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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, 2001
OR
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
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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)
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 April 30, 2001, there were 2,318,996 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]
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INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2001
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
Consolidated Balance Sheets of Intrepid Capital Corporation and Subsidiaries as of March 31, 2001
and December 31, 2000......................................................................................... 3
Consolidated Statements of Operations of Intrepid Capital Corporation and Subsidiaries for the Three
Months Ended March 31, 2001 and 2000.......................................................................... 4
Consolidated Statements of Cash Flows of Intrepid Capital Corporation and Subsidiaries for the Three
Months Ended March 31, 2001 and 2000.......................................................................... 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
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INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2001 and December 31, 2000
(unaudited)
ASSETS 2001 2000
----------- ----------
Current assets:
Cash and cash equivalents $ 299,944 474,544
Investments, at fair value 55,216 59,999
Accounts receivable 127,729 470,800
Inventories 78,321 69,348
Prepaid and other assets 264,859 251,694
----------- ----------
Total current assets 826,069 1,326,385
Equipment and leasehold improvements, net of accumulated
depreciation of $197,245 in 2001 and $171,648 in 2000 439,657 467,263
Goodwill, less accumulated amortization of $164,538
in 2001 and $145,955 in 2000 950,461 969,044
Other assets -- 1,192
----------- ----------
Total assets $ 2,216,187 2,763,884
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 164,407 213,148
Accrued expenses 313,112 274,123
Current portion of notes payable 241,572 327,778
Other 114,367 108,832
----------- ----------
Total current liabilities 833,458 923,881
Notes payable, less current portion 505,650 547,222
Minority interest in consolidated subsidiary 44,382 122,464
----------- ----------
Total liabilities 1,383,490 1,593,567
----------- ----------
Stockholders' equity:
Common stock, $.01 par value. Authorized 15,000,000 shares;
issued 2,318,996 shares 23,190 23,190
Treasury stock, at cost - 1,000 shares (3,669) (3,669)
Additional paid-in capital 2,687,227 2,687,227
Accumulated deficit (1,874,051) (1,536,431)
----------- ----------
Total stockholders' equity 832,697 1,170,317
----------- ----------
$ 2,216,187 2,763,884
=========== ==========
See accompanying notes to consolidated financial statements.
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INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Three months ended March 31, 2001 and 2000
(unaudited)
2001 2000
----------- ----------
Revenues:
Commissions $ 353,685 594,938
Asset management fees 219,693 183,887
Investment banking revenues 101,889 20,381
Net trading profits 2,272 56,162
Resinous material sales 115,651 225,187
Dividend and interest income 12,764 23,258
Other 14,127 6,195
----------- ----------
Total revenues 820,081 1,110,008
----------- ----------
Expenses:
Salaries and employee benefits 711,674 767,590
Brokerage and clearing 70,295 127,108
Cost of resinous material sales 57,853 115,151
Advertising and marketing 70,722 81,948
Professional and regulatory fees 57,346 90,031
Occupancy and maintenance 115,928 113,834
Depreciation and amortization 44,625 51,269
Interest expense 18,351 18,860
Other 88,989 101,123
----------- ----------
Total expenses 1,235,783 1,466,914
----------- ----------
Loss before income taxes and minority interest (415,702) (356,906)
Income tax benefit -- (134,304)
----------- ----------
Loss before minority interest (415,702) (222,602)
Minority interest (78,082) --
----------- ----------
Net loss $ (337,620) (222,602)
=========== ==========
Basic net loss per share $ (0.15) (0.10)
=========== ==========
Weighted average shares outstanding 2,318,996 2,214,525
=========== ==========
See accompanying notes to consolidated financial statements.
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INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months ended March 31, 2001 and 2000
(unaudited)
2001 2000
--------- ----------
Cash flows from operating activities:
Net loss $(337,620) (222,602)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 44,625 51,269
Loss on disposal of equipment 3,556 --
Minority interest (78,082) --
Sales of investments and securities sold, not yet purchased, net 7,055 228,861
Net trading profits (2,272) (56,162)
Deferred tax benefit -- (10,954)
Change in assets and liabilities:
Accounts receivable 343,071 58,703
Inventories (8,973) (5,508)
Prepaid and other assets (11,973) (130,764)
Accounts payable and accrued expenses (9,752) 14,380
Other liabilities 5,535 (4,295)
--------- ----------
Net cash used in operating activities (44,830) (77,072)
--------- ----------
Cash flows from investing activities:
Purchase of equipment (5,492) (76,856)
Proceeds from sales of equipment 3,500 --
--------- ----------
Net cash used in investing activities (1,992) (76,856)
--------- ----------
Cash flows from financing activities-
principal payments on notes payable (127,778) --
--------- ----------
Net decrease in cash and cash equivalents (174,600) (153,928)
Cash and cash equivalents at beginning of period 474,544 1,094,700
--------- ----------
Cash and cash equivalents at end of period $ 299,944 940,772
========= ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 8,861 11,860
========= ==========
See accompanying notes to consolidated financial statements.
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INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2001
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OPERATIONS
(A) ORGANIZATION AND BASIS OF PRESENTATION
Intrepid Capital Corporation ("ICAP") 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, ICAP
acquired all the outstanding shares of Enviroq Corporation
("Enviroq"), Intrepid Capital Management ("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. ICAP 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, ICAP acquired all
the outstanding stock 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 NASD and the SIPC. Concurrent with that transaction, ICAP
contributed 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
of Allen C. Ewing & Co. ("Ewing"), which retained its
registered broker-dealer status. Effective December 31, 1999,
CRC was no longer a registered broker-dealer.
Enviroq conducts its operations through Sprayroq, Inc.
("Sprayroq"), a 50% owned subsidiary over which Enviroq has
voting control. Sprayroq is engaged in development,
commercialization, manufacture and marketing of spray-applied
resinous materials and in the treatment of municipal
wastewater.
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INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2001
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. ICAP 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
ICAP's Annual Report on Form 10-KSB filed with the SEC on
April 2, 2001. Except as indicated herein, there have been no
significant changes from the financial data published in
ICAP'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 the
three months ended March 31, 2001 and 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 ICAP and its subsidiaries ICM, Ewing, and
Enviroq.
All significant intercompany balances and transactions have
been eliminated in consolidation. ICAP, through its ownership
in Enviroq, controls the operations and activities of
Sprayroq. Minority interest is recognized for 50% of
Sprayroq's equity.
(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, 2001 and
2000, ICAP 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, 2001 and 2000.
(2) RELATED PARTY TRANSACTION
ICM performs certain asset management functions for Intrepid
Capital, L.P., an investment limited partnership of which ICM
is general partner and a 1.23% equity interest owner as of
March 31, 2001. For the three months ended March 31, 2001 and
2000, ICM received $10,277 and $8,944, respectively, for such
services.
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INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2001
(3) SEGMENTS
During 2001 and 2000, ICAP operated in two principal
segments, investment advisory services and broker-dealer
services which includes investment banking revenues. Enviroq
constitutes a separate segment. ICAP 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 for each of the
reportable segments are summarized as follows for the three
months ended March 31, 2001 and 2000:
2001 2000
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Revenues:
Investment advisory services segment $ 222,414 186,565
Broker-dealer services segment 478,170 694,016
Enviroq 118,876 227,420
Corporate 173,694 151,253
Intersegment revenues (173,073) (149,246)
----------- ----------
$ 820,081 1,110,008
=========== ==========
Net loss:
Investment advisory services segment $ (37,500) (71,293)
Broker-dealer services segment (58,919) (3,683)
Enviroq (94,554) (92,170)
Corporate (146,647) (55,456)
----------- ----------
$ (337,620) (222,602)
=========== ==========
The total assets for each of the reportable segments are
summarized as follows as of March 31, 2001 and December 31,
2000. Non-segment assets consist primarily of cash, certain
investments and other assets, which are recorded at the
parent company level.
2001 2000
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Assets:
Investment advisory services segment $ 136,280 131,655
Broker-dealer services segment 509,279 573,747
Enviroq 1,273,721 1,403,626
Other 296,907 654,856
----------- ----------
$ 2,216,187 2,763,884
=========== ==========
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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
ICAP's current assets consist generally of cash, accounts receivable
and prepaid and other assets, which includes a tax refund receivable of
$176,263. ICAP has financed its operations with funds provided by stockholder
capital and the sale of trading securities. ICAP has developed a growth
strategy plan that includes both internal and external growth through
acquisitions.
For the three month period ended March 31, 2001, ICAP incurred
significant operating losses and negative cash flows from operations. ICAP is
evaluating several options to raise capital which include the issuance of
equity securities in private placements, and enhancing the operations, or the
complete disposal of, Sprayroq, Inc. (Enviroq's 50% owned subsidiary). ICAP
also believes that its broker-dealer services segment will generate substantial
high-margin investment banking revenues during 2001. If additional funds are
raised through the issuance of equity securities, the percentage of ownership
of the stockholders of ICAP will be reduced. While management believes it will
be able to meet its capital needs through several of the above alternatives,
there can be no assurances that such transactions will take place on terms
favorable to ICAP, if at all. If adequate funds are not available or terms are
not suitable, ICAP's growth strategy would be significantly limited and such
limitation could have an effect on ICAP's business, results of operations and
financial condition.
For the three months ended March 31, 2001, net cash used in operating
activities was $44,830, primarily attributable to ICAP's net loss, offset by a
decrease in accounts receivable. Net cash used in investing activities was
$1,992, which is primarily due to the purchase of equipment. Net cash used in
financing activities was $127,778, which is due to principal payments on notes
payable.
ICAP, through its subsidiary Ewing, is subject to the net capital
requirements of the SEC, the NASD and other regulatory authorities. At March
31, 2001, Ewing's regulatory net capital was $116,795, which is $66,795 in
excess of its minimum net capital requirement of $50,000.
Since its acquisition of Enviroq in December 1998, ICAP has been
evaluating alternatives for the future of this business because of its
inconsistency with ICAP's primary mission. ICAP 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.
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Results of Operations
Three Months Ended March 31, 2001 Compared to the Three Months Ended
March 31, 2000
Total revenues were $820,021 for the three months ended March 31,
2001, compared to $1,110,008 for the three months ended March 31, 2000,
representing a 26.1% decrease.
Commissions decreased $241,253, or 40.6%, to $353,685. Commissions
represent revenue earned by Ewing from securities transactions conducted on
behalf of customers, including sales of mutual fund shares and variable
annuities. The decrease is primarily attributable to decreased transaction
volume as a result of negative market conditions.
Asset management fees increased $35,806 or 19.5%, to $219,693. 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 $105.3
million at December 31, 2000, compared to $92.5 million at December 31, 1999.
The increase in asset management fees for the three months ended March 31, 2001
relates directly to the net increase in AUM at the market close of the prior
quarter. The net increase in AUM is primarily attributable to a positive net
change in client assets during the three months ended December 31, 2000. AUM
was $84.6 million at March 31, 2001, compared to $84.5 million at March 31,
2000. The net decrease in AUM during the three months ended March 31, 2001 is
primarily attributable to a negative net change in client assets due to client
movement during the three months ended March 31, 2001.
Investment banking revenues increased $81,508, or 399.9%, to $101,889.
Investment banking revenues represent fees earned by Ewing for providing
investment banking services to clients on corporate finance matters, including
mergers and acquisitions and the issuance of capital stock to the public. Such
revenues are dependent on the timing of services provided and are normally
received upon consummation of the underlying transaction. The increase is
primarily attributable to an increase in mortgage loan placement services.
Net trading profits decreased $53,890, or 96.0%, to $2,272. There were
$190 of realized gains and $2,082 of unrealized gains in ICAP's investment in
trading securities, which includes an investment in Intrepid Capital, L.P. The
decrease is primarily attributable to lower exposure in trading securities.
Resinous material sales decreased $109,536, or 48.6% to $115,651. The
decrease is primarily attributable to the delay in timing of resinous material
sales to repeat customers until the second quarter of 2001.
Dividend and interest income decreased $10,494, or 45.1%, to $12,764.
The decrease is primarily attributable to a decrease in interest received from
the lower average cash balances invested in money markets.
Total expenses were $1,235,783 for the three months ended March 31,
2001, compared to $1,466,914 for the three months ended March 31, 2000,
representing a 15.8% decrease.
Salaries and employee benefits decreased $55,916, or 7.3%, to
$711,674. Salaries and employee benefits represent fixed salaries, commissions
paid on securities transactions and investment banking revenues, and other
related employee benefits. The decrease is primarily attributable to decreased
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commission expenses as a result of decreased securities transactions partially
offset by increased fixed salaries.
Brokerage and clearing expenses decreased $56,813, or 44.7%, to
$70,295. Brokerage and clearing expenses represent the securities transaction
and other costs paid to the clearing broker-dealer, and are related to
commission revenue earned by Ewing. During the quarter ended March 31, 2000,
ICAP re-negotiated its clearing agreement, resulting in reduced transactional
costs and decreased brokerage and clearing expenses per trade. The net decrease
is primarily attributable to decreased transaction volume and reflects
decreased costs as a result of the re-negotiated clearing agreement.
Cost of resinous material sales decreased $57,298, or 49.8%, to
$57,853. The decrease is primarily attributable to the delay in timing of
resinous material sales to repeat customers until the second quarter of 2001.
Advertising and marketing expenses decreased $11,226, or 13.7%, to
$70,722. The decrease is primarily attributable to non-recurring advertising
and marketing expenses related to the opening of ICAP's new headquarters in
January 2000.
Professional and regulatory expenses decreased $32,685, or 36.3%, to
$57,346. The decrease is primarily attributable to the elimination of Ewing's
market making operations.
Other expenses decreased $12,135, or 12.0%, to $88,988 due to
decreased general and administrative expenses.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings pending against ICAP or any of
its subsidiaries.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None.
(b) Reports on Form 8-K:
None.
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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 14, 2001
By /s/ Michael J. Wallace
--------------------------------
Michael J. Wallace, Chief
Accounting Officer
Dated: May 14, 2001
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