 898,454 shares of common stock of the Company. After the
acquisition, Harris Williams began operating as a "C" corporation. Harris
Williams is a merger and acquisition advisory services firm located in
Richmond, Virginia, that is being operated as a wholly-owned subsidiary of the
Company. The acquisition of Harris Williams is accounted for as a pooling of
interests. The Consolidated Balance Sheets as of December 31, 1995 and
September 30, 1996, the Consolidated Statements of Operations and Cash Flows
for the nine months ended September 30, 1995 and 1996 and the Consolidated
Statements of Operations and Cash Flows for the three months ended September
30, 1995 and 1996 have been restated accordingly to reflect the operations of
Harris Williams as an unconsolidated subsidiary accounted for by the equity
method of accounting in conformity with the requirements of the 1940 Act.
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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of the Company
and SII. All intercompany accounts and transactions have been eliminated in
the consolidation. Harris Williams is accounted for by the equity method of
accounting in conformity with the requirements of the 1940 Act.
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
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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.
Equity interests and warrants for which there is not a public market are
valued based on factors such as pending or completed 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 September 30, 1996, the investment
portfolio included investments totaling $260,715,637, 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 typically
valued at 70% of market value at the balance sheet date. All other publicly
traded stocks are typically 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 8.00% 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 the loan is
closed.
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 the term of the related loan, which is
ten years for the 11 SBA debentures, as discussed in Note 3, and three years
for the Revolving Credit Facility, as discussed in Note 4.
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") and in August 1996 SII elected the same tax treatment. If the Company
and SII each, 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 and SII may each be generally taxed as a pass through
entity which acts as a partial conduit of income to its shareholders.
8
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In order to maintain its RIC status, the Company and SII must each
separately 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 and SII currently intend 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 September 30, 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 three
months ended September 30, 1996 totaled $1,469,215.
4. REVOLVING CREDIT FACILITY
During December 1995, the Company entered into a 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% (6.62% at September 30, 1996).
The stated LIBOR rate at September 30, 1996 reflects a margin decrease of 0.57%
that the Company negotiated with the bank for borrowings under the line of
credit which are secured by cash. As of September 30, 1996, $41,811,000 was
outstanding. This agreement expires on December 27, 1998.
Interest expense related to the line of credit for the three months ended
September 30, 1996 was $668,865.
The Company has entered into two interest rate swap agreements. The first
agreement effectively converts the variable rate on $30,000,000 of borrowings
under 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. The second agreement effectively converts the variable rate on
$15,000,000 of borrowings to a fixed rate of 8.05%. Under the agreement, the
Company has exchanged the interest rate difference between the fixed and
variable rates on incremental amounts of $5,000,000 a month beginning in
December 1996.
5. INCOME TAXES
For the quarter ended September 30, 1996, the Company provided for taxes
of $525,000 on realized long-term capital gains not distributed to shareholders
and also provided for $35,000 in state taxes.
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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. During 1996, the
Company has granted options to purchase 521,966 shares, at prices ranging from
$18.625 per share to $31.75 per share, the grant of some of which shares is
conditioned upon shareholder approval of an increase in the number of shares
available under the 1996 Plan. The options on 471,966 shares vest 20% each year
beginning one year from the date of grant, and the options on 50,000 shares vest
33.3% beginning one year from the date of grant.
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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
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
</TABLE>
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<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
----- ---- ---- ---- ----------
<S> <C> <C> <C> <C>
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
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
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
----- ---- ---- ---- ----------
<S> <C> <C> <C> <C>
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, Ltd. 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
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>
13
The accompanying notes are an integral part of this schedule.
<PAGE> 14
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER
OF SHARES/ COST OR
PERCENTAGE CONTRIBUTED
EQUITY INTERESTS OWNERSHIP VALUE FAIR VALUE
---------------- --------- ----- ----------
<S> <C> <C> <C>
PUBLICLY TRADED INVESTMENTS(a)
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
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
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
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
NUMBER
OF SHARES/ COST OR
PERCENTAGE CONTRIBUTED
EQUITY INTERESTS OWNERSHIP VALUE FAIR VALUE
---------------- ---------- ----- ----------
<S> <C> <C> <C>
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
----------- -----------
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 -- --
Delaware Publishing Group, Inc. 6,296 24.50 15,000 15,000
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
Delaware Publishing Group, Inc. 6,296 24.50 15,000 15,000
Innotech, Inc. 521,220 4.00 20,000 300,000
In-Store Service, Inc. 429 12.50 12,000 12,000
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE
-------- ------ --------- ----- ----------
<S> <C> <C> <C> <C>
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
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 AND SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS
AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
----- ---- ---- ---- ----------
<S> <C> <C> <C> <C>
AB Plastics Holding Corporation 9/27/01 13.50% $ 4,000,000 $ 4,000,000
Affinity Fund, Inc. 6/29/98 12.50 1,485,000 1,497,182
Affinity Fund, Inc. 3/10/00 14.00 1,000,000 1,000,000
Affinity Fund, Inc. 12/28/98 12.50 495,000 495,830
American Corporate Literature, Inc. 9/29/01 14.00 1,683,000 1,683,283
ARAC Holding Co., Inc. 9/27/01 13.50 3,000,000 3,000,000
American Network Exchange 11/30/98 13.00 990,000 995,845
American Network Exchange 1/18/99 13.00 990,000 995,511
Amscot Holdings, Inc. 5/26/00 14.00 800,000 800,000
Amscot Holdings, Inc. 9/20/00 14.00 200,000 200,000
Amscot Holdings, Inc. 6/28/01 14.00 500,000 500,000
Argenbright Holdings Limited 7/7/01 13.50 2,750,000 2,787,500
Ashe Industries, Inc. 12/28/97 12.50 990,000 232,058
Ashe Industries, Inc. 3/25/99 12.50 445,500 147,300
Ashe Industries, Inc. 5/18/99 12.50 544,500 146,524
Ashe Industries, Inc. 6/12/96 14.00 750,000 100,000
Ashe Industries, Inc. 6/12/96 14.00 285,546 0
Associated Response Services, Inc. 6/20/99 12.50 1,386,000 1,392,524
Associated Response Services, Inc. 2/15/00 12.50 335,000 335,000
Associated Response Services, Inc. 1/6/00 12.50 300,000 300,000
Assured Power, Inc. 10/1/00 13.50 700,000 700,000
Avionics Systems, Inc. 7/19/01 13.50 3,000,000 3,000,000
B & N Company, Inc. 8/8/00 12.50 2,970,000 2,977,000
B & N Company, Inc. 3/28/01 13.00 990,000 991,169
BankCard Services Corporation 1/21/98 13.00 297,000 299,250
BiTec Southeast, Inc. 10/31/97 12.70 445,500 449,025
BiTec Southeast, Inc. 11/30/98 12.70 1,188,000 1,194,800
BiTec Southeast, Inc. 10/31/97 12.70 445,500 447,975
BiTec Southeast, Inc. 8/1/99 12.70 521,321 521,321
BiTec Southeast, Inc. 8/9/01 14.00 950,000 950,000
C.J. Spirits, Inc. 5/1/97 13.50 750,171 455,796
Caldwell/VSR Inc. 2/28/01 8.00 1,500,000 1,500,000
Caldwell/VSR Inc. 9/27/01 14.00 116,000 116,000
Cardiac Control Systems, Inc. 3/31/00 13.50 1,500,000 1,500,000
Cartech Holdings, Inc. 4/29/01 13.00 1,500,000 1,500,000
Carter Kaplan Holdings, LLC 6/22/00 14.00 594,000 144,800
Cedaron Medical, Inc. 6/28/01 13.50 1,500,000 1,500,000
Cell Call, Inc. 11/4/97 12.75 990,000 997,848
CF Data Corp. 3/16/00 13.75 1,732,500 1,738,048
Champion Glove Manufacturing Co.,Inc. 7/27/00 13.50 1,250,000 1,250,000
Clearidge, Inc. 9/29/99 13.00 2,000,000 2,000,000
Clearidge, Inc. 12/28/00 13.50 500,000 500,000
Clearidge, Inc. 3/6/97 14.00 200,000 200,000
Colonial Investments, Inc. 10/16/00 13.75 800,000 800,000
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
----- ---- ---- ---- ----------
<S> <C> <C> <C> <C>
Colonial Investments, Inc. 5/8/01 13.75 300,000 300,000
Consumat Systems, Inc. 11/1/00 14.00 500,000 500,000
Consumat Systems, Inc. 1/1/01 14.00 500,000 500,000
Consumat Systems, Inc. 3/11/01 14.00 500,000 500,000
Consumer Credit Associates, Inc. 12/6/00 13.50 2,000,000 2,000,000
Consumer Credit Associates, Inc. 3/28/01 13.50 1,000,000 1,000,000
Consumer Credit Associates, Inc. 8/12/01 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. 11/16/99 13.00 200,000 200,000
Corporate Flight Mgmt, Inc. 12/4/97 12.50 346,500 349,167
Cougar Power Products, Inc. 10/5/96 13.00 495,000 172,169
Cougar Power Products, Inc. 10/5/96 13.00 495,000 270,249
Cougar Power Products, Inc. 10/5/96 14.00 325,000 100,000
Dalcon International, Inc. 1/31/02 13.00 150,000 150,000
Dalcon International, Inc. 1/31/00 13.00 200,000 200,000
Dalcon International, Inc. 5/15/96 13.00 25,000 25,000
Dalts, Inc. 4/28/01 13.50 2,000,000 2,000,000
DentureCare, Inc. 7/29/99 11.50 490,000 494,509
DentureCare, Inc. 11/3/00 14.00 111,150 111,150
DentureCare, Inc. 8/31/00 14.00 800,000 800,000
DentureCare, Inc. 1/11/01 12.50 550,000 550,000
Eastern Food Group LLC 8/30/00 8.00 500,000 500,000
Eastern Food Group LLC 12/20/00 8.00 200,000 200,000
Eastern Food Group LLC 1/21/01 8.00 200,000 200,000
Eastern Food Group LLC 2/14/01 8.00 265,000 265,000
Eastern Food Group LLC 4/30/01 8.00 200,000 200,000
Eastern Food Group LLC 9/10/01 8.00 100,000 100,000
Educational Medical Inc. 3/31/00 14.00 2,200,000 2,200,000
Electronic Merchant Services 2/27/00 13.50 1,237,500 1,040,204
Electronic Merchant Services 2/29/96 14.00 34,572 34,572
Electronic Merchant Services 2/29/96 14.00 134,000 134,000
Encore Orthopedics, Inc. 7/31/00 13.50 2,620,985 2,715,740
Encore Orthopedics, Inc. 2/28/01 13.00 1,667,680 1,711,992
Entek Scientific, Inc. 6/28/01 13.00 2,500,000 2,500,000
Express Shipping Centers, Inc. 9/22/00 13.25 1,697,598 1,817,289
Factory Card Outlet of America Ltd. 11/15/00 12.50 3,670,917 3,731,682
Factory Card Outlet of America Ltd. 6/27/01 12.50 915,622 921,246
FoodNet Holdings, LLC 7/22/01 13.50 1,000,000 1,000,000
Fortrend Engineering Corp. 8/30/01 12.99 1,500,000 1,500,000
Front Royal, Inc. 10/1/99 13.00 1,550,000 1,550,000
Front Royal, Inc. 12/27/99 13.00 675,000 675,000
FX Direct, Inc. 1/23/01 13.50 2,324,000 2,350,400
Fycon Technologies, Inc. 12/17/00 12.50 100,000 100,000
Fycon Technologies, Inc. 5/16/00 10.00 350,000 350,000
Fycon Technologies, Inc. 8/30/00 14.00 1,000,000 800,000
Fycon Technologies, Inc. 12/17/00 14.00 100,000 100,000
Fycon Technologies, Inc. 5/30/96 12.50 100,000 100,000
Fycon Technologies, Inc. 6/30/96 12.50 130,000 130,000
</TABLE>
19
<PAGE> 20
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
----- ---- ---- ---- ----------
<S> <C> <C> <C> <C>
Fycon Technologies, Inc. various 14.00 202,838 0
Fycon Technologies, Inc. 8/31/96 12.50 130,000 130,000
Fycon Technologies, Inc. 9/30/96 12.50 130,000 130,000
Gardner Wallcovering, Inc. 3/28/01 13.50 1,485,000 1,486,750
Gates Communications, L.P. 12/30/98 12.50 990,000 995,010
Gates Communications, L.P. 12/30/98 14.00 125,000 125,000
Gates Communications, L.P. 12/30/98 14.00 145,000 145,000
General Materials Management, Inc. 7/29/01 13.50 2,500,000 2,500,000
Global Finance and Leasing, Inc. 1/3/00 13.00 1,500,000 1,500,000
Global Marine Electronics, Inc. 5/1/01 13.00 1,350,000 1,350,000
Gold Medal Products, Inc. 11/19/00 13.50 1,250,000 1,250,000
Gold Medal Products, Inc. 2/15/01 13.50 25,000 25,000
Gold Medal Products, Inc. 6/27/01 13.50 100,000 100,000
Gold Medal Products, Inc. 7/31/01 13.50 100,000 100,000
Golf Corporation of America, Inc. 9/16/99 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 Corporation of America, Inc. 7/13/96 14.00 100,000 100,000
Golf Corporation of America, Inc. 10/5/96 14.00 50,000 50,000
Golf Video, Inc. 3/27/01 14.00 500,000 500,000
Gulfstream International Airlines Inc. 7/29/99 13.00 1,490,000 1,496,012
Gulfstream International Airlines Inc. 9/25/00 13.50 1,000,000 1,000,000
Gulfstream International Airlines Inc. 10/15/96 14.00 1,000,000 1,000,000
Hancock Company (acquired Gitman) 12/31/00 14.00 1,700,000 400,000
Hancock Company (acquired Gitman) 6/28/01 10.25 200,000 200,000
Horizon Medical Products, Inc. 9/22/00 13.75 1,500,000 1,500,000
Hoveround Corporation 6/11/98 13.00 495,000 498,115
Hoveround Corporation 3/8/00 13.00 250,000 250,000
HPC America, Inc. 8/15/01 13.50 2,970,000 2,971,000
HSA International, Inc. 1/4/01 14.00 1,485,000 986,500
HSA International, Inc. 5/15/01 14.00 300,000 300,000
HSA International, Inc. 5/23/01 14.00 100,000 100,000
HSA International, Inc. 7/8/01 14.00 250,000 250,000
Hunt Incorporated 3/31/00 14.00 3,250,000 3,250,000
H & H Acq. Corp. 8/30/01 14.00 1,500,000 1,500,000
I.Schneid Acquisition, LLC 4/1/01 14.00 2,000,000 2,000,000
ILD Communications 5/10/01 13.50 1,500,000 1,500,000
In-Store Services, Inc. 4/19/00 14.00 1,188,000 1,191,600
Innotech, Inc. 3/22/99 13.00 1,980,000 1,990,323
Intermed Healthcare Systems, Inc. 6/29/99 12.00 742,500 746,000
Intermed Healthcare Systems, Inc. 2/10/00 14.00 375,000 375,000
Johnston County Cable, L.P. 8/31/00 14.00 1,990,000 1,992,171
Kentucky Kingdom, Inc. 4/4/99 8.25 250,000 250,000
Kentucky Kingdom, Inc. 1/5/98 12.50 1,980,000 1,994,986
Kentucky Kingdom, Inc. 9/26/99 10.50 1,200,000 1,200,000
Kentucky Kingdom, Inc. 3/1/00 14.00 835,000 835,000
Kentucky Kingdom, Inc. 11/6/00 12.50 1,500,000 1,500,000
Kentucky Kingdom, Inc. 3/30/98 14.00 2,000,000 2,000,000
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
----- ---- ---- ---- ----------
<S> <C> <C> <C> <C>
Kryptonics, Inc. 12/14/00 12.90 2,500,000 2,500,000
KWC Management Co., LLC 4/25/01 14.00 500,000 500,000
Leisure Clubs International, Inc. 4/1/01 14.00 1,485,000 1,486,500
Lovett's Buffet, Inc. 4/1/00 13.00 2,250,000 2,250,000
Mayo Hawaiian Corp. 6/27/01 14.00 2,200,000 2,200,000
MBA Marketing Corporation 2/4/99 12.50 1,782,000 1,791,600
McAuley's Incorporated 7/31/01 13.00 3,000,000 3,000,000
Medical Associates of America, Inc. 11/1/97 12.50 385,000 392,000
Money Transfer Systems, Inc. 7/24/00 14.00 247,500 248,130
Money Transfer Systems, Inc. 12/20/00 14.00 148,500 148,750
Money Transfer Systems, Inc. 3/1/01 14.00 148,500 148,675
Money Transfer Systems, Inc. 5/2/01 14.00 148,500 148,575
Money Transfer Systems, Inc. 7/8/01 14.00 148,500 148,575
Monogram Products, Inc. 6/18/01 13.50 916,000 921,600
Moore Diversified Products, Inc. 6/16/00 13.50 800,000 800,000
Multicom Publishing, Inc. 3/29/01 13.00 2,200,000 2,293,331
Multimedia Learning, Inc. 5/8/00 14.00 1,500,000 1,500,000
Multimedia Learning, Inc. 4/18/01 13.50 500,000 500,000
Multimedia Learning, Inc. 9/12/01 13.50 750,000 750,000
NASC, Inc. 6/26/01 13.50 1,500,000 1,500,000
Nationwide Engine Supply, Inc. 1/12/99 12.00 2,475,000 2,488,761
Nationwide Engine Supply, Inc. 9/26/01 13.50 1,000,000 1,000,000
Nelson Juvenile Products, LLC 10/31/00 14.00 2,000,000 2,000,000
Novavision, Inc. 6/21/99 10.00 1,000,000 1,000,000
Novavision, Inc. 6/21/00 10.00 350,000 350,000
Novavision, Inc. 10/16/00 10.00 100,000 100,000
Novavision, Inc. 12/4/01 10.00 351,500 351,500
Novavision, Inc. 11/30/96 10.00 40,000 40,000
NRI Service and Supply L.P. 2/13/00 14.00 2,225,000 2,233,340
Orchid Manufacturing Group, Inc. 9/14/00 13.00 2,960,000 2,966,670
Orchid Manufacturing Group, Inc. 12/28/00 13.50 1,000,000 1,000,000
Palco Telecom Service, Inc. 11/22/99 12.00 1,300,000 1,300,000
Patton Management Corporation 5/26/00 13.50 1,900,000 1,900,000
PaySys International, Inc. 5/1/97 13.00 990,000 998,791
PFIC Corporation 2/28/01 13.00 1,000,000 1,000,000
Pharmaceutical Research Assoc., Inc. 8/10/00 13.50 1,980,000 1,984,662
Pipeliner Systems, Inc. 9/30/98 10.00 980,000 992,321
Plymouth, Inc. 9/28/00 13.00 1,000,000 1,000,000
Precision Fixtures & Graphics, Inc. 4/11/01 14.00 1,095,000 1,095,000
Precision Fixtures & Graphics, Inc. 4/11/01 14.00 300,000 300,000
Precision Fixtures & Graphics, Inc. 5/8/01 14.00 100,000 100,000
Precision Fixtures & Graphics, Inc. 5/28/01 14.00 75,000 75,000
Precision Fixtures & Graphics, Inc. 7/12/01 14.00 75,000 75,000
Precision Fixtures & Graphics, Inc. 7/22/01 14.00 100,000 100,000
Precision Fixtures & Graphics, Inc. 8/27/01 14.00 250,000 250,000
Precision Fixtures & Graphics, Inc. 8/27/01 14.00 295,000 295,000
Precision Fixtures & Graphics, Inc. 8/27/01 14.00 150,000 150,000
Precision Panel Products, Inc. 1/11/00 12.75 1,485,000 1,490,250
</TABLE>
21
<PAGE> 22
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
----- ---- ---- ---- ----------
<S> <C> <C> <C> <C>
Pritchard Paint & Glass Co. 2/14/01 14.00 567,431 567,431
Quest Group International, Inc. 11/15/00 13.25 1,125,000 1,147,913
Quest Group International, Inc. 9/3/01 14.00 1,350,000 1,352,500
Radio Systems Corporation 12/27/99 13.00 905,725 940,287
Scandia Technologies, Inc. 4/9/01 14.00 1,825,000 1,825,000
Sheet Metal Specialties, Inc. 6/20/01 14.00 250,000 250,000
SkillSearch Corporation 2/5/98 13.00 496,000 499,148
SkillSearch Corporation 3/10/97 14.00 100,000 100,000
Softsense Computer Products, Inc. 6/27/01 14.00 2,760,000 2,776,000
Softsense Computer Products, Inc. 9/24/01 14.00 1,500,000 1,500,000
Southern Specialty Brands, Inc. 6/30/01 14.00 1,732,500 1,735,128
Sqwincher Corporation 1/31/00 13.50 500,000 500,000
Summit Publishing Group, Ltd. 3/17/99 12.00 1,485,000 1,492,750
Summit Publishing Group, Ltd. 7/26/01 14.00 625,000 625,000
Suncoast Medical Group, Inc. 9/14/99 13.50 485,000 491,748
Suncoast Medical Group, Inc. 6/7/00 14.00 495,000 495,830
Suncoast Medical Group, Inc. 2/23/01 14.00 495,000 495,664
TCOM Systems, Inc. 2/5/98 13.00 490,914 490,914
Tower Environmental, Inc. 11/30/98 10.00 2,440,000 2,201,990
Tower Environmental, Inc. 5/30/95 12.50 150,000 150,000
Trade Am International, Inc. 9/30/00 12.75 4,000,000 4,000,000
UltraFab, Inc. 6/27/01 14.00 1,500,000 1,500,000
Unique Electronics, Inc. 11/30/99 10.67 600,000 600,000
Urethane Technologies, Inc. 3/16/01 13.50 1,636,520 1,678,926
Valdawn, LLC 4/13/00 13.50 2,399,974 2,400,000
Viking Moorings Acquisition, LLC 12/15/00 13.00 1,655,500 1,712,920
Virtual Resources Inc. 8/16/01 14.00 3,000,000 3,000,000
Vista Information Solutions, Inc. 4/30/01 13.50 2,032,157 2,063,345
WWR Technology, Inc. 6/30/97 13.50 394,700 398,920
Zahren Alternative Power Corp. 1/30/00 13.00 495,000 495,826
Zahren Alternative Power Corp. 11/27/99 13.00 1,980,000 1,988,678
------------ ------------
Total Loans $225,656,411 $220,049,964
============ ============
</TABLE>
22
<PAGE> 23
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS
AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
COST OR
NUMBER OF -----------
SHARES/PERCENTAGE CONTRIBUTED
----------------- -----------
EQUITY INTERESTS OWNERSHIP VALUE FAIR VALUE
---------------- ----------------- ----------- -----------
<S> <C> <C> <C>
Publicly Traded Investments (a)
- ------------------------------
National Vision Associates, Ltd.
Common Stock 208,698 $ 1,771,149 $ 751,313
Trans Global Services, Inc.
Common Stock 28,088 5,300 36,456
Moovies, Inc.
Common Stock 156,110 1,561 669,322
Premiere Technologies, Inc.
Common Stock 378,360 0 8,059,068
Cardiac Control Systems, Inc.
Common Stock 50,000 250,000 59,062
Innotech, Inc.
Common Stock 65,530 20,000 602,057
American Exchange Network
Common Stock 139,651 21,879 231,297
Equity Investments in Private Companies
- ---------------------------------------
Skillsearch Corporation
Common Stock 2,241 250,035 150,000
Potomac Group, Inc.
Preferred Stock - Series A 800,000 1,000,000 2,000,000
Potomac Group, Inc.
Common Stock 479,115 289,779 1,299,038
Kentucky Kingdom, Inc.
Common Stock 13,260 258,316 1,650,000
Golf Corporation of America, Inc.
Common Stock 100,000 100,000 0
International Risk Control, Inc.
Preferred Stock - Series A 200,000 50,000 50,000
DentureCare, Inc.
Preferred Stock - Series E 490,978 800,000 800,000
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
NovaVision, Inc.
Preferred Stock - Series A 1,763,846 1,763,846 1,763,846
Fycon Technologies, Inc.
Preferred Stock - Series A 597,162 597,162 0
</TABLE>
23
<PAGE> 24
<TABLE>
<CAPTION>
COST OR
NUMBER OF -----------
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% of L.P. 100,000 100,000
Eastern Food Group LLC
Class B Preferred Units 7,500 754,444 0
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
Electronic Merchant Services
Series B Preferred Stock 163 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
Precision Fixtures & Graphics, Inc.
Preferred Stock 1,500,000 1,500,000 1,100,000
Palco Telecom Service
Common Stock 157,895 1,579 1,579
----------- -----------
Total Equity Interests $16,150,050 $25,578,037
=========== ===========
</TABLE>
24
<PAGE> 25
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS
AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE
-------- ------ -------- ----- ----------
<S> <C> <C> <C> <C>
Publicly Traded Companies (a)
- -----------------------------
American Network Exchange 13,988 0.00% $ 0 $ 0
Cardiac Control Systems, Inc. 100,000 4.35 0 118,125
Consumat Systems, Inc. 250,000 20.00 0 183,750
Moovies, Inc. 20,000 0.20 0 85,750
Multicom Publishing, Inc. 163,791 4.80 800,000 611,486
Urethane Technologies, Inc. 484,640 4.66 363,480 296,842
Vista Information Solutions, Inc. 1,247,582 5.00 467,843 836,920
Private Companies
- -----------------
AB Plastics Holding Corporation 200,000 20.00 0 0
Affinity Corporation 2,041 10.04 20,000 385,000
Alvin Carter Holdings Corp. 20 2.00 0 0
American Corporate Literature 222,197% 19.72 17,000 17,000
American Rockwool Acquisition Corp. 1,100,000 11.00 0 0
Amscot Holdings, Inc. 1,409 22.02 0 0
Argenbright Holdings LLC 18 3.50 750,000 750,000
Ashe Industries, Inc. 225 17.14 20,000 0
Associated Response Services, Inc. 356 24.27 14,000 1,000,000
Assured Power, Inc. 234 16.00 0 0
Auto Rental Systems, Inc. 144,869 9.00 0 285,000
Avionics Systems, Inc. 15.00% of Co. 15.00 0 0
B & N Company, Inc. 46 4.00 40,000 40,000
BankCard Services Corporation 149,261 28.00 3,000 0
BiTec Southeast, Inc. 1,480 15.00 21,000 55,000
Carter Kaplan Holdings, LLC 24 24.00 6,100 0
C.J. Spirits, Inc. 180,000 10.00 7,500 0
Caldwell/VSR Inc. 159 15.93 0 0
Cartech 210,527 20.00 0 0
Cedaron Medical, Inc. 173,981 4.25 0 0
CellCall, Inc. 358 1.35 10,000 125,000
CF Data Corp. 257 20.50 17,500 17,500
Champion Glove Manufacturing Co.,
Inc. 538,614 6.88 0 0
Clearidge, Inc. 449,039 9.32 0 0
CLS Corporation 126,997 4.22 0 0
Colonial Investments, Inc. 264 18.00 0 0
Consumer Credit Associates, Inc. 3,669 15.50 0 0
Continental Diamond Cutting Company 112 12.22 0 0
Corporate Flight Mgmt., Inc. 66,315 6.63 3,500 100,000
Cougar Power Products, Inc. 336 22.61 10,000 0
Dalcon Technologies, Inc. 250,000 20.00 0 0
</TABLE>
25
<PAGE> 26
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE
-------- ------ -------- ----- ----------
<S> <C> <C> <C> <C>
Dalt's, Inc. 125 25.00 0 0
Delaware Publishing Group, Inc. 4,386 37.00 15,000 15,000
DentureCare, Inc. 628,500 12.65 10,000 375,000
Eastern Food Group LLC 17,647 15.00 0 0
Educational Medical, Inc. 141,667 8.00 0 900,000
Electronic Merchant Services 430 12.50 12,500 0
Encore Orthopedics, Inc. 524,094 7.36 711,335 711,335
Entek Scientific Corporation 18,548 4.25 0 0
Express Shipping Centers, Inc. 73,752 3.00 552,402 552,402
FCOA Acquisition Corp. 29,724 3.13 413,461 815,000
Foodnet Holdings, LLC 8.00% of LLC 8.00 0 0
Fortrend Engineering Corp. 437,552 3.25 0 0
Front Royal, Inc. 240,458 3.59 0 420,000
Fycon Technologies, Inc. 58,677 15.00 0 0
Gardner Wallcovering, Inc. 2 2.00 15,000 15,000
Gates Communication L.P. 47.00% of L.P. 47.00 10,000 0
General Materials Management Inc. 600,000 10.00 0 0
Global Finance & Leasing, Inc. 5,000 25.00 0 0
Global Marine 5,137 18.00 0 0
Gold Medal Products, Inc. 102,370 32.77 0 0
Golf Corporation of America, Inc. 390,000 31.50 0 0
Golf Video, Inc. 98 49.50 0 0
Gulfstream International Airlines,
Inc. 271 27.00 10,000 140,000
H & H Acquisition Corp. 3,600 22.50 0 0
Horizon Medical Products, Inc. 9,486 8.25 0 0
Hoveround Corporation 491 10.00 5,000 750,000
HPC America, Inc. 5 2.75 30,000 30,000
HSA International, Inc. 2,534,003 62.49 15,000 0
Hunt Incorporated 44 10.00 0 100,000
Hunt Leasing & Rental Corporation 265 10.00 0 100,000
I. Schneid Holdings LLC 11% of LLC 11.00 0 0
ILD Communications 5,429 3.20 0 0
In Store Services, Inc. 429 12.50 12,000 12,000
Intermed Healthcare Systems, Inc. 11,884 10.50 7,500 7,500
Johnston County Cable L.P. 27.5% of LP 27.50 10,000 10,000
Kentucky Kingdom, Inc. 6,132 2.00 0 0
K.W.C. Management Corp. 794 24.40 0 0
Kryptonics, Inc. 1,255 9.00 0 400,000
Leisure Clubs International, Inc. 144 10.00 15,000 15,000
Lovett's Buffet, Inc. 204,219 5.00 0 400,000
Mayo Hawaiian Corp. 81 7.50 0 0
MBA Marketing Corporation 11,100 4.29 18,000 18,000
McAuley's Incorporated 64 6.00 0 0
Money Transfer Systems, Inc. 94 8.50 8,500 8,500
Monogram Products, Inc. 1,276 6.00 84,000 84,000
Moore Diversified Products, Inc. 12 11.00 0 0
</TABLE>
26
<PAGE> 27
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE
-------- ------ -------- ----- ----------
<S> <C> <C> <C> <C>
Multimedia Learning, Inc. 116,450 7.32 0 800,000
NASC, Inc. 130 13.00 0 0
Nationwide Engine Supply, Inc. 1,265,664 20.20 25,000 25,000
Nelson Juvenile Products, LLC 30 30.00 0 0
Novavision, Inc. 222,222 10.00 0 0
NRI Service and Supply, L.P. 27.5% of LP 27.50 25,000 25,000
Orchid Manufacturing, Inc. 1,719,047 4.50 40,000 540,000
P.A. Plymouth, Inc. 92,647 15.00 0 0
Patton Management Corporation 426 10.00 0 185,000
PaySys International, Inc. 30,000 2.68 10,000 10,000
PFIC Corporation 5,917 6.00 0 0
Pharmaceutical Research Assoc.,
Inc. 259,848 6.00 20,000 685,000
Pipeliner Systems, Inc. 2,080,000 20.55 20,000 20,000
Precision Fixtures & Graphics, Inc. 2,602 51.00 0 0
Precision Panel Products, Inc. 122 8.25 15,000 15,000
Pritchard Glass, Inc. 12,500 25.00 0 0
Quest Group International, Inc. 88,840 17.79 275,000 275,000
Radio Systems Corporation 162,167 8.92 94,275 600,000
Ryland Company 1,518 20.50 0 0
Scandia Technologies, Inc. 282 22.00 0 0
SkillSearch Corporation 2,381 7.59 254,000 150,000
Softsense Computer Products, Inc. 171,642 1.50 240,000 240,000
Southern Specialty Brands, Inc. 10,000 10.00 17,500 17,500
Suncoast Medical Group, Inc. 580,159 23.00 25,000 0
Suprex Corporation 1,058,179 3.45 0 0
Tower Environmental, Inc. 82 10.07 20,000 0
Trade Am International, Inc. 335,106 6.00 0 0
Treasure Coast Pizza Co. 51 10.00 0 8,500
UltraFab, Inc. 120,000 12.00 0 0
Unique Electronics, Inc. 20% of Co. 20.00 0 0
Universal Marketing Corporation 111 10.00 0 0
VDI Acquisition Company, LLC 2,658 21.00 26 26
Viking Moorings Acquisition, LLC 7 6.50 344,500 344,500
Virginia Gas Company 59,413 10.00 0 160,000
Virtual Resources, Inc. 8 7.50 0 0
Voice FX Corporation 233,112 8.00 176,000 176,000
Zahren Alternative Power
Corporation 1,168 6.54 25,000 25,000
------------ ------------
Total Warrants $ 6,151,922 $ 15,087,636
------------ ------------
$247,958,383 $260,715,637
Total Investments ============ ============
</TABLE>
(a) All restricted or locked up publicly traded stocks and warrants
are being valued each month at 70% of the publicly traded price. All
other publicly traded stocks are valued at 90% of the publicly traded
price.
27
<PAGE> 28
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
In August 1996, the Company completed a corporate reorganization (the
"Restructuring") pursuant to which it transferred all of its small business
investment company ("SBIC") operations, including its SBIC license, assets and
liabilities, to a wholly-owned subsidiary, Sirrom Investments, Inc., a
Tennessee corporation ("SII"). In August 1996, the Company also consummated
the acquisition of Harris Williams & Co., L.P. ("Harris Williams"), a merger
and acquisition advisory services firm located in Richmond, Virginia. Harris
Williams was acquired for 898,454 shares of common stock of the Company and the
acquisition is being accounted for as a pooling-of-interests. Harris Williams
operates as a wholly-owned subsidiary of the Company.
The Company's and SII's results of operations are presented on a
consolidated basis. Harris Williams' results of operations are presented as an
unconsolidated subsidiary accounted for by the equity method of accounting in
conformity with the requirements of the 1940 Act.
RESULTS OF OPERATIONS
The Company's principal investment objectives are to achieve through its
own operations and those of its subsidiaries, SII and Harris Williams, 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 and SII'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 and SII also typically
collects an up-front processing fee on each loan they originate. Harris
Williams typically obtains a retainer fee for each transaction in which it is
retained and, in addition, a success fee when the transaction is consummated.
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 from interest, dividends, fees,
and Harris Williams' pre-tax income 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 September 30, 1996,
interest on investments was $6.4 million, an 88.0% increase over the $3.4
million earned in the same quarter of 1995. For the nine month period ended
September 30, 1996, interest on investments was $16.8 million, a 87% increase
over the $9.0 million earned in the same period of 1995. During the third
quarter of 1996, the Company collected $797,000 in processing fees, a 13.0%
increase over the $706,000 collected in the same quarter of 1995. During the
first nine months of 1996, the Company collected $2,370,000 in processing fees,
a 52% increase over the $1,561,000 collected in the same period of 1995. These
increases in interest income and processing fees are a result of the increase
both in the dollar amount of loans outstanding during the quarter and period
and loans originated during the quarter and period. The Company's loan
portfolio increased 93.0% to $220 million at September 30, 1996, from $127
million at September 30, 1995. The $42 million of loans originated during the
third quarter of 1996 was a 35.0% increase over the $31 million of loans
originated in the same quarter of 1995. The $103.1 million of loans originated
in the first nine months of 1996 was 38% increase over the $74.7 million of
loans originated in the same period of 1995. In addition, the weighted average
interest rate charged on the loan portfolio at September 30, 1996 was 13.13%,
as compared to 12.67% at September 30, 1995.
28
<PAGE> 29
The most significant portion of the Company's total operating expenses is
interest expense. In connection with the Restructuring, the Company transferred
its SBA-guaranteed debentures and the Revolving Credit Facility to SII. The
Company continues to guarantee that indebtedness. The Company's interest
expense, most of which is related to the SBA-guaranteed debentures of SII and
the Revolving Credit Facility, increased to $2.1 million in the third quarter
of 1996, a 75.0% increase over the $1.2 million paid in the second quarter of
1995. The Company's interest expense for the first nine months of 1996 increased
to $6.0 million, a 76.0% increase over the $3.4 million paid in the same period
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 September 30, 1996, and $73.3 million on September 30, 1995.
Amounts outstanding under the Revolving Credit Facility at September 30, 1996,
were $41.8 million.
The other significant components of total operating expenses are (i)
overhead, which primarily 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 third quarter of 1996, a 111% increase over the $665,000 of such expenses
in the same quarter of 1995. These expenses totaled $4.0 million for the first
nine months of 1996, a 110% increase over the $1.9 million of such expenses in
the same period of 1995. These increases can be largely attributed to the
increase in the number of employees in 1996 versus 1995 and the accrual of
bonuses in the current year as opposed to the former policy of expensing
bonuses when paid in the first quarter of each year. The bonus accrual added
approximately $420,000 to operating expenses in the third quarter of 1996 and
$725,000 for the first nine months of 1996.
For the quarter, Harris Williams had revenues of $2,353,000, up 176%
from 853,000 for the third quarter of 1996, and pre-tax income increased
182% to $1,151,000 from $408,000. For the nine months ended September 30, 1996,
Harris Williams had revenue of $5,000,000, up 164% from $1,896,000 for the same
period of 1995, and pre-tax income increased 136% to $1,438,000 from $609,000.
Harris Williams provided advisory services on four transactions that closed in
the quarter ended September 30, 1996, bringing the total of transactions closed
in the first nine months of 1996 to nine. No taxes were accrued on Harris
Williams' pretax income for the third quarter of 1996 due to the timing of the
acquisition during the quarter and the timing of Harris Williams' revenue and
expenses. No taxes were accrued in 1995, as Harris Williams was a partnership
at that time.
During the quarter ended September 30, 1996, the Company paid dividends of
$3.0 million from net operating income. The Company paid dividends of $2.0
million in the third quarter of 1995.
Realized Gain (Loss) on Investments. The Company's net realized gain on
investments was $7,206,000 for the nine month period ended September 30, 1996,
and $1,250,000 during the quarter ended September 30, 1996. The $1,250,000 gain
resulted from a gain of $1,500,000 on the sale of half its warrant position in
Hoveround Corporation offset by a loss of $250,000 on the sale of collateral
securing a loan to Alpha West Partners I, L.P. The net realized gain for the
third quarter of 1995 was $434,000, primarily resulting from $1,319,000 in gains
on the sale of equity positions in Termnet Merchant Services, Inc., One Stop
Record House and PMT Services, Inc., which were largely offset by a realized
loss of $885,000 on a loan to Quality Care Networks. 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 September 30, 1996, and 1995, the Company recorded net increase
in unrealized depreciation of investments of $1.7 million and net increase in
unrealized appreciation of $1.8 million, respectively. For the nine month
periods ended September 30, 1996, and 1995, the Company recorded net increases
in unrealized appreciation of investments of $2.8 million and $4.1 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.
29
<PAGE> 30
The following table sets forth information regarding significant changes
in unrealized appreciation (depreciation) of assets in the Company's portfolio
made during the third quarter of 1995 and 1996.
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30,
1995 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
LOANS:
Ashe Industries, Inc. $(250) $ (150)
Carter-Kaplan Holdings, LLC (450)
Gitman Shirt Company (1,200)
HSA International, Inc. (400)
Medical Associates of America, Ltd. (300)
Quality Care Networks 500
Tower Environmental, Inc. (250)
PRIVATE COMPANY WARRANTS AND
EQUITY SECURITIES:
Alvin Carter Holdings Corp. (500)
Capital Networks, Inc. 330
CellCall, Inc. (300)
CLS Corporation (350)
Delaware Publishing Group, Inc. (335)
Educational Medical Inc. 500
Gulfstream International Airlines, Inc. 300
Hoveround, Inc. (750)
Kryptonics, Inc. 400
Lovetts Buffet, Inc. 400
Multimedia Learning Inc. 800
Nationwide Engine Supply, Inc. (375)
Pharmaceutical Research Associates, Inc. 665
Termnet Merchant Services, Inc. (591)
PUBLIC COMPANY WARRANTS AND
EQUITY SECURITIES:
Consumat Systems, Inc. (385)
Moovies, Inc. 1,793
PMT Services, Inc. (269)
Premiere Technologies, Inc. 1,131 291
Vista Information Solutions, Inc. (892)
</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") and in August 1996, SII elected the
same tax treatment. If the Company and SII, each as a RIC, satisfy certain
requirements relating to the source of its income, the diversification of its
assets and the distribution of its net income, each 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, each entity 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 and SII presently intend 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 and SII will continue to elect such
treatment.
For the quarter and nine month period ended September 30, 1996, the
Statements of Operations include a provision for taxes totaling $525,000 and
$2,765,000, respectively, for federal income tax at a 35% rate on realized gains
not distributed to shareholders. The $525,000 tax is payable on the retained
long-term capital gain
30
<PAGE> 31
of $1,500,000 on the Company's sale of half of its warrant position in
Hoveround Corporation. The Company also accrued $35,000 for state income taxes
during the quarter.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had $20.8 million in cash and cash
equivalents, and approximately $10.4 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. In June 1996, the Company
consummated a third public offering of 2,300,000 shares of Common Stock
generating net proceeds of $59.2 million. The Company used the proceeds of the
first two offerings to originate new loans, and the Company has used and will
use the proceeds of the most recent offering to originate new loans.
During the third quarter of 1996, SII received no additional funding from
the SBA, leaving total SBA borrowings at $83.3 million at September 30, 1996.
Each borrowing from the SBA has a term of ten years, is secured by the assets
of SII, is guaranteed by the Company and can be prepaid without penalty after
five years. The average interest rate on these borrowings was 7.02% as of
September 30, 1996, and none of these borrowings mature prior to 2002. Based
on SII'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. SII
intends to request the remaining $6.7 million of SBA funding available to it
during November 1996. Given the increased demand for borrowings under the SBA
sponsored SBIC debenture program, no assurances can be given as to the amount
of additional SBA borrowing that will be granted to SII.
As of September 30, 1996, SII had $41.8 million outstanding under its $50
million Revolving Credit Facility, which is secured by all of SII's assets and
is guaranteed by the Company. The interest rate on these borrowings was 7.50%
at September 30, 1996. The Revolving Credit Facility matures on December 27,
1998. The Revolving Credit Facility requires that SII 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. The Company
did not use the net proceeds of the public offering of its Common Stock
consummated in June 1996 to repay the amounts owing under the Revolving Credit
Facility due to tax considerations related to the Company's pending
Restructuring. The Company has negotiated a temporary reduction in the interest
rate paid on the Revolving Credit Facility to the extent the debt outstanding
under the Revolving Credit Facility is secured by cash remaining from the June
1996 public offering.
In order to manage the interest rate risk associated with the variable
interest rate provided for under the Revolving Credit Facility, SII has entered
into two interest rate swap agreements that effectively convert the variable
rate on a portion of the Revolving Credit Facility to fixed rates of 8.15% and
8.05% per annum on borrowings of $30.0 million and $15.0 million, respectively.
Under this agreement, SII will convert the $30.0 million in $3.0 million per
month increments beginning in April 1996 and will convert the $15.0 million in
$5.0 million per month increments beginning in December 1996.
The Company has signed a commitment letter with ING Capital Markets, Inc.
("ING") to establish a credit facility (the "ING Credit Facility") in the
amount of $100.0 million. Under the ING Credit Facility, it is anticipated that
the Company would form a special purpose, bankruptcy remote subsidiary
("Newco"), that would buy new loans originated by the
31
<PAGE> 32
Company and the related warrants and use the loans and warrants purchased as
collateral to secure the issuance of commercial paper by ING. Newco would pay a
spread to ING over the rate paid on the commercial paper issued, along with
other fees to originate and administer the ING Credit 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 8.50% to 8.75%. The
ING Credit 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 the public offering of Common Stock consummated
in June 1996 will be contributed as equity to Newco. Definitive documentation
with respect to the ING Credit Facility is being finalized. The Company has
filed an application with the Securities and Exchange Commission (the
"Commission"), requesting exemptive relief from certain provisions of the
Investment Company Act of 1940 relating to the establishment of this facility.
The Company presently anticipates receiving an exemptive order from the
Commission by year end, at which time it plans to close on the ING Credit
Facility. No assurances can be given that an order will be granted by the
Commission within such period of time. In the interim, the Company has obtained
a term sheet from ING to establish a $15.0 million bridge loan (the "Bridge
Loan") that will be secured by loans originated by the Company. The Company
presently intends to repay the Bridge Loan with funds drawn down under the ING
Credit Facility.
The Company believes that anticipated borrowings from the SBA and under
the Company's Revolving Credit Facility and Bridge Loan, together with cash on
hand and cash flow from operations (after distributions to shareholders), will
be adequate to fund the continuing growth of the Company's investment portfolio
through early 1997 and through the second half of 1997 if the ING Credit
Facility is obtained. 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 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 assurances 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 September 30, 1996, the Company made loans to 35
companies totaling approximately $42.0 million and experienced eleven
repayments (either partial or full) aggregating $6.1 million. During the
quarter ended September 30, 1995, the Company made loans to 23 companies
totaling approximately $31.0 million and experienced 6 repayments (either
partial or full) aggregating approximately $3.9 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.
32
<PAGE> 33
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
a. The Company's Special Shareholder's Meeting was held on August 14,
1996 to consider and vote upon a proposal to approve the Acquisition
Agreement dated as of May 16, 1996 (the "Acquisition Agreement")
relating to the acquisition of Harris Williams & Co., L.P., and the
transactions related thereto, and (ii) to approve and adopt the
Amended and Restated Charter of the Company.
b. The resolutions passed were as follows:
1. To approve the Acquisition Agreement and the transactions
contemplated thereby.
FOR 6,224,085 AGAINST 24,332 WITHHELD 23,645
2. To approve the adoption of the Company's Amended and Restated
Charter.
FOR 3,380,653 AGAINST 91,000 WITHHELD 3,870
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 2.1 Acquisition Agreement by and among Sirrom Capital
Corporation, Sirrom Capital Acquisition Corporation,
Sirrom, Ltd., and Harris Williams & Co., dated May 16,
1996 (incorporated by reference to Exhibit K.9 to the
Company's Form N-2, as amended (File No. 333-4023)
Exhibit 3.1 Amended and Restated Charter
Exhibit 10.1 Fourth Amended and Restated Loan Agreement dated as of
August 16, 1996, by and among SII, as Borrower, the
Lenders referred to herein, and First Union National Bank
of Tennessee, as Agent*
Exhibit 10.2 Guaranty Agreement dated August 16, 1996 by and between
Sirrom Capital Corporation and the U.S. Small Business
Administration
Exhibit 10.3 Fourth Amended and Restated Revolving Credit Note dated
August 16, 1996, in the principal amount of $27,500,000,
made by SII in favor of First Union National Bank of
Tennessee*
33
<PAGE> 34
<TABLE>
<S> <C>
Exhibit 10.4 Revolving Credit Note dated August 16, 1996, in the
principal amount of $10,000,000, made by SII in favor of
Amsouth Bank of Tennessee*
Exhibit 10.5 Revolving Credit Note dated August 16, 1996, in the
principal amount of $7,500,000, made by SII in favor of
First American National Bank*
Exhibit 10.6 Amended and Restated Swingline Note dated August 16,
1996, in the principal amount of $5,000,000, made by SII
in favor of First Union National Bank of Tennessee*
Exhibit 10.7 Fourth Amended and Restated Revolving Credit Note dated
August 16, 1996 by SII in favor of First Tennessee Bank
National Association*
Exhibit 10.8 Third Amended and Restated Security Agreement dated
August 16, 1996, by and between SII and First Union
National Bank of Tennessee*
Exhibit 10.9 Amended and Restated Borrower Pledge Agreement dated
August 16, 1996, made by SII in favor of First Union
National Bank of Tennessee*
Exhibit 10.10 Amended and Restated Security Agreement dated as of
August 16, 1996 by and between SII and U.S. Small
Business Administration*
Exhibit 10.11 Amended and Restated Pledge Agreement dated as of August
16, 1996 by and between the Registrant and U.S. Small
Business Administration*
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule (for SEC use only)
</TABLE>
_______________________
* Incorporated by reference to the exhibits to the Post-Effective Amendment
No. 1 to SII's Registration Statement on Form N-5, as amended, (Commission
File No. 811-7779)
(b) Reports on Form 8-K.
1. A Report on Form 8-K dated August 31, 1996 was filed with the
Commission on September 13, 1996 with respect to the acquisition of
Harris Williams & Co., L.P.
A. The following historical financial statements of
Harris Williams and pro forma financial statements of the
Company were incorporated into the Form 8-K by reference to the
Company's Registration Statement on Form N-2, as amended,
(Commission No. 333-4023):
Harris Williams Historical Financial Statements
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1994 and 1995 and
March 31, 1996 (unaudited)
Consolidated Statements of Income for the Years Ended December
31, 1993, 1994 and 1995 and for the Three Months Ended
March 31, 1995 and 1996 (unaudited)
Consolidated Statements of Changes in Stockholders' Equity for
the Years Ended December 31, 1993, 1994 and 1995 and the
Three Months Ended March 31, 1996 (unaudited)
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1994 and 1995 and the Three Months
Ended March 31, 1995 and 1996 (unaudited)
34
<PAGE> 35
Notes to Consolidated Financial Statements
Sirrom Capital Corporation Pro Forma Financial Statements
Pro Forma Statement of Operations Data for
the Three Months Ended March 31, 1996
Pro Forma Statement of Operations Data for
the Year Ended December 31, 1995
Pro Forma Statement of Operations Data for
the Year Ended December 31, 1994
Pro Forma Balance Sheet Data for the Period
Ended March 31, 1996
Pro Forma Balance Sheet Data for the Period
Ended December 31, 1995
b. The following historical financial statements of
Harris Williams and pro forma financial statements of the
Company were set forth in the Company's Form 8-K:
Unaudited consolidated balance sheets of Harris Williams & Co.
and Subsidiary as of June 30, 1996 and the related
consolidated statements of income, stockholders' equity
and cash flows for the six months ended June 30, 1995 and
1996
Introduction to unaudited pro forma condensed combined
financial information; unaudited pro forma condensed
combined balance sheet as of June 30, 1996; unaudited pro
forma condensed combined statement of operations for the
six months ended June 30, 1996; and notes to the unaudited
pro forma condensed combined financial information
35
<PAGE> 36
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: November 14, 1996 By: /s/ Carl W. Stratton
_____________________________
Carl W. Stratton
Chief Financial Officer
36
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<S> <C>
Exhibit 2.1 Acquisition Agreement by and among Sirrom Capital Corporation, Sirrom Capital Acquisition Corporation,
Sirrom, Ltd., and Harris Williams & Co., dated May 16, 1996 (incorporated by reference to Exhibit K.9 to
the Company's Form N-2, as amended (File No. 333-4023)
Exhibit 3.1 Amended and Restated Charter
Exhibit 10.1 Fourth Amended and Restated Loan Agreement dated as of August 16, 1996, by and among SII, as Borrower, the
Lenders referred to herein, and First Union National Bank of Tennessee, as Agent*
Exhibit 10.2 Guaranty Agreement dated August 16, 1996 by and between Sirrom Capital Corporation and the U.S. Small
Business Administration
Exhibit 10.3 Fourth Amended and Restated Revolving Credit Note dated August 16, 1996, in the principal amount of
$27,500,000, made by SII in favor of First Union National Bank of Tennessee*
Exhibit 10.4 Revolving Credit Note dated August 16, 1996, in the principal amount of $10,000,000, made by SII in favor
of Amsouth Bank of Tennessee*
Exhibit 10.5 Revolving Credit Note dated August 16, 1996, in the principal amount of $7,500,000, made by SII in favor
of First American National Bank*
Exhibit 10.6 Amended and Restated Swingline Note dated August 16, 1996, in the principal amount of $5,000,000, made by
SII in favor of First Union National Bank of Tennessee*
Exhibit 10.7 Fourth Amended and Restated Revolving Credit Note dated August 16, 1996 by SII in favor of First Tennessee
Bank National Association*
Exhibit 10.8 Third Amended and Restated Security Agreement dated August 16, 1996, by and between SII and First Union
National Bank of Tennessee*
Exhibit 10.9 Amended and Restated Borrower Pledge Agreement dated August 16, 1996, made by SII in favor of First Union
National Bank of Tennessee*
Exhibit 10.10 Amended and Restated Security Agreement dated as of August 16, 1996 by and between SII and U.S. Small
Business Administration*
Exhibit 10.11 Amended and Restated Pledge Agreement dated as of August 16, 1996 by and between the Registrant and U.S.
Small Business Administration*
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule (for SEC use only)
</TABLE>
_______________________
* Incorporated by reference to the exhibits to the Post-Effective Amendment
No. 1 to SII's Registration Statement on Form N-5, as amended, (Commission
File No. 811-7779)
37
<PAGE> 1
AMENDED AND RESTATED
CHARTER
OF
SIRROM CAPITAL CORPORATION
The undersigned corporation hereby amends and restates its charter
pursuant to T.C.A. Section 48-20-107, and states as follows:
1. The name of the corporation is Sirrom Capital Corporation.
2. The text of the amended and restated charter is as follows:
1. The name of the corporation is Sirrom Capital
Corporation.
2. The corporation is for profit.
3. The street address of the corporation's principal
office is:
500 Church Street, Suite 200
Nashville, Tennessee 37219
County of Davidson
4. (a) The name of the corporation's initial
registered agent is Carl W. Stratton.
(b) The street address of the corporation's initial
registered office in Tennessee is:
500 Church Street, Suite 200
Nashville, Tennessee 37219
County of Davidson
5. (a) The name and address of the incorporator is:
Maria-Lisa Caldwell, Esq.
Caldwell & Caldwell, P.C.
500 Church Street, Suite 200
Nashville, TN 37219
6. The number of shares of stock the corporation is
authorized to issue is fifty million (50,000,000)
shares of common stock, no par value.
7. The shareholders of the corporation shall not have
preemptive rights.
8. To the fullest extent permitted by the Tennessee
Business Corporation Act as in effect on the date
hereof and as hereafter amended from time to time, a
director of the corporation shall not be liable to
the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director.
If the Tennessee Business Corporation Act or any
successor statute is amended after adoption of this
provision to authorize corporate action further
eliminating or limiting the personal liability of
directors, then the liability of a director of the
corporation shall be eliminated or limited to the
fullest extent permitted by the Tennessee Business
Corporation Act, as so amended from time to time.
Any repeal or modification of this Paragraph 8 by the
shareholders of the corporation shall not adversely
affect any right or protection of a director of the
corporation existing at the time of such repeal or
modification or with respect to events occurring
prior to such time.
<PAGE> 2
9. The purpose of the corporation is to provide assistance
to small business directly or indirectly through
subsidiaries, including making loans or other
investments in small and medium sized businesses,
purchasing such loans and investments, providing
financial advisory and/or merger and acquisition
advisory services with respect to such businesses,
investing in equity securities of such businesses,
being licensed under applicable provisions of Tennessee
law (including Chapter 5 and/or Chapter 8 of Title 45)
and to engage in any other lawful business which the
Board of Directors determines to be necessary or
appropriate in connection or associated therewith.
3. The amended and restated charter was duly adopted by the Board
of Directors on July 12, 1996 and by the shareholders on
August 14, 1996.
Dated: August 14, 1996 SIRROM CAPITAL CORPORATION
By:___________________________
Maria-Lisa Caldwell, Secretary
2
<PAGE> 1
GUARANTY AGREEMENT
This Guaranty Agreement (the "Guaranty") is made and entered into as of
the _____ day of August, 1996, by and between Sirrom Capital Corporation, a
Tennessee corporation (the "Guarantor"), and the U. S. Small Business
Administration (the "SBA").
STATEMENT OF PURPOSE
WHEREAS, Sirrom Investments, Inc. (the "Borrower") is licensed by the SBA
as a small business investment company pursuant to the Small Business
Investment Act of 1958, as amended (the "Act") and the regulations promulgated
thereunder (the "Regulations");
WHEREAS, the SBA has previously guaranteed certain debentures (the
"Existing Debentures") issued pursuant to the Act and the Regulations by the
Guarantor, who, pursuant to a corporate reorganization, assigned those
debentures and other liabilities and a majority of its assets to Borrower (the
"Restructuring"); and
WHEREAS, as a condition to approving the Restructuring and as an
inducement therefor, the SBA has required the Guarantor to guarantee the
obligations of the Borrower to the SBA;
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
promises herein contained, other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by the parties hereto, parties
do hereby agree as follows:
Section 1. Definitions. Terms otherwise not defined herein shall have
the meaning assigned to them in that certain Amended and Restated Security
Agreement of even date herewith by and between Borrower and the SBA. "Loan
Documents" shall mean the Existing Debentures, any SBA guaranteed debentures
issued by Borrower after the date hereof, the Amended and Restated Security
Agreement, the Amended and Restated Pledge Agreement, the Amended and Restated
Agreement for Bailment Collateral and Remittance of Funds, and any other
document hereafter evidencing or securing the Obligations.
Section 2. Guaranty of Obligations. The Guarantor hereby unconditionally
guarantees to the SBA, and its successors, endorsees, transferees and assigns,
the prompt payment and performance of all Obligations of the Borrower, whether
primary or secondary (whether by way of endorsement or otherwise), whether now
existing or hereafter arising, whether or not from time to time reduced or
extinguished (except by payment thereof) or hereafter increased or incurred,
whether or not recovery may be or hereafter become barred by the statute of
limitations, whether enforceable or unenforceable as against the Borrower,
whether or not discharged, stayed or otherwise affected by any bankruptcy,
insolvency or other similar law or proceeding, whether created directly with
the SBA or acquired by the SBA through assignment, endorsement or otherwise,
whether matured or unmatured, whether joint or several, as and when the same
become due and payable (whether at maturity or earlier, by reason of
acceleration, mandatory repayment or otherwise), in accordance with the terms
of any such instruments evidencing any such
<PAGE> 2
obligations, including all renewals, extensions or modifications thereof (all
Obligations of the Borrower to the SBA, including all of the foregoing, being
hereinafter collectively referred to as the "Guaranteed Obligations").
Section 3. Nature of Guaranty. The Guarantor agrees that this Guaranty
is a continuing, unconditional guaranty of payment and performance and not of
collection, and that is obligations under this Guaranty shall be primary,
absolute and unconditional, irrespective of, and unaffected by (a) the
genuineness, validity, regularity, enforceability or any future amendment of,
or change in, this Agreement or any other Loan Document or any other agreement,
document or instrument to which the Borrower is or may become a party, (b) the
absence of any action to enforce this Guaranty or any other Loan Document or
the waiver or consent by the SBA with respect to any of the provisions of this
Guaranty, or any other Loan Document, (c) the existence, value or condition of,
or failure to perfect its lien against, any security for or other guaranty of
the Guaranteed Obligations or any action, or the absence of any action, by the
SBA in respect of such security or guaranty (including, without limitation, the
release of any such security or guaranty) or (d) any other action or
circumstances which might otherwise constitute a legal or equitable discharge
or defense of a surety or guarantor; it being agreed by the Guarantor that its
obligations under this Guaranty shall not be discharged until the final payment
and performance, in full, of the Guaranteed Obligations. The Guarantor
expressly waives all rights it may now or in the future have under any statute
or at law or in equity, or otherwise, to compel the SBA to proceed in respect
of the Guaranteed Obligations against the Borrower or any other party or
against any security for or other guaranty of the payment and performance of
the Guaranteed Obligations before proceeding against, or as a condition to
proceeding against, the Guarantor. The Guarantor further expressly waives and
agrees not to assert or take advantage of any defense based upon the failure of
the SBA to commence an action in respect of the Guaranteed Obligations against
the Borrower, the Guarantor or any other party or any security for the payment
and performance of the Guaranteed Obligations. The Guarantor agrees that any
notice or directive given at any time by Borrower or Guarantor to the SBA which
is inconsistent with the waivers in the preceding two sentences shall be null
and void and may be ignored by the SBA, and, in addition, may not be pleaded or
introduced as evidence in any litigation relating to this Guaranty for the
reason that such pleading or introduction would be at variance with the written
terms of this Guaranty, unless the SBA has specifically agreed otherwise in
writing. The foregoing waivers are of the essence of the transaction
contemplated by the Loan Documents.
Section 4. Demand by the SBA. In addition to the terms set forth in
Section 2, and in no manner imposing any limitation on such terms, if all or
any portion of the then outstanding Guaranteed Obligations are declared to be
immediately due and payable, then the Guarantor shall, upon demand in writing
therefor by the SBA to the Guarantor, pay all or such portion of the
outstanding Guaranteed Obligations then declared due and payable. Payment by
the Guarantor shall be made to the SBA, to be credited and applied upon the
Guaranteed Obligations, in immediately available funds in dollars to an account
designated by the SBA or at the SBA's office or at any other address that may
be specified in writing from time to time by the SBA.
2
<PAGE> 3
Section 5. Waivers. In addition to the waivers contained in Section 3,
the Guarantor waives, and agrees that it shall not at any time insist upon,
plead or in any manner whatever claim or take the benefit or advantage of, any
appraisal, valuation, stay, extension, marshaling of assets or redemption laws,
or exemption, whether now or at any time hereafter in force, which may delay,
prevent or otherwise affect the performance by the Guarantor of its obligations
under, or the enforcement by the SBA of, this Guaranty. The Guarantor further
hereby waives diligence, presentment, demand, protest and notice of whatever
kind or nature with respect to any of the Guaranteed Obligations and waives the
benefit of all provisions of law which are or might by in conflict with the
terms of this Guaranty. The Guarantor represents, warrants and agrees that its
obligations under this Guaranty are not and shall not be subject to any
counterclaims, offsets or defenses of any kind against the SBA or the Borrower
whether now existing or which may arise in the future.
Section 6. Modification of Loan Documents etc. If the SBA shall at any
time or from time to time, with or without the consent of, or notice to, the
Guarantor (a) change or extend the manner, place or terms of payment of, or
renew or alter all or any portion of, the Guaranteed Obligations, (b) take any
action under or in respect of the Loan Documents in the exercise of any remedy,
power or privilege contained therein or available to it at law, in equity or
otherwise, or waive or refrain from exercising any such remedies, powers or
privileges, (c) amend or modify, in any manner whatsoever, the Loan Documents,
(d) extend or waive the time for performance by the Guarantor, the Borrower or
any other person of, or compliance with, any term, covenant or agreement on its
part to be performed or observed under a Loan Document (other than this
Guaranty), or waive such performance or compliance or consent to a failure of,
or departure from, such performance or compliance, (e) take and hold security
or collateral for the payment of the Guaranteed Obligations or sell, exchange,
release, dispose of, or otherwise deal with, any property pledged, mortgaged or
conveyed, or in which the SBA has been granted a lien, to secure any debt of
the Guarantor or the Borrower to the SBA, (f) release anyone who may be liable
in any manner for the payment of any amounts owed by the liable in any manner
for the payment of any amounts owed by the Guarantor or the Borrower to the
SBA, (g) modify or terminate the terms of any intercreditor or subordination
agreement pursuant to which claims of other creditors of the Guarantor or the
Borrower are subordinated to the claims of the SBA or (h) apply any sums by
whomever paid or however realized to any amounts owing by the Guarantor or the
Borrower to the SBA on account of the Obligations in such manner as the SBA
shall determine in its reasonable discretion, then the SBA shall not incur any
liability to the Guarantor as a result thereof, and no such action shall impair
or release the obligations of the Guarantor under this Guaranty.
Section 7. Reinstatement. The Guarantor agrees that, if any payment made
by the Borrower or any other person applied to the Obligations is at any time
annulled, set aside, rescinded, invalidated, declared to be fraudulent or
preferential or otherwise required to be refunded or repaid, or the proceeds of
Collateral are required to be returned by the SBA to the Borrower, its estate,
trustee, receiver or any other party, including, without limitation, the
Guarantor, under any applicable law or equitable cause, then, to the extent of
such payment or
3
<PAGE> 4
repayment, the Guarantor's liability hereunder (and any lien or collateral
securing such liability) shall be and remain in full force and effect, as fully
as if such payment had never been made, and, if prior thereto, this Guaranty
shall have been canceled or surrendered (and if any lien or collateral securing
the Guarantor's liability hereunder shall have been released or terminated by
virtue of such cancellation or surrender), this Guaranty (and such lien or
collateral) shall be reinstated in full force and effect, and such prior
cancellation or surrender shall not diminish, release, discharge, impair or
otherwise affect the obligations of the Guarantor in respect of the amount of
such payment (or any lien or collateral securing such obligation).
Section 8. No Subrogation. Until all amounts owing to the SBA on account
of the Obligations are paid in full, the Guarantor hereby waives any claims or
other rights which it may now or hereafter acquire against the Borrower that
arise from the existence or performance of the Guarantor's obligations under
this Guaranty, including, without limitation, any fight of subrogation,
reimbursement, exoneration, indemnification, any right to participate in any
claim or remedy of the SBA against the Borrower or any collateral which are SBA
now has or may hereafter acquire, whether or not such claim, remedy or right
arises in equity or under contract, statute or common law, by any payment made
hereunder or otherwise, including, without limitation, the right to take or
receive from the Borrower, directly or indirectly, in cash or other property or
by set-off or in any other manner, payment or security on account of such claim
or other rights. If any amount shall be paid to the Guarantor on account of
such rights at any time when all of the Obligations shall not have been paid in
full, such amount shall be held by the Guarantor in trust for the SBA,
segregated from other funds of the Guarantor, and shall, forthwith upon receipt
by the Guarantor, be turned over to the SBA in the exact form received by the
Guarantor (duly indorsed by the Guarantor to the SBA, if required to be applied
against the Obligations, whether matured or unmatured, in such order as set
forth herein.
Section 9. Titles and Captions. Titles and captions of Articles,
Sections and subsections in this Guaranty are for convenience only, and neither
limit nor amplify the provisions of this Guaranty.
Section 10. Severability of Provisions. Any provision of this Guaranty
or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 11. Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.
Section 12. Termination of Guaranty. Notwithstanding anything to the
contrary contained herein, this Guaranty and all obligations of the Guarantor
hereunder shall terminate and be of no
4
<PAGE> 5
further force and effect upon the termination of the guaranty granted to First
Union National Bank of Tennessee (the "Agent") pursuant to the terms of that
certain Fourth Amended and Restated Loan Agreement dated August ___, 1996, by
and among the Borrower, the Guarantor, the Agent and the other lenders that are
a party thereto.
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be
executed by their duly authorized officers, all as of the day and year first
written above.
GUARANTOR:
SIRROM CAPITAL CORPORATION
By:____________________________
Name:_______________________
Title:______________________
SBA:
U.S. SMALL BUSINESS ADMINISTRATION
By:____________________________
Name:__________________________
Title:_________________________
5
<PAGE> 1
EXHIBIT 11
SIRROM CAPITAL CORPORATION
PER SHARE DATA
FOR THE QUARTER ENDING SEPTEMBER 30, 1996(1)
<TABLE>
<S> <C>
Net asset value, beginning of period $ 13.36
----------
Net operating income $ 0.39
Net realized and unrealized gains and
losses on investments(2) $ <.79>
----------
Total from investments operations $ <.40>
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 $ 12.70
Per share market value, end of period $ 30.17
Shares outstanding, end of period 12,328,567
</TABLE>
1. All shown are based on shares outstanding per share data at end of period.
2. Per share net realized and unrealized gains or losses include the effect
of stock issuances at per share prices in excess of the Company's per
share net asset value.
38
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SIRROM CAPITAL, CORPORATION FOR THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 247,958,383
<INVESTMENTS-AT-VALUE> 260,715,637
<RECEIVABLES> 2,455,789
<ASSETS-OTHER> 24,090,270
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 287,261,696
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 125,071,000
<OTHER-ITEMS-LIABILITIES> 5,651,639
<TOTAL-LIABILITIES> 130,722,639
<SENIOR-EQUITY> 132,407,465
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 12,328,567
<SHARES-COMMON-PRIOR> 9,195,116
<ACCUMULATED-NII-CURRENT> 8,002,404
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,061,800
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,607,245
<NET-ASSETS> 156,539,057
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16,837,156
<OTHER-INCOME> 5,033,632
<EXPENSES-NET> 10,015,756
<NET-INVESTMENT-INCOME> 11,855,033
<REALIZED-GAINS-CURRENT> 7,206,489
<APPREC-INCREASE-CURRENT> 2,793,944
<NET-CHANGE-FROM-OPS> 19,090,506
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,028,049
<DISTRIBUTIONS-OF-GAINS> 577,200
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,198,451
<NUMBER-OF-SHARES-REDEEMED> 65,000
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 5,972,873
<ACCUMULATED-GAINS-PRIOR> 620,271
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 5,979,355
<GROSS-EXPENSE> 10,015,756
<AVERAGE-NET-ASSETS> 122,442,335
<PER-SHARE-NAV-BEGIN> 9.61
<PER-SHARE-NII> .96
<PER-SHARE-GAIN-APPREC> 3.09
<PER-SHARE-DIVIDEND> .96
<PER-SHARE-DISTRIBUTIONS> .0
<RETURNS-OF-CAPITAL> .0
<PER-SHARE-NAV-END> 12.70
<EXPENSE-RATIO> .082
<AVG-DEBT-OUTSTANDING> 105,765,500
<AVG-DEBT-PER-SHARE> 8.58
</TABLE>
