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 JUNE 30, 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 August 5, 1997 was 15,483,613.
2
TABLE OF CONTENTS
PAGE NUMBER
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 1996 and June 30, 1997 4
Consolidated Statements of Operations for the Three Months Ended
June 30, 1996 and 1997 and for the Six Months Ended June 30, 1996 and 1997 5
Consolidated Statements of Cash Flows for the Three Months Ended
June 30, 1996 and 1997 and for the Six Months Ended June 30, 1996 and 1997 6
Notes to Consolidated Financial Statements 7
Consolidated Portfolio of Investments as of December 31, 1996 11
Consolidated Portfolio of Investments as of June 30, 1997 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General 33
Results of Operations 33
Financial Condition, Liquidity and Capital Resources 36
Impact of Inflation 37
Risks 37
Portfolio Turnover and Credit Quality 37
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 38
ITEM 2. CHANGES IN SECURITIES 38
2
3
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 38
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 38
ITEM 5. OTHER INFORMATION 39
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 39
SIGNATURES
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4
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
1996 1997
------------- -------------
ASSETS
- ------
Investments, at fair value
Loans $ 221,487,385 $ 312,355,939
Equity interests 34,965,801 38,011,186
Warrants 15,893,828 16,837,295
Other 2,990,282 4,277,343
------------- -------------
Total investments (cost of $262,943,963 and $362,282,827, respectively) 275,337,296 371,481,763
Investment in unconsolidated subsidiary 911,487 1,957,551
Cash 4,611,532 528,481
Interest receivable 2,870,138 3,746,665
Debenture costs (less accumulated amortization of $920,289 and $1,351,894,
respectively) 3,690,362 3,739,029
Fixed assets (less accumulated depreciation of $73,711 and $115,709 respectively) 275,454 381,192
Other assets 316,797 339,900
------------- -------------
Total Assets $ 288,013,066 $ 382,174,581
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
LIABILITIES:
- ------------
Debentures payable to Small Business Administration $ 90,000,000 $ 90,000,000
Revolving credit facilities 30,858,213 9,488,000
Interest payable 1,348,252 1,305,992
Accrued taxes payable 4,333,144 5,025,866
Accounts payable, accrued expenses, and other liabilities 2,852,942 3,476,690
------------- -------------
Total Liabilities 129,392,551 109,296,548
------------- -------------
SHAREHOLDERS' EQUITY:
- ---------------------
Common stock 140,061,092 250,126,913
Notes receivable from employees (1,539,858) (677,231)
Undistributed net realized earnings 7,705,948 14,229,441
Unrealized appreciation of investments 12,393,333 9,198,910
------------- -------------
Total Shareholders' Equity 158,620,515 272,878,033
------------- -------------
Total Liabilities and Shareholders' Equity $ 288,013,066 $ 382,174,581
============= =============
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SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 1996 JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1997
------------- ------------- ------------- -------------
Operating Income:
Interest on investments $ 5,585,856 $ 9,623,500 $ 10,448,319 $ 17,651,786
Loan processing fees 651,800 1,262,462 1,573,050 2,956,783
Other income 62,055 12,241 62,055 29,825
------------ ------------ ------------ ------------
Total Operating Income 6,299,711 10,898,203 12,083,424 20,638,394
------------ ------------ ------------ ------------
Operating Expenses:
Interest expense 2,051,288 1,818,515 3,841,275 3,960,124
Salaries and benefits 659,179 1,087,354 1,407,678 1,878,810
Other operating expenses 512,330 811,493 979,908 1,425,909
Amortization expense 89,246 225,428 277,643 432,954
------------ ------------ ------------ ------------
Total Operating Expenses 3,312,043 3,942,790 6,506,504 7,697,797
------------ ------------ ------------ ------------
Equity in pretax income of Harris Williams
(before taxes of $0, $142,995, $0 and
$215,355) 627,208 1,020,230 1,422,626 1,261,431
------------ ------------ ------------ ------------
Net Operating Income 3,614,876 7,975,643 6,999,546 14,202,028
------------ ------------ ------------ ------------
Realized gain (loss) on investments 200,000 2,987,316 5,956,489 7,444,207
Change in unrealized appreciation
(depreciation) of investments 2,254,868 1,293,380 4,495,427 (3,194,421)
Provision for income taxes 70,000 2,339,008 2,204,960 4,648,488
------------ ------------ ------------ ------------
Net increase in shareholders'
equity resulting from operations $ 5,999,744 $ 9,917,331 $ 15,246,502 $ 13,803,326
============ ============ ============ ============
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SIRROM CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months Three months Six months Six months
ended ended ended ended
June 30, 1996 June 30, 1997 June 30, 1996 June 30, 1997
------------- ------------- ------------- -------------
OPERATING ACTIVITIES:
Net increase in partners' capital and shareholders'
equity resulting from operations $ 5,999,744 $ 9,917,332 $ 15,246,502 $ 13,803,326
Adjustments to reconcile net increase to net cash
provided by operating activities:
Net unrealized (appreciation) depreciation of
investments (2,254,868) (1,293,380) (4,495,427) 3,194,421
Realized (gain) loss on investments (200,000) (2,987,316) (5,956,489) (7,444,207)
(Incr.) Decr. in investment in unconsolidated
subsidiary (627,208) (877,235) (1,422,626) (1,046,076)
Amortization of debenture costs 87,746 160,065 274,643 429,090
Increase in interest receivable (169,586) (1,111,553) (584,793) (876,527)
Increase (decrease) in accounts payable and
accrued expenses 1,040,483 755,118 858,598 623,763
Amortization of organization costs 1,500 2,364 3,000 3,864
Depreciation of fixed assets 11,962 29,560 22,670 41,997
Increase in accrued taxes payable 43,100 2,209,999 1,279,843 692,721
Increase in interest payable (14,358) (137,306) 330,157 (42,260)
------------- ------------- ------------- -------------
Net cash provided by operating activities 3,918,515 6,667,648 5,556,078 9,380,112
------------- ------------- ------------- -------------
INVESTING ACTIVITIES:
Proceeds from sale of investments 5,506,934 23,168,351 17,238,940 43,803,516
Investments originated or acquired (29,163,064) (67,198,413) (61,300,299) (135,598,199)
Purchase of fixed assets (17,293) (118,386) (38,877) (147,735)
Increase in other assets (16,889) (94,332) (407,195) (126,966)
Disposition of other assets 0 0 0 0
------------- ------------- ------------- -------------
Net cash used in investing activities (23,690,312) (44,242,780) (44,507,431) (92,069,384)
------------- ------------- ------------- -------------
FINANCING ACTIVITIES:
Proceeds from debentures payable to Small
Business Administration 0 0 10,000,000 0
Proceeds from revolving credit facilities 20,327,766 18,511,000 50,178,766 36,061,132
Repayment of credit facility borrowings (9,356,000) (9,023,000) (27,491,000) (57,431,345)
Increase in debenture costs (250,000) (25,336) (512,500) (477,757)
Issuance of common stock 51,402,622 7,344 51,402,622 109,953,785
Employee shares repurchased (809,645) 0 (809,645) (102,614)
Repayment of employee notes 440,142 0 440,142 862,627
Stock options exercised 0 140,650 0 214,650
Payment of dividends (1,837,029) (5,319,587) (4,227,759) (9,757,497)
Distribution of capital gains 405,660 (716,760) 405,660 (716,760)
------------- ------------- ------------- -------------
Net cash provided by financing activities 59,512,196 3,574,311 78,574,966 78,606,221
------------- ------------- ------------- -------------
Increase (decrease) in cash and cash equivalents 39,740,399 (34,000,821) 39,623,613 (4,083,051)
Cash and cash equivalents, beginning of period 78,283 34,529,302 195,069 4,611,532
============= ============= ============= =============
Cash and cash equivalents, end of period $ 39,818,682 $ 528,481 $ 39,818,682 $ 528,481
============= ============= ============= =============
Supplemental disclosures of cash flow information:
Interest paid $ 2,065,645 $ 1,954,606 $ 3,511,117 3,910,623
============= ============= ============= =============
Taxes paid $ 12,949 $ -- $ 964,066 3,738,278
============= ============= ============= =============
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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
generally 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 December 31, 1996 and June 30, 1997 and the
consolidated statements of operations and cash flows for each of the quarters
and six months ended June 30, 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 million 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 and the Quarterly Report on Form 10-Q
for the period ended March 31, 1997.
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.
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8
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 June 30, 1997, the investment portfolio included
investments totaling $275,337,296 and $359,767,902, 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
Board of Directors, are included as changes in the unrealized appreciation or
depreciation of investments in the Statement of Operations.
Derivative Financial Instruments
The Company uses interest rate swaps to hedge interest costs on its floating
rate revolving credit facilities. Any amounts paid or received on interest
rate swap agreements are recognized as an adjustment to interest expense.
Gains and losses on terminated swaps are recognized over the remaining life of
the underlying obligation as an adjustment to investment income or interest
expense. The fair value of the swap agreements are not recognized in the
consolidated financial statements as they are accounted for as hedges.
The Company does not hold derivative financial instruments for trading
purposes.
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 Board of 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 46.6% 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 $20,798,845 at December 31, 1996 and June 30,
1997, respectively. The aggregate fair values of these loans as determined by
the Company's Board of Directors totaled $8,683,178 and $12,648,845 at December
31, 1996 and June 30, 1997, respectively.
Included in the investment portfolio at June 30, 1997 are Other Investments
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 Investments at June 30, 1997 was $6,127,343 which represents the cost
basis of the original loans plus capitalized workout expenses. The Company's
Board of Directors has estimated the fair value of these investments to be
$4,277,343.
5. REVOLVING CREDIT FACILITIES AND INTEREST RATE SWAP AGREEMENTS
In June 1997, the Company terminated the two interest rate swap
agreements it had entered into under the $50.0 million revolving credit
facility and replaced them with a single, new swap agreement. Under the new
agreement, the Company has exchanged the variable rate on $45.0 million in
borrowings to a fixed rate of 8.12% through May 31, 2000.
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6. INCOME TAXES
For the quarters ended June 30, 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 June 30, 1996 and
1997 were $70,000 and $2.1 million, respectively. For the quarter ended June
30, 1997, the Company also provided for taxes of $215,355 on Harris Williams'
pre-tax income.
7. STOCK OPTION PLANS
Employee 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,
and includes options that were granted subject to shareholder approval of an
increase in the number of shares available for grant:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27.9375- 35.00 866,500
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18.50 4,000
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18.50 16,000
---------
Outstanding, June 30, 1997 . . . . . . . . . . . . . . . . . . . . . . 2,041,047
=========
Directors Stock Option Plan. During 1995, the Company adopted the 1995
Stock Option Plan for Non-Employee Directors which permits the issuance of
options to purchase the Company's stock to non-employee directors. The plan
reserves 114,000 shares of common stock for automatic grant. New directors
will receive options to purchase 6,000 upon initial election to the Company's
Board of Directors. The options' exercise price may not be less than the fair
market value of the common stock on the date of the grant. No options were
granted in 1995, options on 84,000 shares were granted in 1996 at $24.25 per
share, and options on 6,000 shares were granted during the second quarter of
1997 at $27 15/16 per share. No shares were exercised prior to 1997, and
during the second quarter of 1997, 5,800 shares were exercised. No shares have
been forfeited to date.
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 June 30, 1997, the Company paid dividends of
$6,036,347 of which $6,036,347 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 June 30, 1997
and statements of income for the quarters ended June 30, 1996 and 1997 and for
the six months periods ended June 30, 1996 and 1997 are as follows:
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BALANCE SHEETS
June 30,
1997
----
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 74,380
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . 3,484,509
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . 148,976
----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . $3,707,865
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,750,313
Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . 1,957,552
----------
Total liabilities and shareholders' equity . . . . . . . . . . $3,707,865
==========
THREE MONTHS SIX MONTHS
------------ -----------
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
1996 1997 1996 1997
---- ---- ---- ----
REVENUES:
Fee income . . . . . . . . . . . . . . . . . . . . . . . $ 1,176,234 $ 2,674,945 $ 2,453,831 $3,480,772
Expense reimbursements and other . . . . . . . . . . . . 96,494 130,671 227,539 241,101
----------- ----------- ----------- ----------
Total revenues . . . . . . . . . . . . . . . . . . . . 1,272,728 2,805,616 2,681,370 3,721,873
----------- ----------- ----------- ----------
EXPENSES:
Salaries and benefits . . . . . . . . . . . . . . . . . . 518,603 1,374,100 1,017,005 1,791,829
Operating expenses . . . . . . . . . . . . . . . . . . . 126,917 411,286 241,739 668,613
----------- ----------- ----------- ----------
Total expenses . . . . . . . . . . . . . . . . . . . 645,520 1,785,386 1,258,744 2,460,442
----------- ----------- ----------- ----------
Operating income before taxes . . . . . . . . . . . . . . 627,208 1,020,230 1,422,626 1,261,431
Provision for income taxes . . . . . . . . . . . . . . . 0 142,995 0 215,355
----------- ----------- ----------- ----------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 627,208 $ 877,235 $ 1,422,626 $1,046,076
----------- ----------- ----------- ----------
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 June 30, 1996 and the six months ended June
30, 1996. Subsequent to the acquisition in August 1996, Harris Williams began
operating as a "C" corporation.
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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
11
12
COUPON
INTEREST
LOANS MATURITY COST RATE FAIR VALUE
----- -------- ---- ---- ----------
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
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
12
13
COUPON
INTEREST
LOANS MATURITY COST RATE FAIR VALUE
----- -------- ---- ---- ----------
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 2,972,500
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
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
13
14
COUPON
INTEREST
LOANS MATURITY COST RATE FAIR VALUE
----- -------- ---- ---- ----------
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 . . . . . . . . . . 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
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
14
15
COUPON
INTEREST
LOANS MATURITY COST RATE FAIR VALUE
----- -------- ---- ---- ----------
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
============ ============
15
16
Number of Cost or
--------- -------
Shares/Percentage Contributed
----------------- -----------
EQUITY INTERESTS Ownership Value Fair Value
---------------- --------- ----- ----------
PUBLICLY TRADED COMPANIES
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
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
=========== =============
16
17
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
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
Entek Scientific Corporation. . . . . . . . 185,480 3.75 0 0
Express Shipping Centers, Inc . . . . . . . 73,752 5.09 552,402 552,402
17
18
Cost or
-------
Number of Percentage Contributed
--------- ---------- -----------
STOCK WARRANTS Shares Ownership Value Fair Value
-------------- ------ --------- ----- ----------
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 . . . . . . . . . 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. . . . . . . . 7.5% 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
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
18
19
Cost or
-------
Number of Percentage Contributed
--------- ---------- -----------
STOCK WARRANTS Shares Ownership Value Fair Value
-------------- ------ --------- ----- ----------
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 . . . . . 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 Stock 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
============ ============
19
20
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS
AS OF JUNE 30,1997
LOANS Maturity Cost Coupon Fair Value
- ----- -------- ---- ------ ----------
AB Plastics Holding Corporation 9/27/01 $4,000,000 13.50% $4,000,000
Aero Products Corporation 6/9/02 2,500,000 13.00 2,500,000
Affinity Fund, Inc. 6/29/98 1,485,000 12.50 1,499,432
Affinity Fund, Inc. 3/10/00 1,000,000 14.00 1,000,000
Affinity Fund, Inc. 12/28/98 495,000 12.50 496,577
American Consolidated Labs 4/25/02 1,575,000 13.50 1,575,000
American Corporate Literature, Inc. 9/29/01 1,683,000 14.00 1,685,830
American Network Exchange 11/30/98 990,000 13.00 997,348
American Network Exchange 1/18/99 990,000 13.00 997,014
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
Anton Airfood, Inc. 5/21/02 5,000,000 13.50 5,000,000
APS America 4/9/02 2,000,000 13.50 2,000,000
ARAC Holding Co., Inc. 9/27/01 3,000,000 13.50 3,000,600
Ashe Industries, Inc. 5/18/99 535,546 12.50 185,546
Associated Response Services, Inc. 6/20/99 1,386,000 12.50 1,394,621
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 2,981,500
B & N Company, Inc. 3/28/01 990,000 13.00 992,505
BankCard Services Corporation 1/21/98 297,000 13.00 299,700
BiTec Southeast, Inc. 7/1/99 2,600,321 12.70 2,616,271
BiTec Southeast, Inc. 8/9/01 950,000 14.00 950,000
BiTec Southeast, Inc. 4/30/97 350,000 14.00 350,000
BroadNet, Inc. 6/9/02 2,500,000 14.00 2,500,000
C.J. Spirits, Inc. 6/1/97 750,171 13.50 55,796
Caldwell/VSR Inc. 2/28/01 1,500,000 8.00 1,500,000
Caldwell/VSR Inc. 9/27/01 84,754 14.00 84,754
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
20
21
LOANS Maturity Cost Coupon Fair Value
- ----- -------- ---- ------ ----------
Campus Voice, LLC 12/31/99 $ 150,000 8.00% $ 150,000
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 12.75 999,351
CF Data Corp. 3/16/00 1,732,500 13.75 1,740,676
Champion Glove Manufacturing Co.,Inc. 7/27/00 1,250,000 13.50 250,000
Check Into Cash, Inc. 11/7/01 3,039,000 14.00 3,092,781
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
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 12.50 349,689
Corporate Link, Inc. 12/13/01 600,000 14.00 600,000
Corporate Link, Inc. 9/13/97 300,000 14.00 300,000
Creighton Shirtmakers 7/1/97 1,862,000 14.00 1,862,000
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
Dartek Industries 11/20/01 3,800,000 13.50 3,800,000
Dartek Industries 6/1/99 312,590 13.50 312,590
DentalCare Partners, Inc. 1/11/01 1,981,023 12.50 1,987,035
DynaGen, Inc. 6/17/02 1,733,300 13.50 1,737,745
Eagle Quest* 6/20/02 1,600,000 13.50 1,600,000
Electronic Accessory Specialists Int'l, Inc. 6/23/02 1,600,000 13.50 1,600,000
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 44,076 12.00 44,076
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
Entek IRD International Corp 5/22/02 1,090,000 13.00 1,092,712
Entek IRD International Corp 6/28/01 2,500,000 13.00 2,500,000
Faxnet Corporation 6/17/02 400,000 13.00 401,667
FDL, Inc. 1/30/02 1,750,000 13.50 1,775,002
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. 12/17/01 300,000 14.00 300,000
21
22
LOANS Maturity Cost Coupon Fair Value
- ----- -------- ---- ------ ----------
Gardner Wallcovering, Inc. 3/28/01 $1,485,000 13.50% $1,489,000
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
Gloves Inc. 5/1/02 1,500,000 13.00 1,500,000
Gold Medal Products, Inc. 11/19/00 180,885 13.50 105,885
Golf Corporation of America, Inc. 9/16/99 300,000 11.00 30,000
Golf Corporation of America, Inc. 12/28/00 200,000 14.00 20,000
Golf Corporation of America, Inc. 12/29/00 455,589 10.00 30,589
Golf Corporation of America, Inc. 7/13/96 100,000 14.00 0
Golf Corporation of America, Inc. 10/5/96 50,000 14.00 0
Golf Corporation of America, Inc. 12/1/96 52,000 14.00 27,000
Golf Corporation of America, Inc. 12/31/96 39,000 14.00 29,000
Golf Corporation of America, Inc. 1/31/97 25,500 14.00 15,500
Golf Corporation of America, Inc. demand 90,803 14.00 60,803
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 1,497,515
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
H & H Acq. Corp. 8/30/01 1,500,000 14.00 1,500,000
Home Link Services, Inc. 12/30/01 208,750 14.00 208,750
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 2,975,500
HTR, Inc. 10/30/01 3,000,000 13.50 3,000,000
Hunt Incorporated 3/31/00 3,250,000 14.00 3,250,000
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 1,193,400
International Displays Inc. 5/12/02 3,965,000 14.00 3,965,000
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
IV Infusion Corporation 12/30/97 300,000 14.00 300,000
Johnston County Cable, L.P. 8/31/00 1,990,000 14.00 1,993,674
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 1,997,983
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
Kryptonics, Inc. 2/28/97 750,000 14.00 750,000
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 1,488,750
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
Master Graphics, Inc. 5/31/02 4,300,000 13.25 4,300,000
22
23
LOANS Maturity Cost Coupon Fair Value
- ----- -------- ---- ------ ----------
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 1,794,300
McAuley's Incorporated 7/31/01 3,000,000 13.00 3,000,000
Mead Higgs Co. 5/19/02 1,400,000 14.00 1,400,000
Merge Technologies, Inc. 6/30/02 2,000,000 13.50 2,000,000
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 14.00 248,508
Money Transfer Systems, Inc. 12/20/00 148,500 14.00 148,975
Money Transfer Systems, Inc. 3/1/01 148,500 14.00 148,900
Money Transfer Systems, Inc. 5/2/01 148,500 14.00 148,800
Money Transfer Systems, Inc. 7/8/01 148,500 14.00 148,800
Money Transfer Systems, Inc. 10/1/01 148,500 14.00 148,725
Money Transfer Systems, Inc. 1/5/02 245,000 14.00 245,498
Money Transfer Systems, Inc. 3/6/02 250,000 14.00 250,000
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
Multi-Media Data Systems, Inc. 11/20/01 2,000,000 14.00 2,000,000
Multicom Publishing, Inc. 3/29/01 1,025,000 13.00 1,238,328
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
NASC, Inc. 6/26/01 1,500,000 13.50 1,500,000
NASC, Inc. 12/13/98 500,000 13.50 500,000
National Health Systems 11/1/97 385,000 12.50 392,000
Nationwide Engine Supply, Inc. 1/12/99 2,475,000 12.00 2,492,514
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 2,237,093
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 2,972,673
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 1,900,152
Package Net, Inc. 5/1/02 250,000 13.25 250,000
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. 9/1/97 890,000 13.00 900,000
Pipeliner Systems, Inc. 9/30/98 980,000 10.00 995,318
Plymouth, Inc. 9/28/00 1,000,000 13.00 1,000,000
PRA International, Inc. 8/10/00 1,980,000 13.50 1,987,659
Precision Panel Products, Inc. 1/11/00 2,022,781 12.75 2,030,281
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 1,914,498
Quest Group International, Inc. 11/15/00 1,125,000 13.25 1,166,660
Quest Group International, Inc. 9/3/01 1,350,000 13.25 1,375,000
Quest Group International, Inc. 9/3/01 123,601 14.00 123,601
Recompute Corporation 2/21/02 1,300,000 13.50 1,325,000
23
24
LOANS Maturity Cost Coupon Fair Value
- ----- -------- ---- ------ ----------
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
Saraventures Fixtures Inc. 5/23/02 1,550,000 14.00 1,550,000
Scandia Technologies, Inc. 4/9/01 1,825,000 14.00 1,825,000
Scandia Technologies, Inc. 4/7/98 400,000 14.00 400,000
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 2,476,668
SkillSearch Corportion 2/5/98 496,000 13.00 499,751
SkillSearch Corportion 6/1/97 300,000 14.00 300,000
Solutioneering, Inc. 3/31/02 2,000,000 13.75 2,000,000
Southern Specialty Brands, Inc. 6/30/02 1,732,500 14.00 1,737,756
Southern Therapy, Inc. 4/22/02 1,000,000 13.50 1,000,000
Sport & Social Clubs 5/21/02 1,500,000 13.50 1,500,000
Sqwincher Corporation 2/1/98 160,000 10.00 160,000
Stratford Safety Products, Inc. 3/1/02 575,000 13.50 581,250
Studley Products Corp. 11/18/99 207,000 12.00 207,000
Studley Products Corp. 12/1/99 440,800 8.00 440,800
Summit Publishing Group, Ltd. 3/17/99 1,485,000 12.00 1,495,000
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 21,700
Suncoast Medical Group, Inc. 12/31/98 625,000 13.50 625,000
TAC Systems, Inc. 3/27/02 760,000 14.00 760,000
TAC Systems, Inc. 6/1/02 252,000 14.00 252,000
TCOM Systems, Inc. 2/5/98 432,888 0.00 432,888
Temps & Co. 5/12/02 3,000,000 13.25 3,000,000
Tower Environmental, Inc. 11/30/98 2,440,000 10.00 41,990
Tower Environmental, Inc. 5/30/95 150,000 12.50 0
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 2,000,000
Viking Moorings Acquisition, LLC 12/31/01 1,655,500 13.00 1,764,598
Vista Information Solutions, Inc. 4/30/01 2,032,157 13.50 2,133,518
Vista Information Solutions, Inc. 4/10/02 254,936 14.00 257,189
Wearever Health Products, LLC 3/31/02 1,500,000 13.50 1,500,000
Wolfgang Puck Food Company 5/20/02 4,000,000 12.50 4,000,000
Zahren Alternative Power Corp. 1/30/00 495,000 13.00 496,573
Zahren Alternative Power Corp. 11/27/99 1,980,000 13.00 1,991,656
24
25
TANDEM CAPITAL INVESTMENTS Maturity Cost Coupon Fair Value
- -------------------------- -------- ---- ------ ----------
Altris Software, Inc. 6/27/02 $ 3,000,000 11.50% $ 3,000,000
Cover-All Technologies, Inc. 3/31/02 3,000,000 12.50 3,000,000
Environmental Tectonics Corporation 3/27/04 4,000,000 12.00 4,000,000
Smartchoice Automotive Group 3/12/99 3,500,000 12.00 3,500,000
SmartChoice Automotive Group 5/13/02 4,000,000 12.00 4,000,000
Teltronics, Inc. 2/13/02 4,250,000 11.00 4,250,000
------------ ------------
LOANS DENOMINATED IN CANADIAN CURRENCY
- --------------------------------------
Century Pacific Greenhouses Ltd. 4/14/02 1,002,794 13.00 1,002,794
Quadravision Communications Ltd. 4/11/02 437,956 13.00 437,956
Systech Group, Inc. 3/31/02 874,636 13.00 874,636
------------ ------------
Total Loans $319,364,333 $312,355,939
============ ============
25
26
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
Cost or
Number of Contributed
EQUITY INTERESTS Shares Value Fair Value
- ---------------- ------ ----- ----------
PUBLICLY TRADED COMPANIES
National Vision Associates, Ltd. Common Stock 208,698 $1,771,149 $ 903,923
Trans Global Services, Inc. Common Stock 28,088 0 17,379
Moovies, Inc. Common Stock 156,110 1,561 746,401
Premiere Technologies, Inc. Common Stock 50,000 0 1,157,813
Cardiac Control Systems, Inc. Common Stock 50,000 250,000 44,063
American Network Exchange Common Stock 76,222 21,879 154,350
American Network Exchange Common Stock - escrowed 63,429 0 0
Educational Medical, Inc. Common Stock 108,198 0 799,313
Encore Medical Common Stock - restricted 464,291 0 1,609,542
FCOA Acquisition Corp. Common Stock 94,335 0 495,259
QuadraMed Corporation Common Stock - restricted 25,700 0 121,433
QuadraMed Corporation Common Stock - escrowed 2,856 0 0
Radiant Systems Common Stock - restricted 93,454 0 1,414,660
Virginia Gas Company Common Stock 54,163 0 511,840
American Consolidated Labs Common Stock - restricted 1,000,000 1,000,000 525,000
NON-TRADED EQUITY INVESTMENTS IN PUBLIC COMPANIES
Altris Software, Inc. Preferred Stock 3,000 3,000,000 3,000,000
American Consolidated Labs Preferred Stock - Series A 2,720,141 2,720,141 2,375,000
Environmental Tectonics Corporation Preferred Stock - Series A 25,000 2,500,000 2,500,000
Multicom Publishing, Inc. Preferred Stock - Series A 235,000 1,175,000 950,000
PRIVATE COMPANIES
Skillsearch Corporation Common Stock 2,241 250,035 150,000
Potomac Group, Inc. Series A Preferred Stock 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
Kentucky Kingdom, Inc. Preferred Stock 6,000 600,000 600,000
Golf Corporation of America, Inc. Common Stock 100,000 100,000 0
International Risk Control, Inc. Series A Preferred Stock 200,000 50,000 50,000
Dentalcare Partners, Inc. Series E Preferred Stock 490,978 800,000 800,000
Unique Electronics, Inc. Series A Preferred Stock 1,000,000 1,000,000 880,000
Pipeliner Systems, Inc. Series D Preferred Stock 5,000 1,000,000 800,000
Front Royal, Inc. Common Stock 110,000 275,000 275,000
Fycon Technologies, Inc. Series A Preferred Stock 96,000 96,000 0
Johnston County Cable, L.P. Class A Interest in L.P. 11.11% of L.P 100,000 90,000
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 31,279 190,000 430,000
PRA International, Inc. Common Stock 117,298 21,173 1,616,173
26
27
Cost or
EQUITY INTERESTS Number of Contributed
Shares Value Fair Value
------ ----- ----------
Caldwell/VSR Inc. Preferred Stock 890 $ 890,000 $ 760,000
International Displays Inc. Preferred Stock 1,500,000 1,659,469 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 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. Series A Preferred Stock 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 50,000
Recompute Corporation Common Stock 125,000 250,000 250,000
CSM, Inc. Class A Common Stock 99,673 100,000 100,000
Relevant Knowledge, Inc. Series B Preferred Stock 312,500 500,000 500,000
----------- -----------
Total Equity Interests $31,161,482 $38,011,186
=========== ===========
27
28
SIRROM CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
Cost or
Number of Percentage Contributed
STOCK WARRANTS Shares Ownership Value Fair Value
- -------------- ------ --------- ----- ----------
PUBLICLY TRADED COMPANIES
American Consolidated Labs 720,000 6.69% $ 0 $ 378,000
American Network Exchange 13,988 0.00 0 0
Cardiac Control Systems, Inc. 100,000 4.35 0 88,125
Cardiac Control Systems, Inc. 50,000 2.15 0 0
Consumat Systems, Inc. 250,000 20.00 0 506,250
DynaGen, Inc. 266,700 0.01 266,700 194,469
Encore Medical 69,841 0.01 0 0
Moovies, Inc. 20,000 0.20 0 0
Multicom Publishing, Inc. 162,525 2.80 800,000 164,557
Urethane Technologies, Inc. 525,435 5.01 363,480 0
Vista Information Solutions, Inc. 1,247,582 5.61 467,843 1,684,236
Vista Information Solutions, Inc. 160,000 0.63 45,064 168,000
Virginia Gas Company 54,163 1.52 54 29,248
TANDEM CAPITAL WARRANTS
AND OPTIONS IN PUBLIC COMPANIES
Altris Software, Inc. 300,000 3.00 0 0
Environmental Tectonics Corporation 166,410 5.00 0 800,000
Smartchoice Automotive Group 300,000 2.50 0 0
PRIVATE COMPANIES
AB Plastics Holding Corporation 200,000 20.00 0 2,875,000
APS America, Inc. 13.64 12.00 0 0
Aero Products Corporation 14.28 12.50 0 0
Affinity Corporation 550 9.67 20,000 20,000
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
Anton Airfoods 124 11.00 0 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
28
29
Cost or
Number of Percentage Contributed
STOCK WARRANTS Shares Ownership Value Fair Value
- -------------- ------ --------- ----- ----------
Auto Rental Systems, Inc. 144,869 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
BroadNet, Inc. 265,568 15.00 0 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
Catalina Food Ingredients, Inc. 10.2 9.25 0 0
Cedaron Medical, Inc. 173,981 4.25 0 0
CellCall, Inc. 358 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, Inc. 52 5.00 461,000 461,000
Clearidge, Inc. 442,164 1.63 0 0
CLS Corporation 126,997 4.22 0 0
Colonial Investments, Inc. 194 18.00 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 3,500
Corporate Link, Inc. 190 16.00 0 0
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
Dartek Industries 250,000 25.00 0 0
Delaware Publishing Group, Inc. 8,534 47.67 15,000 15,000
Dentalcare Partners, Inc. 666,022 4.98 10,000 10,000
Electronic Accessory Specialists Int'l, Inc. 3,694 3.00 0 0
Electronic Merchant Services 430 12.50 12,500 0
Encor Technologies, Inc. 7 6.84 0 0
Entek IRD 75,230 1.50 160,000 160,000
Entek IRD 185,480 3.75 0 0
Express Shipping Centers, Inc. 73,752 5.09 552,402 262,386
Faxnet, Inc. 190,321 2.50 100,000 100,000
FDL, Inc. 548 16.00 250,000 250,000
Film Technologies International, Inc. 8 7.50 0 0
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 Marine 5,137 18.00 0 0
Gloves Inc. 5,000 5.00 0 0
Gold Medal Products, Inc. 102,370 32.77 0 0
29
30
Cost or
Number of Percentage Contributed
STOCK WARRANTS Shares Ownership Value Fair Value
- -------------- ------ --------- ----- ----------
Golf Corporation of America, Inc. 350,000 31.50 % $ 0 $ 0
Good Food Fast Companies, The 174,779 17.00 0 0
Gulfstream International Airlines, Inc. 271 21.00 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 0 200,000
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
International Displays, Inc. 1,250.25 20.00 0 0
IV Infusion Corporation 279,481 21.00 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. 7,704 2.00 0 610,000
Kryptonics, Inc. 1,630 8.89 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
Master Graphics, Inc. 5 5.00 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
Mead-Higgs, Inc. 2,500 10.00 0 0
Merge Technologies, Inc. 21,449 3.25 0 0
Mesa International, Inc. 13 11.00 0 0
Metals Recycling Technologies Corp. 257,801 5.00 0 0
Miller Group 208,375 4.00 0 0
Money Transfer Systems, Inc. 137 12.00 15,000 15,000
Monogram Products, Inc. 1,276 6.00 0 116,000
Moore Diversified Products, Inc. 17 15.00 0 0
Multimedia Learning, Inc. 148,397 9.41 0 650,000
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
30
31
Cost or
Number of Percentage Contributed
STOCK WARRANTS Shares Ownership Value Fair Value
- -------------- ------ --------- ----- ----------
Pipeliner Systems, Inc. 2,080,000 20.55% $ 20,000 $ 0
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. 120,326 22.90 275,000 275,000
Recompute Corporation 611,144 8.00 300,000 300,000
Relevant Knowledge, Inc. 75,000 1.5 0 0
Rynel Ltd., Inc. 390,517 15.00 0 0
Saraventures Fixtures, Inc. 25 20.00 0 0
Scandia Technologies, Inc. 327 25.50 0 0
Sheet Metal Specialties, Inc. 538 35.00 0 0
SkillMaster, Inc. 176 8.30 25,000 25,000
SkillMaster, Inc. 111 0.05 0 0
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
Southern Therapy 248 7.50 0 0
Sport & Social Clubs 11 10.00 0 0
Stratford Safety Products, Inc. 70 6.50 75,000 75,000
Suncoast Medical Group, Inc. 580,159 24.00 25,000 0
Suprex Corporation 1,058,179 3.45 0 0
Systech Group, Inc. 5% of Co. 5.00 0 0
TAC Systems, Inc. 157,780 1.80 0 0
Temps & Co. 53 5.00 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
Voice FX Corporation 233,112 8.00 0 400,000
Wearever Healthcare Products, LLC 222,375 9.00 0 0
Wearever Healthcare Products, LLC 100,000 3.89 250,000 250,000
Wolfgang Puck Food Company 59,650 1.00 0 0
Zahren Alternative Power Corporation 1,247 6.54 25,000 400,000
---------- -----------
Total Stock Warrants $5,629,669 $16,837,295
========== ===========
OTHER INVESTMENTS
- -----------------
SWS3, Inc. (expected proceeds from sale of mfg. plant) $3,090,728 $ 2,740,728
Hancock Company (royalty stream to be collected
from sale of Gitman brand name) 1,700,000 400,000
31
32
Cost or
Contributed
OTHER INVESTMENTS Value Fair Value
- ----------------- ----- ------------
HSA International, Inc. (anticipated proceeds from
litigation) $ 1,150,000 $ 1,000,000
Capitalized workout expenses 186,615 136,615
------------ ------------
Total Other Investments $ 6,127,343 $ 4,277,343
------------ ------------
TOTAL INVESTMENTS $362,282,827 $371,481,763
============ ============
32
33
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 June 30, 1997, the Company
earned interest on investments of $9.6 million, a 71% increase over the $5.6
million earned in the same quarter of 1996. For the six month period ended June
30, 1997, interest on investments was $17.7 million, a 70% increase over the
$10.4 million earned in the same period of 1996. In addition to interest on
investments, the Company also collects an up-front processing fee for each loan
it originates. During the second quarter of 1997, the Company earned $1.3
million in processing fees, a 99% increase over the $652,000 earned in the
second quarter of 1996. During the first six months of 1997, the Company
earned $3.0 million in processing fees, an 87% increase over the $1.6
million earned in the first six months 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 $312.4 million at June 30, 1997, an increase of 67%
over the $187.6 million loan portfolio balance at June 30, 1996. The $61.6
million of loans originated during the second quarter of 1997 was a 115%
increase over the $28.7 million of loans originated during the second quarter
of 1996. The $128.7 million of loans originated in the first half of 1997 was a
110% increase over the $61.2 million of loans originated in the first half of
1996. Of the loans originated this quarter and this half, $7.0 million and
$21.7, respectively, were made to public companies with a market capitalization
of less than $100.0 million, 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 June 30, 1997 was 13.2%, as compared to 13.0%
at June 30, 1996.
The Company's interest expense decreased to $1.8 million in the second
quarter of 1997, a 17% decrease from the $2.1 million paid in the second
quarter of 1996. Interest expense was $4.0 million in the first half of 1997,
a 5% increase over the $3.8 million of such expenses in the first half of 1996.
The decrease in the second quarter of 1997 versus 1996 resulted from repayment
of amounts outstanding under the Company's revolving credit facilities from the
proceeds of the public offering completed in February 1997. The increase in
the first half of 1997 versus 1996 is due to increased borrowings from the SBA.
Overhead and amortization of borrowing costs totaled $2.1 million in the
second quarter of 1997, a 62% increase over the $1.3 million of such expenses
in the second quarter of 1996 and $3.7 million in the first half of 1997, a 37%
increase over the $2.7 million of such expenses in the first half of 1996.
These increases can be largely attributed to the increase in the number of
employees to 35 in June 1997 from 16 in June 1996. Although the dollar amount
of these expenses increased between the periods, annualized overhead expenses
as a percentage of average assets remained fairly constant at 2.0% for the
second quarter of 1997 versus 1.9% for the second quarter of 1996 and decreased
to 1.9% for the first half of 1997 compared to 2.2% for the first half 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 second quarter of 1997, Harris Williams had revenues of $2.8
million, a 115% increase from $1.3 million in the second quarter
33
34
of 1996. For the first half of 1997, Harris Williams had revenues of $3.7
million, a 37% increase over the $2.7 million for the first half of 1996.
During the second quarter of 1997, Harris Williams had pretax income of $1.0
million, a 59% increase from $627,000 in pretax income in the second quarter of
1996 and during the first half of 1997, had pretax income of $1.3 million, a 7%
decrease over the $1.4 million for the first half 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. Income taxes of $142,995 were accrued on Harris Williams' pretax
income during the second quarter of 1997 and $215,355 during the first half of
1997. No taxes were accrued on Harris Williams' pretax income in the second
quarter of 1996 or the first half 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 $3.0 million during the second quarter of 1997 and $7.4 million
during the first half of 1997, as compared to $200,000 and $6.0 million for the
second quarter and first half of 1996, respectively.
The following table sets forth the details of realized gains and losses that
occurred during the first quarter and first half of 1997 and 1996.
Realized Gains and (Losses) for the quarters and six month periods ended
June 30, 1996, and June 30, 1997.
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
JUNE 30, JUNE 30,
-------- --------
1996 1997 1996 1997
-------- -------- -------- --------
(in thousands) (in thousands)
Emerald Pointe Waterpark, L.P. Warrant $200 $ 200
Premiere Technologies, Inc. Common Stock $ 2,044 6,279 $ 7,170
American Remedial Technologies Warrant 450
WXMT, Channel 30 TV Warrant 100
Osco, Inc. Warrant 27
Medical Associates of America Loan (1,100)
Radio Systems Corporation Warrant 1,800 1,800
Argenbright Holdings Ltd. Warrant 750 750
Virtual Resources, Inc. Warrant 432 432
Global Finance & Leasing, Inc. Warrant 409 409
Union Planters, Inc. Common Stock 170 170
Miscellaneous (10) (26)
Ashe Industries, Inc. Loan (2,608) (2,608)
Eastern Food Group LLC Loan (1,265)
Gold Medal Products, Inc. Loan (825)
Golf Video, Inc. Loan (500)
Sqwincher Corporation Warrant 320
Radiant Systems, Inc. Common Stock 716
Innotech, Inc. Common Stock 901
---- ------- ------- -------
$200 $ 2,987 $ 5,956 $ 7,444
==== ======= ======= =======
Management does not attempt to maintain a comparable level of realized gains
from year to year, but instead attempts to maximize total investment portfolio
appreciation.
Change in Unrealized Appreciation (Depreciation) of Investments. For the
quarters ended June 30, 1997 and 1996, the Company recorded net increases in
unrealized appreciation of investments of $1.3 million and $2.3 million,
respectively. For the six month periods ended June 30, 1997 and 1996, the
Company recorded a net increase in unrealized depreciation of investments of
$3.2 million and a net increase in unrealized appreciation of investments of
$4.5 million, respectively. 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.
34
35
The following table sets forth information regarding significant changes in
unrealized appreciation (depreciation) of assets in the Company's portfolio
made during the first quarter of 1997 and 1996 and the first half of 1997 and
1996.
Schedule of significant unrealized appreciation (depreciation) for the
quarters and six months ending June 30, 1996 and June 30, 1997.
Quarter Ended June 30, Six Months Ended June 30,
---------------------- -------------------------
1996 1997 1996 1997
------ ------- ------- -------
(in thousands) (in thousands)
LOANS:
Ashe Industries, Inc. $ (150) $ 2,450 $(1,900) $ 2,300
Argenbright Holdings, Ltd. (750) (750)
Tower Environmental, Inc. (250) (125) (1,710)
Cougar Power Products, Inc. (525) (775)
C.J. Spirits, Inc. (250) (400)
SWS3, Inc. (350) (350)
Golf Corporation of America (350) (625)
Valdawn, LLC (400) (400)
Champion Glove Manufacturing Co., Inc. (875) (1,000)
Medical Associates of America, Inc. 1,100
Eastern Food Group LLC 1,265
Golf Video, Inc. 450
Campus Voice LLC (200)
PRIVATE COMPANY WARRANTS AND
EQUITY SECURITIES:
Hoveround Corporation 1,175 1,175
Radio Systems Corporation 270 (1,000) 270 (1,000)
Affinity Corporation 215 (365) 215 (365)
Emerald Pointe Waterpark L.P. (244) (244)
Fycon Technologies, Inc. (500) (500)
Eastern Food Group, LLC (654) (654)
AB Plastics Holding Corporation 2,875 2,875
Multicom Publishing, Inc. (non-traded) (225) (225)
DentalCare Partners, Inc. (280) (280)
Global Finance & Leasing, Inc. (425) --
Potomac Group, Inc. 956
Associated Response Services, Inc. 600
Educational Medical, Inc. 400
Capital Network System, Inc. 250
American Remedial Technologies, Inc. (230)
PRA International, Inc. 1,170
Argenbright Holdings Ltd. 375
HomeLink Services, Inc. (250)
Express Shipping Centers, Inc. (290)
Virtual Resources, Inc. (250) (250)
PUBLIC COMPANY WARRANTS AND
EQUITY SECURITIES:
Premiere Technologies, Inc. 1,611 (1,206) 2,789 (6,563)
Vista Information Solutions, Inc. 1,261 1,334 1,261 1,334
Consumat Systems, Inc. 569 178 569 178
National Vision Associates 254 254
Innotech, Inc. 235 235 (454)
Moovies, Inc. (528) 150 (528) 150
Encore Medical, Inc. 669 1,166
Educational Medical, Inc. 268 518
American Consolidated Laboratories, Inc. (442) (442)
Radiant Systems, Inc. (109) 705
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.
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36
During the second quarter of 1997, the Company paid dividends of $6.0
million compared to the $2.2 million paid in the second quarter of 1996. Of
these dividends, $6.0 million and $1.8 million were derived from net operating
income for the second quarter of 1997 and 1996, respectively, and $0 and
$400,000 were derived from realized long-term capital gains for the second
quarter of 1997 and 1996, respectively.
For the quarters ended June 30, 1997 and 1996, the Company 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 $2.1 million and $70,000 for the quarters ended June 30,
1997 and 1996, respectively.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had $500,000 in cash and cash equivalents. At
June 30, 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 $11.7
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 June 30, 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 June 30, 1997, and none of
these borrowings mature prior to 2002.
As of June 30, 1997, SII had $1.9 million 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
a lien on all of SII's assets and a pledge of SII's stock and 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 purchases loans originated by
the Company and the related warrants and uses 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 June 30, 1997, $7.6
million 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 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.
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37
The Company believes that anticipated borrowings under the Revolving Credit
Facility 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 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 Registration Statement on Form N-2 (Registration No. 333-19493) and
should be kept in mind when evaluating the Company's financial performance.
PORTFOLIO TURNOVER AND CREDIT QUALITY
During the quarter ended June 30, 1997, the Company made loans to 45
companies totaling approximately $61.6 million and experienced 13 repayments
(either partial or full) aggregating $17.4 million. During the quarter ended
June 30, 1996, the Company made loans to 28 companies totaling approximately
$28.7 million and experienced 5 repayments (either partial or full) aggregating
approximately $5.3 million. The Company cannot control all changes in its
portfolio of investments, as borrowers have the right to prepay loans made by
the Company without penalty.
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 group. Loans
with a grade 5 are generally in default, and interest is generally 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 expects to charge off some part of the loan. At June 30, 1997 and
1996, the Company had loans to 15 companies with an aggregate principal balance
of $20.8 million, and 9 companies with an aggregate principal balance of $13.5
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.
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38
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. The Company's Annual Shareholder's Meeting was held on April
4, 1997 to (i) elect the directors of the Company for the
ensuing year, (ii) approve an amendment to the Company's 1996
Incentive Stock Option Plan to increase the number of shares
available for grant thereunder, and (iii) ratify the selection
of Arthur Andersen LLP to serve as independent public
accountants for the Company for the year ending December 31,
1997.
b. The following directors were elected at the Annual Meeting of
Shareholders:
FOR WITHHELD
---------- ----------
E. Townes Duncan 11,897,960 66,037
William D. Eberle 11,897,260 65,737
Edward J. Mathias 11,895,067 68,930
Robert A. McCabe, Jr. 11,898,260 65,737
George M. Miller, II 11,898,260 65,737
John A. Morris, Jr. 11,829,460 134,537
Raymond H. Pirtle, Jr. 11,894,960 69,037
Keith M. Thompson 11,898,060 65,937
Christopher A. Williams 11,898,260 65,737
L. Edward Wilson, P.E. 11,897,460 66,537
c. The resolutions passed were as follows:
1. To approve the adoption of an amendment to the
Company's 1996 Incentive Stock Option Plan to
increase the number of shares available for grant
thereunder.
FOR AGAINST WITHHELD
11,230,235 486,362 231,521
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39
2. To ratify the selection of Arthur Andersen LLP to
serve as independent public accountants for the
Company for the year ending December 31, 1997.
FOR AGAINST WITHHELD
11,948,272 6,280 9,445
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 3.1 Amended and Restated Charter of the Company
(incorporated by reference to Exhibit 3.1 to
the Registrant's Quarterly Report on Form 10-Q for
the period ending September 30, 1996, filed with the
Commission on November 14, 1996)
Exhibit 3.2 Bylaws of the Company (incorporated by reference to
exhibit b. contained in the Registrant's
Registration Statement on Form N-2, as amended (File
No. 33-86680), filed with the Commission on November
23, 1994)
Exhibit 4.1 Instruments defining rights of holders of securities:
See Paragraph 6 of the Company's Amended and
Restated Charter (incorporated by reference to
Exhibit 3.1 to the Registrant's Quarterly Report on
Form 10-Q for the period ending September 30, 1996,
filed with the Commission on November 14, 1996)
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K.
None.
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40
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: August 12, 1997 By: /s/ Carl W. Stratton
------------------------
Carl W. Stratton
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
Exhibit 3.1 Amended and Restated Charter of the Company
(incorporated by reference to Exhibit 3.1 to
the Registrant's Quarterly Report on Form 10-Q for
the period ending September 30, 1996, filed with the
Commission on November 14, 1996)
Exhibit 3.2 Bylaws of the Company (incorporated by reference to
exhibit b. contained in the Registrant's
Registration Statement on Form N-2, as amended (File
No. 33-86680), filed with the Commission on November
23, 1994)
Exhibit 4.1 Instruments defining rights of holders of securities:
See Paragraph 6 of the Company's Amended and
Restated Charter (incorporated by reference to
Exhibit 3.1 to the Registrant's Quarterly Report on
Form 10-Q for the period ending September 30, 1996,
filed with the Commission on November 14, 1996)
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule (for SEC use only)
41