<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 March 31, 1996
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ________ to ________
Commission File Number: 0-25174
SIRROM CAPITAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
TENNESSEE 62-1583116
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
500 CHURCH STREET, SUITE 200
NASHVILLE, TENNESSEE 37219
(Address of Principal (Zip Code)
Executive Offices)
(615) 256-0701
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last
Report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. The number of shares of
common stock, no par value per share, outstanding on May 15, 1995 was 9,153,836.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Page Number
-----------
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets as of December 31, 1995 and March 31, 1996. . . . . . . . . . . . . . . . . . .
Statements of Operations for the Three Months Ended March 31, 1995 and March 31, 1996. . . . .
Statements of Cash Flows for the Three Months Ended March 31, 1995 and March 31, 1996. . . . .
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio of Investments as of December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . .
Portfolio of Investments as of March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Condition, Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . .
Impact of Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . .
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES
</TABLE>
<PAGE> 3
SIRROM CAPITAL CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
------------ ------------
1995 1996
ASSETS ------------ ------------
(unaudited)
<S> <C> <C>
Investments, at fair value:
Loans $144,854,517 $166,936,281
Equity Interests $ 15,912,467 $ 22,548,818
Warrants $ 11,513,183 $ 11,198,843
------------ ------------
Total Investments (cost of $162,466,881 and
$188,430,081, respectively) $172,280,167 $200,683,942
Cash and cash equivalents $ 195,069 $ 78,283
Interest receivable $ 2,119,567 $ 2,534,774
Accounts receivable $ 0 $ 0
Debenture costs (less accumulated amortization of
$383,279 and $570,175, respectively) $ 2,020,030 $ 2,095,634
Furniture and equipment (less accumulated
depreciation of $18,565 and $29,273, respectively) $ 203,860 $ 214,734
Other assets $ 211,165 $ 598,473
------------ ------------
Total assets $177,029,858 $206,205,840
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Debentures payable to Small Business Administration $ 73,260,000 $ 83,260,000
Revolving credit facility $ 13,200,000 $ 24,916,000
Interest payable $ 936,818 $ 1,281,333
Accrued taxes payable $ 1,073,525 $ 2,310,268
Accounts payable and accrued expenses $ 213,901 $ 32,016
------------ ------------
Total liabilities $ 88,684,244 $111,799,617
------------ ------------
Shareholders' Equity:
Common stock $ 73,919,184 $ 73,919,184
Notes receivable from employees $ (1,980,000) $ (1,980,000)
Undistributed net realized earnings $ 6,593,144 $ 10,413,179
Unrealized appreciation of investments $ 9,813,286 $ 12,053,860
------------ ------------
Total shareholders' equity $ 88,345,614 $ 94,406,223
------------ ------------
Total liabilities and shareholders' equity $177,029,858 $206,205,840
============ ============
</TABLE>
See notes to financial statements.
<PAGE> 4
SIRROM CAPITAL CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Three
months ended months ended
March 31, March 31,
---------- ----------
1995 1996
---------- ----------
<S> <C> <C>
Operating Income:
Interest on investments $2,424,130 $4,862,463
Loan processing fees $ 540,992 $ 921,250
---------- ----------
Total operating income $2,965,122 $5,783,713
---------- ----------
Operating Expenses:
Interest expense $ 998,871 $1,789,982
Salaries and benefits $ 451,643 $ 739,020
Other operating expenses $ 221,620 $ 477,064
State income tax on interest $ 51,661 $ 0
Amortization expense $ 30,009 $ 188,397
---------- ----------
Total operating expenses $1,753,804 $3,194,463
---------- ----------
Net operating income $1,211,318 $2,589,250
Realized gain (loss) on investments $ 49,795 $5,756,489
Change in unrealized appreciation
(depreciation) of investment $1,602,920 $2,240,559
Provision for income taxes $ 0 ($2,134,960)
---------- ----------
Net increase in shareholders' equity
resulting from operations $2,864,033 $8,451,338
========== ==========
</TABLE>
See notes to financial statements.
<PAGE> 5
SIRROM CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 1995 March 31, 1996
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net increase in partners' capital and shareholders'
equity resulting from operations $ 2,864,033 $ 8,451,338
Adjustments to reconcile net increase to net cash provided
by operating activities:
Net unrealized (appreciation) depreciation of investments $ (1,602,920) $ (2,240,559)
Realized (gain) loss on investments $ (49,795) $ (5,756,489)
Amortization of debenture costs $ 28,509 $ 186,897
Increase in interest receivable $ (169,440) $ (415,185)
Increase (decrease) in accounts payable and
accrued expenses $ 119,135 $ (181,886)
Amortization of organization costs $ 1,500 $ 1,500
Depreciation of fixed assets $ 1,622 $ 10,709
(Increase) decrease in accounts receivable $ (587,400) $ 0
Increase in accrued taxes payable $ (441,804) $ 1,236,743
Increase in interest payable $ 121,831 $ 344,515
------------ ------------
Net cash provided by operating activities $ 285,271 $ 1,637,583
------------ ------------
INVESTING ACTIVITIES:
Proceeds from sale of investments $ 4,162,187 $ 12,506,905
Investments originated or acquired $(28,619,362) $(32,714,000)
Purchase of fixed assets $ (45,976) $ (21,237)
Increase in other assets $ 0 $ (588,808)
------------ ------------
Net cash used in investing activities $(24,503,151) $(20,817,140)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from debentures payable to Small
Business Administration $ 0 $ 10,000,000
Proceeds from revolving credit facilities $ 8,475,596 $ 29,703,000
Repayment of credit facility borrowings $(10,820,847) $(17,987,000)
Increase in debenture costs $ 110,351 $ (262,500)
Issuance of common stock $ 26,508,058 $ 0
Payment of dividends $ 0 $ (2,390,730)
Distribution of capital gains $ 0 $ 0
------------ ------------
Net cash provided by financing activities $ 24,273,158 $ 19,062,770
------------ ------------
Increase (decrease) in cash and cash equivalents $ 55,278 $ (116,786)
Cash and cash equivalents, beginning of period $ 137,247 $ 195,069
------------ ------------
Cash and cash equivalents, end of period $ 192,525 $ 78,283
============ ============
Supplemental disclosures of cash flow information:
Interest paid $ 877,041 $ 1,398,134
============ ============
Taxes paid $ 591,322 $ 951,116
============ ============
</TABLE>
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Sirrom Capital Corporation (the "Company"), a Tennessee Corporation, was
formed in November 1994 and Sirrom Capital, L.P. (the "Partnership") became a
partnership under the laws of the State of Tennessee in November 1991. The
accompanying financial statements have been prepared on a basis appropriate for
investment companies as enumerated in the American Institute of Certified
Public Accountants' Audit and Accounting Guide on Audits of Investment
Companies.
The Company is a non-diversified, closed-end investment company, which has
elected to be treated as a business development company under the Investment
Company Act of 1940. The Company is also a small business investment company
("SBIC") licensed under the Small Business Investment Act of 1958 (the "1958
Act"). The Company was licensed by the U.S. Small Business Administration (the
"SBA") on May 14, 1992. Under applicable SBA regulations, the Company is
restricted to investing only in qualified small business concerns in the manner
contemplated by the 1958 Act, as amended. Additionally, beginning in February
1995, the Company elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended.
The Company's objectives are to achieve both a high level of current
income from interest on loans and fees, as well as 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 meet certain
criteria, including the potential for significant growth, adequate collateral
coverage, experienced management teams, sophisticated outside equity investors
and profitable operations.
Effective February 1, 1995, the partners of the Partnership transferred,
in a tax free conversion, their partnership interests to the Company in
exchange for the issuance of 5,050,116 shares of common stock of the Company.
The common stock was received by each partner in proportion to the partner's
percentage interest in the Partnership. As a result of this exchange, the
Partnership was dissolved and liquidated, with all of the assets and
liabilities of the Partnership (including the SBIC license which was obtained
by the Partnership in May 1992) being thereby assigned and transferred to the
Company. This transaction was accounted for as a reorganization of entities
under common control, in a manner similar to a pooling of interests.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Valuation of Investments
Portfolio investments are stated at fair value as determined by the Board
of Directors.
Under the Company's valuation policy, the fair values of loans to small
business concerns are based on the Board of Director's evaluation of the
financial condition of the borrowers and/or the underlying collateral. The
values assigned are considered to be amounts which could be realized in the
normal course of business which anticipates the Company holding the loan to
maturity and realizing the face value of the loan. Fair value for loans
normally corresponds to cost unless the borrower's condition or external
factors lead to a determination of fair value at a lower amount.
<PAGE> 7
Equity interests and warrants for which there is not a public market are
valued based on factors such as significant equity financing by sophisticated,
unrelated investors, history of positive cash flow from operations, the market
value of comparable publicly traded companies (discounted for illiquidity) and
other pertinent factors. The Board of Directors also considers recent offers
to purchase a portfolio company's securities when valuing warrants.
The Company's investments in restricted stocks of public companies are
valued at the bid quotation less a discount rate of 30%. Unrestricted public
securities are valued at recently published market values.
At March 31, 1996, the investment portfolio included investments totaling
$192,409,978, whose values had been estimated by the Board of Directors in the
absence of readily ascertainable market values. Because of the inherent
uncertainty of the valuations, the estimated fair values may differ
significantly from the values that would have been used had a ready market for
the securities existed, and the difference could be material.
Realized and Unrealized Gain or Loss on Investments
Realized gains or losses are recorded upon disposition of investments and
are calculated based upon the difference between the proceeds and the cost
basis determined using the specific identification method. All other changes
in the valuation of portfolio investments are included as changes in the
unrealized appreciation or depreciation of investments in the statement of
operations.
Description of Loans Terms
The loans to small business concerns included in investments bear interest
at rates ranging from 4.00% to 14.00%. Interest is payable in monthly and
quarterly installments over five years with the entire principal amounts due at
maturity. These loans are generally collateralized by the assets of the
borrower, certain of which are subject to prior liens, and/or guarantees.
Loan Processing Fees
The Company recognizes loan processing fees as income when received.
Cash and Cash Equivalents
The Company defines cash and cash equivalents as cash on hand, cash in
interest bearing and non-interest bearing operating bank accounts and highly
liquid investments such as time deposits with an original maturity of three
months or less.
Debenture Costs
Debenture costs are amortized over ten years which represents the term of
the 11 SBA debentures, as discussed in Note 3.
<PAGE> 8
Income Taxes
Beginning in February 1995, the Company elected to be taxed as a regulated
investment company ("RIC") under Subchapter M of the Internal Revenue Code (the
"Code"). If the Company, as a RIC, satisfies certain requirements relating to
the source of its income, the diversification of its assets and the
distribution of its net income, the Company is generally taxed as a pass
through entity which acts as a partial conduit of income to its shareholders.
In order to maintain its RIC status, the Company must in general: a)
derive at least 90% of its gross income from dividends, interest and gains from
the sale or disposition of securities b) derive less than 30% of its gross
income from the sale or disposition of securities held for less than three
months, c) meet investment diversification requirements defined by the Code
and d) distribute to shareholders at least 90% of its net income (other than
long-term capital gains).
The Company currently intends to meet the RIC qualification in future
years. Therefore, the Company has not provided for federal income taxes on the
unrealized appreciation of investments.
3. DEBENTURES PAYABLE TO SMALL BUSINESS ADMINISTRATION
As of March 31, 1996, the Company had 11 debentures totaling $83,260,000
payable to the SBA with semiannual interest only payments based upon rates
ranging from 6.12% to 8.20% per annum, with scheduled maturity dates as
follows:
<TABLE>
<CAPTION>
Date Amount
----------------------------------------
<S> <C>
2002 $10,000,000
2003 24,000,000
2004 17,000,000
2005 22,260,000
2006 10,000,000
-----------
$83,260,000
</TABLE>
The debentures are subject to a prepayment penalty if paid prior to five
years from maturity. Interest expense related to these debentures for the
period ended March 31, 1996 totaled $1,317,441.
4. REVOLVING CREDIT FACILITY
During December 1995, the Company entered into a new revolving credit
facility with a bank, whereby it may borrow up to $50,000,000 at LIBOR plus
1.75% (7.19% at March 31, 1996). As of March 31, 1996, $24,916,000 was
outstanding. This agreement expires on December 27, 1998.
Interest expense related to the line of credit for the period ended March
31, 1996 was $472,541.
The Company entered into an interest rate swap agreement that effectively
converts the variable rate of $30,000,000 of borrowings on the revolving credit
facility to a fixed rate of 8.15%. Under the agreement, the Company has
exchanged the interest rate difference between the fixed and variable rates on
incremental amounts of $3,000,000 a month beginning in April 1996.
<PAGE> 9
5. INCOME TAXES
For the period ended March 31, 1996, the statement of operations includes
a provision for income taxes at a 35% rate for realized long-term capital gains
not distributed to shareholders.
<PAGE> 10
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- - ------------------------------------------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Affinity Fund, Inc.............................. 06/29/98 12.50% $ 1,485,000 $ 1,494,932
Affinity Fund, Inc.............................. 03/10/00 14.00 1,000,000 1,000,000
Affinity Fund, Inc.............................. 12/28/98 12.50 495,000 495,083
Alpha West Partners I, L.P...................... 12/31/97 12.50 771,308 675,058
American Remedial Tech., Inc.................... 03/26/00 13.50 1,485,000 1,487,500
American Remedial Tech., Inc.................... 07/11/00 14.00 495,000 495,498
Amscot Holdings, Inc............................ 05/26/00 14.00 800,000 800,000
Amscot Holdings, Inc............................ 09/20/00 14.00 200,000 200,000
Ashe Industries, Inc............................ 12/28/97 12.50 990,000 646,178
Ashe Industries, Inc............................ 03/25/99 12.50 445,500 447,150
Ashe Industries, Inc............................ 05/18/99 12.50 544,500 546,340
Ashe Industries, Inc............................ 06/12/96 14.00 750,000 750,000
Ashe Industries, Inc............................ 06/12/96 14.00 285,546 285,546
Associated Response Services, Inc............... 06/20/99 12.50 1,386,000 1,390,427
Associated Response Services, Inc............... 02/15/00 12.50 335,000 335,000
Associated Response Services, Inc............... 01/06/00 12.50 300,000 300,000
Assured Power, Inc.............................. 10/01/00 13.50 700,000 700,000
B & N Company, Inc.............................. 08/08/00 12.50 2,970,000 2,972,500
BankCard Services Corporation................... 01/21/98 13.00 297,000 298,800
BiTec Southeast, Inc............................ 11/03/97 12.50 445,500 448,350
BiTec Southeast, Inc............................ 11/30/98 12.50 1,188,000 1,193,000
BiTec Southeast, Inc............................ 11/03/97 12.50 445,500 447,300
BiTec Southeast, Inc............................ 08/01/99 13.50 521,321 521,321
C.J. Spirits, Inc............................... 05/01/97 13.50 750,171 455,546
Capital Network System, Inc..................... 11/30/98 12.50 990,000 994,342
Capital Network System, Inc..................... 01/18/99 12.50 990,000 994,008
Cardiac Control Systems, Inc.................... 03/31/00 13.50 1,500,000 1,500,000
Carter Kaplan Holdings, L.L.C................... 06/22/00 14.00 594,000 594,300
CCS Technology Group, Inc....................... 05/01/97 13.00 990,000 997,288
CellCall, Inc................................... 11/04/97 12.75 990,000 996,345
CF Data Corp.................................... 03/16/00 13.75 1,732,500 1,735,420
Champion Glove Mfg. Co., Inc.................... 07/27/00 13.50 1,250,000 1,250,000
Clearidge, Inc.................................. 09/29/99 13.00 2,000,000 2,000,000
Clearidge, Inc.................................. 12/28/00 13.50 500,000 500,000
Colonial Investments, Inc....................... 10/16/00 13.75 800,000 800,000
Consumat Systems, Inc........................... 11/01/00 14.00 500,000 500,000
Consumer Credit Associates, Inc................. 12/06/00 13.50 2,000,000 2,000,000
Continental Diamond Cutting Co.................. 10/28/99 13.00 1,500,000 1,500,000
Continental Diamond Cutting Co.................. 12/28/99 13.00 200,000 200,000
Continental Diamond Cutting Co.................. 05/31/96 14.00 300,000 300,000
Corporate Flight Mgmt., Inc..................... 12/04/97 12.50 346,500 348,645
Cougar Power Products, Inc...................... 10/05/96 13.00 495,000 495,083
Cougar Power Products, Inc...................... 10/05/96 13.00 495,000 497,003
Cougar Power Products, Inc...................... 10/05/96 14.00 325,000 325,000
Dalcon International, Inc....................... 01/31/02 13.00 150,000 150,000
Dalcon International, Inc....................... 01/31/00 13.00 200,000 200,000
</TABLE>
<PAGE> 11
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- - ------------------------------------------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Dalt's, Inc..................................... 04/28/01 13.50% $ 2,000,000 $ 2,000,000
DentureCare, Inc................................ 07/29/99 11.50 990,000 993,006
DentureCare, Inc................................ 11/03/00 14.00 111,150 111,150
DentureCare, Inc................................ 08/31/00 14.00 800,000 800,000
Eastern Food Group LLC.......................... 08/30/00 8.00 500,000 500,000
Eastern Food Group LLC.......................... 12/20/00 8.00 200,000 200,000
Educational Medical, Inc........................ 03/31/00 14.00 2,200,000 2,200,000
Electronic Merchant Services.................... 02/27/00 13.50 1,237,500 1,239,788
Electronic Merchant Services.................... 12/31/95 14.00 242,450 242,450
Emerald Pointe Waterpark L.P.................... 04/29/99 12.50 594,000 596,000
Emerald Pointe Waterpark L.P.................... 03/09/00 13.50 400,000 400,000
Encore Orthopedics, Inc......................... 07/31/00 13.50 2,620,985 2,658,887
Express Shipping Centers, Inc................... 09/25/00 13.25 1,697,619 1,734,426
Factory Card Outlet Of America Ltd.............. 11/15/00 12.50 3,670,917 3,682,317
Front Royal, Inc................................ 10/01/99 13.00 1,550,000 1,550,000
Front Royal, Inc................................ 12/27/99 13.00 675,000 675,000
Fycon Technologies, Inc......................... 05/16/00 10.00 350,000 350,000
Fycon Technologies, Inc......................... 08/30/00 14.00 1,000,000 1,000,000
Fycon Technologies, Inc......................... 12/17/00 14.00 100,000 100,000
Gates Communications, L.P....................... 12/31/98 12.50 990,000 994,175
Gitman and Company.............................. 12/31/00 14.00 1,700,000 1,700,000
Global Finance and Leasing, Inc................. 01/03/00 13.00 1,500,000 1,500,000
Gold Medal Products, Inc........................ 11/19/00 13.50 1,250,000 1,250,000
Golf Corporation of America, Inc................ 09/16/99 11.00 300,000 300,000
Golf Corporation of America, Inc................ 12/28/00 14.00 200,000 200,000
Golf Corporation of America, Inc................ 12/29/00 10.00 455,589 455,589
Gulfstream International Airlines Inc........... 07/29/99 13.00 1,490,000 1,494,509
Gulfstream International Airlines Inc........... 09/25/00 14.00 1,000,000 1,000,000
Horizon Medical Products, Inc................... 09/22/00 13.75 1,500,000 1,500,000
Hoveround Corporation........................... 06/11/98 13.00 495,000 497,368
Hoveround Corporation........................... 11/08/99 13.50 250,000 250,000
Hoveround Corporation........................... 03/08/00 14.00 250,000 250,000
Hunt Incorporated............................... 03/31/00 14.00 3,300,000 3,300,000
In-Store Services, Inc.......................... 04/19/00 14.00 1,188,000 1,189,800
Innotech, Inc................................... 03/22/99 13.00 1,980,000 1,987,326
Intermed Healthcare Systems, Inc................ 06/29/99 12.00 742,500 744,875
Intermed Healthcare Systems, Inc................ 02/10/00 14.00 375,000 375,000
International Manufacturing and Trade, Inc...... 04/27/99 13.00 495,000 496,743
International Manufacturing and Trade, Inc...... 12/01/99 13.00 400,000 400,000
International Manufacturing and Trade, Inc...... 06/09/00 14.00 500,000 500,000
International Manufacturing and Trade, Inc...... 07/25/00 14.00 250,000 250,000
International Manufacturing and Trade, Inc...... 11/10/00 14.00 100,000 100,000
Johnston County Cable L.P....................... 08/31/00 14.00 1,990,000 1,990,668
Kentucky Kingdom, Inc........................... 04/04/99 8.50 250,000 250,000
Kentucky Kingdom, Inc........................... 01/05/98 12.50 1,980,000 1,991,989
Kentucky Kingdom, Inc........................... 09/26/99 10.50 1,200,000 1,200,000
</TABLE>
<PAGE> 12
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- - ------------------------------------------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Kentucky Kingdom, Inc........................... 03/01/00 14.00% $ 835,000 $ 835,000
Kentucky Kingdom, Inc........................... 11/06/00 12.50 1,500,000 1,500,000
Kryptonics, Inc................................. 12/14/00 12.90 2,500,000 2,500,000
Lovett's Buffet, Inc............................ 04/01/00 13.00 2,250,000 2,250,000
MBA Marketing Corporation....................... 02/04/99 12.50 1,782,000 1,788,900
Medical Associates of America, Inc.............. 11/01/97 12.50 1,485,000 392,000
Money Transfer Systems, Inc..................... 07/24/00 14.00 247,500 247,752
Money Transfer Systems, Inc..................... 12/20/00 14.00 148,500 148,525
Moore Diversified Products, Inc................. 06/16/00 13.50 800,000 800,000
Moovies, Inc.................................... 04/18/00 13.50 1,485,000 1,487,250
Multimedia Learning, Inc........................ 05/08/00 14.00 1,500,000 1,500,000
Nationwide Engine Supply, Inc................... 01/12/99 12.00 2,475,000 2,485,008
Nelson Juvenile Products L.L.C.................. 10/31/00 14.00 2,000,000 2,000,000
NRI Service and Supply L.P...................... 02/13/00 14.00 2,475,000 2,479,587
OcuTec Corporation.............................. 06/21/99 10.00 1,000,000 1,000,000
OcuTec Corporation.............................. 06/21/00 10.00 350,000 350,000
OcuTec Corporation.............................. 10/16/00 10.00 100,000 100,000
OcuTec Corporation.............................. 12/04/01 10.00 351,500 351,500
Orchid Manufacturing Group, Inc................. 09/14/00 13.00 2,960,000 2,960,667
Orchid Manufacturing Group, Inc................. 12/28/00 13.50 1,000,000 1,000,000
Palco Telecom Service, Inc...................... 11/22/99 12.00 1,800,000 1,800,000
Patton Management Corporation................... 05/26/00 13.50 1,900,000 1,900,000
Pharmaceutical Research Assoc., Inc............. 08/10/00 13.50 1,980,000 1,981,665
Pipeliner Systems, Inc.......................... 09/30/98 13.00 980,000 989,324
Plymouth, Inc................................... 09/28/00 13.00 1,000,000 1,000,000
Precision Fixtures & Graphics, Inc.............. 07/31/10 6.50 1,100,000 889,976
Precision Fixtures & Graphics, Inc.............. 05/26/00 6.50 250,000 202,267
Precision Fixtures & Graphics, Inc.............. 11/07/00 6.50 200,000 161,814
Precision Fixtures & Graphics, Inc.............. 12/27/00 6.50 100,000 80,907
Precision Fixtures & Graphics, Inc.............. 07/10/00 6.50 135,000 109,224
Precision Fixtures & Graphics, Inc.............. 08/28/00 6.50 110,000 88,998
Precision Fixtures & Graphics, Inc.............. 12/12/00 6.50 200,000 161,814
Precision Panel Products, Inc................... 01/11/00 12.75 1,485,000 1,488,000
Premiere Technologies, Inc...................... 05/01/97 12.50 990,000 997,345
Premiere Technologies, Inc...................... 12/23/98 12.00 990,000 994,175
Pritchard Paint & Glass Co...................... 03/21/00 14.00 250,000 250,000
Quest Group International, Inc.................. 11/15/00 13.25 1,125,000 1,129,166
Radio Systems Corporation....................... 12/27/99 13.00 905,725 926,148
SkillSearch Corporation......................... 02/05/98 13.00 496,000 498,545
Summit Publishing Group, Inc.................... 03/17/99 12.00 1,485,000 1,490,500
Suncoast Medical Group, Inc..................... 09/14/99 13.50 485,000 489,498
Suncoast Medical Group, Inc..................... 06/07/00 14.00 495,000 495,083
TCOM Systems, Inc............................... 02/05/98 13.00 571,969 571,969
Tower Environmental, Inc........................ 11/30/98 10.00 2,440,000 2,201,990
</TABLE>
<PAGE> 13
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
LOAN COUPON
MATURITY INTEREST
LOANS DATE RATE COST FAIR VALUE
- - ------------------------------------------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Tower Environmental, Inc........................ 05/30/95 12.50% $ 150,000 $ 150,000
Trade Am International, Inc..................... 09/30/00 12.75 4,000,000 4,000,000
Treasure Coast Pizza Co......................... 07/29/98 12.00 841,500 845,760
Truckload Management Services, Inc.............. 03/14/98 13.00 150,000 150,000
Unique Electronics, Inc......................... 11/30/99 10.70 600,000 600,000
Universal Marketing Corporation................. 01/31/00 13.50 500,000 500,000
Valdawn, L.L.C.................................. 04/13/00 13.50 2,399,974 2,400,000
Viking Moorings Acquisition, L.L.C.............. 12/15/00 13.00 1,655,500 1,661,242
WWR Technology, Inc............................. 11/01/97 13.00 524,700 528,128
Zahren Alternative Power Corp................... 01/30/00 13.00 495,000 495,083
Zahren Alternative PowerCorp.................... 11/27/99 13.00 1,980,000 1,985,679
------------ ------------
Total Loans................................... $147,018,924 $144,854,517
=========== ===========
</TABLE>
The accompanying notes are an integral part of this schedule.
<PAGE> 14
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF COST OR
SHARES/PERCENTAGE CONTRIBUTED
EQUITY INTERESTS OWNERSHIP VALUE FAIR VALUE
- - ----------------------------------------------------- ----------------- ----------- -----------
<S> <C> <C> <C>
PUBLICLY TRADED INVESTMENTS
National Vision Associates, Ltd.
Common Stock -- restricted......................... 208,698 $ 1,771,149 $ 563,485
Concept Technologies Group, Inc. Common Stock --
restricted...................................... 23,408 5,300 30,723
Moovies Inc.
Common Stock....................................... 156,110 16,561 1,475,240
----------- -----------
Subtotal................................... 1,793,010 2,069,448
----------- -----------
EQUITY INVESTMENTS IN PRIVATE COMPANIES
National Recovery Technologies, Inc.
Preferred Stock -- Series A........................ 20,000 -- --
Premiere Technologies, Inc.
Common Stock....................................... 8,000 100,400 1,280,000
Medical Associates of America, Inc.
Preferred Stock -- Series A........................ 66,667 -- --
Viking Moorings Acquisition, L.L.C.
Membership interest in L.L.C....................... 6.50% 344,500 344,500
Nelson Juvenile Products, L.L.C.
Membership interest in L.L.C....................... 30.00% -- --
Skillsearch Corporation
Common Stock....................................... 2,241 250,035 250,035
Potomac Group, Inc.
Preferred Stock -- Series A........................ 800,000 1,000,000 1,232,966
Potomac Group, Inc.
Common Stock....................................... 240,000 60,000 370,504
Kentucky Kingdom, Inc.
Common Stock....................................... 11,671 258,300 1,539,603
Golf Corporation of America, Inc.
Common Stock....................................... 100,000 100,000 100,000
International Risk Control, Inc.
Preferred Stock -- Series A........................ 200,000 50,000 50,000
DentureCare, Inc.
Preferred Stock -- Series D........................ 49,342 300,000 300,000
Unique Electronics, Inc.
Preferred Stock -- Series A........................ 1,000,000 1,000,000 1,000,000
Pipeliner Systems, Inc.
Preferred Stock -- Series D........................ 5,000 1,000,000 1,000,000
Front Royal, Inc.
Common Stock....................................... 110,000 275,000 275,000
Ocutec Acquisition Corporation
Preferred Stock -- Series A........................ 1,539,867 1,539,867 1,539,867
Fycon Technologies, Inc.
Preferred Stock -- Series A........................ 800,000 800,000 800,000
Carter Kaplan Holdings, L.L.C.
Membership interest in LLC......................... 24.00% 6,100 6,100
</TABLE>
<PAGE> 15
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF COST OR
SHARES/PERCENTAGE CONTRIBUTED
EQUITY INTERESTS OWNERSHIP VALUE FAIR VALUE
- - ----------------------------------------------------- ----------------- ----------- -----------
<S> <C> <C> <C>
Virginia Gas Company
Preferred Stock -- Series A........................ 2,000% $ 2,000,000 $ 2,000,000
Johnston County Cable, L.P.
Class A Interest in L.P............................ 11.11 100,000 100,000
Eastern Food Group, L.L.C.
Class B Preferred Stock............................ 7,500 754,444 754,444
Dalcon International, Inc.
Series B Preferred Stock........................... 850,000 850,000 490,000
Zahren Alternative Power Corporation
Common Stock....................................... 700 210,000 210,000
Zahren Alternative Power Corporation
Preferred Stock.................................... 200 200,000 200,000
----------- -----------
Subtotal................................... 11,198,646 13,843,020
----------- -----------
Total Equity Interests..................... $12,991,656 $15,912,467
========== ==========
</TABLE>
The accompanying notes are an integral part of this schedule.
<PAGE> 16
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE
- - ------------------------------------------ ------------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Affinity Fund, Inc........................ 1,725 8.62% $ 20,000 $ 600,000
Alpha West Partners I, L.P................ 2 units 20.00 7,500 --
American Remedial Tech., Inc.............. 244,168 17.05 20,000 230,000
Amscot Holdings, Inc...................... 1,121 18.10 -- --
Ashe Industries, Inc...................... 216 16.52 20,000 --
Associated Responses Services, Inc........ 343 24.27 14,000 400,000
Assured Power, Inc........................ 234 11.94 -- --
Auto Rental Systems, Inc.................. 144,869 8.00 -- 285,000
B & N Company, Inc........................ 18 2.14 30,000 30,000
BankCard Services Corporation............. 138,000 24.00 3,000 --
BiTec Southeast, Inc...................... 938 10.00 21,000 100,000
C.J. Spirits, Inc......................... 180,000 10.00 7,500 --
CF Data Corp.............................. 257 20.45 17,500 17,500
Capital Network System, Inc............... 173,409 3.50 20,000 --
Cardiac Control Systems, Inc.............. 100,000 3.51 -- 153,127
CCS Technology Group, Inc................. 30,000 2.68 10,000 10,000
CellCall, Inc............................. 31,836 1.25 10,000 125,000
Champion Glove Mfg. Co., Inc.............. 538,614 5.87 -- --
CLS Corporation........................... 126,997 4.22 -- --
Clearidge, Inc............................ 367,026 7.91 -- --
Colonial Investments, Inc................. 194 18.00 -- --
Consumer Credit Associates, Inc........... 3,669 15.78 -- --
Continental Diamond Cutting Co............ 112 10.00 -- --
Corporate Flight Mgmt., Inc............... 66,315 10.00 3,500 100,000
Cougar Power Products, Inc................ 336 16.29 10,000 --
Dalcon International, Inc................. 250,000 20.00 -- --
Dalt's, Inc............................... 125 25.00 -- --
DentureCare, Inc.......................... 396,724 11.30 10,000 375,000
Electronic Merchant Services.............. 430 12.50 12,500 12,500
Eastern Food Group LLC.................... 17,647 15.00 -- --
Educational Medical, Inc.................. 85,000 8.00 -- --
Emerald Pointe Waterpark L.P.............. 10 units 10.00 6,000 250,000
Encore Orthopedics, Inc................... 291,550 4.92 379,015 379,015
Express Shipping Centers, Inc............. 73,752 5.10 552,402 552,402
Factory Card Outlet of America Ltd........ 23,658 2.50 329,083 329,083
Front Royal, Inc.......................... 240,458 3.58 -- 420,000
Fycon Technologies, Inc................... 58,677 15.00 -- --
Gates Communication, L.P.................. 47% of LP 47.00 10,000 10,000
Gitman Bros............................... 1,518 20.50 -- --
Global Finance and Leasing, Inc........... 5,000 25.00 -- --
Gold Medal Products, Inc.................. 90,000 30.00 -- --
Golf Corporation of America, Inc.......... 390,000 11.48 -- --
Gulfstream International Airlines Inc..... 260 21.00 10,000 --
Horizon Medical Products, Inc............. 9,486 8.25 -- --
Hoveround Corporation..................... 1,963 27.00 5,000 325,000
Hunt Incorporated......................... 309 11.09 -- 200,000
</TABLE>
<PAGE> 17
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE
- - ------------------------------------------ ------------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Innotech, Inc............................. 521,220 4.00% $ 20,000 $ 300,000
In-Store Service, Inc..................... 429 12.50 12,000 12,000
Intermed Healthcare Systems, Inc.......... 11,884 10.50 7,500 --
International Manufacturing and Trade,
Inc..................................... 482 29.94 5,000 --
Johnston County Cable, L.P................ 27.5% of LP 27.50 10,000 10,000
Kryptonics, Inc........................... 1,255 9.00 -- --
Lovett's Buffet, Inc...................... 204,219 5.00 -- --
MBA Marketing Corporation................. 26 4.00 18,000 --
Money Transfer Systems, Inc............... 45 4.31 4,000 4,000
Moore Diversified Products, Inc........... 12 10.68 -- --
Multimedia Learning, Inc.................. 202 6.09 -- --
Nationwide Engine Supply, Inc............. 882,353 15.00 25,000 25,000
NRI Service and Supply, L.P............... 27.5% of LP 27.50 25,000 25,000
OcuTec Corp............................... 222,222 6.13 -- --
One Stop Acquisitions, Inc................ 794 24.40 -- 500,000
Orchid Manufacturing Group, Inc........... 1,719,047 4.50 40,000 540,000
Palco Telecom Services, Inc............... 157,895 5.00 -- --
Patton Management Corporation............. 12 10.00 -- 300,000
Pharmaceutical Research Assoc., Inc....... 150,114 7.82 20,000 20,000
Pipeliner Systems, Inc.................... 2,080,000 20.38 20,000 20,000
Plymouth, Inc............................. 92,647 15.00 -- --
Potomac Group, Inc........................ 239,115 1.85 125,000 368,530
Precision Fixtures & Graphics, Inc........ 132 5.00 -- --
Precision Panel Products, Inc............. 122 8.25 15,000 15,000
Premiere Technologies, Inc................ 23,863 2.08 20,000 3,820,000
Quest Group International, Inc............ 44,444 10.00 125,000 125,000
Radio Systems Corporation................. 129,734 7.27 94,275 330,000
SkillSearch Corporation................... 2,381 7.59 254,000 119,000
Summit Publishing Group, Inc.............. 6,296 24.50 15,000 15,000
Suncoast Medical Group, Inc............... 330,245 13.82 20,000 20,000
Suprex Corporation........................ 1,058,179 3.45 -- 7,500
Tower Environmental, Inc.................. 82 10.07 20,000 --
Trade Am International, Inc............... 335,106 6.00 -- --
Treasure Coast Pizza Company.............. 51 10.00 8,500 8,500
Valdawn, L.L.C............................ 2,658 21.00 26 26
Unique Electronics, Inc................... 55,732 20.00 -- --
Universal Marketing Corporation........... 111 10.00 -- --
Virginia Gas Company...................... 525 6.00 -- --
Zahren Alternative Power Corp............. 1,108 5.00 25,000 25,000
------------ ------------
Total Warrants.................. 2,456,301 11,513,183
------------ ------------
Total Investments............... $162,466,881 $172,280,167
=========== ===========
</TABLE>
The accompanying notes are an integral part of this schedule.
<PAGE> 18
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS
AS OF MARCH 31,1996
(UNAUDITED)
<TABLE>
<CAPTION>
LOANS Original
Maturity Coupon Principal Fair Value
---------- ------ ---------- ----------
<S> <C> <C> <C> <C>
Affinity Fund, Inc. 06/29/98 12.50 $1,485,000 $1,495,682
Affinity Fund, Inc. 03/10/00 14.00 $1,000,000 $1,000,000
Affinity Fund, Inc. 12/28/98 12.50 $ 495,000 $ 495,332
Amscot Holdings, Inc. 05/26/00 14.00 $ 800,000 $ 800,000
Amscot Holdings, Inc. 09/20/00 14.00 $ 200,000 $ 200,000
Ashe Industries, Inc. 12/28/97 12.50 $ 990,000 $ 146,512
Ashe Industries, Inc. 03/25/99 12.50 $ 445,500 $ 197,300
Ashe Industries, Inc. 05/18/99 12.50 $ 544,500 $ 196,524
Ashe Industries, Inc. 06/12/96 14.00 $ 750,000 $ 100,000
Ashe Industries, Inc. 06/12/96 14.00 $ 285,546 $ 285,546
Associated Response Services, Inc. 06/20/99 12.50 $1,386,000 $1,391,126
Associated Response Services, Inc. 02/15/00 12.50 $ 335,000 $ 335,000
Associated Response Services, Inc. 01/06/00 12.50 $ 300,000 $ 300,000
Assured Power, Inc. 10/01/00 13.50 $ 700,000 $ 700,000
B & N Company, Inc. 08/08/00 12.50 $2,970,000 $2,974,000
B & N Company, Inc. 03/28/01 13.00 $ 990,000 $ 990,167
BankCard Services 01/21/98 13.00 $ 297,000 $ 298,950
BiTec Southeast, Inc. 10/31/97 12.50 $ 445,500 $ 448,575
BiTec Southeast, Inc. 11/30/98 12.50 $1,188,000 $1,193,600
BiTec Southeast, Inc. 10/31/97 12.50 $ 445,500 $ 447,525
BiTec Southeast, Inc. 08/01/99 13.50 $ 521,321 $ 521,321
C.J. Spirits, Inc. 05/01/97 13.50 $ 750,171 $ 455,796
Caldwell/VSR Inc. 02/28/01 4.00 $1,500,000 $1,500,000
Capital Networks 11/30/98 12.50 $ 990,000 $ 994,843
Capital Networks 01/18/99 12.50 $ 990,000 $ 994,509
Cardiac Control, Inc. 03/31/00 13.50 $1,500,000 $1,500,000
Carter Kaplan Holdings, Inc. 06/22/00 14.00 $ 594,000 $ 594,600
CCS Technology, Inc. 05/01/97 13.00 $ 990,000 $ 997,789
Cell Call, Inc. 11/04/97 12.75 $ 990,000 $ 996,846
CF Data 03/16/00 13.75 $1,732,500 $1,736,296
Champion Glove Manufacturing 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 10/16/00 13.75 $ 800,000 $ 800,000
Consumat Systems 11/01/00 14.00 $ 500,000 $ 500,000
Consumat Systems 01/01/01 14.00 $ 500,000 $ 500,000
Consumat Systems 03/11/01 14.00 $ 500,000 $ 500,000
Consumer Credit Associates, Inc. 12/06/00 13.50 $2,000,000 $2,000,000
Consumer Credit Associates, Inc. 03/28/01 13.50 $1,000,000 $1,000,000
Continental Diamond, Inc. 10/28/99 13.00 $1,500,000 $1,500,000
Continental Diamond, Inc. 12/28/99 13.00 $ 200,000 $ 200,000
Continental Diamond, Inc. 05/31/96 14.00 $ 200,000 $ 200,000
Corporate Flight Mgmt, Inc. 12/04/97 12.50 $ 346,500 $ 348,819
Cougar Power Products 10/05/96 13.00 $ 495,000 $ 372,169
Cougar Power Products 10/05/96 13.00 $ 495,000 $ 370,249
Cougar Power Products 10/05/96 14.00 $ 325,000 $ 325,000
Dalcon Technologies, Inc. 01/31/02 13.00 $ 150,000 $ 150,000
Dalcon Technologies, Inc. 01/31/00 13.00 $ 200,000 $ 200,000
Dalcon Technologies, Inc. 05/15/96 13.00 $ 45,000 $ 45,000
Dalts, Inc. 04/28/01 13.50 $2,000,000 $2,000,000
DentureCare 07/29/99 11.50 $ 990,000 $ 993,507
DentureCare 11/03/00 14.00 $ 111,150 $ 111,150
DentureCare 08/31/00 14.00 $ 800,000 $ 800,000
DentureCare 01/11/01 12.50 $ 550,000 $ 550,000
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
LOANS Original
Maturity Coupon Principal Fair Value
---------- ------ ---------- ----------
<S> <C> <C> <C> <C>
Eastern Food Group 08/30/00 8.00 $ 500,000 $ 500,000
Eastern Food Group 12/20/00 8.00 $ 200,000 $ 200,000
Eastern Food Group 01/21/01 8.00 $ 200,000 $ 200,000
Eastern Food Group 02/14/01 8.00 $ 265,000 $ 265,000
Educational Medical Inc. 03/31/00 14.00 $2,200,000 $2,200,000
Electronic Merchant Services, Inc. 02/27/00 13.50 $1,237,500 $1,040,204
Electronic Merchant Services, Inc. 02/29/96 14.00 $ 272,450 $ 272,450
Electronic Merchant Services, Inc. 02/29/96 14.00 $ 134,000 $ 134,000
Emerald Pointe 04/29/99 12.50 $ 594,000 $ 596,300
Emerald Pointe 03/09/00 13.50 $ 400,000 $ 400,000
Encore Orthopedics 07/31/00 13.50 $2,620,985 $2,677,838
Encore Orthopedics 02/28/01 13.00 $1,667,680 $1,678,758
Express Shipping Centers, Inc. 09/22/00 13.25 $1,697,598 $1,762,047
Factory Card Outlet 11/15/00 12.50 $3,670,917 $3,698,772
Front Royal 10/01/99 13.00 $1,550,000 $1,550,000
Front Royal 12/27/99 13.00 $ 675,000 $ 675,000
Fycon Technologies, Inc. 05/16/00 10.00 $ 450,000 $ 450,000
Fycon Technologies, Inc. 08/30/00 14.00 $1,000,000 $ 800,000
Fycon Technologies, Inc. 12/17/00 14.00 $ 100,000 $ 100,000
Gardner Wallcovering, Inc. 03/28/01 13.50 $1,485,000 $1,485,250
Gates Communications 12/31/98 12.50 $ 990,000 $ 994,676
Gitman Bros. 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 11/19/00 13.50 $1,250,000 $1,250,000
Gold Medal Products 02/15/01 13.00 $ 25,000 $ 25,000
Golf Corporation of America 09/16/99 11.00 $ 300,000 $ 300,000
Golf Corporation of America 12/28/00 14.00 $ 200,000 $ 200,000
Golf Corporation of America 12/29/00 10.00 $ 455,589 $ 455,589
Golf Video, Inc. 03/27/01 14.00 $ 250,000 $ 250,000
Gulfstream International 07/29/99 13.00 $1,490,000 $1,495,010
Gulfstream International 09/25/00 14.00 $1,000,000 $1,000,000
Horizon Medical Products, Inc. 09/22/00 13.75 $1,500,000 $1,500,000
Hoveround Corporation 06/11/98 13.00 $ 495,000 $ 497,617
Hoveround Corporation 11/08/99 13.50 $ 250,000 $ 250,000
Hoveround Corporation 03/08/00 14.00 $ 250,000 $ 250,000
HSA International 01/04/01 14.00 $1,485,000 $1,485,750
Hunt Truck Sales 03/31/00 14.00 $3,300,000 $3,300,000
I.S. Acquisition, LLC 04/01/01 14.00 $2,000,000 $2,000,000
In Store Services, Inc. 04/19/00 14.00 $1,188,000 $1,190,400
Innotech, Inc. 03/22/99 13.00 $1,980,000 $1,988,325
Intermed Healthcare Systems, Inc. 06/29/99 12.00 $ 742,500 $ 745,250
Intermed Healthcare Systems, Inc. 02/10/00 14.00 $ 375,000 $ 375,000
Johnston County Cable 08/31/00 14.00 $1,990,000 $1,991,169
Kentucky Kingdom, Inc. 04/04/99 8.75 $ 250,000 $ 250,000
Kentucky Kingdom, Inc. 01/05/98 12.50 $1,980,000 $1,992,988
Kentucky Kingdom, Inc. 09/26/99 10.50 $1,200,000 $1,200,000
Kentucky Kingdom, Inc. 03/01/00 14.00 $ 835,000 $ 835,000
Kentucky Kingdom, Inc. 11/06/00 12.50 $1,500,000 $1,500,000
Kentucky Kingdom, Inc. 09/15/96 14.00 $2,000,000 $2,000,000
Kryptonics 12/14/00 12.90 $2,500,000 $2,500,000
Lovett's Buffet 04/01/00 13.00 $2,250,000 $2,250,000
MBA Marketing 02/04/99 12.50 $1,782,000 $1,789,800
Medical Associates of America 11/01/97 12.50 $ 385,000 $ 392,000
Midbrook 02/28/01 13.50 $3,600,000 $3,613,334
Money Transfer Systems 07/24/00 14.00 $ 247,500 $ 247,878
Money Transfer Systems 12/20/00 14.00 $ 148,500 $ 148,600
Money Transfer Systems 03/01/01 14.00 $ 148,500 $ 148,525
Moore Diversified, Inc. 06/16/00 13.50 $ 800,000 $ 800,000
Moorings 12/15/00 13.00 $1,655,500 $1,678,468
Moovies Inc. 04/18/00 13.50 $1,485,000 $1,488,000
Moovies Inc. 01/04/01 13.00 $1,980,000 $1,980,999
Multicom Publishing, Inc. 03/29/01 13.00 $2,200,000 $2,213,333
Multimedia Learning, Inc. 05/08/00 14.00 $1,500,000 $1,500,000
Nationwide Engine Supply 01/12/99 12.00 $2,475,000 $2,486,259
Nelson Juvenile Products 10/31/00 14.00 $2,000,000 $2,000,000
Novavision 06/21/99 10.00 $1,000,000 $1,000,000
Novavision 06/21/00 10.00 $ 350,000 $ 350,000
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
LOANS Original
Maturity Coupon Principal Fair Value
---------- ------ ---------- ----------
<S> <C> <C> <C> <C>
Novavision 10/16/00 10.00 $ 100,000 $ 100,000
Novavision 12/04/01 10.00 $ 386,500 $ 386,500
Nozzle Rebuilders, Inc. 02/13/00 14.00 $ 2,475,000 $ 2,480,838
Orchid Manufacturing Group, Inc. 09/14/00 13.00 $ 2,960,000 $ 2,962,668
Orchid Manufacturing Group, Inc. 12/28/00 13.50 $ 1,000,000 $ 1,000,000
PFIC Corporation 02/28/01 13.00 $ 1,000,000 $ 1,000,000
Palco Telecom Service, Inc. 11/22/99 12.00 $ 1,300,000 $ 1,300,000
Patton Management Corporation 05/26/00 13.50 $ 1,900,000 $ 1,900,000
Pharmaceutical Research Associates 08/10/00 13.50 $ 1,980,000 $ 1,982,664
Pipeliner Systems, Inc. 09/30/98 13.00 $ 980,000 $ 990,323
Plymouth Inc. 09/28/00 13.00 $ 1,000,000 $ 1,000,000
Precision Fixtures & Graphics 07/31/10 7.76 $ 1,100,000 $ 700,000
Precision Fixtures & Graphics 05/26/00 7.76 $ 250,000 $ 250,000
Precision Fixtures & Graphics 11/07/00 7.76 $ 200,000 $ 200,000
Precision Fixtures & Graphics 12/27/00 7.76 $ 100,000 $ 100,000
Precision Fixtures & Graphics 07/10/00 7.76 $ 135,000 $ 135,000
Precision Fixtures & Graphics 08/28/00 7.76 $ 110,000 $ 110,000
Precision Fixtures & Graphics 12/12/00 7.76 $ 200,000 $ 200,000
Precision Fixtures & Graphics 01/28/01 7.76 $ 200,000 $ 200,000
Precision Fixtures & Graphics 02/15/01 7.76 $ 100,000 $ 100,000
Precision Fixtures & Graphics 02/19/01 7.76 $ 100,000 $ 100,000
Precision Fixtures & Graphics 03/07/01 7.76 $ 100,000 $ 100,000
Precision Panel Products, Inc. 01/11/00 12.75 $ 1,485,000 $ 1,488,750
Pritchard Paint & Glass Co. 02/14/01 14.00 $ 1,100,000 $ 1,100,000
Quest Group Int'l 11/15/00 13.25 $ 1,125,000 $ 1,135,415
Radio Systems, Inc. 12/27/99 13.00 $ 905,725 $ 930,861
SkillSearch Corportion 02/05/98 13.00 $ 496,000 $ 498,746
Southern Specialty Group 06/30/01 14.00 $ 1,732,500 $ 1,733,376
Summit Publishing Group, Inc. 03/17/99 12.00 $ 1,485,000 $ 1,491,250
Suncoast Medical 09/14/99 13.50 $ 485,000 $ 490,248
Suncoast Medical 06/07/00 14.00 $ 495,000 $ 495,332
Suncoast Medical 02/23/01 14.00 $ 495,000 $ 495,166
TCOM/ACS 02/05/98 13.00 $ 546,853 $ 546,853
Tower Environmental, Inc. 11/30/98 10.00 $ 2,440,000 $ 2,451,990
Tower Environmental, Inc. 05/30/95 12.50 $ 150,000 $ 150,000
Trade Am International, Inc. 09/30/00 12.75 $ 4,000,000 $ 4,000,000
Treasury Coast Pizza Company 07/29/98 12.00 $ 841,500 $ 846,186
Urethane Technologies, Inc. 03/16/01 13.50 $ 1,636,520 $ 1,642,578
Unique Electronics 11/30/99 10.70 $ 600,000 $ 600,000
Universal Marketing, Inc. 01/31/00 13.50 $ 500,000 $ 500,000
Valdawn, Inc. 04/13/00 13.50 $ 2,399,974 $ 2,400,000
Voice FX 01/23/01 13.50 $ 2,324,000 $ 2,332,799
WWR Technology, Inc. 11/01/97 13.50 $ 524,700 $ 528,392
Zahren Alternative Power 01/30/00 13.00 $ 495,000 $ 495,328
Zahren Alternative Power 11/27/99 13.00 $ 1,980,000 $ 1,986,696
------------ ------------
Total Loans $169,895,679 $166,936,281
------------ ------------
</TABLE>
<PAGE> 21
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS
AS OF MARCH 31,1996
(UNAUDITED)
<TABLE>
<CAPTION>
Cost or
EQUITY INTERESTS Number of Contributed
Shares Value Fair Value
------ ----- ----------
<S> <C> <C> <C>
Publicly Traded Investments
National Vision Associates, Ltd. (a)
Common Stock - restricted 208,698 $1,771,149 $563,485
Concept Technologies Group, Inc. (a)
Common Stock - restricted 23,408 $5,300 $22,792
Moovies Inc. (a)
Common Stock 156,110 $16,561 $1,529,878
Premiere Technologies, Inc. (a)
Common Stock 378,360 $0 $6,157,809
Equity Investments in Private Companies
National Recovery Technologies, Inc.
Preferred Stock - Series A 20,000 $0 $0
Medical Associates of America
Preferred Stock - Series A 66,667 $0 $0
Skillsearch Corporation
Common Stock 2,241 $250,035 $250,035
Potomac Group
Preferred Stock - Series A 800,000 $1,000,000 $2,000,000
Potomac Group
Common Stock 254,115 $63,529 $635,288
Kentucky Kingdom
Common Stock 13,260 $258,316 $1,539,620
Golf Club of America
Common Stock 100,000 $100,000 $100,000
International Risk Control, Inc.
Preferred Stock - Series A 200,000 $50,000 $50,000
DentureCare
Preferred Stock - Series D 49,342 $300,000 $300,000
Unique Electronics, Inc.
Preferred Stock - Series A 1,000,000 $1,000,000 $1,000,000
Pipeliners Systems, Inc.
Preferred Stock - Series D 5,000 $1,000,000 $1,000,000
Front Royal
Common Stock 110,000 $275,000 $275,000
Ocutec Aquisition Corporation
Preferred Stock - Series A 1,539,867 $1,539,867 $1,539,867
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
Cost or
EQUITY INTERESTS Number of Contributed
Shares Value Fair Value
------ ----- ----------
<S> <C> <C> <C>
Fycon Technologies
Preferred Stock - Series A 800,000 $800,000 $500,000
Carter Kaplan Holdings Inc.
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
Class A Interest in L.P. 11.11% of L.P. $100,000 $100,000
Eastern Food Group
Class B Preferred Units 7,500 $754,444 $654,444
Dalcon Technologies, Inc.
Series B Preferred Stock 850,000 $850,000 $490,000
Zahren Alternative Power
Common Stock 700 $210,000 $210,000
Zahren Alternative Power
Preferred Stock 200 $200,000 $200,000
Moorings LLC
Membership interest in LLC 6.50% $344,500 $344,500
Association Membership Services
Series B Preferred Stock 163 $0 $0
Nelson Juvenile Products
Membership interest in LP 30.00% $0 $0
Pharmaceutical Research Associates Inc.
Class F Preferred Stock 29,195 $190,000 $190,000
Caldwell/VSR Inc.
Preferred Stock 890 $890,000 $890,000
----------- -----------
Subtotal $12,181,791 $14,274,854
----------- -----------
TOTAL EQUITY INTERESTS $13,974,801 $22,548,818
----------- -----------
</TABLE>
<PAGE> 23
SIRROM CAPITAL CORPORATION
PORTFOLIO OF INVESTMENTS
AS OF MARCH 31,1996
(UNAUDITED)
<TABLE>
<CAPTION>
Cost or
Number of Contributed
Shares Ownership Value Fair Value
------ --------- ----- ----------
<S> <C> <C> <C> <C>
STOCK WARRANTS
Affinity Fund 1,725 8.62% $20,000 $600,000
Amscot Holdings, Inc. 1,121 17.50% $0 $0
Ashe Industries, Inc. 216 16.52% $20,000 $0
Associated Response Services, Inc. 343 34.30% $14,000 $1,000,000
Assured Power Inc. 374 16.00% $0 $0
Auto Rental Systems, Inc. 144,869 8.00% $0 $285,000
B & N Company 33 4.00% $40,000 $40,000
BankCard Services 149,261 28.00% $3,000 $0
BiTec Southeast, Inc. 938 10.00% $21,000 $100,000
C.J. Spirits, Inc. 180,000 10.00% $7,500 $0
CF Data 257 20.50% $17,500 $17,500
Caldwell/VSR Inc. 159 15.93% $0 $0
Capital Networks 173,409 3.50% $20,000 $250,000
Cardiac Control Systems, Inc. 100,000 2.90% $0 $150,000
CCS Technology, Inc. 30,000 2.00% $10,000 $10,000
CellCall, Inc. 332 1.23% $10,000 $125,000
Champion Glove Manufacturing 538,614 6.88% $0 $0
CLS Corporation 126,997 4.90% $0 $0
Clearidge, Inc. 449,039 7.90% $0 $0
Colonial Investments 194 18.00% $0 $0
Consumat Systems, Inc. 250,000 20.00% $0 $0
Consumer Credit Associates 3,669 15.50% $0 $0
Continental Diamond 112 12.22% $0 $0
Corporate Flight Mgmt., Inc. 66,315 10.00% $3,500 $100,000
Cougar Power Products, Inc. 336 22.61% $10,000 $0
Dalcon Technologies, Inc. 250,000 20.00% $0 $0
Dalt's, Inc. 125 25.00% $0 $0
DentureCare 546,545 12.65% $10,000 $375,000
Electronic Merchant Services, Inc. 430 12.50% $12,500 $12,500
Eastern Food Group 17,647 15.00% $0 $0
Educational Medical, Inc. 85,000 8.00% $0 $400,000
Emerald Pointe 10% of LP 10.00% $6,000 $250,000
Encore Orthopedics 466,455 7.36% $711,335 $711,335
Express Shipping Centers, Inc. 73,752 3.00% $552,402 $552,402
Factory Card Outlet 23,658 2.50% $329,083 $500,000
Front Royal 240,458 3.59% $0 $420,000
Fycon Technologies 58,677 15.00% $0 $0
FX Direct 233,112 8.00% $176,000 $176,000
Gardner Wallcovering, Inc. 2 2.00% $15,000 $15,000
Gates Communication 47% of LP 47.00% $10,000 $10,000
The Ryland Co. 1,518 20.50% $0 $0
Global Leasing 5,000 25.00% $0 $0
Gold Medal Products 90,000 30.00% $0 $0
Golf Corporation of America 300,000 31.50% $0 $0
Golf Video, Inc. 98 49.50% $0 $0
Gulfstream International 271 21.00% $10,000 $0
Horizon Medical Products, Inc. 9,486 8.25% $0 $0
Hoveround Corporation 1,963 27.00% $5,000 $325,000
HSA International 100,999 12.00% $15,000 $15,000
Hunt Truck Sales 309 10.00% $0 $200,000
I. Schneid Holdings LLC 11% of LLC 11.00% $0 $0
Innotech, Inc. 65,995 3.79% $20,000 $268,100
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
Cost or
Number of Contributed
Shares Ownership Value Fair Value
------ --------- ----- ----------
<S> <C> <C> <C> <C>
In Store Services, Inc. 429 12.50% $12,000 $12,000
Intermed Healthcare Systems, Inc. 11,884 10.25% $7,500 $0
Johnston County Cable 27.5% of LP 27.50% $10,000 $10,000
Kryptonics 1,255 9.00% $0 $0
Lovett's Buffet 204,219 5.00% $0 $0
MBA Marketing 28 4.29% $18,000 $0
Midbrook Group Inc. 7.40% 7.40% $400,000 $400,000
Money Transfer Systems 45 4.00% $5,500 $5,500
Moore Diversified, Inc. 12 11.00% $0 $0
Moovies 20,000 0.20% $20,000 $20,000
Multicom Publishing, Inc. 335,423 6.00% $800,000 $800,000
Multimedia Learning, Inc. 202 6.00% $0 $0
Nationwide Engine Supply 952,381 16.19% $25,000 $25,000
Nozzle Rebuilders, Inc. 27.5% of LP 27.50% $25,000 $25,000
OcuTec Corp. 222,222 10.00% $0 $0
One Stop Acquisitions, Inc. 794 24.40% $0 $500,000
Orchid Manufacturing 1,719,047 4.50% $40,000 $540,000
PFIC Corporation 5,917 6.00% $0 $0
Palco Telecom Service, Inc. 157,895 5.00% $0 $0
Patton Management Corporation 426 10.00% $0 $300,000
Pharmaceutical Research Associates 259,848 6.00% $20,000 $20,000
Pipeliner Systems, Inc. 2,080,000 20.55% $20,000 $20,000
Plymouth 92,647 15.00% $0 $0
Potomac Group, Inc. 225,000 1.90% $125,000 $562,500
Precision Fixtures & Graphics Inc. 132 5.00% $0 $0
Precision Panel Products, Inc. 122 8.25% $15,000 $15,000
Pritchard Paint & Glass 12,500 25.00% $0 $0
Quest Group Int'l 44,444 10.00% $125,000 $125,000
Radio Systems, Inc. 129,734 7.27% $94,275 $330,000
SkillSearch Corporation 2,381 7.20% $254,000 $119,000
Southern Specialty Brands, Inc. 10,000 10.00% $17,500 $17,500
Summit Publishing Group, Inc. 6,296 24.50% $15,000 $15,000
Suncoast Medical 580,159 23.00% $25,000 $25,000
Suprex 1,058,179 3.45% $0 $7,500
Tower Environmental, Inc. 82 10.07% $20,000 $0
Trade Am International, Inc. 335,106 6.00% $0 $0
Treasure Coast Pizza Company 51 10.00% $8,500 $8,500
Valdawn, Inc. 2,658 21.00% $26 $26
Unique Electronics 80.00% 20.00% $0 $0
Universal Marketing, Inc. 111 10.00% $0 $0
Urethane Technologies, Inc. 484,640 4.66% $363,480 $363,480
Virginia Gas Company 525 6.00% $0 $0
Zahren Alternative Power 1,168 9.80% $25,000 $25,000
Total Warrants $4,559,601 $11,198,843
------------ ------------
TOTAL INVESTMENTS $188,430,081 $200,683,942
============ ============
</TABLE>
(a) All restricted publicly traded stocks are being valued each month at
approximately 70% of the publicly traded price. All other publicly
traded stocks are valued at 90% of of the publicly traded price.
<PAGE> 25
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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 and
fees and its total operating expenses, including interest expense, but not
including federal income taxes. The second element is "Realized gain (loss) on
investments," which is the difference between the proceeds received from the
disposition of portfolio assets and their stated cost. The third element is
the "Change in unrealized appreciation (depreciation) of investments," which is
the net change in the fair value of the Company's portfolio assets compared
with their stated cost. 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
corresponding 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 transfer of the depreciation causes an increase in
unrealized appreciation.
NET OPERATING INCOME
The Company's principal investment objectives are to achieve both a high
level of income from interest on loans and fees, as well as long-term growth in
the value of its shareholders equity through the appreciation of equity
interests in its portfolio companies. Therefore, the Company's loans are
typically made in the form of senior or subordinated secured debt with
relatively high fixed interest rates and with warrants to purchase equity
securities of the borrower. During the quarter ended March 31, 1996, the
Company had interest on investments of $4,862,000, a 101% increase over the
$2,424,000 earned in the same quarter of 1995. In addition to interest on
investments, the Company also typically collects an up-front processing fee on
each loan it originates. During the first quarter of 1996, the Company
collected $921,000 in processing fees, a 70% increase over the $541,000
collected in the same quarter of 1995. This increase in interest income and
processing fees is a result of the increase in the dollar amount of loans
outstanding and originated during the period and a result of the recognition
and collection of certain contingent processing fees in the first quarter of
1996 for loans closed during the fourth quarter of 1995. The Company's loan
portfolio increased 71% to $166.9 million at March 31, 1996 from $97.4 million
at March 31, 1995. The $32.0 million of loans originated during the first
quarter of 1996 was a 14% increase over the $28.0 million of loans originated
in the same quarter of 1995. In addition, the weighted average interest rate
charged on the loan portfolio at March 31, 1996 was 12.9%, as compared to 12.6%
at March 31, 1995.
The most significant portion of the Company's total operating expenses is
interest expense. The Company's interest expense, most of which is related to
the SBA-guaranteed debentures of the Company, increased to $1,790,000 in the
first quarter of 1996, a 79% increase over the $999,000 paid in the first
quarter of 1995. The increase in interest expense from 1995 to 1996 is
primarily attributable to increased borrowings from the SBA, which were $83.3
million on March 31, 1996, and $51 million on March 31, 1995.
The other significant components of total operating expenses are (i)
overhead, which relates to employee compensation, travel and marketing
expenses, office expenses and legal fees, (ii) amortization and (iii) state
taxes. These expenses totaled $1,404,000 in the first quarter of 1996, an 86%
increase over
<PAGE> 26
the $755,000 of such expenses in the same quarter of 1995. These increases can
be largely attributed to the increase in the number of employees from 10 in
1995 to 16 in 1996. Although the dollar amount of these expenses increased,
overhead expenses as a percentage of average assets decreased slightly from
2.6% to 2.5% from the first quarter of 1995 to the first quarter of 1996,
respectively. The first quarter overhead expenses for both years include the
accrual and payment of annual bonuses, and thus, first quarter operating
expenses have historically been higher than other quarters' expenses as a
percentage of assets.
Beginning in February 1995, the Company elected to be taxed as a Regulated
Investment Company ("RIC") under Subchapter M of the Internal Revenue Code (the
"Code"). If the Company, as a RIC, satisfies certain requirements relating to
the source of its income, the diversification of its assets and the
distribution of its net income, the Company is generally taxed as a pass
through entity which acts as a partial conduit of income to its shareholders.
In order to maintain its RIC status, the Company must in general derive at
least 90% of its gross income from dividends, interest and gains from the sale
or disposition of securities; derive less than 30% of its gross income from the
sale or disposition of securities held for less than three months; meet
investment diversification requirements defined by the Code; and distribute to
shareholders at least 90% of its net income (other than long-term capital
gains). The Company presently intends to meet the RIC qualifications in future
years, and therefore, the Company has not provided for federal income taxes on
the unrealized appreciation of investments. However, no assurance can be given
that the Company will continue to elect such treatment.
For the quarter ended March 31, 1996, the Company paid dividends of
$2,391,000 from net operating income. The Company paid no dividends in the
first quarter of 1995.
For the quarter ended March 31, 1996, the Statements of Operations include
a provision for taxes totaling $2,135,000 for federal income tax at a 35% rate
on realized gains not distributed to shareholders. The majority of this tax
related to the retained long-term capital gain of $6,279,000 on the Company's
sale of half of its equity position in Premiere Technology, Inc.
REALIZED GAIN (LOSS) ON INVESTMENTS
The Company's net realized gain on investments was $5,756,000 during the
quarter ended March 31, 1996, largely resulting from gains of $6,729,000 on the
sale of equity positions in Premiere Technologies, Inc. and American Remedial
Technologies, Inc., which were partially offset by a $1,100,000 loan write-off
of Medical Associates of America, Inc. The net realized gain for the first
quarter of 1995 was $50,000, primarily resulting from $560,000 in gains on the
sale of equity positions in Republic Automotive Parts, Inc. and American
Retirement Corp., which were largely offset by a write-off of $515,000 of
equity in Medical Associates of America, Inc. Management does not attempt to
maintain a comparable level of realized gains from year to year, but instead
attempts to maximize total investment portfolio appreciation.
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS
As a small business investment company regulated as a business development
company, the Company revalues its portfolio quarterly, in accordance with its
Valuation Policy, to reflect the fair value of each of its portfolio assets
(including its loans), and accordingly does not maintain an allowance for loan
losses as is common for commercial banks. Any change in the fair value of the
portfolio assets is reflected in unrealized appreciation (depreciation) of
investments (and a corresponding increase or decrease in shareholders' equity),
but has no impact on net operating income.
<PAGE> 27
For the quarters ended March 31, 1996, and 1995, the Company recorded net
increases in unrealized appreciation of investments before income taxes of
$2,241,000 and $1,603,000, respectively.
The following table sets forth information regarding significant changes
in unrealized appreciation (depreciation) of assets in the Company's portfolio
made during the first quarter of 1995 and 1996.
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
-----------------------
1995 1996
- - -----------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
LOANS:
Ashe Industries, Inc. $ $(1,750)
Tower Environmental, Inc. 250
Zortec Holdings, Inc. 100
Quality Care Networks (100)
Medical Associates of America, Inc. 1,100
Electronic Merchant Services, Inc. (200)
Cougar Power Products, Inc. (250)
WARRANTS AND EQUITY SECURITIES:
Educational Medical, Inc. 400
Associated Response Services, Inc. 600
Factory Card Outlet of America Ltd. 171
Potomac Group, Inc. 956
Capital Network System, Inc. 250
Premiere Technologies, Inc. 1,178
American Remedial Technologies, Inc. (230)
DentureCare, Inc. 100
Intermed Healthcare Systems, Inc. 492
TermNet Merchant Services, Inc. 587
National Vision Associates, Ltd. 183
PMT Services, Inc. 143
Medical Associates of America, Inc. 250
Republic Automotive Parts, Inc. (240)
</TABLE>
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had $78,000 in cash and cash equivalents
and approximately $8.3 million of 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 the
Summary of Significant Accounting Policies in the Notes to the Financial
Statements.
<PAGE> 28
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.
During the first quarter of 1996, the Company borrowed an additional $10.0
million from the SBA, bringing total SBA borrowings to a total of $83.3 million
at March 31, 1996. Each borrowing from the SBA has a term of ten years and can
be prepaid without penalty after five years. The average interest rate on
these borrowings is 7.0% and none of these borrowings mature prior to 2002.
Based on the Company's leverageable capital (as defined by the SBA), 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. Given the increased demand for
borrowings under the SBA sponsored SBIC debenture program and concurrent
decrease in funds appropriated by Congress to the SBA, no assurances can be
given as to the amount of additional SBA borrowing that will be available to
the Company.
As of March 31, 1996, the Company had a $50.0 million revolving credit
facility with First Union National Bank and various other lenders. Amounts
outstanding under the credit facility bear interest at a variable rate based on
LIBOR plus 1.75% (approximately 7.19% at March 31, 1996) and are secured by all
of the Company's assets. This credit facility matures on December 27, 1998.
As of March 31, 1996, there were $24,916,000 outstanding under this facility.
The credit facility requires that the Company must 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 order to manage the interest rate risk associated with the variable
interest rate provided for under the Company's credit facility, the Company
entered into an interest rate swap agreement that effectively converts the
variable rate on a portion of the credit facility to a fixed rate of 8.15% per
annum. Under this agreement, the Company can convert up to $30.0 million
borrowed under the credit facility to this fixed rate in $3.0 million
increments per month beginning April 1996.
The Company believes that anticipated borrowings from the SBA and under
the Company's credit facility, together with cash flow from operations (after
distributions to shareholders), will be adequate to fund the continuing growth
of the Company's investment portfolio through the middle of 1996. In order to
provide the funds necessary for the Company to continue its growth strategy
beyond that period, the Company expects to incur, from time to time, additional
short and long-term borrowings from the SBA (to the extent allowed) and other
sources, and to issue, in public or private transactions, its equity and debt
securities. The availability and terms of any such borrowings will depend upon
interest rate, market and other conditions. There can be no assurance that
such additional funding will be available on terms acceptable to the Company.
IMPACT OF INFLATION
The Company does not believe that its business is materially affected by
inflation, other than the impact which inflation may have on the securities
markets, the valuations of business enterprises and the relationship of such
valuations to underlying earnings, all of which will influence the value of the
Company's investments.
- - ---------------------
<PAGE> 29
RISKS
The significant risks inherent in the Company's business, which primarily
consists of making loans to small businesses, are set forth in part in the
Company's 1995 Annual Report and should be kept in mind when evaluating the
Company's financial performance.
PORTFOLIO TURNOVER
During the quarter ended March 31, 1996, the Company made loans to 28
companies totaling approximately $32.0 million and experienced five repayments
(either partial or full) aggregating $4.8 million. During the quarter ended
March 31, 1995, the Company made loans to 26.0 companies totaling approximately
$28 million and experienced two repayments (either partial or full) aggregating
approximately $1.6 million. The Company can not control all changes in its
portfolio of investments, as borrowers have the right to prepay loans made by
the Company without penalty and the first loans made by the Company begin
maturing in May 1997.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K.
None.
<PAGE> 30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIRROM CAPITAL CORPORATION
Date: May 15, 1996 By: /s/ Carl W. Stratton
-------------------------
Carl W. Stratton
Chief Financial Officer
<PAGE> 31
EXHIBIT INDEX
Exhibit No. Description
- - ----------- ------------------------------------------
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule (for SEC use only).
<PAGE> 1
EXHIBIT 11
SIRROM CAPITAL CORPORATION
Per share data
For the quarter ending March 31, 1996
<TABLE>
<S> <C>
Net asset value, beginning of period $9.61
---------
Net operating income $0.28
Net realized and unrealized gains and
losses on investments $0.64
---------
Total from investments operations $0.92
Less: Dividend on net investment income $0.26
Distribution on realized capital gains $0.00
---------
Total distributions $0.26
Net asset value, end of period $10.27
Per share market value, end of period $22.88
Shares outstanding, end of period 9,196,116
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data: December 31, March 31, March 31,
1995 1995 1996
--------------------------------------
<S> <C> <C> <C>
Net assets, end of period (in thousands) $88,348 $61,628 $94,406
Ratio of operating expenses to average
net assets (1) 12.60% 2.58% 3.50%
Ratio of net operating income to average
net assets 13.20% 3.73% 2.83%
</TABLE>
(1) Operating expenses include overhead expenses, amortization expense, state
income taxes, and interest expense.
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 188,430,081
<INVESTMENTS-AT-VALUE> 200,683,942
<RECEIVABLES> 2,534,774
<ASSETS-OTHER> 2,987,124
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 206,205,840
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</TABLE>
