<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, 1997
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 1, 1997 was 15,477,813.
<PAGE> 2
TABLE OF CONTENTS
PAGE NUMBER
-----------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 1996 and March 31, 1997 3
Consolidated Statements of Operations for the Three Months Ended
March 31, 1996 and 1997 4
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1996 and 1997 5
Notes to Consolidated Financial Statements 6
Consolidated Portfolio of Investments as of December 31, 1996 12
Consolidated Portfolio of Investments as of March 31, 1997 21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
Results of Operations 29
Financial Condition, Liquidity and Capital Resources 32
Impact of Inflation 33
Risks 33
Portfolio Turnover and Credit Quality 33
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 34
ITEM 2. CHANGES IN SECURITIES 34
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 34
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 34
ITEM 5. OTHER INFORMATION 34
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 34
SIGNATURES 35
2
<PAGE> 3
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
--------------- ---------------
Assets
- ------
<S> <C> <C>
Investments, at fair value
Loans $ 221,487,385 $ 270,177,423
Equity interests 34,965,801 34,209,579
Warrants 15,893,828 15,089,243
Other 2,990,282 3,594,764
--------------- ---------------
Total investments (cost of $262,943,963 and $315,165,461,
respectively) 275,337,296 323,071,009
Investment in unconsolidated subsidiary 911,487 1,080,316
Cash 4,611,532 34,529,302
Interest receivable 2,870,138 2,635,112
Debenture costs (less accumulated amortization of $920,289 and
$1,126,314, respectively) 3,690,362 3,873,758
Fixed assets (less accumulated depreciation of $73,711 and $90,441,
respectively) 275,454 292,367
Other assets 316,797 347,932
--------------- ---------------
Total Assets $ 288,013,066 $ 365,829,796
=============== ===============
Liabilities and Shareholders' Equity
- ------------------------------------
Liabilities:
- ------------
Debentures payable to Small Business Administration $ 90,000,000 $ 90,000,000
Revolving credit facilities 30,858,213 0
Interest payable 1,348,252 1,443,298
Accrued taxes payable 4,333,144 2,815,866
Accounts payable, accrued expenses, and other liabilities 2,852,942 2,721,577
--------------- ---------------
Total Liabilities 129,392,551 96,980,741
--------------- ---------------
Shareholders' Equity:
- --------------------
Common stock 140,061,092 249,978,919
Notes receivable from employees (1,539,858) (677,231)
Undistributed net realized earnings 7,705,948 11,641,835
Unrealized appreciation of investments 12,393,333 7,905,532
--------------- ---------------
Total Shareholders' Equity 158,620,515 268,849,055
--------------- ---------------
Total Liabilities and Shareholders' Equity $ 288,013,066 $ 365,829,796
=============== ===============
</TABLE>
3
<PAGE> 4
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 1996 March 31, 1997
--------------- ---------------
<S> <C> <C>
Operating Income:
Interest on investments $ 4,862,463 $ 8,028,286
Loan processing fees 921,250 1,694,320
Other income 0 17,584
--------------- ---------------
Total Operating Income 5,783,713 9,740,190
--------------- ---------------
Operating Expenses:
Interest expense 1,789,982 2,141,609
Salaries and benefits 739,020 791,456
Other operating expenses 477,064 614,417
Amortization expense 188,397 207,525
--------------- ---------------
Total Operating Expenses 3,194,463 3,755,007
--------------- ---------------
Equity in pretax income of unconsolidated subsidiary
(before taxes of $0 and $72,360) 795,418 241,201
--------------- ---------------
Net Operating Income 3,384,668 6,226,384
--------------- ---------------
Realized gain (loss) on investments 5,756,489 4,456,891
Change in unrealized appreciation
(depreciation) of investments 2,240,559 (4,487,800)
Provision for income taxes 2,134,960 2,309,480
--------------- ---------------
Net increase in shareholders'
equity resulting from operations $ 9,246,756 $ 3,885,995
=============== ===============
</TABLE>
4
<PAGE> 5
SIRROM CAPITAL CORPORATION
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 1996 March 31, 1997
--------------- ---------------
<S> <C> <C>
Operating Activities:
Net increase in partners' capital and shareholders'
equity resulting from operations $ 9,246,756 $ 3,885,995
Adjustments to reconcile net increase to net cash provided
by operating activities:
Net unrealized (appreciation) depreciation of investments (2,240,559) 4,487,800
Realized (gain) loss on investments (5,756,489) (4,456,891)
(Incr.) Decr. in investment in unconsolidated subsidiary (795,418) (168,829)
Amortization of debenture costs 186,897 269,025
Increase in interest receivable (415,185) 235,026
Increase (decrease) in accounts payable and
accrued expenses (181,886) (131,367)
Amortization of organization costs 1,500 1,500
Depreciation of fixed assets 10,709 12,437
Increase in accrued taxes payable 1,236,743 (1,517,278)
Increase in interest payable 344,515 95,046
--------------- ---------------
Net cash provided by operating activities 1,637,583 2,712,464
--------------- ---------------
Investing Activities:
Proceeds from sale of investments 12,506,905 20,635,165
Investments originated or acquired (32,714,000) (68,399,786)
Purchase of fixed assets (21,237) (29,349)
Increase in other assets (588,808) (32,634)
--------------- ---------------
Net cash used in investing activities (20,817,140) (47,826,604)
--------------- ---------------
Financing Activities:
Proceeds from debentures payable to Small
Business Administration 10,000,000 0
Proceeds from revolving credit facilities 29,703,000 17,550,132
Repayment of credit facility borrowings (17,987,000) (48,408,345)
Increase in debenture costs (262,500) (452,421)
Issuance of common stock 0 109,946,441
Stock options exercised 0 74,000
Repayment of employee notes 0 862,627
Payment of dividends (2,390,730) (4,437,910)
Distribution of capital gains 0 0
Employee shares repurchased 0 (102,614)
--------------- ---------------
Net cash provided by financing activities $ 19,062,770 $ 75,031,910
--------------- ---------------
Increase (decrease) in cash and cash equivalents $ (116,786) $ 29,917,770
Cash and cash equivalents, beginning of period $ 195,069 $ 4,611,532
--------------- ---------------
Cash and cash equivalents, end of period $ 78,283 $ 34,529,302
=============== ===============
Supplemental disclosures of cash flow information:
Interest paid $ 1,398,134 $ 1,956,016
=============== ===============
Taxes paid $ 951,116 $ 3,738,278
=============== ===============
</TABLE>
5
<PAGE> 6
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Sirrom Capital Corporation (the "Company"), a Tennessee Corporation, was
formed in November 1994. 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 specialty finance company
that is primarily engaged in making loans to small businesses. 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. In addition to making loans to small businesses, the
Company provides merger and acquisition advisory services through its
wholly-owned subsidiary, Harris Williams & Co., ("Harris Williams").
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, as amended (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, and the majority of its assets and liabilities, to its wholly-owned
subsidiary, Sirrom Investments Inc. ("SII"), a Tennessee Corporation. Under
applicable SBA regulations, SII is restricted to investing only in qualified
small business concerns in the manner contemplated by the 1958 Act.
Additionally, beginning in February 1995, the Company elected to be taxed as a
regulated investment company ("RIC") 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 the ownership interests of Harris
Williams & Co., L.P. for 898,454 shares of common stock of the Company. After
the acquisition, Harris Williams began operating as a "C" corporation. The
acquisition of Harris Williams is accounted for as a pooling of interests. The
consolidated balance sheets as of March 31, 1996 and 1997 and the consolidated
statements of operations and cash flows for each of the quarters ended March 31,
1996 and 1997 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.
In December 1996, the Company formed a wholly-owned subsidiary, Sirrom
Funding Corporation ("SFC") to purchase loans originated by the Company and the
related warrants. These loans and warrants will be used as collateral to secure
borrowings under the Company's $100.0 revolving credit facility. SFC has also
elected to be taxed as a RIC.
2. INTERIM FINANCIAL STATEMENTS
Certain notes and other information have been omitted from the interim
consolidated financial statements presented in this Quarterly Report on
Form 10-Q. Therefore, these financial statements should be read in conjunction
with the consolidated financial statements and notes thereto contained in the
Company's 1996 Annual Report on Form 10-K.
6
<PAGE> 7
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. 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 Directors' 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 normally
corresponds to cost unless the borrower's condition or external factors lead to
a determination of fair value at a higher or a lower amount.
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 new 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 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 and 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.
At December 31, 1996 and March 31, 1997, the investment portfolio included
investments totaling $275,337,296 and $323,071,009, respectively, 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
differences could be material.
Realized and Unrealized Gain or Loss on Investments
Realized gains 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. Realized losses are
recorded upon the final disposition of the cost basis of investments according
to federal income tax guidelines and are calculated in the same manner. All
other changes in the valuation of portfolio investments, as determined by the
directors, are included as changes in the unrealized appreciation or
depreciation of investments in the statement of operations.
7
<PAGE> 8
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INVESTMENTS
Investments consist primarily of loans made to and warrants obtained from
borrowers of the Company and its, SBIC subsidiary, SII. Investments are recorded
at fair value as determined by the directors or by current market prices, if
available, in accordance the Company's valuation policy (See Note 3). While the
Company markets to borrowers throughout the United States, approximately 50.5%
of the investment portfolio consists of loans and equity investments in
companies that are headquartered in the southeastern United States.
The aggregate cost basis of loans on non-accrual status, less realized
losses, totaled $15,873,178 and $16,016,170 at December 31, 1996 and March 31,
1997, respectively. The aggregate fair values of these loans as determined by
the Company's directors totaled $8,683,178 and $8,031,170 at December 31, 1996
and March 31, 1997, respectively.
Included in the investment portfolio at March 31, 1997 are other assets
which consist of rights to royalty payments, a right to receive payment from a
potential arbitration settlement and certain tangible assets. The Company
obtained these rights upon foreclosure of three loans. The aggregate cost of
other assets at March 31, 1997 is $5,194,764 which represents the cost basis
of the original loans plus capitalized workout expenses. The Company's directors
have estimated the fair value of these assets to be $3,594,764.
5. REVOLVING CREDIT FACILITIES AND INTEREST RATE SWAP AGREEMENTS
During the quarter ended March 31, 1997, the Company modified swap
agreements previously entered under the $100.0 million revolving credit
facility. The Company has now exchanged the variable rates in incremental
amounts of $12.5 million per month beginning in July 1997, reaching a total
notional amount of $100.0 million in February 1998. The Company terminated the
previously secured caps and floors through December 1997 and secured a new cap
that caps the Company's annual rate at 8.25% through December 1997.
6. INCOME TAXES
For the quarters ended March 31, 1996 and 1997 the Company provided for
federal income tax at a 35% rate and excise taxes at a 4% rate on taxable net
investment income as defined by the Code and realized gains not distributed to
shareholders. These tax provisions for the quarters ended March 31, 1996 and
1997 were $2.1 million and $2.2 million, respectively. For the quarter ended
March 31, 1997, the Company also provided for taxes of $72,000 on Harris
Williams' pre-tax income.
8
<PAGE> 9
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. STOCK OPTION PLANS
The Company's two employee stock option plans, the Amended and Restated
1994 Employee Stock Option Plan (the "1994 Plan"), and the 1996 Employee Stock
Incentive Plan (the "1996 Plan") provide for the granting of options for 500,000
and 1,140,000 shares, respectively, of common stock to selected employees at an
exercise price not less than the fair market value of the common stock on the
date of the grant. The terms of each award are determined by the Board of
Directors. The options vest over a five year period and expire ten years from
the date of grant.
A summary of stock option activity related to the plans is as follows:
<TABLE>
<CAPTION>
PRICE RANGE
PER SHARE SHARES
-------------- ---------
<S> <C> <C>
Outstanding, December 31, 1994............................. -- --
Granted............................................... $11 -18.50 466,966
Exercised............................................. -- --
Forfeited............................................. -- --
---------
Outstanding, December 31, 1995............................. 466,966
Granted............................................... $18.625-35.75 767,581
Exercised............................................. $13.50 -17.875 15,000
Forfeited............................................. $18.50 -26.33 25,000
---------
Outstanding, December 31, 1996............................. 1,194,547
Granted............................................... $ 34.75 125,000
Exercised............................................. $ 18.50 4,000
Forfeited............................................. $ 18.50 16,000
----------
Outstanding, March 31, 1997................................ 1,299,547
==========
</TABLE>
9
<PAGE> 10
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. SECONDARY OFFERING
In February 1997, the Company completed a public offering of 3,335,000
shares of common stock at a price of $37.00 per share of which 3,146,286 shares
were sold by the Company. The net proceeds to the Company of the offering,
after underwriting commissions and expenses, were approximately $109,946,000.
9. DIVIDENDS AND DISTRIBUTIONS
During the quarter ended March 31, 1997, the Company paid dividends of
$4,437,910 of which $4,437,910 and $0 were derived from net operating income
and realized long-term capital gains, respectively.
10. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
As discussed in Note 1, Harris Williams is accounted for by the equity
method of accounting. The balance sheet for Harris Williams as of March 31,
1997 and statements of income for the quarter ended March 31, 1997 is as
follows:
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
1997
---------
<S> <C>
ASSETS
Cash and cash equivalents............................................. $1,155,970
Accounts receivable................................................... 230,546
Other assets, net..................................................... 119,790
---------
Total Assets..................................................... $1,506,306
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities........................................................... $ 425,989
Shareholders' equity.................................................. 1,080,317
----------
Total liabilities and shareholders' equity....................... $1,506,306
==========
</TABLE>
10
<PAGE> 11
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
-------------------------
1996 1997
---------- ----------
<S> <C> <C>
REVENUES:
Fee income................................................... $1,277,597 $805,827
Expense reimbursements and other............................. 131,045 110,430
---------- --------
1,408,642 916,257
---------- --------
EXPENSES:
Salaries and benefits........................................ 498,402 417,729
Operating expenses........................................... 114,822 257,327
---------- --------
613,224 675,056
---------- --------
Operating income before taxes................................ 795,418 241,201
Provision for income taxes................................... 0 72,360
---------- --------
Net income................................................... $ 795,418 $168,841
========== ========
</TABLE>
Advisory services are typically provided by Harris Williams in accordance
with engagement contracts that stipulate a monthly retainer, reimbursement of
direct expenses and transaction closing fees. Retainer fees are recognized
ratably over the retainer period, expense reimbursements are recognized monthly
as billed and success fees are recognized at the time of closing.
Prior to the acquisition by the Company, Harris Williams operated as a
Subchapter S corporation from inception to August 1994 and as a limited
partnership subsequent to August 1994. Accordingly, no provision for income tax
was recorded for the quarter ended March 31, 1996. Subsequent to the acquisition
in August 1996, Harris Williams began operating as a "C" corporation and has
provided for federal income taxes of $72,000 which is included in provision for
income taxes in the accompanying consolidated statements of operations for the
quarter ended March 31, 1997.
11
<PAGE> 12
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
COUPON
INTEREST
LOANS MATURITY COST RATE FAIR VALUE
----- -------- ------------ -------- ------------
<S> <C> <C> <C> <C>
AB Plastics Holding Corporation.................. 9/27/01 $ 4,000,000 13.50% $ 4,000,000
Affinity Fund, Inc............................... 6/29/98 1,485,000 12.50 1,497,932
Affinity Fund, Inc............................... 3/10/00 1,000,000 14.00 1,000,000
Affinity Fund, Inc............................... 12/28/98 495,000 12.50 496,079
American Corporate Literature, Inc............... 9/29/01 1,683,000 14.00 1,684,132
ARAC Holding Co., Inc............................ 9/27/01 3,000,000 13.50 3,000,000
American Network Exchange........................ 11/30/98 990,000 13.00 996,346
American Network Exchange........................ 1/18/99 990,000 13.00 996,012
Amscot Holdings, Inc............................. 5/26/00 800,000 14.00 800,000
Amscot Holdings, Inc............................. 9/20/00 200,000 14.00 200,000
Amscot Holdings, Inc............................. 6/28/01 500,000 14.00 500,000
Amscot Holdings, Inc............................. 12/27/01 250,000 14.00 250,000
Argenbright Holdings Limited..................... 7/7/01 2,750,000 13.50 3,500,000
Ashe Industries, Inc............................. 12/28/97 990,000 12.50 132,058
Ashe Industries, Inc............................. 3/25/99 445,500 12.50 122,300
Ashe Industries, Inc............................. 5/18/99 544,500 12.50 121,524
Ashe Industries, Inc............................. 6/12/96 750,000 14.00 100,000
Ashe Industries, Inc............................. 6/12/96 285,546 14.00 0
Associated Response Services, Inc................ 6/20/99 1,386,000 12.50 1,393,223
Associated Response Services, Inc................ 2/15/00 335,000 12.50 335,000
Associated Response Services, Inc................ 1/6/00 300,000 12.50 300,000
Associated Response Services, Inc................ 11/8/01 500,000 12.50 500,000
Assured Power, Inc............................... 10/1/00 700,000 13.50 700,000
Avionics Systems, Inc............................ 7/19/01 3,000,000 13.50 3,000,000
B & N Company, Inc............................... 8/8/00 2,970,000 12.50 2,978,500
B & N Company, Inc............................... 3/28/01 990,000 13.00 991,670
BankCard Services Corporation.................... 1/21/98 297,000 13.00 299,400
BiTec Southeast, Inc............................. 7/1/99 2,600,321 12.70 2,614,171
BiTec Southeast, Inc............................. 8/9/01 950,000 14.00 950,000
C.J. Spirits, Inc................................ 6/1/97 750,171 13.50 455,796
Caldwell/VSR Inc................................. 2/28/01 1,500,000 8.00 1,500,000
Caldwell/VSR Inc................................. 9/27/01 116,000 14.00 116,000
Cardiac Control Systems, Inc..................... 3/31/00 1,500,000 13.50 1,500,000
Cartech Holdings, Inc............................ 4/29/01 1,500,000 13.00 1,500,000
Carter Kaplan Holdings, LLC...................... 6/22/00 594,000 14.00 94,800
Cedaron Medical, Inc............................. 6/28/01 1,500,000 13.50 1,500,000
Cell Call, Inc................................... 11/4/97 990,000 12.75 998,349
CF Data Corp..................................... 3/16/00 1,732,500 13.75 1,738,924
Champion Glove Manufacturing Co.,Inc............. 7/27/00 1,250,000 13.50 1,250,000
Colonial Investments, Inc........................ 10/16/00 800,000 13.75 800,000
Colonial Investments, Inc........................ 5/8/01 300,000 13.75 300,000
Consumat Systems, Inc............................ 11/1/00 500,000 14.00 500,000
Consumat Systems, Inc............................ 1/1/01 500,000 14.00 500,000
Consumat Systems, Inc............................ 3/11/01 500,000 14.00 500,000
Continental Diamond Cutting Co................... 10/28/99 1,500,000 13.00 1,500,000
Continental Diamond Cutting Co................... 11/16/99 200,000 13.00 200,000
</TABLE>
12
<PAGE> 13
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
COUPON
INTEREST
LOANS MATURITY COST RATE FAIR VALUE
----- -------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Corporate Flight Mgmt, Inc....................... 12/4/97 $ 346,500 12.50% $ 349,341
Corporate Link, Inc.............................. 12/13/01 600,000 14.00 600,000
Corporate Link, Inc.............................. 3/13/97 300,000 14.00 300,000
CreditCorp and affiliates........................ 11/7/01 539,000 14.00 546,683
Dalcon International, Inc........................ 1/31/02 150,000 13.00 150,000
Dalcon International, Inc........................ 1/31/00 200,000 13.00 200,000
Dalts, Inc....................................... 4/28/01 2,000,000 13.50 2,000,000
DentalCare Partners, Inc......................... 1/11/01 1,951,150 12.50 1,956,160
Eastern Food Group LLC........................... 8/30/00 500,000 8.00 25,000
Eastern Food Group LLC........................... 12/20/00 200,000 8.00 25,000
Eastern Food Group LLC........................... 1/21/01 200,000 8.00 25,000
Eastern Food Group LLC........................... 2/14/01 265,000 8.00 25,000
Eastern Food Group LLC........................... 4/30/01 200,000 8.00 100,000
Eastern Food Group LLC........................... 9/10/01 180,000 8.00 80,000
Electronic Merchant Services..................... 2/27/00 1,237,500 13.50 1,040,204
Electronic Merchant Services..................... 2/29/96 168,572 14.00 168,572
Encore Orthopedics, Inc.......................... 7/31/00 2,620,985 13.50 2,734,691
Encore Orthopedics, Inc.......................... 2/28/01 1,667,680 13.00 1,728,609
Entek Scientific, Inc............................ 6/28/01 2,500,000 13.00 2,500,000
Express Shipping Centers, Inc.................... 9/22/00 1,697,598 13.25 1,844,910
FoodNet Holdings, LLC............................ 7/22/01 1,000,000 13.50 1,000,000
Fortrend Engineering Corp........................ 8/30/01 1,500,000 12.99 1,500,000
FX Direct, Inc................................... 1/23/01 2,324,000 13.50 2,359,199
Fypro, Inc....................................... 12/17/01 3,117,480 12.50 3,117,480
Fypro, Inc....................................... 12/17/01 592,000 4.00 152,000
Gardner Wallcovering, Inc........................ 3/28/01 1,485,000 13.50 1,487,500
General Materials Management, Inc................ 7/29/01 2,500,000 13.50 2,500,000
Generation 2 Worldwide LLC....................... 10/31/00 2,000,000 14.00 2,000,000
Global Finance and Leasing, Inc.................. 1/3/00 1,500,000 13.00 1,500,000
Global Marine Electronics, Inc................... 5/1/01 1,350,000 13.00 1,350,000
Gold Medal Products, Inc......................... 11/19/00 1,250,000 13.50 1,250,000
Gold Medal Products, Inc......................... 2/15/01 25,000 13.50 25,000
Gold Medal Products, Inc......................... 6/27/01 100,000 13.50 100,000
Gold Medal Products, Inc......................... 7/31/01 100,000 13.50 100,000
Golf Corporation of America, Inc................. 9/16/99 300,000 11.00 150,000
Golf Corporation of America, Inc................. 12/28/00 200,000 14.00 150,000
Golf Corporation of America, Inc................. 12/29/00 455,589 10.00 180,589
Golf Corporation of America, Inc................. 7/13/96 100,000 14.00 100,000
Golf Corporation of America, Inc................. 10/5/96 50,000 14.00 50,000
Golf Corporation of America, Inc................. 12/1/96 52,000 14.00 52,000
Golf Corporation of America, Inc................. 12/31/96 39,000 14.00 39,000
Golf Video, Inc.................................. 3/27/01 500,000 14.00 50,000
Good Food Fast Companies, The.................... 12/13/01 1,300,000 13.50 1,300,000
Gulfstream International Airlines Inc............ 7/29/99 1,490,000 13.00 1,496,513
Gulfstream International Airlines Inc............ 9/25/00 1,000,000 13.50 1,000,000
Home Link Services, Inc.......................... 12/30/01 79,750 14.00 79,750
</TABLE>
13
<PAGE> 14
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
COUPON
INTEREST
LOANS MATURITY COST RATE FAIR VALUE
----- -------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Horizon Medical Products, Inc.................... 9/22/00 $ 1,500,000 13.75% $ 1,500,000
HPC America, Inc................................. 8/15/01 2,970,000 13.50 2,972,500
Hunt Incorporated................................ 3/31/00 3,250,000 14.00 3,250,000
H & H Acq. Corp.................................. 8/30/01 1,500,000 14.00 1,500,000
HTR, Inc......................................... 10/30/01 3,000,000 13.50 3,000,000
I.Schneid Acquisition, LLC....................... 4/1/01 2,000,000 14.00 2,000,000
ILD Communications............................... 5/10/01 1,500,000 13.50 1,500,000
In-Store Services, Inc........................... 4/19/00 1,188,000 14.00 1,192,200
Innotech, Inc.................................... 3/22/99 1,980,000 13.00 1,991,322
IV Infusion Corporation.......................... 12/19/01 1,000,000 14.00 1,000,000
Johnston County Cable, L.P....................... 8/31/00 1,990,000 14.00 1,992,672
Kentucky Kingdom, Inc............................ 4/4/99 250,000 8.25 250,000
Kentucky Kingdom, Inc............................ 1/5/98 1,980,000 12.50 1,995,985
Kentucky Kingdom, Inc............................ 9/26/99 1,200,000 10.50 1,200,000
Kentucky Kingdom, Inc............................ 3/1/00 835,000 14.00 835,000
Kentucky Kingdom, Inc............................ 11/6/00 1,500,000 12.50 1,500,000
Kentucky Kingdom, Inc............................ 3/30/98 2,000,000 14.00 2,000,000
Kryptonics, Inc.................................. 12/14/00 2,500,000 12.90 2,500,000
KWC Management Co., LLC.......................... 4/25/01 500,000 14.00 50,000
Lane Acquisition Corporation..................... 11/21/01 4,000,000 13.75 4,000,000
Leisure Clubs International, Inc................. 4/1/01 1,485,000 14.00 1,487,250
Lovett's Buffet, Inc............................. 4/1/00 2,250,000 13.00 2,250,000
Mayo Hawaiian Corp............................... 6/27/01 2,200,000 14.00 2,200,000
MBA Marketing Corporation........................ 2/4/99 1,782,000 12.50 1,792,500
McAuley's Incorporated........................... 7/31/01 3,000,000 13.00 3,000,000
Medical Associates of America, Inc............... 11/1/97 385,000 12.50 392,000
Metals Recycling Technologies, Inc............... 10/31/01 2,000,000 14.00 2,000,000
Money Transfer Systems, Inc...................... 7/24/00 247,500 14.00 248,256
Money Transfer Systems, Inc...................... 12/20/00 148,500 14.00 148,825
Money Transfer Systems, Inc...................... 3/1/01 148,500 14.00 148,750
Money Transfer Systems, Inc...................... 5/2/01 148,500 14.00 148,650
Money Transfer Systems, Inc...................... 7/8/01 148,500 14.00 148,650
Money Transfer Systems, Inc...................... 10/1/01 148,500 14.00 148,575
Monogram Products, Inc........................... 6/18/01 916,000 13.50 925,800
Moore Diversified Products, Inc.................. 6/16/00 800,000 13.50 800,000
Multicom Publishing, Inc......................... 3/29/01 2,200,000 13.00 2,333,330
Multimedia Learning, Inc......................... 5/8/00 1,500,000 14.00 1,500,000
Multimedia Learning, Inc......................... 4/18/01 500,000 13.50 500,000
Multimedia Learning, Inc......................... 9/12/01 750,000 13.50 750,000
Multi-Media Data Systems, Inc.................... 11/20/01 2,000,000 14.00 2,000,000
NASC, Inc........................................ 6/26/01 1,500,000 13.50 1,500,000
NASC, Inc........................................ 12/13/98 500,000 13.50 500,000
Nationwide Engine Supply, Inc.................... 1/12/99 2,475,000 12.00 2,490,012
Nationwide Engine Supply, Inc.................... 9/26/01 1,000,000 13.50 1,000,000
Novavision, Inc.................................. 12/18/01 520,000 13.00 520,000
NRI Service and Supply L.P....................... 2/13/00 2,225,000 14.00 2,234,591
</TABLE>
14
<PAGE> 15
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
COUPON
INTEREST
LOANS MATURITY COST RATE FAIR VALUE
----- -------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Orchid Manufacturing Group, Inc.................. 9/14/00 $ 2,960,000 13.00% $ 2,968,671
Orchid Manufacturing Group, Inc.................. 12/28/00 1,000,000 13.50 1,000,000
Palco Telecom Service, Inc....................... 11/22/99 1,300,000 12.00 1,300,000
Paradigm Valve Services, Inc..................... 11/12/01 1,600,000 13.50 1,600,000
Patton Management Corporation.................... 5/26/00 1,900,000 13.50 1,900,000
PaySys International, Inc........................ 6/1/97 990,000 13.00 999,292
PFIC Corporation................................. 2/28/01 1,000,000 13.00 1,000,000
Pipeliner Systems, Inc........................... 9/30/98 980,000 10.00 993,320
Plymouth, Inc.................................... 9/28/00 1,000,000 13.00 1,000,000
PRA International, Inc........................... 8/10/00 1,980,000 13.50 1,985,661
Precision Fixtures & Graphics, Inc............... 4/11/01 1,095,000 14.00 1,095,000
Precision Fixtures & Graphics, Inc............... 4/11/01 300,000 14.00 300,000
Precision Fixtures & Graphics, Inc............... 5/8/01 100,000 14.00 100,000
Precision Fixtures & Graphics, Inc............... 5/28/01 75,000 14.00 75,000
Precision Fixtures & Graphics, Inc............... 7/12/01 75,000 14.00 75,000
Precision Fixtures & Graphics, Inc............... 7/22/01 100,000 14.00 100,000
Precision Fixtures & Graphics, Inc............... 8/27/01 750,000 14.00 750,000
Precision Fixtures & Graphics, Inc............... demand 100,000 14.00 100,000
Precision Panel Products, Inc.................... 1/11/00 1,485,000 12.75 1,491,000
Pritchard Paint & Glass Co....................... 2/14/01 567,431 14.00 567,431
Quest Group International, Inc................... 11/15/00 1,125,000 13.25 1,154,162
Quest Group International, Inc................... 9/3/01 1,350,000 13.25 1,360,000
Radiant Systems, Inc............................. 6/27/01 2,760,000 14.00 2,788,000
Radiant Systems, Inc............................. 9/24/01 1,500,000 14.00 1,500,000
Rocky Mountain Radio Company LLC................. 11/10/01 2,500,000 13.50 2,500,000
Rynel Ltd., Inc.................................. 10/1/01 1,250,000 14.00 1,250,000
Scandia Technologies, Inc........................ 4/9/01 1,825,000 14.00 1,825,000
Sheet Metal Specialties, Inc..................... 6/20/01 250,000 14.00 250,000
Sheet Metal Specialties, Inc..................... 12/4/01 211,750 12.00 211,750
SkillSearch Corporation.......................... 2/5/98 496,000 13.00 499,349
SkillSearch Corporation.......................... 3/10/97 150,000 14.00 150,000
Southern Specialty Brands, Inc................... 6/30/01 1,732,500 14.00 1,736,004
Sqwincher Corporation............................ 1/31/00 500,000 13.50 500,000
Studley Products Corp............................ 11/18/99 107,000 12.00 107,000
Studley Products Corp............................ 12/1/99 440,800 8.00 440,800
Summit Publishing Group, Ltd..................... 3/17/99 1,485,000 12.00 1,493,500
Summit Publishing Group, Ltd..................... 7/26/01 625,000 14.00 625,000
Suncoast Medical Group, Inc...................... 9/14/99 485,000 13.50 441,998
Suncoast Medical Group, Inc...................... 6/7/00 495,000 14.00 445,913
Suncoast Medical Group, Inc...................... 2/23/01 522,000 14.00 472,747
TCOM Systems, Inc................................ 2/5/98 462,610 0.00 462,608
Tower Environmental, Inc......................... 11/30/98 2,440,000 10.00 1,601,990
Tower Environmental, Inc......................... 5/30/95 150,000 12.50 150,000
Trade Am International, Inc...................... 9/30/00 4,000,000 12.75 4,000,000
TRC Acquisition Corporation...................... 10/21/01 1,000,000 13.50 1,000,000
UltraFab, Inc.................................... 6/27/01 1,500,000 14.00 1,500,000
</TABLE>
15
<PAGE> 16
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
COUPON
INTEREST
LOANS MATURITY COST RATE FAIR VALUE
----- -------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Unique Electronics, Inc.......................... 11/30/99 $ 600,000 10.67% $ 600,000
Urethane Technologies, Inc....................... 3/16/01 1,636,520 13.50 1,697,100
Valdawn, LLC..................................... 4/13/00 2,399,974 13.50 2,400,000
Viking Moorings Acquisition, LLC................. 12/15/00 1,655,500 13.00 1,730,146
Virtual Resources Inc............................ 8/16/01 3,000,000 14.00 3,000,000
Vista Information Solutions, Inc................. 4/30/01 2,032,157 13.50 2,086,736
WJ Holdings, Inc................................. 11/19/01 4,000,000 13.50 4,000,000
WWR Technology, Inc.............................. 11/1/97 319,700 13.50 324,184
Zahren Alternative Power Corp.................... 1/30/00 495,000 13.00 496,075
Zahren Alternative Power Corp.................... 11/27/99 1,980,000 13.00 1,989,663
------------ ------------
Total Loans.................................... $227,313,284 $221,487,385
============ ============
</TABLE>
16
<PAGE> 17
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
COST OR
NUMBER OF CONTRIBUTED
EQUITY INTERESTS SHARES VALUE FAIR VALUE
---------------- -------------- ----------- -----------
<S> <C> <C> <C>
PUBLICLY TRADED INVESTMENTS
National Vision Associates, Ltd. Common Stock......... 208,698 $ 1,771,149 $ 802,180
Trans Global Services, Inc. Common
Stock -- restricted................................. 28,088 5,300 37,685
Moovies, Inc. Common Stock -- restricted.............. 156,110 1,561 566,874
Premiere Technologies, Inc. Common Stock.............. 328,360 0 7,720,565
Cardiac Control Systems, Inc. Common
Stock -- restricted................................. 50,000 250,000 52,500
Innotech, Inc. Common Stock........................... 65,530 20,000 474,273
American Network Exchange Common
Stock -- restricted................................. 139,651 21,879 197,839
Educational Medical, Inc. Common
Stock -- restricted................................. 108,198 0 817,346
FCOA Acquisition Corp. Common Stock -- restricted..... 94,335 0 597,084
QuadraMed Corporation Common Stock -- restricted...... 25,700 0 180,275
QuadraMed Corporation Common Stock -- escrowed........ 2,856 0 0
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 1,325,000
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
DentalCare Partners, Inc. Preferred Stock -- Series
E................................................... 490,978 800,000 800,000
Unique Electronics, Inc. Preferred Stock -- Series
A................................................... 1,000,000 1,000,000 880,000
Pipeliner Systems, Inc. Preferred Stock -- Series D... 5,000 1,000,000 900,000
Front Royal, Inc. Common Stock........................ 110,000 275,000 275,000
NovaVision, Inc. Preferred Stock -- Series A.......... 3,720,141 3,720,141 3,720,141
Fycon Technologies, Inc. Preferred Stock -- Series
A................................................... 96,000 96,000 0
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
Dalcon International, Inc. Series B Preferred Stock... 850,000 850,000 750,000
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
PRA International, Inc. Common Stock.................. 31,279 190,000 190,000
Caldwell/VSR Inc. Preferred Stock..................... 890 890,000 760,000
Precision Fixtures & Graphics, Inc. Preferred Stock... 1,500,000 1,500,000 0
Palco Telecom Service Common Stock.................... 157,895 1,579 100,000
Studley Products Corp. Common Stock................... 2,204 220,400 0
Clearidge, Inc. Series A Preferred Stock.............. 14,800,000 3,700,000 3,700,000
Gulfstream International Airlines, Inc. Series A
Preferred Stock..................................... 216 3,000,000 3,000,000
Home Link, Inc. Preferred Stock....................... 1,000,000 1,000,000 1,000,000
Voice FX Corporation Common Stock..................... 24,078 110,001 110,001
----------- -----------
Total Equity Interests.............................. $24,881,140 $34,965,801
=========== ===========
</TABLE>
17
<PAGE> 18
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
STOCK WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE
-------------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
PUBLICLY TRADED COMPANIES
American Network Exchange................... 13,988 0.00% $ 0 $ 0
Cardiac Control Systems, Inc................ 100,000 4.35 0 104,997
Consumat Systems, Inc....................... 250,000 20.00 0 229,688
Moovies, Inc................................ 20,000 0.20 0 0
Multicom Publishing, Inc.................... 163,791 2.80 800,000 138,540
Urethane Technologies, Inc.................. 484,640 4.66 363,480 42,406
Vista Information Solutions, Inc............ 1,247,582 5.00 467,843 491,235
Virginia Gas Company........................ 54,163 1.52 0 278,034
Virginia Gas Company........................ 54,163 1.52 54 0
PRIVATE COMPANIES
AB Plastics Holding Corporation............. 200,000 20.00 0 0
Affinity Corporation........................ 550 9.67 20,000 385,000
Alternative Home Care....................... 163,695 13.00 0 0
Alvin Carter Holdings Corp.................. 2% of Co. 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........................ 1,534 26.47 0 0
Argenbright Holdings LLC.................... 18 3.50 750,000 375,000
Ashe Industries, Inc........................ 254 19.35 20,000 0
Associated Response Services, Inc........... 370 35.20 14,000 1,000,000
Assured Power, Inc.......................... 374 16.00 0 0
Auto Rental Systems, Inc.................... 144,869 7.00 0 0
Avionics Systems, Inc....................... 15% of Co. 15.00 0 0
B & N Company, Inc.......................... 33 4.00 40,000 0
BankCard Services Corporation............... 149,261 28.00 3,000 0
BiTec Southeast, Inc........................ 1,480 15.00 21,000 0
Carter Kaplan Holdings, LLC................. 24% of LLC 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 Holdings, Inc....................... 210,527 20.00 0 0
Cedaron Medical, Inc........................ 173,981 4.25 0 0
CellCall, Inc............................... 398 1.50 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.............................. 442,164 1.78 0 0
CLS Corporation............................. 126,997 4.22 0 0
Colonial Investments, Inc................... 264 24.00 0 0
Continental Diamond Cutting Company......... 112 12.22 0 0
Corporate Flight Mgmt., Inc................. 66,315 6.63 3,500 100,000
Corporate Link, Inc......................... 190 16.00 0 0
CreditCorp and affiliates................... 52 5.00 461,000 461,000
Dalcon Technologies, Inc.................... 250,000 20.00 0 0
Dalts, Inc.................................. 125 25.00 0 0
Delaware Publishing Group, Inc.............. 8,534 47.67 15,000 200,000
DentalCare Partners, Inc.................... 666,022 4.98 10,000 290,000
Eastern Food Group LLC...................... 17,647 15.00 0 0
Electronic Merchant Services................ 430 12.50 12,500 0
Encore Orthopedics, Inc..................... 577,300 5.21 711,335 1,205,000
</TABLE>
18
<PAGE> 19
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
STOCK WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE
-------------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Entek Scientific Corporation................ 185,480 3.75% $ 0 $ 0
Express Shipping Centers, Inc............... 73,752 5.09 552,402 552,402
Foodnet Holdings, LLC....................... 8.00% 8.00 0 0
Fortrend Engineering Corp................... 437,552 3.25 0 0
Front Royal, Inc............................ 240,458 1.85 0 480,000
Fycon Technologies, Inc..................... 58,677 15.00 0 0
Fypro, Inc.................................. 255,882 15.00 0 0
Gardner Wallcovering, Inc................... 2 2.00 15,000 15,000
General Materials Management Inc............ 600,000 10.00 0 0
Generation 2 Worldwide LLC.................. 30% of LLC 30.00 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............ 350,000 28.27 0 0
Golf Video, Inc............................. 98 49.50 0 0
Good Food Fast Companies, The............... 174,779 17.00 0 0
Gulfstream International Airlines, Inc...... 413 32.00 10,000 140,000
H & H Acquisition Corporation............... 3,600 22.50 0 0
Home Link Services, Inc..................... 166,667 20.00 0 0
Horizon Medical Products, Inc............... 9,486 8.25 0 0
Hoveround Corporation....................... 850 10.00 0 1,135,000
HPC America, Inc............................ 5 2.75 30,000 30,000
Hunt Incorporated........................... 44 10.00 0 100,000
Hunt Leasing & Rental Corporation........... 265 10.00 0 100,000
HTR, Inc.................................... 849,381 6.00 0 0
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
Johnston County Cable L.P................... 27.5% of L.P. 27.50 10,000 10,000
K.W.C. Management Corp...................... 794 24.40 0 0
Kentucky Kingdom, Inc....................... 6,132 2.00 0 610,000
Kryptonics, Inc............................. 1,255 6.40 0 400,000
Lane Acquisition Corporation................ 11,667 10.00 0 0
Leisure Clubs International, Inc............ 144 10.00 15,000 15,000
Lovett's Buffet, Inc........................ 204,219 3.02 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
Metals Recycling Technologies Corp.......... 257,801 5.00 0 0
Money Transfer Systems, Inc................. 94 8.50 10,000 10,000
Monogram Products, Inc...................... 1,276 6.00 84,000 84,000
Moore Diversified Products, Inc............. 12 11.00 0 0
Multimedia Learning, Inc.................... 131,697 8.10 0 800,000
Multi-Media Data Systems, Inc............... 259,072 20.00 0 0
NASC, Inc................................... 2,652 23.00 0 0
Nationwide Engine Supply, Inc............... 1,265,664 20.20 25,000 25,000
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................... 1,219,047 2.61 40,000 600,000
P.A. Plymouth, Inc.......................... 92,647 15.00 0 0
</TABLE>
19
<PAGE> 20
SIRROM CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
COST OR
NUMBER OF PERCENTAGE CONTRIBUTED
STOCK WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE
-------------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Paradigm Valve Services, Inc................ 30,000 12.00% $ 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
PRA International, Inc...................... 117,298 3.63 20,000 685,000
Pipeliner Systems, Inc...................... 2,080,000 20.55 20,000 0
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 17.52 275,000 275,000
Radiant Systems, Inc........................ 174,642 1.52 240,000 950,000
Radio Systems Corporation................... 162,167 8.13 0 1,000,000
Rynel Ltd., Inc............................. 390,517 15.00 0 0
Scandia Technologies, Inc................... 282 22.00 0 0
Sheet Metal Specialties, Inc................ 538 35.00 0 0
SkillSearch Corporation..................... 2,381 7.59 254,000 150,000
Southern Specialty Brands, Inc.............. 10,000 10.00 17,500 17,500
Sqwincher Corporation....................... 111 10.00 0 140,000
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
TRC Acquisition Corporation................. 375,000 12.50 0 0
UltraFab, Inc............................... 120,000 12.00 0 0
Unique Electronics, Inc..................... 20% of Co. 20.00 0 0
VanGard Communications Co., LLC............. 12% of LLC 12.00 0 0
VDI Acquisition Company, LLC................ 21% of LLC 21.00 26 26
Viking Moorings Acquisition, LLC............ 6.5% of LLC 6.50 344,500 344,500
Virtual Resources, Inc...................... 8 7.50 0 250,000
Voice FX Corporation........................ 233,112 7.10 176,000 450,000
WJ Holdings, Inc............................ 250,000 25.00 0 0
Zahren Alternative Power Corporation........ 1,247 6.54 25,000 400,000
------------ ------------
Total Warrants............................ $ 6,059,240 $ 15,893,828
============ ============
OTHER INVESTMENTS
Gates Communication, L.P. -- Anticipated
royalty payments upon sale of assets...... -- -- $ 1,389,628 $ 1,289,628
Hancock Company -- Royalty stream from sale
of Gitman brand name...................... -- -- 1,900,000 600,000
HSA International, Inc. -- Anticipated
proceeds from litigation.................. -- -- 1,150,000 1,000,000
Capitalized workout expenses................ -- -- 250,671 100,654
------------ ------------
Total other investments................... $ 4,690,299 $ 2,990,282
============ ============
Total Investments......................... $262,943,963 $275,337,296
============ ============
</TABLE>
20
<PAGE> 21
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS
AS OF MARCH 31,1997
<TABLE>
<CAPTION>
LOANS
Maturity Cost Coupon Fair Value
-------- ---- ------ ----------
<S> <C> <C> <C> <C>
AB Plastics Holding Corporation 9/27/01 $4,000,000 13.50% $4,000,000
Affinity Fund, Inc. 6/29/98 1,485,000 12.50 1,498,682
Affinity Fund, Inc. 3/10/00 1,000,000 14.00 1,000,000
Affinity Fund, Inc. 12/28/98 495,000 12.50 496,328
American Corporate Literature, Inc. 9/29/01 1,683,000 14.00 1,684,981
ARAC Holding Co., Inc. 9/27/01 3,000,000 13.50 3,000,000
American Network Exchange 11/30/98 990,000 13.00 996,847
American Network Exchange 1/18/99 990,000 13.00 996,513
Amscot Holdings, Inc. 5/26/00 800,000 14.00 800,000
Amscot Holdings, Inc. 9/20/00 200,000 14.00 200,000
Amscot Holdings, Inc. 6/28/01 500,000 14.00 500,000
Amscot Holdings, Inc. 12/27/01 250,000 14.00 250,000
Argenbright Holdings Limited 7/7/01 2,750,000 13.50 3,500,000
Ashe Industries, Inc. 12/28/97 990,000 12.50 82,058
Ashe Industries, Inc. 3/25/99 445,500 12.50 97,300
Ashe Industries, Inc. 5/18/99 544,500 12.50 96,524
Ashe Industries, Inc. 6/12/96 750,000 14.00 50,000
Ashe Industries, Inc. 6/12/96 285,546 14.00 0
Associated Response Services, Inc. 6/20/99 1,386,000 12.50 1,393,922
Associated Response Services, Inc. 2/15/00 335,000 12.50 335,000
Associated Response Services, Inc. 1/6/00 300,000 12.50 300,000
Associated Response Services, Inc. 11/8/01 500,000 12.50 500,000
Associated Response Services, Inc. 3/27/02 3,000,000 12.50 3,000,000
Assured Power, Inc. 10/1/00 700,000 13.50 700,000
Atlantic Security Systems, Inc. and affiliates 1/29/02 2,000,000 13.25 2,000,000
Avionics Systems, Inc. 7/19/01 3,000,000 13.50 3,000,000
B & N Company, Inc. 8/8/00 2,970,000 12.50 2,980,000
B & N Company, Inc. 3/28/01 990,000 13.00 992,171
BankCard Services Corporation 1/21/98 297,000 13.00 299,550
BiTec Southeast, Inc. 7/1/99 2,600,321 12.70 2,615,221
BiTec Southeast, Inc. 8/9/01 950,000 14.00 950,000
BiTec Southeast, Inc. 4/30/97 350,000 14.00 350,000
C.J. Spirits, Inc. 6/1/97 750,171 13.50 305,796
Caldwell/VSR Inc. 2/28/01 1,500,000 8.00 1,500,000
Caldwell/VSR Inc. 9/27/01 116,000 14.00 116,000
Campus Voice, LLC 12/31/06 1,263,223 12.00 1,063,223
Campus Voice, LLC 12/31/06 300,000 12.00 300,000
Campus Voice, LLC 12/31/99 210,000 8.00 210,000
Cardiac Control Systems, Inc. 3/31/00 1,500,000 13.50 1,500,000
Cartech Holdings, Inc. 4/29/01 1,500,000 13.00 1,500,000
Carter Kaplan Holdings, LLC 6/22/00 594,000 14.00 119,800
Catalina Food Ingredients, Inc. 3/30/02 3,500,000 13.00 3,500,000
Cedaron Medical, Inc. 6/28/01 1,500,000 13.50 1,500,000
Cell Call, Inc. 11/4/97 990,000 12.75 998,850
CF Data Corp. 3/16/00 1,732,500 13.75 1,739,800
Champion Glove Manufacturing Co.,Inc. 7/27/00 1,250,000 13.50 1,125,000
Check Into Cash, Inc. 11/7/01 539,000 14.00 569,732
Check Into Cash, Inc. 11/7/01 500,000 14.00 500,000
Colonial Investments, Inc. 10/16/00 800,000 13.75 800,000
Colonial Investments, Inc. 5/8/01 300,000 13.75 300,000
Columbus Medical 1/31/02 4,000,000 13.75 4,000,000
Consumat Systems, Inc. 11/1/00 500,000 14.00 500,000
Consumat Systems, Inc. 1/1/01 500,000 14.00 500,000
</TABLE>
21
<PAGE> 22
<TABLE>
<CAPTION>
LOANS
Maturity Cost Coupon Fair Value
-------- ---- ------ ----------
<S> <C> <C> <C> <C>
Consumat Systems, Inc. 3/11/01 $ 500,000 14.00% $ 500,000
Consumat Systems, Inc. 3/26/02 500,000 14.00 500,000
Continental Diamond Cutting Co. 10/28/99 1,500,000 13.00 1,500,000
Continental Diamond Cutting Co. 11/16/99 200,000 13.00 200,000
Corporate Flight Mgmt, Inc. 12/4/97 346,500 12.50 349,515
Corporate Link, Inc. 12/13/01 600,000 14.00 600,000
Corporate Link, Inc. 6/13/97 300,000 14.00 300,000
Cover All Technologies, Inc. 3/31/02 3,000,000 12.50 3,000,000
CSM, Inc. 12/31/01 1,400,000 14.00 1,400,000
Dalcon International, Inc. 1/31/02 150,000 13.00 150,000
Dalcon International, Inc. 1/31/00 200,000 13.00 200,000
Dalts, Inc. 4/28/01 2,000,000 13.50 2,000,000
Dalts, Inc. 5/4/97 229,875 14.00 229,875
Dartech Industries 11/20/01 4,000,000 13.50 4,000,000
DentalCare Partners, Inc. 1/11/01 1,951,150 12.50 1,956,661
Eckler Industries, Inc. 3/12/99 3,500,000 12.00 3,500,000
Electronic Merchant Services 2/27/00 1,237,500 13.50 1,040,204
Electronic Merchant Services 2/29/96 34,572 14.00 34,572
Electronic Merchant Services 2/29/96 134,000 14.00 134,000
Electronic Merchant Services demand 25,715 12.00 25,715
Encor Technologies, Inc. 3/30/02 2,052,000 13.13 2,052,000
Encor Technologies, Inc. 3/30/02 380,000 13.13 380,000
Encore Orthopedics, Inc. 7/31/00 2,620,985 13.50 2,753,642
Encore Orthopedics, Inc. 2/28/01 1,667,680 13.00 1,745,226
Entek Scientific, Inc. 6/28/01 2,500,000 13.00 2,500,000
Environmental Tectonics Corporation 3/27/04 4,000,000 12.00 4,000,000
FDL, Inc. 1/30/02 1,750,000 13.50 1,762,501
Film Technologies International, Inc. 2/27/02 1,500,000 14.00 1,500,000
FoodNet Holdings, LLC 7/22/01 1,000,000 13.50 1,000,000
Fortrend Engineering Corp. 8/30/01 1,500,000 12.99 1,500,000
Fypro, Inc. 12/17/01 3,117,480 12.50 3,117,480
Fypro, Inc. 12/17/01 592,000 4.00 152,000
Fypro, Inc. 12/17/01 110,000 14.00 110,000
Gardner Wallcovering, Inc. 3/28/01 1,485,000 13.50 1,488,250
General Materials Management, Inc. 7/29/01 2,500,000 13.50 2,500,000
Generation 2 Worldwide LLC 10/31/00 2,000,000 14.00 2,000,000
Global Finance and Leasing, Inc. 1/3/00 1,500,000 13.00 1,500,000
Global Marine Electronics, Inc. 5/1/01 1,350,000 13.00 1,350,000
Gold Medal Products, Inc. 11/19/00 191,257 13.50 141,257
Golf Corporation of America, Inc. 9/16/99 300,000 11.00 55,000
Golf Corporation of America, Inc. 12/28/00 200,000 14.00 70,000
Golf Corporation of America, Inc. 12/29/00 455,589 10.00 80,589
Golf Corporation of America, Inc. 7/13/96 100,000 14.00 100,000
Golf Corporation of America, Inc. 10/5/96 50,000 14.00 50,000
Golf Corporation of America, Inc. 12/1/96 52,000 14.00 52,000
Golf Corporation of America, Inc. 12/31/96 39,000 14.00 39,000
Golf Corporation of America, Inc. 1/31/97 25,500 14.00 25,500
Golf Corporation of America, Inc. demand 50,600 14.00 50,600
Good Food Fast Companies, The 12/10/01 2,500,000 13.50 2,500,000
Gulfstream International Airlines Inc. 7/29/99 1,490,000 13.00 1,497,014
Gulfstream International Airlines Inc. 9/25/00 1,000,000 14.00 1,000,000
Gulfstream International Airlines Inc. 3/19/02 1,500,000 14.00 1,500,000
Home Link Services, Inc. 12/30/01 79,750 14.00 79,750
Horizon Medical Products, Inc. 9/22/00 1,500,000 13.75 1,500,000
HPC America, Inc. 8/15/01 2,970,000 13.50 2,974,000
Hunt Incorporated 3/31/00 3,250,000 14.00 3,250,000
H & H Acq. Corp. 8/30/01 1,500,000 14.00 1,500,000
HTR, Inc. 10/30/01 3,000,000 13.50 3,000,000
I.Schneid Acquisition, LLC 4/1/01 2,000,000 14.00 2,000,000
ILD Communications 5/10/01 1,500,000 13.50 1,500,000
In-Store Services, Inc. 4/19/00 1,188,000 14.00 1,192,800
IV Infusion Corporation 12/19/01 1,500,000 14.00 1,500,000
IV Infusion Corporation 3/31/02 500,000 14.00 500,000
Johnston County Cable, L.P. 8/31/00 1,990,000 14.00 1,993,173
Karawia Industries, Inc. 3/27/02 2,500,000 14.00 2,500,000
Kentucky Kingdom, Inc. 4/4/99 250,000 8.25 250,000
Kentucky Kingdom, Inc. 1/5/98 1,980,000 12.50 1,996,984
Kentucky Kingdom, Inc. 9/26/99 1,200,000 10.50 1,200,000
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
LOANS
Maturity Cost Coupon Fair Value
-------- ---- ------ ----------
<S> <C> <C> <C> <C>
Kentucky Kingdom, Inc. 3/1/00 $ 835,000 14.00% $ 835,000
Kentucky Kingdom, Inc. 11/6/00 1,500,000 12.50 1,500,000
Kentucky Kingdom, Inc. 3/30/98 2,000,000 14.00 2,000,000
Kryptonics, Inc. 12/14/00 2,500,000 12.90 2,500,000
KWC Management Co., LLC 4/25/01 500,000 14.00 50,000
Lane Acquisition Corporation 11/21/01 4,000,000 13.75 4,000,000
Leisure Clubs International, Inc. 4/1/01 1,485,000 14.00 1,488,000
Leisure Clubs International, Inc. 3/27/02 125,000 14.00 125,000
M & M Industries, Inc. 2/26/02 2,250,000 14.00 2,250,000
Mayo Hawaiian Corp. 6/27/01 2,200,000 14.00 2,200,000
MBA Marketing Corporation 2/4/99 1,782,000 12.50 1,793,400
McAuley's Incorporated 7/31/01 3,000,000 13.00 3,000,000
Medical Associates of America, Inc. 11/1/97 385,000 12.50 392,000
Mesa International, Inc. 1/23/02 3,000,000 14.00 3,000,000
Metals Recycling Technologies Corp. 10/31/01 2,000,000 14.00 2,000,000
Money Transfer Systems, Inc. 7/24/00 247,500 14.00 248,382
Money Transfer Systems, Inc. 12/20/00 148,500 14.00 148,900
Money Transfer Systems, Inc. 3/1/01 148,500 14.00 148,825
Money Transfer Systems, Inc. 5/2/01 148,500 14.00 148,725
Money Transfer Systems, Inc. 7/8/01 148,500 14.00 148,725
Money Transfer Systems, Inc. 10/1/01 148,500 14.00 148,650
Money Transfer Systems, Inc. 1/5/02 245,000 14.00 245,249
Money Transfer Systems, Inc. 3/6/02 250,000 14.00 250,000
Monogram Products, Inc. 6/18/01 916,000 13.50 930,000
Moore Diversified Products, Inc. 6/16/00 800,000 13.50 800,000
Moore Diversified Products, Inc. 3/27/02 1,000,000 13.50 1,000,000
Multicom Publishing, Inc. 3/29/01 1,025,000 13.00 1,198,329
Multimedia Learning, Inc. 5/8/00 1,500,000 14.00 1,500,000
Multimedia Learning, Inc. 4/18/01 500,000 13.50 500,000
Multimedia Learning, Inc. 9/12/01 750,000 13.50 750,000
Multi-Media Data Systems, Inc. 11/20/01 2,000,000 14.00 2,000,000
NASC, Inc. 6/26/01 1,500,000 13.50 1,500,000
NASC, Inc. 12/13/98 500,000 13.50 500,000
Nationwide Engine Supply, Inc. 1/12/99 2,475,000 12.00 2,491,263
Nationwide Engine Supply, Inc. 9/26/01 1,000,000 13.50 1,000,000
Novavision, Inc. 12/18/01 520,000 13.00 520,000
NRI Service and Supply L.P. 2/13/00 2,225,000 14.00 2,235,842
Omni Home Medical, Inc. 3/30/02 2,000,000 14.00 2,000,000
Orchid Manufacturing Group, Inc. 9/14/00 2,960,000 13.00 2,970,672
Orchid Manufacturing Group, Inc. 12/28/00 1,000,000 13.50 1,000,000
Package Net, Inc. 9/22/00 1,697,598 13.25 1,872,531
Palco Telecom Service, Inc. 11/22/99 1,300,000 12.00 1,300,000
Paradigm Valve Services, Inc. 11/12/01 1,600,000 13.50 1,600,000
Patton Management Corporation 5/26/00 1,900,000 13.50 1,900,000
PaySys International, Inc. 6/1/97 990,000 13.00 999,793
PRA International, Inc. 8/10/00 1,980,000 13.50 1,986,660
Pipeliner Systems, Inc. 9/30/98 980,000 10.00 994,319
Plymouth, Inc. 9/28/00 1,000,000 13.00 1,000,000
Precision Fixtures & Graphics, Inc. 4/11/01 1,095,000 14.00 1,095,000
Precision Fixtures & Graphics, Inc. 4/11/01 300,000 14.00 300,000
Precision Fixtures & Graphics, Inc. 5/8/01 100,000 14.00 100,000
Precision Fixtures & Graphics, Inc. 5/28/01 75,000 14.00 75,000
Precision Fixtures & Graphics, Inc. 7/12/01 75,000 14.00 75,000
Precision Fixtures & Graphics, Inc. 7/22/01 100,000 14.00 100,000
Precision Fixtures & Graphics, Inc. 8/27/01 750,000 14.00 750,000
Precision Fixtures & Graphics, Inc. demand 100,000 14.00 100,000
Precision Fixtures & Graphics, Inc. 3/1/97 100,000 14.00 100,000
Precision Fixtures & Graphics, Inc. 3/1/97 151,853 14.00 151,853
Precision Fixtures & Graphics, Inc. 5/1/97 232,616 14.00 232,616
Precision Fixtures & Graphics, Inc. 5/1/97 275,000 14.00 275,000
Precision Panel Products, Inc. 1/11/00 2,022,781 12.75 2,029,531
Pritchard Paint & Glass Co. 2/14/01 567,431 14.00 567,431
Pritchard Paint & Glass Co. 2/10/01 200,000 14.00 200,000
Protect America, Inc. 1/30/02 1,905,000 13.50 1,909,749
Quest Group International, Inc. 11/15/00 1,125,000 13.25 1,160,411
</TABLE>
23
<PAGE> 24
<TABLE>
<CAPTION>
LOANS
Maturity Cost Coupon Fair Value
-------- ---- ------ ----------
<S> <C> <C> <C> <C>
Quest Group International, Inc. 9/3/01 $ 1,350,000 13.25% $ 1,367,500
Quest Group International, Inc. 9/3/01 92,161 14.00 92,161
Recompute Corporation 2/21/02 1,300,000 13.50 1,310,000
Rocky Mountain Radio Company LLC 11/10/01 3,000,000 13.50 3,000,000
Rynel Ltd., Inc. 10/1/01 1,250,000 14.00 1,250,000
Scandia Technologies, Inc. 4/9/01 1,825,000 14.00 1,825,000
Sheet Metal Specialties, Inc. 6/20/01 250,000 14.00 250,000
Sheet Metal Specialties, Inc. 12/4/01 211,750 12.00 211,750
Sheet Metal Specialties, Inc. 1/24/02 38,250 12.00 38,250
SkillMaster, Inc. 3/30/02 2,475,000 13.75 2,475,417
SkillSearch Corportion 2/5/98 496,000 13.00 499,550
SkillSearch Corportion 6/1/97 300,000 14.00 300,000
Southern Specialty Brands, Inc. 6/30/01 1,732,500 14.00 1,736,880
Solutioneering, Inc. 3/31/02 2,000,000 13.75 2,000,000
Sqwincher Corporation 2/1/98 160,000 10.00 160,000
Stratford Safety Products, Inc. 3/1/02 575,000 13.50 577,500
Studley Products Corp. 11/18/99 157,000 12.00 157,000
Studley Products Corp. 12/1/99 440,800 8.00 440,800
Summit Publishing Group, Ltd. 3/17/99 1,485,000 12.00 1,494,250
Summit Publishing Group, Ltd. 7/26/01 625,000 14.00 625,000
Suncoast Medical Group, Inc. 9/14/99 485,000 13.50 441,998
Suncoast Medical Group, Inc. 6/7/00 495,000 14.00 445,913
Suncoast Medical Group, Inc. 2/23/01 522,000 14.00 472,747
Suncoast Medical Group, Inc. 2/23/01 71,700 14.00 71,700
TAC Systems, Inc. 3/27/02 760,000 14.00 760,000
TCOM Systems, Inc. 2/5/98 450,828 0.00 450,828
Teltronics, Inc. 2/13/02 4,250,000 11.00 4,250,000
Tower Environmental, Inc. 11/30/98 2,440,000 10.00 116,990
Tower Environmental, Inc. 5/30/95 150,000 12.50 50,000
Trade Am International, Inc. 9/30/00 4,000,000 12.75 4,000,000
TRC Acquisition Corporation 10/21/01 2,000,000 13.50 2,000,000
UltraFab, Inc. 6/27/01 1,500,000 14.00 1,500,000
Unique Electronics, Inc. 11/30/99 600,000 10.67 600,000
Valdawn, LLC 4/13/00 2,399,974 13.50 2,400,000
Viking Moorings Acquisition, LLC 12/31/01 1,655,500 13.00 1,747,372
Virtual Resources Inc. 8/31/01 3,000,000 14.00 3,000,000
Vista Information Solutions, Inc. 4/30/01 2,032,157 13.50 2,110,127
Wearever Health Products, LLC 3/31/02 1,500,000 13.50 1,500,000
WWR Technology, Inc. 6/30/97 247,869 13.50 252,617
Zahren Alternative Power Corp. 1/30/00 495,000 13.00 496,321
Zahren Alternative Power Corp. 11/27/99 1,980,000 13.00 1,990,656
------------ ------------
SUBTOTALS $275,816,682 $269,302,787
------------ ------------
LOANS DENOMINATED IN CANADIAN CURRENCY
Systech Group, Inc. 3/31/02 874,636 13.00 874,636
------------ ------------
TOTAL LOANS $276,691,317 $270,177,423
------------ ------------
</TABLE>
24
<PAGE> 25
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS
MARCH 31, 1997
<TABLE>
<CAPTION>
Cost or
EQUITY INTERESTS Number of Contributed
Shares Value Fair Value
--------- ----------- -----------
<S> <C> <C> <C>
Publicly Traded Investments
- -------------------------------
National Vision Associates, Ltd. Common Stock 208,698 $ 1,771,149 $ 884,347
Trans Global Services, Inc. Common Stock - restricted 28,088 5,300 29,902
Moovies, Inc. Common Stock - restricted 156,110 1,561 596,467
Premiere Technologies, Inc. Common Stock 128,360 0 2,363,425
Cardiac Control Systems, Inc. Common Stock - restricted 50,000 250,000 42,291
American Network Exchange Common Stock - restricted 139,651 21,879 199,296
Educational Medical, Inc. Common Stock - restricted 108,198 0 1,067,100
Encore Medical Common Stock - restricted 461,136 711,335 1,660,090
FCOA Acquisition Corp. Common Stock - restricted 94,335 0 555,793
QuadraMed Corporation Common Stock - restricted 25,700 0 192,642
QuadraMed Corporation Common Stock - escrowed 2,856 0 0
Radiant Systems Common Stock - restricted 93,454 0 601,026
Union Planters Corp. Common Stock -restricted 3,598 0 107,041
Virginia Gas Company Common Stock - restricted 54,163 0 375,982
Non-traded Equity Investments in Public Companies
- -------------------------------------------------
Multicom Publishing, Inc. Preferred Stock - Series A 235,000 1,175,000 1,175,000
Environmental Tectonics Corporation Preferred Stock - Series A 25,000 2,500,000 2,500,000
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 1,325,000
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
Dentalcare Partners, Inc. Preferred Stock - Series E 490,978 800,000 800,000
Unique Electronics, Inc. Preferred Stock - Series A 1,000,000 1,000,000 880,000
Pipeliner Systems, Inc. Preferred Stock - Series D 5,000 1,000,000 900,000
Front Royal, Inc. Common Stock 110,000 275,000 275,000
NovaVision, Inc. Preferred Stock - Series A 3,720,141 3,720,141 3,720,141
Fycon Technologies, Inc. Preferred Stock - Series A 96,000 96,000 0
Johnston County Cable, L.P. Class A Interest in L.P. 11.11% of L.P. 100,000 100,000
Dalcon International, Inc. Preferred Stock - Series B 850,000 850,000 750,000
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 Preferred Stock - Series B 163 0 0
PRA International, Inc. Common Stock 31,279 190,000 430,000
Caldwell/VSR Inc. Preferred Stock 890 890,000 760,000
Precision Fixtures & Graphics, Inc. Preferred Stock 1,500,000 1,500,000 0
Palco Telecom Service Common Stock 157,895 1,579 100,000
Studley Products Corp. Common Stock 2,204 220,400 0
Clearidge, Inc. Preferred Stock - Series A 10,800,000 2,700,000 2,700,000
Clearidge, Inc. Common Stock 4,000,000 1,000,000 1,000,000
Gulfstream International Airlines, Inc. Preferred Stock - Series A 216 3,000,000 3,000,000
Home Link, Inc. Preferred Stock 1,000,000 1,000,000 750,000
Voice FX Corporation Common Stock 24,078 110,001 110,001
Recompute Corporation Common Stock 125,000 250,000 250,000
CSM, Inc. Common Stock - Class A 99,673 100,000 100,000
----------- -----------
TOTAL EQUITY INTERESTS $27,597,475 $34,209,579
----------- -----------
</TABLE>
25
<PAGE> 26
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS
MARCH 31, 1997
<TABLE>
<CAPTION>
STOCK WARRANTS Cost or
Number of Percentage Contributed
Publicly Traded Companies Shares Ownership Value Fair Value
- ----------------------------- ------ --------- ----- ----------
<S> <C> <C> <C> <C>
American Network Exchange 13,988 0.00% $ 0 $ 0
Cardiac Control Systems, Inc. 100,000 4.35 0 84,581
Consumat Systems, Inc. 250,000 20.00 0 328,215
Eckler Industries 300,000 2.50 0 0
Encore Medical 69,170 1.00 0 42,367
Environmental Tectonics Corporation 166,410 5.00 0 0
Moovies, Inc. 20,000 0.20 0 0
Multicom Publishing, Inc. 163,791 2.80 800,000 148,098
Multicom Publishing, Inc. 844,354 15.00 0 0
Urethane Technologies, Inc. 525,435 5.01 363,480 0
Vista Information Solutions, Inc. 1,247,582 5.00 467,843 473,071
Virginia Gas Company 54,163 1.52 54 0
Private Companies
- -----------------
AB Plastics Holding Corporation 200,000 20.00 0 0
Affinity Corporation 550 9.67 20,000 385,000
Alvin Carter Holdings Corp. 2% of Co. 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. 1,534 26.47 0 0
Argenbright Holdings Ltd. 18 3.50 750,000 750,000
Ashe Industries, Inc. 255 17.14 20,000 0
Associated Response Services, Inc. 470 30.77 14,000 1,000,000
Assured Power, Inc. 374 16.00 0 0
Atlantic Security Systems, Inc. 99 9.00 0 0
Auto Rental Systems, Inc. 104,869 9.00 0 0
Avionics Systems, Inc. 15% of Co. 15.00 0 0
B & N Company, Inc. 33 4.00 40,000 0
BankCard Services Corporation 149,261 28.00 3,000 0
BiTec Southeast, Inc. 1,480 15.00 21,000 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
Carter Kaplan Holdings, LLC 24% of LLC 24.00 6,100 0
Catalina Food Ingredients, Inc. 5 9.25 0 0
Cedaron Medical, Inc. 173,981 4.25 0 0
CellCall, Inc. 405 1.35 10,000 10,000
CF Data Corp. 257 20.50 17,500 17,500
Champion Glove Manufacturing Co., Inc. 538,614 6.88 0 0
Check into Cash 53 5.00 461,000 461,000
Clearidge, Inc. 442,164 1.78 0 0
CLS Corporation 126,997 4.22 0 0
Colonial Investments, Inc. 264 24.00 0 0
Columbus Medical Holdings, LLC 15,421 12.00 0 0
Continental Diamond Cutting Company 112 12.22 0 0
Corporate Flight Mgmt., Inc. 66,315 6.63 3,500 100,000
Corporate Link, Inc. 190 16.00 0 0
</TABLE>
26
<PAGE> 27
<TABLE>
<CAPTION>
STOCK WARRANTS Cost or
Number of Percentage Contributed
Private Companies Shares Ownership Value Fair Value
- ----------------- ------ --------- ----- ----------
<S> <C> <C> <C> <C>
CSM, Inc. 130,000 13.00% $ 0 $ 0
Dalcon Technologies, Inc. 250,000 20.00 0 0
Dalt's, Inc. 140 28.00 0 0
Delaware Publishing Group, Inc. 8,534 47.67 15,000 15,000
Dentalcare Partners, Inc. 666,022 4.98 10,000 290,000
Electronic Merchant Services 430 12.50 12,500 0
Encor Technologies, Inc. 7 6.84 0 0
Entek Scientific Corporation 185,480 3.75 0 0
Express Shipping Centers, Inc. 73,752 5.09 552,402 262,386
FDL, Inc. 548 16.00 250,000 250,000
Film Technologies International, Inc. 8 7.50 0 0
Foodnet Holdings, LLC 8% of LLC 8.00 0 0
Fortrend Engineering Corp. 437,552 3.25 0 0
Front Royal, Inc. 240,458 1.85 0 480,000
Fycon Technologies, Inc. 58,677 15.00 0 0
Fypro, Inc. 255,882 15.00 0 0
Gardner Wallcovering, Inc. 2 2.00 15,000 15,000
General Materials Management Inc. 600,000 10.00 0 0
Generation 2 Worldwide LLC 30% of LLC 30.00 0 0
Global Finance & Leasing, Inc. 5,000 25.00 0 425,000
Global Marine 5,137 18.00 0 0
Gold Medal Products, Inc. 102,370 32.77 0 0
Golf Corporation of America, Inc. 350,000 28.27 0 0
Golf Video, Inc. 98 49.50 0 0
Good Food Fast Companies, The 174,779 17.00 0 0
Gulfstream International Airlines, Inc. 271 32.00 10,000 140,000
H & H Acqu. Corp. 3,600 22.50 0 0
Home Link Services, Inc. 166,667 20.00 0 0
Horizon Medical Products, Inc. 9,486 8.25 0 0
Hoveround Corporation 850 10.00 0 1,135,000
HPC America, Inc. 5 2.75 30,000 30,000
HTR, Inc. 849,381 6.00 0 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
IV Infusion Corporation 205,732 16.00 0 0
Johnston County Cable L.P. 27.5% of LP 27.50 10,000 10,000
Karawia Industries, Inc. 1,391 12.00 0 0
K.W.C. Management Corp. 794 24.40 0 0
Kentucky Kingdom, Inc. 6,132 2.00 0 610,000
Kryptonics, Inc. 1,255 6.39 0 400,000
Lane Acquisition Corporation 11,667 10.00 0 0
Leisure Clubs International, Inc. 162 11.00 15,000 0
Lovett's Buffet, Inc. 337,765 5.00 0 400,000
M & M Industries, Inc. 1,659,113 15.00 0 0
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
Mesa International, Inc. 13 11.00 0 0
Metals Recycling Technologies Corp. 257,801 5.00 0 0
Money Transfer Systems, Inc. 137 12.00 15,000 15,000
Monogram Products, Inc. 1,276 6.00 84,000 84,000
Moore Diversified Products, Inc. 17 15.00 0 0
Multimedia Learning, Inc. 148,397 9.41 0 800,000
Multi-Media Data Systems, Inc. 259,072 20.00 0 0
NASC, Inc. 2,652 23.00 0 0
Nationwide Engine Supply, Inc. 1,265,664 20.20 25,000 25,000
Novavision, Inc. 222,222 10.00 0 0
NRI Service and Supply, L.P. 27.5% of LP 27.50 25,000 25,000
Omni Home Medical, Inc. 2,672 15.00 0 0
Orchid Manufacturing, Inc. 1,219,047 2.61 40,000 600,000
P.A. Plymouth, Inc. 92,647 15.00 0 0
Paradigm Valve Services, Inc. 30,000 12.00 0 0
Patton Management Corporation 426 10.00 0 185,000
PaySys International, Inc. 30,000 2.68 10,000 10,000
PRA International, Inc. 117,298 3.16 20,000 1,615,000
Pipeliner Systems, Inc. 2,240,000 21.79 20,000 0
Precision Fixtures & Graphics, Inc. 2,602 51.00 0 0
</TABLE>
27
<PAGE> 28
<TABLE>
<CAPTION>
STOCK WARRANTS Cost or
Number of Percentage Contributed
Private Companies Shares Ownership Value Fair Value
- ----------------- ------ --------- ----- ----------
<S> <C> <C> <C> <C>
Precision Panel Products, Inc. 122 8.25% $ 15,000 $ 15,000
Protect America, Inc. 12,200 10.00 95,000 95,000
Pritchard Glass, Inc. 12,500 25.00 0 0
Quest Group International, Inc. 88,840 17.52 275,000 275,000
Radio Systems Corporation 162,167 8.13 0 1,000,000
Recompute Corporation 611,144 8.00 300,000 300,000
Rynel Ltd., Inc. 390,517 15.00 0 0
Scandia Technologies, Inc. 282 22.00 0 0
Sheet Metal Specialties, Inc. 538 35.00 0 0
SkillMaster, Inc. 176 8.30 25,000 25,000
SkillSearch Corporation 2,381 7.59 254,000 150,000
Solutioneering, Inc. 13,135 7.50 0 0
Southern Specialty Brands, Inc. 10,000 10.00 17,500 17,500
Stratford Safety Products, Inc. 70 6.50 75,000 75,000
Suncoast Medical Group, Inc. 580,159 23.00 25,000 0
Suprex Corporation 1,058,179 3.45 0 0
Systech Group, Inc. 34,330 5.00 0 0
TAC Systems, Inc. 157,780 1.80 0 0
Tower Environmental, Inc. 82 10.07 20,000 0
Trade Am International, Inc. 335,106 6.00 0 0
TRC Acquisition Corporation 375,000 12.50 0 0
UltraFab, Inc. 120,000 12.00 0 0
Unique Electronics, Inc. 20% of Co. 20.00 0 0
VanGard Communications Co., LLC 14.4% of LLC 14.40 0 0
VDI Acquisition Company, LLC 21% of LLC 21.00 26 26
Viking Moorings Acquisition, LLC 3,510 6.50 344,500 344,500
Virtual Resources, Inc. 8 7.50 0 250,000
Voice FX Corporation 233,112 8.00 0 274,000
Wearever Healthcare Products, LLC 222,375 9.00 0 0
WJ Holdings, Inc. 250,000 25.00 0 0
Zahren Alternative Power Corporation 1,168 6.54 25,000 400,000
------------ ------------
TOTAL WARRANTS $ 5,681,905 $ 15,089,243
------------ ------------
OTHER INVESTMENTS (See Note 4)
SWS3, Inc. (manufacturing plant to be sold) $ 2,086,520 $ 2,086,520
Hancock Company (royalty stream to be collected
from sale of Gitman brand name) $ 1,700,000 $ 400,000
HSA International, Inc. (anticipated proceeds from
litigation) $ 1,150,000 $ 1,000,000
Capitalized workout expenses $ 258,244 $ 108,244
------------ ------------
TOTAL OTHER INVESTMENTS $ 5,194,764 $ 3,594,764
------------ ------------
TOTAL INVESTMENTS $315,165,461 $323,071,009
============ ============
</TABLE>
28
<PAGE> 29
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company's principal investment objectives are to achieve a high level
of income from the collection of interest and processing and financial advisory
fees and long-term growth in its shareholders' equity through the appreciation
in value of equity interests in its portfolio companies. The Company makes
loans that are typically in the form of secured debt with relatively high fixed
interest rates accompanied by warrants to purchase equity securities of the
borrower. In addition to interest on investments, the Company also
typically collects an up-front processing fee on each loan it originates.
Harris Williams & Co. ("Harris Williams"), a wholly-owned subsidiary of
the Company, typically obtains a monthly retainer fee in each transaction for
which it is retained and, in addition, a success fee when the transaction is
consummated.
RESULTS OF OPERATIONS
The Company's financial performance in the Consolidated Statements of
Operations is composed of four primary elements. The first is "net operating
income," which is the difference between the Company's income from interest,
dividends, fees and Harris Williams' pretax 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 and their stated costs. 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 since 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. The fourth element is "provision for income taxes," which
primarily consists of taxes owed on retained capital gains and taxes on the
pretax income of Harris Williams.
Net Operating Income. During the quarter ended March 31, 1997, the
Company earned interest on investments of $8.0 million, a 63.3% increase over
the $4.9 million earned in the same quarter of 1996. In addition to interest on
investments, the Company also collects an up-front processing fee for each loan
it originates. During the first quarter of 1997, the Company collected $1.7
million in processing fees, an 84.6% increase over the $921,000
collected in the first quarter of 1996. These increases in interest income and
processing fees are a result of increases in the dollar amount of loans
outstanding and originated during the applicable periods. The Company's loan
portfolio increased to $270.2 million at March 31, 1997, an increase of 61.9%
over the $166.9 million loan portfolio balance at March 31, 1996. The
$67.2 million of loans originated during the first quarter of 1997 was a 106.8%
increase over the $32.5 million of loans originated during the first quarter of
1996. Of the loans originated this quarter, $14.8 million were made to public
companies with a market capitalization of less than $100.0, through the
Company's newly formed, wholly-owned subsidiary Tandem Capital, Inc. In
addition, the weighted average interest rate charged on the loan portfolio at
March 31, 1997 was 13.2%, as compared to 12.9% at March 31, 1996. The Company
also earned income from miscellaneous sources in an amount equal to $18,000 for
the first quarter of 1997, primarily from interest received on loans to
employees made in connection with purchases of common stock of the Company.
29
<PAGE> 30
The Company's interest expense increased to $2.1 million in the first
quarter of 1997, a 16.7% increase over the $1.8 million paid in the first
quarter of 1996. The increase in interest expense was primarily attributable to
increased borrowings from the SBA and under the Company's revolving credit
facilities for the period prior to the consummation of the Company's fourth
public offering of stock at which time certain debt was repaid. The Company's
total borrowings were $90 million on March 31, 1997 and $108.2 million on
March 31, 1996.
Overhead and amortization of borrowing costs totaled $1.6
million in the first quarter of 1997, a 14.3% increase over the $1.4 million of
such expenses in the first quarter of 1996. These increases can be largely
attributed to the increase in the number of employees to 26 in March 1997
from 16 in March 1996. Although the dollar amount of these expenses increased
between the periods, annualized overhead expenses as a percentage of average
assets decreased to 1.7% for the first quarter of 1997 from 2.5% for the first
quarter of 1996. The 1996 expenses were increased by the Company's prior
practice of expensing bonuses when paid in the first quarter. In June 1996, the
Company modified its practice to current accrual of bonuses.
During the first quarter of 1997, Harris Williams had revenues of $916,000,
a decrease from $1.4 million in the first quarter of 1996. During the first
quarter of 1997, Harris Williams had pretax income of $241,000, a decrease from
$795,000 in pretax income in the first quarter of 1996. The Company anticipates
that revenues generated by Harris Williams will vary from quarter to quarter
because the amount of revenues generated in a quarter is dependent upon the
timing of the closing of transactions and the size of the transactions. In the
first quarter of 1997, two transactions with respect to which Harris Williams
was providing advisory services were rescheduled to close in the second quarter
of 1997 rather than the first quarter. Income taxes of $72,000 were accrued on
Harris Williams' pretax income during the first quarter of 1997. No taxes were
accrued on Harris Williams' pretax income in the first quarter of 1996, as
Harris Williams was a partnership at that time.
Realized Gain (Loss) on Investments. The Company's net realized gain on
investments was $4.5 million during the first quarter of 1997 and $5.8 million
during the first quarter of 1996.
The following table sets forth the details of realized gains and losses
that occurred during the first quarter of 1997 and 1996.
<TABLE>
<CAPTION>
(in thousands)
1996 1997
-------- --------
<S> <C> <C>
Medical Associates of America Loan ($1,100)
Osco, Inc. Warrant 27
WXMT, Channel 30 TV Warrant 100
American Remedial Technologies Warrant 450
Premiere Technologies, Inc. Common Stock 6,279
Eastern Food Group LLC Loan (1,265)
Gold Medal Preducts, Inc. Loan (825)
Golf Video, Inc. Loan (500)
Miscellaneous (16)
Sqwincher Corporation Warrant 320
Radiant Systems, Inc. Common Stock 716
Innotech, Inc. Common Stock 901
Premiere Technologies, Inc. Common Stock 5,126
--------- --------
$ 5,756 $ 4,457
======== ========
</TABLE>
30
<PAGE> 31
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
quarter ended March 31, 1997 and 1996, the Company recorded net increases in
unrealized depreciation of investments of $4.5 million and a net increase in
unrealized appreciation of $2.2 million. These changes 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.
The following table set forth information regarding significant changes in
unrealized appreciation (depreciation) of assets in the Company's portfolio made
during the first quarter of 1997 and 1996.
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
--------------------------
1996 1997
---------- -----------
(in thousands)
<S> <C> <C>
LOANS:
Medical Associates of America, Inc. $1,100
Tower Environmental, Inc. 250 ($1,585)
Electronic Merchant Services, Inc. (200)
Cougar Power Products, Inc. (250)
Ashe Industries, Inc. (1,750) (150)
Eastern Food Group LLC 1,265
Golf Video, Inc. 450
Campus Voice LLC (200)
Golf Corporation of America (275)
PRIVATE COMPANY WARRANTS AND
EQUITY SECURITIES:
Potomac Group, Inc. 956
Associated Response Services, Inc. 600
Educational Medical, Inc. 400
Capital Network System, Inc. 250
Factory Card Outlet of America Ltd. 171
American Remedial Technologies, Inc. (230)
PRA International, Inc. 1,170
Global Finance & Leasing, Inc. 425
Argenbright Holdings Ltd. 375
HomeLink Services, Inc. (250)
Express Shipping Centers, Inc. (290)
PUBLIC COMPANY WARRANTS AND EQUITY
SECURITIES:
Premiere Technologies, Inc. 1,178 (5,357)
Encore Medical, Inc. 497
Educational Medical, Inc. 250
Innotech, Inc. (454)
</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. 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
90% of its net income (other than long-term capital gains). The Company
presently intends to meet the RIC qualifications in 1997. However, no assurance
can be given that the Company will continue to elect or qualify for such
treatment after 1997.
During the first quarter of 1997, the Company paid dividends of $4.4
million compared to the $2.4 million paid in the first quarter of 1996. Of
these dividends, $4.4 million and $2.4 million were derived from net
operating income for the first quarter of 1997 and 1996, respectively, and
$0 and $0 were derived from realized long-term capital gains for the
first quarter of 1997 and 1996, respectively.
For the quarters ended March 31, 1997, and 1996, the Statements of
Operations include a provision for state income taxes on interest totaling
$0 and $0, respectively. For the quarters ended March 31, 1997 and
1996, the Company also provided for federal income tax at a 35% rate and excise
tax at a 4% rate on taxable net investment income and realized gains not
distributed to shareholders. These tax provisions totaled $2.2 million and $2.1
million for the quarters ended March 31, 1997 and 1996, respectively.
31
<PAGE> 32
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had $34.5 million in cash and cash
equivalents. At March 31, 1997, the Company's investment portfolio included
investments in stocks and warrants of publicly-traded companies that had an
ascertainable market value and were being carried at a fair value of
approximately $9.8 million 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.
Traditionally, 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. In February 1997, the
Company consummated a fourth public offering of 3,146,286 shares of Common Stock
generating net proceeds of $109.9 million. The Company has used the proceeds of
these offerings to temporarily repay debt and to originate new loans.
At March 31, 1997, total SBA borrowings were $90.0 million, the maximum
amount of SBA loans available to an SBIC. 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 March 31, 1997, and none of these borrowings
mature prior to 2002.
As of March 31, 1997, SII had no amounts outstanding under its $50.0
million revolving credit facility with First Union National Bank and a
syndicate of other banks (the "Revolving Credit Facility"), which is secured by
all of SII's assets and by a pledge by the Company to the lenders under the
Revolving Credit Facility of SII's stock and which is also guaranteed by the
Company. 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 various hedging arrangements. The Revolving Credit Facility matures on May
31, 2000. 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.
To support the Company's future loan origination activities outside of SII,
the Company has also established a $100.0 million five-year revolving credit
facility (the "ING Credit Facility") with Holland Limited Securitization, Inc.,
a multi-seller commercial paper conduit sponsored by ING Baring (U.S.) Capital
Markets, Inc. (collectively "ING"). Sirrom Funding Corporation ("SFC"), a
wholly-owned special purpose, bankruptcy remote subsidiary of the Company, is
the borrower under the ING Credit Facility. SFC will purchase loans originated
by the Company and the related warrants and use these loans and warrants as
collateral to secure borrowings from ING. SFC is generally able to borrow up to
70% of the principal amount of conforming loans collateralizing the ING Credit
Facility. As of January 15, 1997, the Company made an initial capital
contribution to SFC of approximately $25.0 million of loans, which loans will
serve as initial collateral for the ING Credit Facility. At March 31, 1997, no
amounts were outstanding under the ING Credit Facility. In order to manage
interest rate risk associated with the variable interest rate provided for under
the ING Credit Facility the Company has entered into various hedging
arrangements. The ING Credit Facility matures on December 31, 2001. The ING
Credit Facility is not guaranteed by the Company. However, certain actions by
the Company can trigger an event of default under the ING Credit Facility, which
will result in termination of further funding thereunder and the application of
the collateral pledged for repayment of the amounts outstanding thereunder. In
addition, the ING Credit Facility provides that an event of default is triggered
if any two of George M. Miller, II, David M. Resha and Carl W. Stratton are no
longer employed by the Company.
The Company believes that the $109.9 million raised in the February 1997
public offering, anticipated borrowings under the Revolving Credit Facility and
the ING Credit Facility, together with cash on hand, loan repayments and cash
flow from operations (after distributions to shareholders), will be adequate to
fund the continuing growth of the
32
<PAGE> 33
Company's investment portfolio through the first or second quarter of 1998.
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 AND CREDIT QUALITY
During the quarter ended March 31, 1997, the Company made loans to 50
companies totaling approximately $67.2 million and experienced 10 repayments
(either partial or full) aggregating $13.6 million. During the quarter ended
March 31, 1996, the Company made loans to 28 companies totaling approximately
$32.5 million and experienced 5 repayments (either partial or full) aggregating
approximately $4.8 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.
The Company has implemented a system by which it grades all loans on
a scale of 1 to 6. The system was intended to reflect the performance of the
borrower's business, as well as the collateral coverage of the loan and other
factors considered relevant. Loans graded 5 or 6 are placed on the Company's
Credit Watch List and are serviced by a member of the Company's workout area.
Loans with a grade 5 may be in default, and interest is probably not being
accrued, but the Company's management believes the borrower's management is
capable of executing a plan to return the borrower to an acceptable risk level.
Loans with a grade 6 involve an unacceptable level of risk with substantial
probability of loss. These loans are on non-accrual and the Company has charged
off or fully expects to charge off some part of the loan. At March 31, 1997 and
1996, the Company had loans to 13 companies with an aggregate principal balance
of $16.1 million, and 7 companies with an aggregate principal balance of $11.3
million, respectively, that were graded a 5 or 6 and that were not accruing
interest. Given the nature of the Company's portfolio, the Company expects some
variability in the absolute dollar amount of loans graded 5 and 6 and in the
ratio of loans graded 5 and 6 to the total portfolio balance.
33
<PAGE> 34
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.
34
<PAGE> 35
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 13, 1997 By: /s/ Carl W. Stratton
Carl W. Stratton
Chief Financial Officer
35
<PAGE> 36
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
<TABLE>
<CAPTION>
PER SHARE DATA
FOR THE QUARTER ENDING MARCH 31, 1997(1)
<S> <C>
Net asset value, beginning of period $12.85
------
Net operating income $ .40
Net realized and unrealized gains and
losses on investments(2) $ 4.41
Total from investments operations $ 4.81
Less: Dividend on net investment income $ .29
Distribution on realized capital gains $ .00
------
Total distributions $ .29
Net asset value, end of period $17.37
Per share market value, end of period $36.25
Shares outstanding, end of period 15,477,813
</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.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SIRROM CAPITAL CORPORATION FOR THE THREE MONTH PERIOD
ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-30-1997
<INVESTMENTS-AT-COST> 315,165,461
<INVESTMENTS-AT-VALUE> 323,071,009
<RECEIVABLES> 2,635,112
<ASSETS-OTHER> 40,123,675
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 365,829,796
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 90,000,000
<OTHER-ITEMS-LIABILITIES> 6,980,741
<TOTAL-LIABILITIES> 96,980,741
<SENIOR-EQUITY> 249,978,919
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 15,477,813
<SHARES-COMMON-PRIOR> 12,343,567
<ACCUMULATED-NII-CURRENT> 6,226,384
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,597,059
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,905,532
<NET-ASSETS> 268,849,055
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,028,286
<OTHER-INCOME> 1,953,105
<EXPENSES-NET> 3,755,007
<NET-INVESTMENT-INCOME> 6,266,384
<REALIZED-GAINS-CURRENT> 4,456,891
<APPREC-INCREASE-CURRENT> (4,487,800)
<NET-CHANGE-FROM-OPS> 3,885,995
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,437,910
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,146,286
<NUMBER-OF-SHARES-REDEEMED> 16,040
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 4,565,780
<ACCUMULATED-GAINS-PRIOR> 3,140,168
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 2,141,609
<GROSS-EXPENSE> 3,755,007
<AVERAGE-NET-ASSETS> 213,734,785
<PER-SHARE-NAV-BEGIN> 12.85
<PER-SHARE-NII> .40
<PER-SHARE-GAIN-APPREC> 4.41
<PER-SHARE-DIVIDEND> .29
<PER-SHARE-DISTRIBUTIONS> .0
<RETURNS-OF-CAPITAL> .0
<PER-SHARE-NAV-END> 17.37
<EXPENSE-RATIO> .070
<AVG-DEBT-OUTSTANDING> 105,429,106
<AVG-DEBT-PER-SHARE> 6.81
</TABLE>
