-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EqDP89QDCwfv4I/DobCDRYNgksOHQ+8qBcUkex5BdHzYS5JclbgDCZoPKus8JBT9 wk7GRlANmn9BR6FqT4JRMg== 0000950144-97-005991.txt : 19970520 0000950144-97-005991.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950144-97-005991 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIRROM CAPITAL CORP CENTRAL INDEX KEY: 0000933166 STANDARD INDUSTRIAL CLASSIFICATION: LOAN BROKERS [6163] IRS NUMBER: 621583116 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 814-00154 FILM NUMBER: 97608551 BUSINESS ADDRESS: STREET 1: 500 CHURCH STREET STREET 2: STE 200 CITY: NASHVILLE STATE: TN ZIP: 37219 BUSINESS PHONE: 6152560701 10-Q 1 SIRROM CAPITAL CORPORATION FORM 10-Q 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. 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 3 SIRROM CAPITAL CORPORATION & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
December 31, March 31, 1996 1997 --------------- --------------- Assets - ------ 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 =============== ===============
3 4 SIRROM CAPITAL CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Three months Three months ended ended March 31, 1996 March 31, 1997 --------------- --------------- 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 =============== ===============
4 5 SIRROM CAPITAL CORPORATION Consolidated Statements of Cash Flows
Three months Three months ended ended March 31, 1996 March 31, 1997 --------------- --------------- 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 =============== ===============
5 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 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 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 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:
PRICE RANGE PER SHARE SHARES -------------- --------- 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 ==========
9 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
MARCH 31, 1997 --------- 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 ==========
10 11 SIRROM CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) STATEMENTS OF INCOME
QUARTER ENDED MARCH 31, ------------------------- 1996 1997 ---------- ---------- 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 ========== ========
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 12 SIRROM CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED PORTFOLIO OF INVESTMENTS AS OF DECEMBER 31, 1996
COUPON INTEREST LOANS MATURITY COST RATE FAIR VALUE ----- -------- ------------ -------- ------------ 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
12 13 SIRROM CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED) AS OF DECEMBER 31, 1996
COUPON INTEREST LOANS MATURITY COST RATE FAIR VALUE ----- -------- ------------ -------- ------------ 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
13 14 SIRROM CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED) AS OF DECEMBER 31, 1996
COUPON INTEREST LOANS MATURITY COST RATE FAIR VALUE ----- -------- ------------ -------- ------------ 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
14 15 SIRROM CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED) AS OF DECEMBER 31, 1996
COUPON INTEREST LOANS MATURITY COST RATE FAIR VALUE ----- -------- ------------ -------- ------------ 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
15 16 SIRROM CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED) AS OF DECEMBER 31, 1996
COUPON INTEREST LOANS MATURITY COST RATE FAIR VALUE ----- -------- ------------ -------- ------------ 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 ============ ============
16 17 SIRROM CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED) AS OF DECEMBER 31, 1996
COST OR NUMBER OF CONTRIBUTED EQUITY INTERESTS SHARES VALUE FAIR VALUE ---------------- -------------- ----------- ----------- 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 =========== ===========
17 18 SIRROM CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED) AS OF DECEMBER 31, 1996
COST OR NUMBER OF PERCENTAGE CONTRIBUTED STOCK WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE -------------- ------------- ---------- ------------ ------------ 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
18 19 SIRROM CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED) AS OF DECEMBER 31, 1996
COST OR NUMBER OF PERCENTAGE CONTRIBUTED STOCK WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE -------------- ------------- ---------- ------------ ------------ 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
19 20 SIRROM CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED PORTFOLIO OF INVESTMENTS -- (CONTINUED) AS OF DECEMBER 31, 1996
COST OR NUMBER OF PERCENTAGE CONTRIBUTED STOCK WARRANTS SHARES OWNERSHIP VALUE FAIR VALUE -------------- ------------- ---------- ------------ ------------ 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 ============ ============
20 21 SIRROM CAPITAL CORPORATION & SUBSIDIARIES CONSOLIDATED PORTFOLIO OF INVESTMENTS AS OF MARCH 31,1997
LOANS Maturity Cost Coupon Fair Value -------- ---- ------ ---------- 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
21 22
LOANS Maturity Cost Coupon Fair Value -------- ---- ------ ---------- 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
22 23
LOANS Maturity Cost Coupon Fair Value -------- ---- ------ ---------- 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
23 24
LOANS Maturity Cost Coupon Fair Value -------- ---- ------ ---------- 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 ------------ ------------
24 25 SIRROM CAPITAL CORPORATION & SUBSIDIARIES CONSOLIDATED PORTFOLIO OF INVESTMENTS MARCH 31, 1997
Cost or EQUITY INTERESTS Number of Contributed Shares Value Fair Value --------- ----------- ----------- 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 ----------- -----------
25 26 SIRROM CAPITAL CORPORATION & SUBSIDIARIES CONSOLIDATED PORTFOLIO OF INVESTMENTS MARCH 31, 1997
STOCK WARRANTS Cost or Number of Percentage Contributed Publicly Traded Companies Shares Ownership Value Fair Value - ----------------------------- ------ --------- ----- ---------- 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
26 27
STOCK WARRANTS Cost or Number of Percentage Contributed Private Companies Shares Ownership Value Fair Value - ----------------- ------ --------- ----- ---------- 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
27 28
STOCK WARRANTS Cost or Number of Percentage Contributed Private Companies Shares Ownership Value Fair Value - ----------------- ------ --------- ----- ---------- 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 ============ ============
28 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 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.
(in thousands) 1996 1997 -------- -------- 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 ======== ========
30 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.
QUARTER ENDED MARCH 31, -------------------------- 1996 1997 ---------- ----------- (in thousands) 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)
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 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 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 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 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 36 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ----------- ----------- Exhibit 11 Computation of Earnings Per Share Exhibit 27 Financial Data Schedule (for SEC use only) EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 SIRROM CAPITAL CORPORATION
PER SHARE DATA FOR THE QUARTER ENDING MARCH 31, 1997(1) 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
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. EX-27 3 FINANCIAL DATA SCHEDULE
6 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. 3-MOS DEC-31-1997 JAN-01-1997 MAR-30-1997 315,165,461 323,071,009 2,635,112 40,123,675 0 365,829,796 0 90,000,000 6,980,741 96,980,741 249,978,919 0 15,477,813 12,343,567 6,226,384 0 7,597,059 0 7,905,532 268,849,055 0 8,028,286 1,953,105 3,755,007 6,266,384 4,456,891 (4,487,800) 3,885,995 0 4,437,910 0 0 3,146,286 16,040 0 0 4,565,780 3,140,168 0 0 0 2,141,609 3,755,007 213,734,785 12.85 .40 4.41 .29 .0 .0 17.37 .070 105,429,106 6.81
-----END PRIVACY-ENHANCED MESSAGE-----