<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 MARCH 31, 2000
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.)
3652 SOUTH THIRD STREET, SUITE 200, JACKSONVILLE BEACH, FLORIDA 32250
(Address of principal executive offices) (Zip Code)
(904) 246-3433
(Registrant's telephone number)
50 NORTH LAURA STREET, SUITE 3550, JACKSONVILLE, FLORIDA 32202
(Former address of principal executive offices) (Zip Code)
--------------------------------------------------
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 April 30, 2000, 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 MARCH 31, 2000
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C>
ITEM 1 FINANCIAL STATEMENTS
Consolidated Balance Sheets of Intrepid Capital Corporation and
Subsidiaries as of March 31, 2000 and December 31, 1999..................................... 3
Consolidated Statements of Operations of Intrepid Capital
Corporation and Subsidiaries for the Three Months Ended March 31,
2000 and 1999............................................................................... 4
Consolidated Statements of Cash Flows of Intrepid Capital
Corporation and Subsidiaries for the Three Months Ended March 31,
2000 and 1999............................................................................... 5
Notes to Consolidated Financial Statements.................................................. 6-8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources............................................................. 9
Results of Operations....................................................................... 9-11
PART II - OTHER INFORMATION
ITEM 1 AND ITEM 6.OTHER INFORMATION
Other Information........................................................................... 11
SIGNATURES....................................................................................... 12
</TABLE>
2
<PAGE> 3
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999
(unaudited)
<TABLE>
<CAPTION>
ASSETS 2000 1999
----------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 940,772 1,094,700
Investments, at fair value 341,121 461,210
Accounts receivable, net of allowance
for doubtful accounts of $58,074 in 2000 and 1999 187,999 246,702
Inventories 113,368 107,860
Prepaid and other assets 277,592 142,848
----------- ----------
Total current assets 1,860,852 2,053,320
Property, plant, and equipment, net of accumulated
depreciation of $143,808 in 2000 and $111,122 in 1999 432,392 388,222
Goodwill, less accumulated amortization of $90,205
in 2000 and $71,622 in 1999 1,024,794 1,043,377
Deferred tax assets 51,628 40,674
Other assets 1,319 5,299
----------- ----------
Total assets $ 3,370,985 3,530,892
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 215,551 149,442
Accrued expenses 337,227 388,956
Securities sold, not yet purchased 55,165 2,555
Current portion of notes payable 133,333 133,333
Other 119,683 123,978
----------- ----------
Total current liabilities 860,959 798,264
Notes payable, less current portion 916,667 916,667
----------- ----------
Total liabilities 1,777,626 1,714,931
----------- ----------
Stockholders' equity:
Common stock, $.01 par value. Authorized 15,000,000 shares;
issued 2,215,525 shares at March 31, 2000
and December 31, 1999 22,155 22,155
Treasury stock, at cost - 1,000 shares held (3,669) (3,669)
Additional paid-in capital 2,481,320 2,481,320
Accumulated deficit (906,447) (683,845)
----------- ----------
Total stockholders' equity 1,593,359 1,815,961
----------- ----------
$ 3,370,985 3,530,892
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Three months ended March 31, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
----------- ----------
<S> <C> <C>
Revenues:
Commissions $ 594,938 385,930
Asset management fees 183,887 225,015
Investment banking revenues 20,381 --
Net trading profits (losses) 56,162 (25,137)
Resinous material sales 225,187 396,846
Dividend and interest income 23,258 3,447
Other 6,195 4,405
----------- ----------
Total revenues 1,110,008 990,506
----------- ----------
Expenses:
Salaries and employee benefits 767,590 505,432
Brokerage and clearing 127,108 118,169
Cost of resinous material sales 115,151 253,598
Advertising and marketing 81,948 60,861
Professional and regulatory fees 90,031 76,479
Occupancy and maintenance 113,834 43,128
Depreciation and amortization 51,269 35,338
Interest expense 18,860 4,851
Other 101,123 61,594
----------- ----------
Total expenses 1,466,914 1,159,450
----------- ----------
Loss before income taxes (356,906) (168,944)
Income tax benefit (134,304) --
----------- ----------
Net loss $ (222,602) (168,944)
=========== ==========
Basic net loss per share $ (0.10) (0.08)
=========== ==========
Weighted average shares outstanding 2,214,525 2,214,758
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months ended March 31, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
---------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (222,602) (168,944)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 51,269 35,338
Sales (purchases) of investments and securities
sold, not yet purchased, net 228,861 (10,000)
Net trading (profits) losses (56,162) 25,137
Deferred tax benefit (10,954) --
Change in assets and liabilities:
Accounts receivable 58,703 (171,206)
Inventories (5,508) (22,144)
Prepaid and other assets (130,764) (6,123)
Accounts payable and accrued expenses 14,380 (362,612)
Other liabilities (4,295) 5,755
---------- --------
Net cash used in operating activities (77,072) (674,799)
---------- --------
Cash flows from investing activities
purchase of property, plant, and equipment (76,856) (2,481)
---------- --------
Cash flows from financing activities:
Principal payments on notes payable -- (39,307)
Purchase of treasury stock -- (3,669)
---------- --------
Net cash used in financing activities -- (42,976)
---------- --------
Net decrease in cash and cash equivalents (153,928) (720,256)
Cash and cash equivalents at beginning of period 1,094,700 928,186
---------- --------
Cash and cash equivalents at end of period $ 940,772 207,930
========== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 11,860 4,851
========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000
(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 Company acquired
all of the outstanding shares 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 Beach, 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 was a registered broker/dealer with the Securities and
Exchange Commission (the "SEC") and a member of the National
Association of Securities Dealers, Inc. (the "NASD") and the
Securities Investor Protection Corporation (the "SIPC"). In a
transaction effective on August 1, 1999, the Company acquired all
the outstanding shares of Allen C. Ewing Financial Services, Inc.
("ACEFS"). Primarily all of ACEFS' operations were conducted
through its wholly owned subsidiary, Allen C. Ewing & Co., a
registered broker/dealer with the SEC and a member of the NASD
and the SIPC. Concurrent with that transaction, the Company
contributed all of the assets and liabilities of ACEFS to CRC.
Subsequent to the acquisition, the operations of CRC and ACEFS
were conducted through the merged entity under the name Allen C.
Ewing & Co. ("ACE"), which retained its broker/dealer
registration. Effective December 31, 1999, CRC is no longer a
registered broker/dealer. ACE conducts 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 ACE's customers.
Enviroq conducts its operations through Sprayroq, Inc.
("Sprayroq"), a 50% owned subsidiary. Sprayroq is engaged in the
development, commercialization, manufacture and marketing of
spray-applied resinous materials and in the treatment of
municipal wastewater.
6
<PAGE> 7
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000
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 March 28, 2000. 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 necessary for fair
presentation of the unaudited information. The results of
operations for three months ended March 31, 2000 are not
necessarily indicative of the results that may be expected for
the full year.
(B) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of the Company and its subsidiaries ICM, ACE, and
Enviroq.
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
Net loss per share of common stock is computed based upon the
weighted average number of common shares and share equivalents
outstanding during the period. Stock warrants and convertible
instruments, when dilutive, are included as share equivalents.
For the three months ended March 31, 2000 and 1999, the Company
had no dilutive common stock equivalents.
(D) COMPREHENSIVE INCOME
No differences between total comprehensive loss and net loss
existed in the financial statements reported for the three months
ended March 31, 2000 and 1999.
(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 3.77% equity interest
owner as of March 31, 2000. For the three months ended March 31,
2000 and 1999, the Company received $8,944 and $17,195,
respectively, for such services.
7
<PAGE> 8
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2000
(3) SEGMENTS
During 2000 and 1999, the Company operated in two principal
segments, investment advisory services and broker/dealer
services, which includes investment banking revenues. 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 (loss) income for each of the
reportable segments are summarized as follows for the three
months ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
---------- --------
<S> <C> <C>
Revenues:
Investment advisory services segment $ 186,565 201,038
Broker/dealer services segment 694,016 392,284
Enviroq 227,420 397,184
Corporate 62,007 123,356
Intersegment revenues (60,000) (123,356)
---------- --------
$1,110,008 990,506
========== ========
Net (loss) income:
Investment advisory services segment $ (71,293) 7,886
Broker/dealer services segment (3,683) 25,417
Enviroq (74,270) (97,388)
Corporate (73,356) (104,859)
---------- --------
$ (222,602) (168,944)
========== ========
</TABLE>
The total assets for each of the reportable segments are
summarized as follows as of March 31, 2000 and December 31, 1999.
Non-segment assets consist primarily of cash, investments and
other assets, which are recorded at the parent company level.
<TABLE>
<CAPTION>
2000 1999
---------- ---------
<S> <C> <C>
Assets:
Investment advisory services segment $ 259,888 256,129
Broker/dealer services segment 1,303,895 1,340,988
Enviroq 1,401,175 1,511,440
Other 406,027 422,335
---------- ---------
$3,370,985 3,530,892
========== =========
</TABLE>
8
<PAGE> 9
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
"forwardlooking 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,
an investment limited partnership to which the Company is general partner. 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 three months ended March 31, 2000, net cash used in operating
activities was $77,072, primarily attributable to the net loss. Net cash used
in investing activities was $76,856 primarily due to the purchase of property,
plant, and equipment. There were no financing activities for the period.
The Company, through its subsidiary ACE, is subject to the net capital
requirements of the SEC, the NASD and other regulatory authorities. At March
31, 2000, ACE's regulatory net capital was $926,055, which is $676,055 in
excess of its minimum net capital requirement of $250,000.
Since its acquisition of Enviroq in December 1998, the Company has been
evaluating alternatives for the future of this business because of its
inconsistency with the Company's primary mission. The Company is currently
pursuing several alternatives for this business, including a possible sale of
Sprayroq, Enviroq's 50% owned subsidiary that conducts primarily all of
Enviroq's operations.
Results of Operations
Three Months Ended March 31, 2000 Compared to the Three Months Ended
March 31, 1999
Total revenues were $1,110,008 for the three months ended March 31,
2000, compared to $990,506 for the three months ended March 31, 1999,
representing a 12.1% increase. The increase is primarily attributable to
increased commissions as a result of the acquisition of ACE in August 1999.
Commissions increased $209,008, or 54.2%, to $594,938. Commissions
represent revenue earned from securities transactions conducted on behalf of
customers, including transactions with mutual funds and variable annuities. The
increase primarily represents increased transaction volume as a result of the
acquisition of ACE in August 1999.
Asset management fees decreased $41,128 or 18.3%, to $183,887. 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 the 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 $92.5
million at December 31, 1999, compared to $101.0 million at December 31, 1998.
The decrease in asset management fees for the three months ended March 31, 2000
relates directly to the net decrease in AUM at the market close of the prior
quarter. The net decrease in AUM was caused by investment performance and the
net change in client assets. AUM was $84.5 million at March 31, 2000, compared
to $89.3 million at March 31, 1999.
9
<PAGE> 10
Investment banking revenues of $20,381 represent fees earned by ACE
for providing advisory services to clients on corporate finance matters,
including mergers and acquisitions and the issuance of public stock.
Net trading profits (losses) increased $81,299, or 323.4%, to $56,162.
There were $74,988 of realized gains and $18,826 of unrealized losses in the
Company's investment in trading securities and Intrepid Capital, L.P.,
primarily due to positive market conditions.
Resinous material sales decreased $171,659, or 43.3% to $225,187. The
decrease is primarily attributable to no new license sales for the three months
ended March 31, 2000 compared to two new license sales for the three months
ended March 31, 1999.
Dividend and interest income increased $19,811, or 574.7%, to $23,258.
The increase is primarily attributable to an increase in interest received from
the higher average cash balances invested in money markets and to increased
margin interest earned on customer margin accounts as a result of the
acquisition of ACE in August 1999.
Total expenses were $1,466,914 for the three months ended March 31,
2000, compared to $1,159,450 for the three months ended March 31, 1999,
representing a 26.5% increase. The increase is primarily attributable to the
acquisition of ACE in August 1999.
Salaries and employee benefits increased $262,158, or 51.9%, to
$767,590. The increases are due to annual increases in salaries and the
acquisition of ACE in August 1999.
Brokerage and clearing expenses increased $8,939, or 7.6%, to
$127,108. Brokerage and clearing expenses represent the securities transaction
costs directly related to commission revenue earned by ACE. These costs, paid
to the clearing broker/dealers, increase at a declining rate because of volume
discounting. During the quarter ended March 31, 2000, the Company re-negotiated
its clearing agreement, resulting in reduced transactional costs and decreased
brokerage and clearing expenses per trade. The net increase reflects increased
transaction volume and one-time costs associated with the re-negotiated
clearing agreement.
Cost of resinous material sales decreased $138,447, or 54.6% to
$115,151. The decrease is primarily attributable to no new license sales or
cost of license sales for the three months ended March 31, 2000 compared to two
new license sales for the three months ended March 31, 1999. Gross margin for
license sales is approximately 15% compared to 50% for resin sales.
Advertising and marketing expenses increased $21,087, or 34.6%, to
$81,948. The increase can be attributed to additional advertising and marketing
expenses ICM incurred to increase name recognition and to the acquisition of
ACE in August 1999.
Professional and regulatory expenses increased $13,552, or 17.7%, to
$90,031 due to an increase in outside professional fees for additional
accounting and legal services necessary to conduct business as a public entity
and to the acquisition of ACE in August 1999.
Occupancy and maintenance expenses increased $70,706, or 163.9%, to
$113,834 as a result of the acquisition of ACE in August 1999 and to the
relocation of the Company's headquarters in January 2000.
10
<PAGE> 11
Depreciation and amortization expenses increased $15,931, or 45.1%, to
$51,269 due to the amortization of goodwill incurred as a result of the
acquisition of ACE in August 1999 and to the depreciation of acquired assets,
including leasehold improvements for the Company's new headquarters.
Other expenses increased $39,529, or 64.2%, to $101,123 due to
increased general and administrative expenses as a result of the acquisition of
ACE in August 1999.
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:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
27 Financial Data Schedule (for SEC use only)
</TABLE>
(b) Reports on Form 8-K:
None.
11
<PAGE> 12
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: May 12, 2000
By /s/ Michael J. Wallace
----------------------------------
Michael J. Wallace, Principal
Accounting Officer
Dated: May 12, 2000
12
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
27 Financial Data Schedule (for SEC use only)
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF INTREPID CAPITAL CORPORATION AS OF MARCH
31, 2000 AND FOR THE THREE MONTHS THEN ENDED. THIS INFORMATION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 940,772
<SECURITIES> 341,121
<RECEIVABLES> 187,999
<ALLOWANCES> 58,074
<INVENTORY> 113,368
<CURRENT-ASSETS> 1,860,852
<PP&E> 432,392
<DEPRECIATION> (143,808)
<TOTAL-ASSETS> 3,370,985
<CURRENT-LIABILITIES> 860,959
<BONDS> 0
0
0
<COMMON> 22,155
<OTHER-SE> 1,571,204
<TOTAL-LIABILITY-AND-EQUITY> 3,370,985
<SALES> 225,187
<TOTAL-REVENUES> 1,110,008
<CGS> 115,151
<TOTAL-COSTS> 1,466,914
<OTHER-EXPENSES> 101,123
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,860
<INCOME-PRETAX> (356,906)
<INCOME-TAX> 134,304
<INCOME-CONTINUING> (222,602)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (222,602)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
