<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to _______
Commission file number 333-66859
INTREPID CAPITAL CORPORATION
(Exact name of Registrant as specified in its Charter)
DELAWARE 59-3546446
(State of Incorporation) (I.R.S. Employer Identification No.)
50 NORTH LAURA STREET, SUITE 3550, JACKSONVILLE, FLORIDA 32202
(Address of principal executive offices) (Zip Code)
(904) 350-9999
(Registrant's telephone number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer: (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 [ ]
As of July 31, 1999, there were 2,214,525 shares of Common Stock, $0.01
par value per share, outstanding, and 1,000 shares of Common Stock issued and
held in treasury.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
<PAGE> 2
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 1999
<TABLE>
<S> <C> <C> <C> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
Consolidated Balance Sheets of Intrepid Capital Corporation and Subsidiaries as
of June 30, 1999 and December 31, 1998...................................................... 3
Consolidated Statements of Operations of Intrepid Capital Corporation and
Subsidiaries for the Three and Six Month Periods Ended June 30, 1999 and the
Combined Statements of Operations of Intrepid Capital Management, Inc. and
Capital Research Corporation for the Three and Six Month Periods Ended June 30,
1998........................................................................................ 4
Consolidated Statement of Cash Flows of Intrepid Capital Corporation and
Subsidiaries for the Six Months Ended June 30, 1999 and the Combined Statement
of Cash Flows of Intrepid Capital Management, Inc. and Capital Research
Corporation for the Six Months Ended June 30, 1998.......................................... 5
Notes to Consolidated and Combined Financial Statements..................................... 6-9
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources............................................................. 10
Results of Operations....................................................................... 10-13
Year 2000 Matters........................................................................... 13-14
PART II - OTHER INFORMATION
ITEMS 1 AND ITEM 6 OTHER INFORMATION
Other Information........................................................................... 15
SIGNATURES....................................................................................... 16
</TABLE>
2
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INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
ASSETS 1999 1998
---------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 510,680 928,186
Investments, at fair value 2,121,561 144,574
Accounts receivable 298,118 195,018
Inventories 103,122 140,288
Prepaid and other assets 50,113 14,243
---------- ---------
Total current assets 3,083,594 1,422,309
Land -- 1,800,000
Property, plant, and equipment, net of accumulated
depreciation of $111,012 in 1999 and $85,579
in 1998 146,113 140,049
Goodwill, less accumulated amortization of $35,845
in 1999 and $2,703 in 1998 979,731 970,274
Other assets 68,287 76,467
---------- ---------
Total assets $4,277,725 4,409,099
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 182,227 696,757
Accrued expenses 159,236 271,803
Margin loan 836,622 --
Current portion of notes payable -- 212,933
Income taxes payable 560,634 --
Other 102,906 150,754
---------- ---------
Total current liabilities 1,841,625 1,332,247
Notes payable, less current portion -- 32,816
Deferred tax liability -- 560,634
---------- ---------
Total liabilities 1,841,625 1,925,697
---------- ---------
Stockholders' equity:
Common stock, $.01 par value. Authorized 15,000,000 shares; 22,155 22,155
issued 2,215,525 shares at June 30, 1999
and December 31, 1998
Treasury stock at cost, 1,000 shares at June 30, 1999 (3,669) --
Additional paid-in capital 2,481,320 2,481,320
Accumulated deficit (63,706) (20,073)
---------- ---------
Total stockholders' equity 2,436,100 2,483,402
---------- ---------
$4,277,725 4,409,099
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Three and Six month periods ended June 30, 1999
(unaudited)
INTREPID CAPITAL MANAGEMENT, INC.
AND CAPITAL RESEARCH CORPORATION
Combined Statements of Operations
Three and Six month periods ended June 30, 1998
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
1999 1998 1999 1998
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues:
Commissions $ 447,180 396,587 833,110 926,940
Asset management fees 209,025 185,775 434,040 348,665
Outside manager income -- 7,312 -- 15,649
Unrealized gains on investments 65,736 19,299 40,599 57,849
Resinous material sales 732,281 -- 1,129,127 --
Other 34,300 15,934 42,152 23,502
---------- --------- ---------- ---------
Total revenues 1,488,522 624,907 2,479,028 1,372,605
---------- --------- ---------- ---------
Expenses:
Salaries and employee benefits 602,441 330,842 1,107,873 744,500
Brokerage and clearing 123,628 152,697 241,797 328,464
Cost of resinous material sales 299,871 -- 553,469 --
Outside manager expense -- 7,312 -- 15,649
Advertising and marketing 81,383 10,579 142,244 34,382
Professional and regulatory fees 82,445 19,091 158,924 39,688
Occupancy and maintenance 48,837 19,458 91,965 38,508
Depreciation and amortization 23,237 6,608 58,575 13,154
Interest expense 8,739 6,881 13,590 11,692
Other 92,630 20,591 154,224 59,208
---------- --------- ---------- ---------
Total expenses 1,363,211 574,059 2,522,661 1,285,245
---------- --------- ---------- ---------
Income (loss) before income taxes 125,311 50,848 (43,633) 87,360
Income tax expense -- -- -- --
---------- --------- ---------- ---------
Net income (loss) $ 125,311 50,848 (43,633) 87,360
========== ========= ========== =========
Basic net income (loss) per share $ 0.06 0.04 (0.02) 0.07
========== ========= ========== =========
Diluted net income (loss) per share $ 0.05 0.04 (0.02) 0.07
========== ========= ========== =========
Basic weighted average shares outstanding 2,214,525 1,206,148 2,214,647 1,206,148
========== ========= ========== =========
Diluted weighted average shares outstanding 2,315,561 1,206,148 2,214,647 1,206,148
========== ========= ========== =========
</TABLE>
See accompanying notes to consolidated and combined financial statements.
4
<PAGE> 5
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Six months ended June 30, 1999
(unaudited)
INTREPID CAPITAL MANAGEMENT, INC.
AND CAPITAL RESEARCH CORPORATION
Combined Statement of Cash Flows
Six months ended June, 1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- --------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (43,633) 87,360
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation and amortization 58,575 13,154
Purchase of investments, net of sales (1,099,766) (20,000)
Distributions from investments -- 33,225
Unrealized gains on investments (40,599) (57,849)
Change in assets and liabilities:
Accounts receivable (103,100) (27,137)
Distributions receivable -- 119,560
Inventories 37,166 --
Prepaid and other assets (27,690) 189
Accounts payable and accrued expenses (669,696) (41,460)
Other liabilities (47,848) 6,221
----------- --------
Net cash (used in) provided by operating activities (1,936,591) 113,263
----------- --------
Cash flows from investing activities:
Purchase of property, plant, and equipment (31,497) (29,515)
Proceeds from sale of land 1,800,000 --
----------- --------
Net cash provided by (used in) investing activities 1,768,503 (29,515)
----------- --------
Cash flows from financing activities:
Principal payments on notes payable (245,749) (26,698)
Distributions -- (104,319)
Purchase of treasury stock (3,669) --
----------- --------
Net cash used in financing activities (249,418) (131,017)
----------- --------
Net decrease in cash and cash equivalents (417,506) (47,269)
Cash and cash equivalents at beginning of period 928,186 182,343
----------- --------
Cash and cash equivalents at end of period $ 510,680 135,074
=========== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 13,590 11,692
=========== ========
Supplemental disclosure of non-cash transactions:
Investments purchased with margin loan 836,622 --
Distribution to stockholders through the assumption of note payable $ -- 169,625
=========== ========
</TABLE>
See accompanying notes to consolidated and combined financial statements.
5
<PAGE> 6
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
June 30, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OPERATIONS
(A) ORGANIZATION AND BASIS OF PRESENTATION
Intrepid Capital Corporation (the "Company") was formed on April
3, 1998 for the purpose of becoming a full service investment
management and consulting business. On December 16, 1998 as part
of a simultaneous merger and reorganization ("the Merger and
Reorganization"), the Company acquired all of the outstanding
shares of the capital stock of Enviroq Corporation ("Enviroq"),
Intrepid Capital Management, Inc. ("ICM") and Capital Research
Corporation ("CRC") through a series of stock-for-stock and
stock-for-cash exchanges with the former shareholders of each
entity. The Company is located in Jacksonville, Florida and
conducts its business through its three wholly-owned subsidiaries.
ICM provides investment consulting and investment management
services to individuals and corporations. ICM has received
authority to act as an investment manager in several states to
meet the needs of its customers, the majority of which are
located in the southeastern United States.
CRC is a registered broker/dealer with the Securities and Exchange
Commission (the "SEC") and is a member of the National Association
of Securities Dealers, Inc. (the "NASD") and the Securities
Investor Protection Corporation (the "SIPC"). CRC is approved to
conduct a general securities business on a fully-disclosed basis
through a clearing broker/dealer that carries all accounts and
prepares and maintains all books and records for CRC's customers.
Enviroq conducts its operations through Sprayroq, Inc.
("Sprayroq"), a 50% owned subsidiary of which Enviroq has voting
control. Sprayroq is engaged in the development,
commercialization, manufacture and marketing of spray-applied
resinous materials.
The interim financial information included herein is unaudited.
Certain information and footnote disclosures normally included in
the financial statements have been condensed or omitted pursuant
to the rules and regulations of the SEC. The Company believes that
the disclosures made herein are adequate to make the information
presented not misleading. These financial statements should be
read in conjunction with the financial statements and related
notes contained in the Company's Annual Report on Form 10-KSB
filed with the SEC on April 14, 1999. Except as indicated herein,
there have been no significant changes from the financial data
published in the Company's Annual Report. In the opinion of
management, such unaudited information reflects all adjustments,
consisting of normal recurring accruals and other adjustments,
necessary for fair presentation of the unaudited information. The
results of operations for three and six month periods ended June
30, 1999 and 1998 are not necessarily indicative of the results
that may be expected for the full year.
(B) PRINCIPLES OF CONSOLIDATION
In accordance with purchase accounting, in which ICM and CRC were
deemed to be the acquiring entities in the Merger and
Reorganization, the accounts of Enviroq have been included since
December 16, 1998 (the date of the consummation of the Merger and
Reorganization).
6
<PAGE> 7
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
June 30, 1999
The accompanying consolidated balance sheets as of June 30, 1999
and December 31, 1998 include the accounts of the Company and its
subsidiaries, ICM, CRC and Enviroq.
The 1998 combined statements of operations and cash flows include
the accounts of ICM and CRC on a combined basis through June 30,
1998.
All significant intercompany balances and transactions have been
eliminated in consolidation. The Company, through its ownership in
Enviroq, controls the operations and activities of Sprayroq. There
is no recognition of minority interest in this subsidiary because
of its accumulated deficit position.
(C) EARNINGS PER SHARE
The Company applies the provisions of Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share." This
statement governs the computation, presentation and disclosure
requirements of earnings per share (EPS) for entities with
publicly held common stock.
Net income per share of common stock is computed based upon the
weighted average number of common shares and share equivalents
outstanding during the year. Stock warrants, when dilutive, are
included as share equivalents. Diluted EPS for the three months
ended June 30, 1999 assumes warrants to purchase 150,000 shares of
common stock have been exercised using the treasury stock method.
For the six months ended June 30, 1999 and the three and six month
periods ended June 30, 1998, the Company had no dilutive common
stock equivalents.
The weighted average shares outstanding for the period ended June
30, 1998 represent the shares issued to ICM and CRC as part of the
Merger and Reorganization as if such shares had been outstanding
since January 1, 1998.
(D) COMPREHENSIVE INCOME
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" (FAS 130), which is effective for fiscal years beginning
after December 15, 1997. FAS 130 establishes standards for
reporting total comprehensive income in financial statements and
requires that companies explain the differences between total
comprehensive income and net income. Management has adopted this
statement in 1998. No differences between total comprehensive
income (loss) and net income (loss) existed in the financial
statements reported for the periods ended June 30, 1999 and 1998.
(2) RELATED PARTY TRANSACTION
The Company performs certain asset management functions for
Intrepid Capital, L.P., an investment limited partnership of which
the Company is general partner and a 2.58% equity interest owner.
For the six months ended June 30, 1999 and 1998, the Company
received $30,942 and $34,083, respectively, for such services.
7
<PAGE> 8
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
June 30, 1999
(3) SEGMENTS
During 1999 and 1998, the Company, ICM and CRC operated in two
principal segments, investment advisory services and broker/dealer
services. Enviroq constitutes a separate segment. The Company
assesses and measures operating performance based upon the net
income derived from each of its operating segments exclusive of the
impact of corporate expenses. The revenues and net income for each
of the reportable segments are summarized as follows for the six
months ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Revenues:
Investment advisory services segment $ 420,483 537,540
Broker/dealer services segment 848,299 947,065
Enviroq 1,141,942 0
Corporate 68,304 0
Intersegment revenues 0 (112,000)
---------- ----------
$2,479,028 1,372,605
========== ==========
Net income (loss):
Investment advisory services segment $ (64,828) 66,166
Broker/dealer services segment 80,617 21,194
Enviroq 137,442 0
Corporate (196,864) 0
---------- ----------
$ (43,633) 87,360
========== ==========
</TABLE>
The total assets for each of the reportable segments are summarized
as follows as of June 30, 1999 and December 31, 1998. Non-segment
assets consist primarily of cash, investments and other assets
which are recorded at the parent company level.
1999 1998
---------- ---------
Assets:
Investment advisory services segment $ 287,622 231,272
Broker/dealer services segment 247,262 192,831
Enviroq 1,653,908 3,325,224
Corporate 2,088,933 659,772
---------- ---------
$4,277,725 4,409,099
---------- ---------
8
<PAGE> 9
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
June 30, 1999
(4) MARGIN LOAN
The Company has an agreement with its primary broker, National
Financial Services Corporation ("NFSC"), to purchase investments in
securities through the use of a margin loan. Advances on the margin
loan, which amounted to $836,622 at June 30, 1999, are secured by
the underlying investments. The interest rate at June 30, 1999 was
6.50%.
(5) SUBSEQUENT EVENTS
On August 4, 1999, the Company acquired all of the outstanding
capital stock of Allen C. Ewing Financial Services, Inc.,
("Ewing"), a Jacksonville, Florida based provider of securities
brokerage and investment banking services. The Company acquired the
Ewing capital stock in exchange for cash of $950,000 and three
promissory notes in the principal amount of $350,000. The Company
financed the cash with funds borrowed from a bank. The acquisition
will be accounted for under the purchase method of accounting.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements contained in this Quarterly Report on Form 10-QSB are
"forward-looking statements," within the meaning of the Private Securities
Litigation Reform Act of 1995, and are thus prospective in nature. Such
forward-looking statements reflect management's beliefs and assumptions and are
based on information currently available to management. The forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause actual results, performance or achievements of Intrepid Capital
Corporation to differ materially from those expressed or implied in such
statements. There can be no assurance that such factors or other factors will
not affect the accuracy of such forward-looking statements.
Liquidity and Capital Resources
The Company's current assets consist generally of cash, money market
funds and trading securities. Trading securities represent a significant
portfolio of individual securities and an investment in Intrepid Capital, L.P.
The Company has financed its growth in operations with funds generated from
stockholder capital and long-term loans. The Company's management believes that
existing capital and funds generated from operations will provide the Company
with sufficient resources to meet present cash and capital needs.
For the six months ended June 30, 1999, net cash used in operating
activities was $1,936,591, primarily attributable to the purchase of investments
and a decrease in accounts payable and accrued expenses. Net cash provided by
investing activities was $1,768,503 primarily due to the sale of approximately
10.6 acres of unimproved land in Jacksonville, Florida, which resulted in
proceeds of approximately $1,800,000. Net cash used in financing activities was
$249,418 primarily due to the repayment of corporate debt.
Subsequent to the three months ended June 30, 1999, the Company
acquired all of the outstanding capital stock of Allen C. Ewing Financial
Services, Inc., ("Ewing"), a Jacksonville, Florida based provider of securities
brokerage and investment banking services. The Company acquired the Ewing
capital stock in exchange for cash of $950,000 and three promissory notes in the
principal amount of $350,000. The Company financed the cash with funds borrowed
from a bank. The acquisition will be accounted for under the purchase method of
accounting.
The Company, through its subsidiary CRC, is subject to the net capital
requirements of the SEC, the NASD and other regulatory authorities. At June 30,
1999, CRC's regulatory net capital was $171,468, which is $121,468 in excess of
its minimum net capital requirement of $50,000.
Results of Operations
Three Months Ended June 30, 1999 Compared to the Three Months Ended
June 30, 1998
Total revenues were $1,488,522 for the three months ended June 30,
1999, compared to $624,907 for the three months ended June 30, 1998,
representing a 138.2% increase. The increase is primarily attributable to the
acquisition of Enviroq in December 1998.
10
<PAGE> 11
Commissions increased $50,593, or 12.8%, to $447,180. Commissions
represent revenue earned from securities transactions through CRC. The increase
represents primarily increased transaction volume.
Asset management fees increased $23,250, or 12.5%, to $209,025. Asset
management fees represent revenue earned by ICM for investment advisory
services. The fees earned are generally a function of the overall fee rate
charged to each account and level of Assets Under Management ("AUM"). Quarterly
management fees are billed on the first day of each quarter based on each
account value at the market close of the prior quarter. AUM was $89.3 million at
March 31, 1999, compared to $68.5 million at March 31, 1998. The increase in
asset management fees for the three months ended June 30, 1999 relates directly
to the net increase in AUM through investment performance, the addition of new
client accounts and the elimination of external portfolio managers. AUM was
$101.4 million at June 30, 1999, compared to $111.0 million at June 30, 1998.
Outside manager income decreased $7,312, or 100.0%. Outside manager
income represents revenue earned by ICM for asset management accounts, whereby
ICM utilizes external portfolio management to provide professional management of
customer accounts. All outside manager income has been eliminated as a result of
management's decision to internally manage accounts that were previously managed
externally.
Unrealized gains on investment increased $46,437, or 240.6%, to $65,736
due to an increase in the performance of the Company's investment in trading
securities and Intrepid Capital, L.P.
Resinous material sales of $732,281 are attributable to the acquisition
of Enviroq in December 1998.
Total expenses were $1,363,211 for the three months ended June 30,
1999, compared to $574,059 for the three months ended June 30, 1998,
representing a 137.5% increase. The increase is primarily attributable to the
acquisition of Enviroq in December 1998.
Salaries and employee benefits increased $271,599, or 82.1%, to
$602,441. The increases are due to the addition of new employees, annual
increases in salaries and the acquisition of Enviroq in December 1998. During
the three months ended June 30, 1999, the Company hired two new employees and
added a full quarter of Enviroq's salaries and benefits.
Brokerage and clearing expenses decreased $29,069, or 19.0%, to
$123,628. Brokerage and clearing expenses represent the securities transaction
costs directly related to commission revenue earned by CRC. These costs, paid to
the clearing broker-dealer, increase at a declining rate because of volume
discounting. During the quarter ended March 31, 1999, The Company re-negotiated
its clearing agreement resulting in reduced transactional costs and decreased
brokerage and clearing expenses.
Cost of resinous material sales of $299,871 is attributable to the
acquisition of Enviroq in December 1998.
Outside manager expense decreased $7,312, or 100.0%. Outside manager
expense directly offsets the outside manager income earned by ICM. All outside
manager expense has been eliminated as a result of management's decision to
internally manage accounts that were previously managed externally.
11
<PAGE> 12
Advertising and marketing expenses increased $70,804, or 669.3%, to
$81,383. The increase can be attributed to additional advertising and marketing
expenses ICM incurred to increase name recognition, produce marketing materials,
enhance client relationships, and to the acquisition of Enviroq in December
1998.
Professional and regulatory expenses increased $63,354, or 331.9%, to
$82,445 due to an increase in outside professional fees for additional
accounting, consulting, and legal services necessary to conduct business as a
public entity.
Other expenses increased $72,039, or 349.9%, to $92,630 due to an
increase of general and administrative expenses and to the acquisition of
Enviroq in December 1998.
Six Months Ended June 30, 1999 Compared to the Six Months Ended June
30, 1998
Total revenues were $2,479,028 for the six months ended June 30, 1999,
compared to $1,372,605 for the six months ended June 30, 1998, representing an
80.6% increase. The increase is primarily attributable to the acquisition of
Enviroq in December 1998.
Commissions decreased $93,830, or 10.1%, to $833,110. Commissions
represent revenue earned from securities transactions through CRC. A
correspondent firm moved to a different clearing firm in March 1998, resulting
in decreased transaction volumes and revenues for the six months ended June 30,
1999.
Asset management fees increased $85,375, or 24.5%, to $434,040. Asset
management fees represent revenue earned by ICM for investment advisory
services. The fees earned are generally a function of the overall fee rate
charged to each account and level of AUM. Quarterly management fees are billed
on the first day of each quarter based on each account value at the market close
of the prior quarter. AUM was $101.0 million at December 31, 1998, compared to
$66.0 million at December 31, 1997. The increase in asset management fees for
the six months ended June 30, 1999 relates directly to the net increase in AUM
through investment performance, the addition of new client accounts and the
elimination of external portfolio managers.
Outside manager income decreased $15,649, or 100.0%. Outside manager
income represents revenue earned by ICM for asset management accounts, whereby
ICM utilizes external portfolio management to provide professional management of
the accounts. All outside manager income has been eliminated as a result of
management's decision to internally manage accounts that were previously managed
externally.
Unrealized gains on investment decreased $17,250, or 29.8%, to $40,599
due to a decrease in the performance of the Company's investment in Intrepid
Capital, L.P during the six months ended June 30, 1999.
Resinous material sales of $1,129,127 are attributable to the
acquisition of Enviroq in December 1998.
Total expenses were $2,522,661 for the six months ended June 30, 1999,
compared to $1,285,245 for the six months ended June 30, 1998, representing a
96.3% increase. The increase is primarily attributable to the acquisition of
Enviroq in December 1998.
12
<PAGE> 13
Salaries and employee benefits increased $363,373, or 48.8%, to
$1,107,873. The increases are due to the addition of new employees, annual
increases in salaries and the acquisition of Enviroq in December 1998. During
the six months ended June 30, 1999, the Company hired three new employees and
added two full quarters of Enviroq's salaries and benefits.
Brokerage and clearing expenses decreased $86,667, or 26.4%, to
$241,797. Brokerage and clearing expenses represent the securities transaction
costs directly related to commission revenue earned by CRC. These costs, paid to
the clearing broker-dealer, increase at a declining rate because of volume
discounting. During the quarter ended March 31, 1999, The Company re-negotiated
its clearing agreement resulting in reduced transactional costs and decreased
brokerage and clearing expenses.
Cost of resinous material sales of $553,469 is attributable to the
acquisition of Enviroq in December 1998.
Outside manager expense decreased $15,649, or 100.0%. Outside manager
expense directly offsets the outside manager income earned by ICM. All outside
manager expense has been eliminated as a result of management's decision to
internally manage accounts that were previously managed externally.
Advertising and marketing expenses increased $107,862, or 313.7%, to
$142,244. The increase can be attributed to additional advertising and marketing
expenses ICM incurred to increase name recognition, produce marketing materials,
enhance client relationships, and to the acquisition of Enviroq in December
1998.
Professional and regulatory expenses increased $119,236, or 300.4%, to
$158,924 due to an increase in outside professional fees for additional
accounting, consulting, and legal services necessary to conduct business as a
public entity.
Other expenses increased $95,016, or 160.5%, to $154,224 due to an
increase of general and administrative expenses and to the acquisition of
Enviroq in December 1998.
Year 2000 Matters
The Company is working to ensure that its operating and processing
systems will, along with those of its service providers and vendors, continue to
function when the Year 2000 ("Y2K") arrives. The Company has developed and
implemented a comprehensive plan to prepare its computer systems and
applications for Y2K, as well as to identify and address any other Y2K
operational issues that may affect operations.
Due to the potential impact of Y2K on the financial services industry,
the SEC, the NASD and other regulatory and self-regulatory securities
organizations have monitored and required reports from their members concerning
Y2K and encouraged planning for system wide function tests. Y2K problems arise
because of concern that widely distributed information technology systems and
imbedded microprocessors date recognition and processing functions which
designate and recognize a year by the year's last two digits will not be able to
distinguish a year in the twenty-first century from one in the twentieth
century.
13
<PAGE> 14
Management has determined that Y2K will not pose significant
operational problems for its internal computer systems. Management believes the
internal modification and upgrade costs associated with the Company's operations
will not be material and will be expensed as incurred. Mission critical systems
and third party vendors have been identified, and computer hardware and software
have been upgraded or replaced as necessary.
Due to the enormous task facing the securities industry and the
interdependent nature of securities transactions, there can be no assurances
with respect to Y2K's impact on the Company. Disruptions in the economy
generally and in the United States investment markets as a result of Y2K could
have a materially adverse affect on the Company and its subsidiaries.
Specifically, unexpected volatilities within and possible suspension of trading
in the securities industry could adversely impact the Company's revenues and its
ability to do business because a significant portion of the Company's revenues
are based upon its ability to make investments and securities trades for its
customers and the net asset value of funds under management. The amount of
potential lost revenue cannot be reasonably estimated at this time.
Management believes that it has an effective program in place to manage
any contingencies arising out of Y2K. This contingency plan involves, among
other actions, manual workarounds and adjusting staffing strategies.
14
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings pending, or to the Company's
knowledge, threatened against the Company or any of its subsidiaries.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit No. Description
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K:
On April 16, 1999 the Company filed a Current Report on Form 8-K
reporting the disposition of the Company's unimproved land.
15
<PAGE> 16
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
INTREPID CAPITAL CORPORATION
By /s/ Forrest Travis
------------------------------------------
Forrest Travis, President and
Chief Executive Officer
Dated: August 12, 1999
By /s/ Brian S. Dickens
------------------------------------------
Brian S. Dickens, Chief Financial
Officer (Principal Accounting Officer)
Dated: August 12, 1999
16
<PAGE> 17
EXHIBIT INDEX
Exhibit No. Description of Exhibit
27 Financial Data Schedule (for SEC use only)
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF INTREPID CAPITAL CORPORATION FOR THE
QUARTER ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 510,680
<SECURITIES> 2,121,561
<RECEIVABLES> 298,118
<ALLOWANCES> 0
<INVENTORY> 103,122
<CURRENT-ASSETS> 3,083,594
<PP&E> 146,113
<DEPRECIATION> (111,012)
<TOTAL-ASSETS> 4,277,725
<CURRENT-LIABILITIES> 1,280,991
<BONDS> 0
0
0
<COMMON> 22,155
<OTHER-SE> 2,413,945
<TOTAL-LIABILITY-AND-EQUITY> 4,277,725
<SALES> 732,281
<TOTAL-REVENUES> 1,488,522
<CGS> 299,871
<TOTAL-COSTS> 1,363,211
<OTHER-EXPENSES> 92,630
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,739
<INCOME-PRETAX> 125,311
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 125,311
<EPS-BASIC> 0.06
<EPS-DILUTED> 0.05
</TABLE>
