<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 4, 1999
Intrepid Capital Corporation
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 333-66859 59-3546446
- -------------------------------- ------------ -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
</TABLE>
50 North Laura Street, Suite 3550, Jacksonville, Florida 32202
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(904) 350-9999
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
This Amendment No. 1 amends and supplements the Current Report on Form
8-K filed on August 18, 1999 (the "Original 8-K") by Intrepid Capital
Corporation (the "Company"). Capitalized terms used herein which are not
otherwise defined herein are used with the respective meanings ascribed to them
in the Original 8-K.
As previously reported, on August 4, 1999, the Company acquired all of
the outstanding capital stock of Ewing from the Ewing Shareholders. As of the
date of the filing of the Original 8-K, it was impracticable for the Company to
provide the financial statements required by Form 8-K. In accordance with
General Instruction C. and Item 7 of Form 8-K, such financial statements are
being filed with this Amendment No.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired. Included in this
Current Report are the consolidated statements of financial
condition, income, changes in stockholders' equity, changes
in subordinated borrowings and cash flows of Ewing for the
two-year period ended December 31, 1998, together with the
notes thereto, which have been audited by the independent
accounting firm of PricewaterhouseCoopers LLP, whose opinion
thereon is included herein.
(b) Pro Forma Financial Information. Included in this Current
Report are the following unaudited pro forma financial
statements, together with the notes thereto (the "Unaudited
Pro Forma Consolidated Financial Statements"):
(i) Unaudited pro forma consolidated balance sheet as of
June 30, 1999.
(ii) Unaudited pro forma consolidated statement of
operations for the six-month period ended June 30,
1999.
(iii) Unaudited pro forma consolidated statement of
operations for the year ended December 31, 1998.
The Unaudited Pro Forma Consolidated Financial Statements of
the Company give effect to the consummation of the Share
Purchase. The pro forma adjustments are based upon currently
available information and upon certain assumptions that the
Company's management believes are reasonable. The Share
Purchase has been accounted for using the purchase method of
accounting. The adjustments recorded in the Unaudited Pro
Forma Consolidated Financial Statements represent the
Company's preliminary determination of these adjustments
based upon available information. There can be no assurance
that the actual adjustments will not differ significantly
from the pro forma adjustments reflected in the Unaudited Pro
Forma Consolidated Financial Statements. The Unaudited Pro
Forma Consolidated Financial Statements should be read in
conjunction with the historical consolidated financial
statements of the Company and Ewing and the related notes
thereto.
2
<PAGE> 3
(c) Exhibits. The following is a list of the Exhibits attached
hereto:
<TABLE>
<S> <C>
Exhibit No. 2 Share Purchase Agreement*
Exhibit No. 10.1 Subordinated Convertible Promissory Note*
Exhibit No. 10.2 Subordinated Convertible Promissory Note*
Exhibit No. 10.3 Subordinated Convertible Promissory Note*
Exhibit No. 10.4 Employment Agreement*
Exhibit No. 99 Press Release*
-----------------------
* Previously filed.
</TABLE>
3
<PAGE> 4
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.
INTREPID CAPITAL CORPORATION
By: /s/ Forrest Travis
----------------------------------
Name: Forrest Travis
Title: President and Chief
Executive Officer
Dated: October 18, 1999
4
<PAGE> 5
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated statements of financial condition, income, changes in
stockholders' equity, changes in subordinated borrowings and cash flows of
Ewing for the two-year period ended December 31, 1998, together with the notes
thereto, which have been audited by the independent accounting firm of
PricewaterhouseCoopers LLP, whose opinion thereon is included herein...........................F-1
Unaudited pro forma consolidated balance sheet as of June 30, 1999.............................F-13
Unaudited pro forma consolidated statements of operations for the six months ended
June 30, 1999 and for the year ended December 31, 1998.........................................F-14
Notes to the unaudited pro forma consolidated financial statements.............................F-16
</TABLE>
5
<PAGE> 6
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and the Board of Directors of
Allen C. Ewing Financial Services, Inc.
In our opinion, the accompanying consolidated statements of financial condition
and the related consolidated statements of income, changes in stockholders'
equity, changes in subordinated borrowings and cash flows present fairly, in
all material respects, the financial position of Allen C. Ewing Financial
Services, Inc. and Subsidiaries at December 31, 1999 and 1998, and the results
of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
/s/ PricewaterhouseCoopers LLP
Tampa, Florida
February 12, 1999
F-1
<PAGE> 7
ALLEN C. EWING FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
--------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 314,042 $ 58,955
Restricted cash 100,000 100,000
Corporate and government securities owned, at market value 829,987 1,065,806
Due from correspondent clearing agents 194,411 246,377
Prepaid expenses and other assets 46,189 22,053
Income taxes receivable 17,234 --
Deferred income taxes 5,819 16,412
Furniture, equipment, and leasehold improvements, at cost, less
accumulated depreciation and amortization of $132,816 and
$107,020 in 1998 and 1997, respectively 47,747 73,543
---------- ----------
Total assets $1,555,429 $1,583,146
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 44,583 $ 37,717
Accrued commissions 159,981 133,539
Income tax payable -- 73,500
Securities sold, not yet purchased, at market value 749 23,182
---------- ----------
Total liabilities 205,313 267,938
---------- ----------
Commitments and contingent liabilities (Notes 3, 4 and 7)
Stockholders' equity:
Common stock, $.10 par value; authorized 25,000 shares; 5,426
issued and outstanding shares in 1998 and 1997 543 543
Additional paid-in capital 536,332 536,332
Retained earnings 813,241 778,333
---------- ----------
Total stockholders' equity 1,350,116 1,315,208
---------- ----------
Total liabilities and stockholders' equity $1,555,429 $1,583,146
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE> 8
ALLEN C. EWING FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Revenues:
Net trading and investment profits $ 152,480 $ 317,833
Securities commissions 686,640 758,530
Underwriting fees and commissions 286,388 597,014
Fee income from corporate finance activities 818,112 1,730,167
Dividends, interest and other income 36,359 76,577
---------- ----------
1,979,979 3,480,121
---------- ----------
Expenses:
Salaries, commissions and related expenses 1,261,246 2,513,017
Administrative operating expenses 399,255 487,590
Clearing expenses, correspondent firms 163,054 172,193
Office and equipment rentals 105,946 120,312
Interest expense 13 13,992
---------- ----------
1,929,514 3,307,104
---------- ----------
Income before provision for income taxes 50,465 173,017
Provision for income taxes 15,557 51,045
---------- ----------
Net income $ 34,908 $ 121,972
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 9
ALLEN C. EWING FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON ADDITIONAL
STOCK $.10 PAID-IN RETAINED
PAR VALUE CAPITAL EARNINGS TOTAL
--------- ------- -------- -----
<S> <C> <C> <C> <C>
Balance, January 1, 1997 $ 395 $ 388,979 $ 719,030 $ 1,108,404
Conversion of subordinated debentures 200 199,800 -- 200,000
Redemption of common stock (52) (52,447) (62,669) (115,168)
Net income -- -- 121,972 121,972
----------- ----------- ----------- -----------
Balance, December 31, 1997 543 536,332 778,333 1,315,208
Net income -- -- 34,908 34,908
----------- ----------- ----------- -----------
Balance, December 31, 1998 $ 543 $ 536,332 $ 813,241 $ 1,350,116
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 10
ALLEN C. EWING FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SUBORDINATED BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Subordinated borrowings at January 1, 1997 $ 300,000
Decreases:
Conversion of subordinated debentures (200,000)
Payment of subordinated note (100,000)
---------
Subordinated borrowings at December 31, 1998 and 1997 $ --
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 11
ALLEN C. EWING FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SUBORDINATED BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 34,908 $ 121,972
--------- ---------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 28,761 31,163
Deferred income taxes 10,593 (27,306)
Change in assets and liabilities:
Decrease (increase) in corporate and government securities
owned, at market 235,819 (193,661)
Decrease in due from correspondent clearing agents 51,966 246,710
(Increase) decrease in prepaid expenses and other assets
and income taxes receivable (44,335) 64,170
(Decrease) increase in accounts payable and accrued expenses (40,192) 62,175
(Decrease) increase in securities sold but not yet purchased,
at market (22,433) 23,182
--------- ---------
Total adjustments 220,179 206,433
--------- ---------
Net cash provided by operating activities 255,087 328,405
--------- ---------
Cash flows from investing activities:
Purchases of furniture, equipment and leasehold improvements -- (23,648)
--------- ---------
Net cash used in investing activities -- (23,648)
--------- ---------
Cash flows from financing activities:
Repayment of convertible subordinated note -- (100,000)
Redemption of common stock -- (115,168)
Payments on notes payable to stockholders -- (100,000)
--------- ---------
Net cash used in financing activities -- (315,168)
--------- ---------
Net increase (decrease) in cash 255,087 (10,411)
Cash, beginning of year 58,955 69,366
--------- ---------
Cash, end of year $ 314,042 $ 58,955
========= =========
Supplemental disclosure of cash flow information:
Cash paid interest $ 13 $ 17,775
========= =========
Cash paid for income taxes $ 95,698 $ 7,892
========= =========
See Note 7 for non-cash activities.
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 12
ALLEN C. EWING FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SUBORDINATED BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
1. OWNERSHIP AND OPERATIONS
Allen C. Ewing Financial Services, Inc. (the Company) is a holding company
whose operations are limited to the ownership of its subsidiaries. The
Company's principal subsidiary, Allen C. Ewing & Co., engages in full service
investment banking, including stock brokerage and investment research,
underwriting, sales and trading, and corporate finance activities. Allen C.
Ewing Financial Services, Inc. and its subsidiaries conduct business throughout
the United States from offices located in the State of Florida.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation. The
consolidated subsidiaries at December 31, 1998 and 1997 include Allen C. Ewing
& Co. (the Principal Subsidiary), Allen C. Ewing Mortgage and Realty, Inc., and
Ewing Asset Management, Inc.
INCOME RECOGNITION
Securities transactions (and related commission revenues) are recorded on a
settlement date basis, which is generally the third business day following the
transaction date. Fees and other income are recorded as earned when collection
is reasonably assured.
SECURITIES OWNED
Securities owned consist of corporate stocks, U.S. Treasury securities, and
money market mutual fund shares at quoted market values. The cost of securities
owned was $777,485 and $949,836 at December 31, 1998 and 1997, respectively. Net
unrealized increases or decreases in market value are recognized in the
accompanying consolidated statements of income.
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements are stated at cost. For
financial statement purposes, depreciation of these assets is computed on the
straight-line method using estimated useful lives; for leasehold improvements,
amortization is computed on the straight-line method using estimated useful
lives or the terms of the leases, whichever is shorter. Accelerated methods are
used for income tax purposes. Upon sale or retirement, the costs and related
depreciation are eliminated from the respective accounts and the resulting gain
or loss is included in operations.
F-7
<PAGE> 13
ALLEN C. EWING FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SUBORDINATED BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
RESTRICTED CASH
Restricted cash consists of cash on deposit with the Principal Subsidiary's
correspondent clearing agent.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist principally of cash and interest bearing
investments with maturities of three months or less. For purposes of the
consolidated statements of cash flows, all highly liquid investments are
considered to be cash equivalents.
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CONCENTRATIONS OF CREDIT RISK
The Company is engaged in various trading and brokerage activities in which
counterparties primarily include broker-dealers, banks, and other financial
institutions. In the event counterparties do not fulfill their obligations, the
Company may be exposed to risk. The risk of default depends on the
creditworthiness of the counterparty or issuer of the instrument. It is the
Company's policy to review, as necessary, the credit standing of each
counterparty.
3. OPERATING LEASES
The Principal Subsidiary leases office space, automobiles, and certain equipment
under various noncancelable operating lease agreements.
Future minimum lease payments in subsequent years ending December 31, under
these operating leases are as follows:
1999 $ 62,247
2000 7,977
---------
$ 70,224
=========
F-8
<PAGE> 14
ALLEN C. EWING FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SUBORDINATED BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS
The Principal Subsidiary previously entered into an agreement with Synagen
Capital Partners, Inc. (Synagen), a stockholder of the Company, providing that
Synagen would furnish office facilities and secretarial services for the
Company's office in Orlando, Florida in exchange for 30% of the gross revenue
received by the Principal Subsidiary's business originated through that office.
The Principal Subsidiary paid Synagen approximately $69,000 and $490,000 in 1998
and 1997, respectively, under this agreement. In November 1997, this agreement
was terminated with respect to engagement agreements entered into after the
termination date. In addition, the Principal Subsidiary also reimburses Synagen
for certain out-of-pocket expenses. Certain of the current or former directors,
officers, and stockholders of Synagen are, or were during a portion of 1997,
also directors, officers, or stockholders of the Company. In addition, the
Principal Subsidiary received approximately $15,000 and $27,000 in consulting
fee income from an affiliated entity for the years ended December 31, 1998 and
1997, respectively.
5. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET CREDIT RISK
In the normal course of business, the Principal Subsidiary's customer and
correspondent clearance activities (customers) involve the execution, settlement
and financing of various customer securities transactions. These activities may
expose the Principal Subsidiary to off-balance-sheet risk in the event the
customer is unable to fulfill its contracted obligations.
The Principal Subsidiary's customer securities activities are transacted on
either a cash or margin basis. In margin transactions, the Principal
Subsidiary's correspondent clearing agent extends credit to the customer,
subject to various regulatory and internal margin requirements, collateralized
by cash and securities in the customer's account. In connection with these
activities, the Principal Subsidiary executes customer transactions which may
include the sale of securities not yet purchased. Such transactions may expose
the Principal Subsidiary to significant off-balance-sheet risk in the event cash
and equity balances in the customer account are not sufficient to cover fully
losses which the customer's account may incur. In the event the customer fails
to satisfy its obligations, the Principal Subsidiary may be required to purchase
or sell the financial instruments of the deficient customer, at prevailing
market prices, in order to fulfill the customer's obligations.
In accordance with industry practice, the Principal Subsidiary records customer
transactions on a settlement date basis, which is generally three business days
after trade date. The Principal Subsidiary is therefore exposed to risk of loss
on these transactions in the event of the customer's inability to meet the terms
of its contracts, in which case the Principal Subsidiary may have to purchase or
sell the financial instruments of the deficient customer, at prevailing market
prices. Settlement of these transactions is not expected to have a material
effect upon the Company's financial statements.
F-9
<PAGE> 15
ALLEN C. EWING FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SUBORDINATED BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
6. NET CAPITAL REQUIREMENTS
The Principal Subsidiary is subject to the Securities and Exchange Commission
Uniform Net Capital Rule (SEC rule 15c3-1), which requires the maintenance of
minimum net capital and requires that the ratio of aggregate indebtedness to net
capital, both as defined, shall not exceed 15 to 1. The Securities and Exchange
Commission is empowered to restrict the Principal Subsidiary's business
activities should its net capital ratio exceed 15 to 1. Net capital and the
related net capital ratio may fluctuate on a daily basis. As of December 31,
1998 and 1997, the Principal Subsidiary had net capital of $1,154,691 and
$1,104,324 (as defined), respectively, and was subject to a net capital
requirement of $250,000. At the same dates, the Principal Subsidiary's ratio of
aggregate indebtedness to net capital was 0.19 to 1 and 0.26 to 1, respectively.
Accordingly, at December 31, 1998 and 1997, the Principal Subsidiary was in
compliance with the net capital requirement.
7. CONVERTIBLE SUBORDINATED DEBENTURES AND NOTES PAYABLE TO STOCKHOLDERS
As of December 31, 1996, the Company had convertible subordinated debentures
(the Debentures) payable to certain of its stockholders. The Debentures were
subordinated to all indebtedness for money borrowed by the Company from a
recognized institutional lender that was evidenced by a promissory note,
debenture, bond, or similar instrument, but specifically excluded any
indebtedness arising pursuant to a lease. The proceeds from the sale of the
Debentures were advanced to the Principal Subsidiary under a subordinated loan
agreement which provided, among other things, that the loan could not be repaid
by the Principal Subsidiary, and the subordinated loan agreement could not be
terminated or modified, if the effect of such action would be to reduce the
capital of the Principal Subsidiary below the amount required by rule 15c3-1.
Effective February 10, 1997, the Company converted the amount due under this
subordinated loan agreement into capital paid in excess of par value of the
Principal Subsidiary.
The Debentures were uncollateralized and could be converted into common stock of
the Company at the option of the holders at a conversion price of $100 per
share, adjusted in certain instances, as described in the Debenture agreement.
The Company converted the Debentures into common stock during February 1997.
The notes payable to stockholders were subject to interest at 10%, payable
semi-annually. These notes were without collateral, due on demand, and contained
no financial covenants. The notes were retired during 1997. The convertible
subordinated note was subject to interest at 8%, payable quarterly, and matured
on August 25, 1997. The note was without collateral and was subordinated to all
indebtedness for money borrowed by the Company from a recognized institutional
lender that was evidenced by a promissory note, debenture, bond, or similar
instrument, but specifically excluded any indebtedness arising under a lease.
The note was payable to an individual who was an officer and director of the
Company.
F-10
<PAGE> 16
ALLEN C. EWING FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SUBORDINATED BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
8. INCOME TAXES
Reconciliation of the effective income tax rate and the federal statutory rate
for the years ended December 31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Federal statutory rate 34% 34%
State tax net of federal benefit 4% 4%
Benefit of graduated tax rates (9)% (2)%
Items principally consisting of nondeductible expenses, dividends
received deduction, and other items 2% (5)%
---- ----
Effective income tax rate 31% 31%
==== ====
</TABLE>
Deferred tax assets or liabilities are computed based on the difference
between the financial statement and income tax bases of assets and
liabilities using the enacted marginal tax rate. Deferred income tax
expenses or credits are based on the changes in the assets or liabilities
from period to period. The effect on deferred income taxes of a change in
tax rates is recognized in income in the period that includes the enactment
date.
The Company's deferred income tax asset primarily arises from an increase
in accrued expenses not deductible for tax purposes. The provision for
income taxes includes a provision for deferred taxes of approximately
$10,000 in 1998 and a benefit for deferred taxes of approximately $27,000
in 1997. The Company files a consolidated income tax return.
9. STOCK OPTIONS
During 1993, the Company adopted a stock option plan (the 1993 Plan)
covering 1,000 shares of common stock. Options may be granted under the
plan to certain key employees at 100% of the fair market value (as defined)
at the date of the grant. These options have a term of five years from the
date of grant and will become exercisable with respect to one-third of the
shares one year after the date of grant, two-thirds of the shares two years
after the date of grant, and all the shares three years after the date of
grant (with acceleration in full upon any change in control of the
Company).
F-11
<PAGE> 17
ALLEN C. EWING FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SUBORDINATED BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- -------------------------------------------------------------------------------
9. STOCK OPTIONS, CONTINUED
A summary to the options granted, exercised and cancelled is as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Options granted and outstanding at December 31, 1996 100 271
Less: options cancelled -- (271)
------- -------
Options exercisable at December 31, 1997 100 --
======= =======
Options exercisable at December 31, 1998 100 --
======= =======
Price of options granted $242.39 $222.03
======= =======
</TABLE>
F-12
<PAGE> 18
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Pro Forma Consolidated Balance Sheet
June 30, 1999
(unaudited)
<TABLE>
<CAPTION>
ICAP EWING PRO FORMA ADJUSTED
ASSETS HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 510,680 228,961 (56,120) (1) 683,521
Investments, at fair value 2,121,561 880,048 -- 3,001,609
Accounts 298,118 416,113 -- 714,231
Inventories 103,122 -- -- 103,122
Prepaid and other assets 50,113 42,783 (51,754) (3) 41,142
------------ ---------- ---------- -----------
Total current assets 3,083,594 1,567,905 (107,874) 4,543,625
Property, plant, and equipment, net 146,113 45,550 -- 191,663
Goodwill, less accumulated amortization 979,731 -- 59,793 (2) 1,039,524
Other assets 68,287 -- -- 68,287
------------ ---------- ---------- -----------
Total assets $ 4,277,725 1,613,455 (48,081) 5,843,099
============ ========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts $ 182,227 13,790 -- 196,017
Accrued 159,236 54,865 62,836 (3) 276,937
Margin loan 836,622 -- -- 836,622
Current portion of notes payable -- -- 300,000 (1) 300,000
Income taxes 560,634 63,020 -- 623,654
Securities sold but not yet purchased, at fair -- 20,863 -- 20,863
Other 102,906 -- -- 102,906
------------ ---------- ---------- -----------
Total current liabilities 1,841,625 152,538 362,836 2,356,999
Notes payable, less current portion -- -- 1,050,000 (1) 1,050,000
Total liabilities 1,841,625 152,538 1,412,836 3,406,999
------------ ---------- ---------- -----------
Stockholders'
Common stock 22,155 543 (543) (4) 22,155
Treasury stock at cost, 1,000 shares at June 30, (3,669) -- -- (3,669)
Additional paid-in capital 2,481,320 536,332 (536,332) (4) 2,481,320
Retained earnings (Accumulated deficit) (63,706) 924,042 (924,042) (4) (63,706)
------------ ---------- ---------- -----------
Total stockholders' equity 2,436,100 1,460,917 (1,460,917) 2,436,100
------------ ---------- ---------- -----------
$ 4,277,725 1,613,455 (48,081) 5,843,099
============ ========== ========== ===========
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
F-13
<PAGE> 19
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
Six month period ended June 30, 1999
(unaudited)
<TABLE>
<CAPTION>
ICAP EWING PRO FORMA ADJUSTED
HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Securities commissions $ 833,110 292,710 -- 1,125,820
Asset management fees 434,040 -- -- 434,040
Investment banking fees -- 467,965 -- 467,965
Net trading and investment -- 392,437 -- 392,437
Unrealized gains on 40,599 -- -- 40,599
Resinous material sales 1,129,127 -- -- 1,129,127
Other 42,152 19,742 -- 61,894
------------- ----------- --------- -----------
Total revenues 2,479,028 1,172,854 -- 3,651,882
------------- ----------- --------- -----------
Expenses:
Salaries and employee 1,107,873 693,755 -- 1,801,628
Brokerage and clearing 241,797 84,352 -- 326,149
Cost of resinous material 553,469 -- -- 553,469
Outside manager expense -- -- -- --
Advertising and marketing 142,244 -- -- 142,244
Professional and regulatory 158,924 -- -- 158,924
Occupancy and maintenance 91,965 95,407 -- 187,372
Depreciation and 58,575 -- 1,993 (2) 60,568
Interest expense 13,590 2,251 47,515 (5) 63,356
Other 154,224 118,854 -- 273,078
------------- ----------- --------- -----------
Total expenses 2,522,661 994,619 49,508 3,566,788
------------- ----------- --------- -----------
Income (loss) before (43,633) 178,235 (49,508) 85,094
Income tax expense -- 67,436 (35,415)(6) 32,021
------------- ----------- --------- -----------
Net income (loss) $ (43,633) 110,799 (14,093) 53,073
============= =========== ========= ===========
Basic net income (loss) per share $ (0.02) 0.02
============= ===========
Diluted net income (loss) per $ (0.02) 0.02
============= ===========
Basic weighted average shares outstanding 2,214,647 2,214,647
============= ===========
Diluted weighted average shares outstanding 2,214,647 2,214,647
============= ===========
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
F-14
<PAGE> 20
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
Year ended December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
ICAP EWING PRO FORMA ADJUSTED
HISTORICAL HISTORICAL ADJUSTMENTS CONSOLIDATED
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Securities commissions $ 1,728,036 686,640 -- 2,414,676
Asset management fees 791,237 -- -- 791,237
Investment banking fees -- 1,104,500 -- 1,104,500
Net trading and investment profits -- 152,480 -- 152,480
Outside manager income 27,917 -- -- 27,917
Unrealized gains on investments 50,445 -- -- 50,445
Resinous material sales 104,244 -- -- 104,244
Other 57,692 36,359 -- 94,051
------------- ---------- --------- ----------
Total revenues 2,759,571 1,979,979 -- 4,739,550
------------- ---------- --------- ----------
Expenses:
Salaries and employee benefits 1,568,854 1,261,246 -- 2,830,100
Brokerage and clearing 585,307 163,054 -- 748,361
Cost of resinous material sales 51,220 -- -- 51,220
Outside manager expense 27,917 -- -- 27,917
Advertising and marketing 81,130 -- -- 81,130
Professional and regulatory fees 127,375 -- -- 127,375
Occupancy and maintenance 89,060 105,946 -- 195,006
Depreciation and amortization 32,562 -- 3,986 (2) 36,548
Interest expense 23,838 13 95,030 (5) 118,881
Other 191,983 399,255 -- 591,238
------------- ---------- --------- ----------
Total expenses 2,779,246 1,929,514 99,016 4,807,776
------------- ---------- --------- ----------
Income (loss) before (19,675) 50,465 (99,016) (68,226)
Income tax expense (benefit) 398 15,557 (41,628)(6) (25,673)
------------- ---------- --------- ----------
Net income (loss) $ (20,073) 34,908 (57,388) (42,553)
============= ========== ========= ==========
Basic net income (loss) per share $ (0.02) (0.03)
============= ==========
Diluted net income (loss) per share $ (0.02) (0.03)
============= ==========
Basic weighted average shares outstanding 1,252,893 1,252,893
============= ==========
Diluted weighted average shares outstanding 1,252,893 1,252,893
============= ==========
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
F-15
<PAGE> 21
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Pro Forma Consolidated Financial Statements
(1) The unaudited pro forma consolidated financial statements set forth the
pro forma balance sheet at June 30, 1999 and the pro forma statements of
operations for the year ended December 31, 1998 and the six month period
ended June 30, 1999. The statements of operations reflect the effects of
the acquisition as though the transactions had occurred at the beginning
of the periods presented, and the balance sheet assumes the acquisition
occurred at the balance sheet date presented. On August 4, 1999, the
Company acquired all of the outstanding capital stock of Allen C. Ewing
Financial Services, Inc ("Ewing"). The Company acquired Ewing for a total
purchase price of $1,422,477. The Company financed the purchase by
borrowing $1,000,000 from a bank and issuing $350,000 in promissory notes
to the former Ewing shareholders. The acquisition will be accounted for
under the purchase method of accounting. The unaudited pro forma
consolidated financial statements do not reflect any cost savings or
increased revenues anticipated as a result of the acquisition.
(2) Goodwill has been reflected for the excess of the estimated purchase
price over the fair value of the assets acquired less the fair value of
the liabilities assumed. Goodwill amortization is on a straight line
basis over 15 years.
(3) Adjusts prepaid assets and accrued expenses to their fair values.
(4) Eliminate the equity of Ewing for consolidation of the Company.
(5) Interest expense has been increased to reflect the effect of financing
the purchase with the debt borrowed from a bank at 6.703% and a rate of
8.000% for the promissory notes.
(6) Adjustments to income tax expense reflect the impact of consolidated
taxes at a blended statutory rate of 37.63%.
F-16
