UNITED STATES SECURITIES AND EXCHANGE COMMISSION
FORM 10-QSB
| [X] |
Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange
Act of 1934 |
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003
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
| 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)
As of September 30, 2003, there were 3,399,183 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]
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Index to Form 10-QSB
For the Quarter Ended September 30, 2003
2
ITEM 1. FINANCIAL INFORMATION
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
See accompanying notes to condensed consolidated financial statements.
3
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three and Nine month periods ended September 30, 2003 and 2002
(unaudited)
See accompanying notes to condensed consolidated financial statements.
4
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of
Cash Flows
See accompanying notes to condensed consolidated financial statements.
5
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
6
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
7
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
8
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
9
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
10
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
11
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
12
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
As provided by the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, the Company cautions that statements in this
Quarterly Report on Form 10-QSB that are forward-looking statements represent
management’s belief and assumptions based on currently available information.
Forward-looking statements can be identified by the use of words such as
“believes”, “intends”, “may”, “should”, “anticipates”, “expected”, “estimated”,
“projected” or comparable terminology, or by discussion of strategies or
trends. Although the Company believes the expectations reflected in such
forward-looking statements are reasonable, it cannot give any assurances that
these expectations will prove to be correct. Such statements, by their nature,
involve substantial risks and uncertainties that could significantly impact
expected results, and actual future results could differ materially from those
described in such forward-looking statements. While it is not possible to
identify all factors, the Company continues to face many risks and
uncertainties. Among the factors that could cause actual future results to
differ materially are the risks and uncertainties discussed in this Quarterly
Report on Form 10-QSB and those described from time to time in the Company’s
other filings with the SEC and the risk that the underlying assumptions made by
management in this Quarterly Report on Form 10-QSB are not, in fact, correct.
Should one or more of these risks materialize (or the consequences of such a
development worsen), or should the underlying assumptions prove incorrect,
actual results could differ materially from those forecasted or expected. The
Company disclaims any intention or obligation to update or revise any
forward-looking statement whether as a result of new information, future events
or otherwise.
Critical Accounting Policies and Estimates
The discussion and analysis of the Company’s financial condition and
results of operations are based on the Company’s consolidated financial
statements which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires us to make estimates and judgments that affect
the reported amounts of assets and liabilities, revenues and expenses, and
related disclosures of contingent assets and liabilities. We base these
estimates on historical experience and on various other assumptions that
management believes are reasonable under the circumstances; additionally we
evaluate these results on an on-going basis. Actual results may differ from
these estimates under different assumptions or conditions.
The Company has a significant amount of goodwill and identifiable
intangible assets recorded on its financial statements. The Company’s
identifiable intangible assets consist of investment management contracts and
customer relationships. Management’s allocation of purchase price to these
identifiable intangible assets requires estimates about the amount and useful
lives of identifiable intangible assets acquired. These estimates require a
significant degree of estimates based on management’s assumptions regarding
future cash flows, account retention, expected profit margins, and applicable
discount rates and are subject to uncertainty and may differ significantly from
actual results under different assumptions or conditions.
13
The Company completed its initial assessment of impairment for goodwill
and identifiable intangible assets during the first quarter of 2003.
Management assessed the recoverability of the identifiable intangible assets
and determined there to be no impairment based on its estimates and analysis of
future cash flows. Management will continue to assess recoverability whenever
events or circumstances indicate they may be impaired and monitor the future
results of the investment management segment. In addition, the Company will
review goodwill and intangible assets for impairment in accordance with
existing accounting pronouncements and has set an annual impairment test date
for goodwill of December 31. Such review will involve the Company’s
determination of reporting unit fair values through estimation of projected
cash flows, discount rates, future performance and other variables, which will
require a significant amount of judgment by the Company’s management.
Discontinued Operations
During the first quarter of 2003, the Company decided to pursue the
divesture of Ewing, which formerly constituted a separate operating segment,
the investment banking segment, and accordingly, the Company has reported its
operations as discontinued for all periods presented.
On June 16, 2003, the Company sold Ewing pursuant to the terms of a Stock
Purchase Agreement dated May 2, 2003. The purchaser acquired all of the issued
and outstanding capital stock of Ewing for an aggregate purchase price of
$300,000, which amount was paid in cash by purchaser at the closing of the
transaction. The Company used $247,783 of the net proceeds to reduce debt and
$37,500 to reduce deferred compensation. The Company recorded a $58,932 gain
on the sale of discontinued operations.
Revenues from Ewing were $0 and $505,853 for the three months ended
September 30, 2003 and 2002, respectively. The income (loss) from discontinued
operations for Ewing was $0 and ($362,524) for the three months ended September
30, 2003 and 2002, respectively.
Revenues from Ewing were $699,554 and $8,381,652 for the nine months ended
September 30, 2003 and 2002, respectively. The income (loss) from discontinued
operations for Ewing was ($87,940) and $2,032,571 for the nine months ended
September 30, 2003 and 2002, respectively.
Liquidity and Capital Resources
The Company’s current assets consist generally of interest in an equity
fund, accounts receivable, and prepaid assets. The Company has financed its
operations with funds provided by operations, proceeds from notes payable,
liquidation of cash surrender value of insurance policies, and proceeds from
the divesture of Ewing (see note 2). The Company has developed and is
implementing a strategically focused plan that includes internal revenue
growth, cost reductions, and operational efficiencies.
The Company believes that the divesture of Ewing will allow management to
focus on leveraging the Company’s expertise in investment management services.
By more closely aligning sales, client relationship management, and fund
management, the Company believes that additional revenue sources can be derived
from current relationships. The Company has taken steps, and is continuing to
take additional steps, which will allow the Company to deliver superior service
and performance at a reduced cost. These steps have led to a reduction in
recurring operating costs, as well as a more beneficial debt reduction schedule
for the Company. Management is also looking at creating back-office
efficiencies through the use of technology, work flow processes, and the
consolidation of functions. Management believes that an improved
organizational structure is beneficial to the Company today, and will be
beneficial to the Company’s future success.
While management believes that it will be able to support its current
operations and capital needs through its current cash flow, management
continues to explore and identify potential equity sources of capital from
private investors, which would give the Company more flexibility in its
operations and debt
14
reduction initiatives. Management cannot provide any assurances that such
a transaction will take place. If adequate funds are not available, the
Company’s refocused strategy would be significantly limited, and such funding
limitation would have a material adverse effect on the Company’s business,
results of operations, and financial condition.
For the nine months ended September 30, 2003, the net cash used in
operating activities of $633,025 was primarily attributable to salary and
benefits costs related to nonperforming sales staff and excess administrative
staff primarily incurred during the first six months of 2003, offset by the
receipt of a $420,000 tax refund, and an increase of $157,374 in accounts
payable and accrued expenses. Net cash provided by investing activities of
$599,961 was primarily due to the net proceeds of $247,283 received from the
divestment of Ewing in June 2003 and the prepayment of two subordinated
promissory notes receivable in the amount of $200,000 (face value of $323,919).
Net cash provided by financing activities of $55,896 was attributable to
proceeds of $592,949 from notes payable and $120,000 from life insurance cash
surrender value loans offset by principal payments on notes payable of $522,806
and preferred stock dividends paid of $134,247.
Results of Operations
The Company has invested and plans to continue to focus on the development
of its investment management segment. ICM has several portfolio styles, ranked
by independent sources such as Effron-PSN, CheckFree Investment Services,
Nelson Information and Money Manager Review, in the top percentile of all
investment managers for both performance and risk control. The Company is
investing in human capital through the retention of portfolio management
professionals and investment management sales professionals, and has sales
promotion efforts, through advertising and marketing, aimed at branding and
broadening ICM’s investment management market share and presence.
The Company is currently experiencing operational losses for 2003 as a
result of its expenditures on sales and administrative salaries and expenses
primarily incurred during the first six months of 2003. Management has taken
corrective measures to reduce sales and administrative costs, and believes that
its current operational expenses are justified by the investment management
revenue, which management expects to see increasing throughout the remainder of
2003 and in 2004.
Three Months Ended September 30, 2003 Compared to the Three Months Ended
September 30, 2002
Total revenues were $1,046,327 for the three months ended September 30,
2003, compared to $915,654 for the three months ended September 30, 2002,
representing a 14.3% increase.
Investment management fees increased $91,085, or 9.9%, to $1,013,982.
Investment 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 $532.9
million at June 30, 2003, compared to $452.1 million at June 30, 2002. The
increase in investment management fees for the three months ended September 30,
2003 relates to an increase in AUM of 17.9% as a result of the net addition of
new clients and an increase of 8.6% in the average investment management fee
rate charged per dollar of AUM. At September 30, 2003, AUM was $553.9 million
compared to $458.2 million at September 30, 2002.
Other income increased $39,588 to $32,345. The increase is primarily
attributable to an increase in investment-related record keeping fees of
$19,224 and an increase of $8,815 from an increase in the cash surrender value
of key man insurance policies in the third quarter of 2003
.
15
Total expenses were $1,190,445 for the three months ended September 30,
2003, compared to $1,614,900 for the three months ended September 30, 2002,
representing a decrease of $424,455, or 26.3%.
Compensation and benefits decreased $97,139, or 13.7%, to $610,283.
Compensation and benefits represent fixed salaries, performance bonuses,
commissions, temporary staffing costs, severance costs, and other related
employee benefits. The decrease is primarily attributable to a reduction in
the sales and administrative staff in the third quarter of 2003, offset with
severance costs incurred in the third quarter of 2003 and the hiring of
thirteen personnel, five near the end of the second quarter of 2002 and eight
in the third quarter of 2002.
Advertising and marketing expenses decreased $213,816, or 81.5%, to
$48,575. The decrease is primarily attributable to a decrease in travel and
entertainment expenses of $66,000 and a decrease of $100,000 in advertising
expenses associated with management’s efforts to reduce operating costs.
Professional and regulatory fees decreased $124,528, or 45.1%, to
$151,306. The decrease is primarily attributable to legal fees and other costs
of $145,838 associated with the FDIC contract incurred in the third quarter of
2002 and a decrease in information technology and investment research services
for the third quarter of 2003 offset by an increase in accounting fees of
$71,500 as a result of a personnel transition in the Chief Financial Officer
position and additional fees associated with the re-filing of 2002 corporate
quarterly and annual reports.
Occupancy and maintenance expenses decreased $24,282, or 20.4%, to
$94,789. The decrease is attributable to the integration of the ICM and ICC
operations in the Jacksonville Beach, Florida office during the second quarter
of 2002.
Interest expense increased $16,946, or 77.3 %, to $38,869. The increase
is primarily attributable to the addition of interest expense associated with
deferred compensation commencing in the third quarter of 2002, a bank note
commencing in the fourth quarter of 2002, and a $92,949 promissory note
commencing in the third quarter of 2003.
The loss on sale of notes receivable increased $139,035, or 100%, to
$139,035. The increase is attributable to the discounting and prepayment of
two subordinated promissory notes receivable in the amounts of $150,000 and
$173,919 owed to Enviroq Corporation, from Sprayroq of Ohio, Inc. The Company
received a total sum of $200,000 in prepayment of the outstanding principal
balance of $323,919 and accrued interest of $15,116. The Company recorded a
loss in the amount of $139,035 on the settlement of the notes.
Other expenses decreased $102,901, or 66.4%, to $52,055. The decrease is
primarily attributable to the reduction of office supplies of $20,161, printing
costs of $12,247, training expenses of $20,338 and life insurance premiums of
$27,943 as a result of the integration of the ICM and ICC operations in the
Jacksonville Beach, Florida office during the second quarter of 2002 and
management’s efforts to reduce operating costs during the third quarter of
2003.
Nine Months Ended September 30, 2003 Compared to the Nine Months Ended
September 30, 2002
Total revenues were $2,911,250 for the nine months ended September 30,
2003, compared to $2,610,013 for the nine months ended September 30, 2002
representing an 11.5% increase.
Investment management fees increased $258,922 or 10.1%, to $2,825,580.
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 $469.1 million
at December 31,
16
2002, compared to $458.4 million at December 31, 2001. AUM was $487.3 million
at March 31, 2003 compared to $475.5 million at March 31, 2002. AUM was $532.9
million at June 30, 2003, compared to $452.1 million at June 30, 2002. The
weighted average AUM increased 10.5% from $455.3 to $501.0 for the nine month
period ended September 30, 2002 and 2003, respectively. The increase in
investment management fees for the nine months ended September 30, 2003 relates
to an increase in AUM of 10.1% as a result of the net addition of new clients
and an increase of 8.6% in the average investment management fee rate charged
per dollar of AUM. At September 30, 2003, AUM was $553.9 million compared to
$458.2 million at September 30, 2002.
Other income increased $42,315, or 97.6%, to $85,670. The increase is
primarily attributable to a one-time management account referral fee of $20,706
received in the second quarter of 2002, offset by an increase in
investment-related keeping fees of $57,503 for the nine months ended September
30, 2003.
Total expenses were $4,405,513 for the nine months ended September 30,
2003, compared to $4,794,487 for the nine months ended September 30, 2002,
representing a decrease of $388,974, or 8.1%.
Compensation and benefits decreased $167,499, or 6.2%, to $2,553,986.
Compensation and benefits represent fixed salaries, performance bonuses,
commissions, temporary staffing costs, severance costs, payroll taxes and other
related employee benefits. The decrease is primarily attributable to a one
time deferred compensation accrual of $364,000 in the second quarter of 2002,
offset by an increase in compensation and benefits expense associated with
severance costs incurred in 2003 and hiring of thirteen personnel, five near
the end of the second quarter of 2002 and eight in the third quarter of 2002.
Advertising and marketing expenses decreased $80,996, or 15.3%, to
$447,067. The decrease is primarily attributable to a decrease in travel and
entertainment expenses.
Professional and regulatory fees decreased $45,821, or 9.0%, to $462,703.
The decrease is primarily attributable to legal fees and other costs of
$145,838 associated with the FDIC contract incurred in the third quarter of
2002 offset by an increase in accounting fees of $84,210 as a result of a
personnel transition in the Chief Financial Officer position, additional fees
associated with the re-filing of 2002 corporate quarterly and annual reports
and an increase in information technology and investment research services for
the nine months ended September 30, 2003.
Occupancy and maintenance expenses decreased $55,644, or 16.5%, to $280,
971. The decrease is attributable to the integration of the ICM and ICC
operations in the Jacksonville Beach, Florida office during the second quarter
of 2002.
Interest expense decreased $16,520, or 18.6%, to $72,265. The decrease is
primarily attributable to the decrease of interest on the AJG note resulting
from its conversion into shares of the Company’s Class A Cumulative Convertible
Pay-In-Kind Preferred Stock at the end of the first quarter of 2002, offset by
the addition of interest expense associated with deferred compensation
commencing in the third quarter of 2002, a $400,000 bank note commencing in the
fourth quarter of 2002, and a $92,949 promissory note commencing in the third
quarter of 2003.
The loss on sale of notes receivable increased $139,035, or 100%, to
$139,035. The increase is attributable to the discounting and prepayment of
two subordinated promissory notes receivable in the amounts of $150,000 and
$173,919 owed to Enviroq Corporation, from Sprayroq of Ohio, Inc. The Company
received a total sum of $200,000 in prepayment of the outstanding principal
balance of $323,919 and accrued interest of $15,116. The Company recorded a
loss in the amount of $139,035 on the settlement of the notes.
Other expenses decreased $154,116, or 35.5%, to $279,898. The decrease is
primarily attributable to the reduction of office supplies of $40,355, printing
costs of $32,973, postage of $7,143, parking fees of $13,013, life insurance
premiums of $21,063 and donations of $18,620 as a result of the
17
integration of the ICM and ICC operations in the Jacksonville Beach, Florida
office during the second quarter of 2002 and management’s efforts to reduce
operating costs during the third quarter of 2003.
ITEM 3. CONTROLS AND PROCEDURES
Based on their evaluation of the Company’s disclosure controls and
procedures as of the end of the period covered by this quarter, the President
and Chief Executive Officer and the Chief Financial Officer of the Company have
concluded that such controls and procedures are effective. There were no
significant changes in the Company’s internal controls or in other factors that
could significantly affect such controls subsequent to the date of their
evaluation.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings pending, or to the Company’s knowledge,
threatened against the Company or any of its subsidiaries.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
On June 11, 2003, the Company received a notice of default from Wachovia
Bank, National Association with respect to the indebtedness of the Company
represented by that certain Renewal Promissory Note dated March 25, 2003. The
default notice related to the Company’s non-payment of three consecutive
$100,000 monthly principal payments due in May, June and July 2003 under the
terms of the Renewal Promissory Note.
On July 31, 2003, the Company entered into a Forbearance Agreement with
Wachovia Bank, National Association as a result of the Company’s non-payment of
the $100,000 monthly principal payments due in May, June and July 2003 under
the Renewal Promissory Note dated March 25, 2003. The Forbearance Agreement
required that the Company make an immediate payment of $50,000 principal plus
$4,129 of accrued interest, a $50,000 principal payment by October 15, 2003 and
a forbearance fee of $5,000 no later than November 15, 2003. On August 1,
2003, the Company paid $54,129 in accordance with the terms of the Forbearance
Agreement. On October 23, 2003, the Company repaid Wachovia Bank, National
Association in the amount of $262,095. Payment included $250,000 in principal,
$2,595 in interest, and $9,500 for the bank’s legal fees associated with the
agreement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On July 21, 2003, the Company entered into a Satisfaction of Subordinated
Indebtedness
18
agreement to permit the discounting and prepayment of two subordinated
promissory notes receivable in the amounts of $150,000 and $173,919 owed to
Enviroq Corporation, a wholly owned subsidiary of the Company, from Sprayroq of
Ohio, Inc. The Company received a total sum of $200,000 in prepayment of the
outstanding principal balance of $323,919 and accrued interest of $15,116. The
Company recorded a loss in the amount of $139,035 on the settlement of the
notes.
The description contained herein of the Satisfaction of Subordinated
Indebtedness Agreement is qualified in its entirety by reference to the
Satisfaction of Subordinated Indebtedness Agreement, a copy of which is
attached hereto and incorporated herein by reference as Exhibit 10.2.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(b) Reports on Form 8-K:
Current Reports on Form 8-K were filed by the Company during the quarter ended
September 30, 2003 as follows:
On July 1, 2003, the Company filed a Current Report on Form 8-K dated June 16,
2003 concerning the sale of stock of Ewing. The Current Report was filed under
Item 5, Other Events, and Item 7, Financial Statements, Pro Forma Financial
Information and Exhibits. No financial statements were filed therewith.
On July 21, 2003, the Company filed a Report on Form 8-K dated July 18, 2003
concerning the restatement of certain of the Company’s financial statements.
The Current Report was filed under Item 7, Financial Statements, Pro Forma
Financial Information and Exhibits and Item 9, Information Furnished Under Item
12 (Results of Operations and Financial Condition). No financial statements
were filed therewith.
19
September 30, 2003 and December 31, 2002
2003
2002
(unaudited)
$
28,185
$
5,353
76,377
128,724
17,724
23,637
19,000
439,000
27,524
202,332
—
387,289
168,810
1,186,335
—
323,919
307,168
412,962
694,600
779,823
3,564,898
3,564,898
$
4,735,476
$
6,267,937
$
177,780
$
265,358
722,638
480,683
595,143
600,000
15,017
72,501
—
89,786
1,510,578
1,508,328
114,222
174,972
210,647
212,826
75,000
—
1,910,447
1,896,126
3,500,000
3,500,000
34,002
34,002
(3,669
)
(3,669
)
3,350,918
3,482,168
(4,056,222
)
(2,640,690
)
2,825,029
4,371,811
$
4,735,476
$
6,267,937
Three months
Nine months
ended September 30
ended September 30
2003
2002
2003
2002
$
1,013,982
$
922,897
$
2,825,580
$
2,566,658
32,345
(7,243
)
85,670
43,355
1,046,327
915,654
2,911,250
2,610,013
610,283
707,422
2,553,986
2,721,485
48,575
262,391
447,067
528,063
151,306
275,834
462,703
508,524
94,789
119,071
280,971
336,615
55,533
73,303
169,588
177,001
38,869
21,923
72,265
88,785
139,035
—
139,035
—
52,055
154,956
279,898
434,014
1,190,445
1,614,900
4,405,513
4,794,487
(144,118
)
(699,246
)
(1,494,263
)
(2,184,474
)
—
(411,244
)
—
(510,124
)
(144,118
)
(288,002
)
(1,494,263
)
(1,674,350
)
11,783
(440,228
)
19,799
2,153,720
—
—
58,932
—
11,783
(440,228
)
78,731
2,153,720
(132,335
)
(728,230
)
(1,415,532
)
479,370
43,750
43,750
131,250
89,897
$
(176,085
)
$
(771,980
)
$
(1,546,782
)
$
389,473
$
(0.06
)
$
(0.10
)
$
(0.48
)
$
(0.52
)
0.01
(0.13
)
0.02
0.64
$
(0.05
)
$
(0.23
)
$
(0.46
)
$
0.12
$
(0.06
)
$
(0.10
)
$
(0.48
)
$
(0.52
)
0.01
(0.13
)
0.02
0.64
$
(0.05
)
$
(0.23
)
$
(0.46
)
$
0.12
3,399,183
3,349,183
3,399,183
3,349,183
3,399,183
3,349,183
3,399,183
3,349,183
Nine months ended September 30, 2003 and 2002
(unaudited)
2003
2002
$
(1,415,532
)
$
479,370
162,258
177,000
—
(936
)
56,689
(3,880
)
(4,342
)
(310
)
(58,932
)
—
5,913
(34,131
)
74,808
(458,007
)
157,374
41,591
420,000
—
(60,750
)
195,223
(2,179
)
(1,622
)
(57,484
)
(95,992
)
89,152
(197,960
)
(633,025
)
100,346
(2,105
)
(259,561
)
30,864
28,327
247,283
—
323,919
—
599,961
(231,234
)
592,949
1,500,000
120,000
—
(522,806
)
(1,625,000
)
(134,247
)
—
55,896
(125,000
)
22,832
(255,888
)
5,353
641,577
$
28,185
$
385,689
$
39,638
$
91,463
$
—
$
3,500,000
$
131,250
$
89,897
September 30, 2003
(1)
Summary of Significant Accounting Policies and Operations
(a)
Organization and Basis of Presentation
Intrepid Capital Corporation (the “Company”), incorporated in 1998, is
a Florida-based financial services holding company that conducts its
business through its wholly-owned subsidiary, Intrepid Capital
Management, Inc. (“ICM”).
ICM, a registered investment advisor, manages equity, fixed-income,
and balanced portfolios for public and private companies, labor
unions, endowments, foundations, and high net worth individuals and
families. ICM has received authority to act as an investment manager
in several states to meet the needs of its customers throughout the
United States.
In a transaction effective October 30, 2001, the Company discontinued
its resinous material operations formerly conducted through Enviroq
Corporation (“Enviroq”) by selling all of the issued and outstanding
capital stock of Sprayroq, Inc. (“Sprayroq”), Enviroq’s 50% owned
subsidiary. Enviroq remains a wholly-owned subsidiary of the Company
which held the promissory notes received in connection with the sale
(see note 9), but conducts no operations currently.
In a transaction effective December 31, 2001, the Company acquired all
of the outstanding stock of ICC Investment Advisors, Inc., the
operations of which were conducted through its wholly-owned
subsidiary, The Investment Counsel Company (“ICC”). Subsequent to the
acquisition, ICC was merged with and into ICM.
In a transaction effective June 16, 2003, the Company discontinued its
investment banking operations conducted through Allen C. Ewing & Co.
(“Ewing”), and accordingly, the Company has reported its operations as
discontinued for all periods presented. Pursuant to the terms of a
Stock Purchase Agreement dated May 2, 2003, the purchaser acquired all
of the issued and outstanding capital stock of Ewing (see note 2).
With the sale of Ewing, the Company’s sole operating business segment
is its investment management services.
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 Amended Annual Report on Form 10-KSB/A filed with the
SEC on August 25, 2003. 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 the three and nine month
periods ended September 30, 2003 are not necessarily indicative of the
results that may be expected for the full year.
Notes to Condensed Consolidated Financial Statements
September 30, 2003
(b)
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its subsidiaries, ICM and Enviroq. Also
included are the accounts of Ewing which have been reported as
discontinued operations (see note 2). All significant intercompany
balances and transactions have been eliminated in consolidation.
(c)
Earnings Per Share
Net income 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 and nine months ended September 30, 2003 and 2002, diluted
net loss per share is the same as basic net loss per share as the
effects of including potentially dilutive securities in the
computation is anti-dilutive. The potentially dilutive securities
excluded from the calculation of earnings per share consisted of
Preferred Stock convertible into 1,166,666 shares of Common Stock in
addition to unexercised options and warrants.
(e)
Comprehensive Income
No differences between total comprehensive income (loss) and net
income (loss) existed in the financial statements reported for the
three and nine month periods ended September 30, 2003 and 2002.
(f)
Stock Option Plan
The Company applies the intrinsic value-based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, “Accounting
for Stock Issued to Employees” (“APB 25”) in accounting for its stock
options. As such, compensation expense would be recorded on the date
of grant only if the current market price of the underlying stock
exceeded the exercise price. As allowed by Statement of Financial
Accounting Standards No. 123, “Accounting for Stock-Based
Compensation” (“FAS 123”) and Statement of Financial Accounting
Standards No. 148, “Accounting for Stock-Based Compensation –
Transition and Disclosure” (“FAS 148”), the Company has elected to
apply the intrinsic value-based method
of accounting described above, and has adopted the disclosure
requirements of FAS 123 and FAS 148.
On January 21, 2003, stock options to purchase 32,500 shares were
issued under the Company’s Non Employee Directors Incentive Stock
Option Plan. The options have a weighted average exercise price of
$2.17 and a term of 5 years. Additionally, on January 21, 2003, non
qualified stock options to purchase 240,000 shares were issued and
have a weighted average exercise price of $2.04 and a term of 5 years.
Notes to Condensed Consolidated Financial Statements
September 30, 2003
The per share weighted-average fair value of Non Employee Directors
Incentive Stock Options and non qualified stock options granted on
January 21, 2003 were $0.36 and $0.39, respectively, using the
Black-Scholes option-pricing model with the following weighted average
assumptions: expected dividend yield 0%, risk free interest rate of
4%, expected volatility 50%, and an expected life of 5 years.
As permitted under FAS 148 and FAS 123, the Company has elected to
continue to apply the provisions of APB 25 and provide the pro forma
disclosures required by FAS 148 and FAS 123. Accordingly, no
compensation cost has been recognized for its stock options in the
consolidated financial statements. Had the Company determined
compensation cost based on the fair value at the date of grant for its
stock options under SFAS 123, the Company’s net income (loss) for the
three and nine month periods ended September 30, 2003 and 2002 would
have been reduced to the pro forma amounts indicated below:
Three months ended Sept 30
Nine months ended Sept 30
2003
2002
2003
2002
$
(176,085
)
$
(771,980
)
$
(1,546,782
)
$
389,473
—
—
(70,210
)
—
$
(176,085
)
$
(771,980
)
$
(1,616,992
)
$
389,473
$
(0.05
)
$
(0.23
)
$
(0.46
)
$
0.12
$
(0.05
)
$
(0.23
)
$
(0.48
)
$
0.12
$
(0.05
)
$
(0.23
)
$
(0.46
)
$
0.12
$
(0.05
)
$
(0.23
)
$
(0.48
)
$
0.12
(2)
Discontinued Operations
During the first quarter of 2003, the Company decided to pursue the
divesture of Ewing, which formerly constituted a separate operating
segment, the investment banking segment, and accordingly, the Company has
reported its operations as discontinued for all periods presented.
On June 16, 2003, the Company sold Ewing pursuant to the terms of a Stock
Purchase Agreement dated May 2, 2003. The purchaser acquired all of the
issued and outstanding capital stock of Ewing for an aggregate purchase
price of $300,000, which was paid in cash by purchaser at the closing of
the transaction. The Company used $247,783 of the net proceeds to reduce
debt and $37,500 to reduce deferred compensation. The Company recorded a
$58,932 gain on the sale of discontinued operations.
Ewing’s assets and liabilities as of September 30, 2003 and December 31,
2002 consisted of the
following:
September 30, 2003
2003
2002
$
—
$
305,613
—
7,329
—
24,881
—
15,575
—
33,891
—
387,289
—
57,100
—
32,686
$
—
$
89,786
Income from discontinued operations for the nine months ended September 30,
2002 includes revenues of approximately $7.0 million earned under a single
contract with the Federal Deposit Insurance Corporation and expenses
incurred of approximately $3.7 million. The contract, which was
nonrecurring, began in January 2002 and ended in June 2002.
(3)
Notes Payable
The notes payable at September 30, 2003 and December 31, 2002 consist of
the following:
2003
2002
shareholder of Ewing, interest due quarterly at 8.0%,
unsecured, principal payment of $25,000 due on
December 31, 2003, and $75,000 due on December 31, 2004
$
100,000
$
200,000
monthly installments of $8,122 due beginning on July 15, 2003
and extending to June 15, 2004
70,143
––
interest at prime plus 4.75% (8.75% at September 30, 2003),
principal plus interest originally due on February 28, 2003,
paid October 23, 2003
250,000
400,000
than June 1, 2004, secured by personal guarantees of two
officers of the Company. Interest is payable monthly at a
rate of prime plus .5% (4.5% at September 30, 2003)
250,000
––
670,143
600,000
595,143
600,000
$
75,000
$
––
Notes to Condensed Consolidated Financial Statements
September 30, 2003
On June 16, 2003, the former shareholder of Ewing agreed to extend the
payment terms of the $100,000 principal payment originally due on December
31, 2003. Under the new agreement, a $25,000 principal payment is due on
December 31, 2003 and the remaining $75,000 in principal is due on December
31, 2004. Interest will continue to be payable quarterly at an annual rate
of 8% until the loan is paid in full.
On July 7, 2003, the Company entered into a Promissory Note agreement with
The Robin Shepherd Group for $92,949 as a result of fees incurred for the
production of a national television commercial aimed at informing
prospective clients of ICM’s top-tier investment performance. Interest
accrues at the rate of 10% per annum with monthly installments of principal
and interest of $8,122 due through June 15, 2004.
On July 31, 2003, the Company entered into a Forbearance Agreement with
Wachovia Bank, National Association as a result of the Company’s
non-payment of the $100,000 monthly principal payments due in May, June and
July 2003 under the Renewal Promissory Note dated March 25, 2003. The
Forbearance Agreement required that the Company make an immediate payment
of $50,000 in principal plus $4,129 of accrued interest, a $50,000
principal payment by October 15, 2003 and a forbearance fee of $5,000 no
later than November 15, 2003. On August 1, 2003, the Company paid $54,129
in accordance with the terms of the Forbearance Agreement. On October 23,
2003, the Company repaid Wachovia Bank, National Association in the amount
of $262,095. Payment included $250,000 in principal, $2,595 in interest,
and $9,500 for the bank’s legal fees associated with the agreement.
(4)
Related Party Transactions
The Company performs certain investment management functions for Intrepid
Capital, L.P., and during the nine months ended September 30, 2003 and
2002, received $48,299 and $50,002, respectively, for such services.
(5)
Segments
During 2003 and 2002, the Company operated in one principal segment,
investment management. The operations of Ewing formerly constituted a
separate operating segment, the investment banking segment, which have been
reclassified as a discontinued operation. The Company assesses and
measures operating performance based upon the net income (loss) derived
from each of its operating segments, exclusive of the impact of corporate
expenses operating segments, exclusive of the impact of corporate expenses.
The revenues and net income (loss) for each of the reportable segments are
summarized as follows for the three and nine month periods ended September
30, 2003 and 2002:
Notes to Condensed Consolidated Financial Statements
September 30, 2003
2003
2002
2003
2002
$
1,046,327
$
917,736
$
2,896,514
$
2,566,107
—
57,918
89,237
648,308
—
(60,000
)
(74,501
)
(604,402
)
$
1,046,327
$
915,654
$
2,911,250
$
2,610,013
$
(144,118
)
$
(204,881
)
$
(967,034
)
$
(478,598
)
—
(83,121
)
(527,229
)
(1,195,752
)
$
(144,118
)
$
(288,002
)
$
(1,494,263
)
$
(1,674,350
)
The total assets for each of the reportable segments are summarized as
follows as of September 30, 2003 and December 31, 2002. Non segment assets
consist primarily of cash, certain investments and other assets, which are
recorded at the parent company level.
2003
2002
$
4,735,476
$
4,729,825
—
1,150,823
—
387,289
$
4,735,476
$
6,267,937
(6)
Liquidity
The Company’s current assets consist generally of interest in an equity
fund, accounts receivable, and prepaid assets. The Company has financed
its operations with funds provided by operations, proceeds from notes
payable, liquidation of cash surrender value of insurance policies, and
proceeds from the divesture of Ewing (see note 2). The Company has
developed and is implementing a strategically focused plan that includes
internal revenue growth, cost reductions, and operational efficiencies.
The Company believes that the divesture of Ewing will allow management to
focus on leveraging the Company’s expertise in investment management
services. By more closely aligning sales, client relationship management,
and fund management, the Company believes that additional revenue sources
can be derived from current relationships. The Company has taken steps,
and is continuing to take additional steps, which will allow the Company to
deliver superior service and performance at a reduced cost. These steps
have led to a reduction in recurring operating costs, as well as a more
beneficial debt reduction schedule for the Company. Management is also
looking at creating back-office efficiencies through the use of technology,
work flow processes, and the consolidation of functions. Management
believes that an improved organizational structure is beneficial to the
Company today, and will be beneficial to the Company’s future success.
Notes to Condensed Consolidated Financial Statements
September 30, 2003
While management believes that it will be able to support its current
operations, debt service requirements (see note 3) and capital needs
through its current cash flow, management continues to explore and identify
potential debt and equity sources of capital from private investors, which
would give the Company more flexibility in its operations and debt
reduction initiatives. Management cannot provide any assurances that such
a transaction will take place. If adequate funds are not available, the
Company’s refocused strategy would be significantly limited, and such
funding limitation would have a material adverse effect on the Company’s
business, results of operations, and financial condition.
(7)
Goodwill and Intangible Assets
Goodwill at September 30, 2003 of $3,564,898 was recorded as a part of the
purchase of ICC and, accordingly, was allocated to the investment
management segment. The Company’s goodwill was recorded after the
Company’s adoption of Statement of Financial Accounting Standards No. 142,
“Goodwill and Other Intangible Assets” (“FAS 142”) and is being carried at
cost. Management tests for impairment on an annual basis and between
annual tests in certain circumstances in accordance with FAS 142.
The Company has determined that certain identifiable intangible assets
exist which are attributable to the estimated fair value of investment
management contracts and customer relationships which were acquired through
the purchase of ICC and have been allocated to the investment management
segment. At September 30, 2003, identifiable intangible assets amounted to
$694,600, net of accumulated amortization of $196,624. Amortization
expense was $85,223 for the nine months ended September 30, 2003.
(8)
Forbearance Agreement
On July 31, 2003, the Company entered into a Forbearance Agreement with
Wachovia Bank, National Association as a result of the Company’s
non-payment of the $100,000 monthly principal payments due in May, June and
July 2003 under the Renewal Promissory Note dated March 25, 2003. The
Forbearance Agreement required that the Company make an immediate payment
of $50,000 in principal plus $4,129 of accrued interest, a $50,000
principal payment by October 15, 2003 and a forbearance fee of $5,000 no
later than November 15, 2003. On August 1, 2003, the Company paid $54,129
in accordance with the terms of the Forbearance Agreement. On October 23,
2003, the Company repaid Wachovia Bank, National Association in the amount
of $262,095. Payment included $250,000 in principal, $2,595 in interest,
and $9,500 for the bank’s legal fees associated with the agreement.
(9)
Satisfaction of Subordinated Indebtedness
On July 21, 2003, the Company entered into a Satisfaction of Subordinated
Indebtedness agreement to permit the discounting and prepayment of two
subordinated promissory notes receivable in the amounts of $150,000 and
$173,919 owed to Enviroq Corporation, a wholly owned subsidiary of the
Company, from Sprayroq of Ohio, Inc. The Company received a total sum of
$200,000 in prepayment of the outstanding principal balance of $323,919 and
accrued interest of $15,116. The Company recorded a loss in the amount of
$139,035 on the settlement of the notes.
Notes to Condensed Consolidated Financial Statements
September 30, 2003
(10)
Subsequent Events
On October 22, 2003, the Company entered into a Promissory Note agreement
with Forrest Travis, Chairman of the Company’s Board of Directors, for the
amount of $250,000 for the purpose of liquidating the Forbearance Agreement
with Wachovia Bank, National Association dated July 31, 2003. Interest
will accrue at the rate of 6% per annum with quarterly installments of
principal and interest of $23,873 due commencing on January 15, 2004 and
extending through October 15, 2006. The Note is secured by Company
accounts receivable.
10.1
Promissory Note dated as of July 7, 2003 among Intrepid Capital
Corporation and The Robin Shepherd Group.
10.2
Promissory Note dated October 22, 2003 among Intrepid Capital Corporation
and Forrest Travis.
10.3
Unconditional Guaranty of Payment and Performance dated as of July 7,
2003 between Mark F. Travis and The Robin Shepard Group.
31.1
Certification of the Company’s Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of the Company’s Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of the Company’s Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of the Company’s Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES AND CERTIFICATIONS
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.
20
INTREPID CAPITAL CORPORATION
By
/s/ Mark F. Travis
Mark F. Travis, President and
Chief Executive Officer
Dated:
November _____ , 2003
By
/s/ Donald C. White
Donald C. White, Chief
Financial Officer
Dated:
November _____ , 2003
EXHIBIT INDEX
10.1
Promissory Note dated as of July 7, 2003 among Intrepid Capital
Corporation and The Robin Shepherd Group.
10.2
Promissory Note dated October 22, 2003 among Intrepid Capital Corporation
and Forrest Travis.
10.3
Unconditional Guaranty of Payment and Performance dated as of July 7,
2003 between Mark F. Travis and The Robin Shepard Group.
31.1
Certification of the Company’s Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of the Company’s Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of the Company’s Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of the Company’s Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
21
EXHIBIT 10.1
PROMISSORY NOTE
$92,949.43 July 7, 2003
FOR VALUE RECEIVED, INTREPID CAPITAL CORPORATION ("Borrower'), promises
to pay to the order of ROBIN SHEPHERD STUDIOS, INC., d/b/a The Robin Shepherd
Group ("Lender"), at 500 Bishopgate Lane, Jacksonville, Florida 32204, or at
such other place as the Lender may designate in writing, the principal sum of
Ninety-two Thousand Nine Hundred Forty-Nine and 43/100 Dollars ($92,949.43),
with interest from the date hereof at the rate set forth below, both principal
and interest being payable In lawful currency of the United States of America,
on the dates and In the following manner;
Interest on the principal balance outstanding from time to time hereunder shall accrue at the rate of tan percent (10%) per annum. Monthly installments of principal any: accrued interest of Eight Thousand One Hundred Twenty one and 96/100 Dollars ($8,121.96) shall be due and payable beginning on July 15, 2003, Bind continuing on the fifteenth (15th) day of each subsequent month thereafter until June 15, 2004, at which time all principal and accrued and unpaid interest shall be DUE AND PAYABLE.
Any monthly installment not received by the last day of the Month when due shall be deemed late and a late penalty of ten percent (10%) of the amount due shall be imposed on any such ate monthly installment.
If default be made in the payment of any installment under this Note, the entire principal sum and accrued interest shell at once become due and payable, upon ten (10) days' prior written notice from Lender to Borrower, at the option of Lender: Failure to exercise this option stall not constitute a waiver of the right to exercise the same in the event of any subsequent default.
In the event that all or substantially all of the assets are sold by the Borrower, or in the event of merger, reorganization, consolidation, liquidation or bankruptcy of the Borrower, the entire principal sum and accrued Interest shall at once become due and payable.
Privilege is reserved to prepay at any time, without premium or fee, the entire Indebtedness evidenced hereby or any part thereof. Any partial prepayment shall be applied against the principal amount outstanding and shall not postpone the due date of any subsequent installments or change the amount of such installments, unless Lender shall otherwise agree in writing.
Borrower waives demand, presentment, notice of dishonor and protest and hereby consents and agrees to any renewal, extension or modification of this Note without notice and does further agree that any such renewal, modification, or extension shall not affect or limit the liability of said parties hereunder.
Should it become necessary to collect this Note through an attorney, by legal proceedings, or otherwise, the undersigned, including endorsers, promises to pay all costs of collection, Including reasonable attorneys' fees.
This Note is to be construed and enforced in accordance with the laws of the State of Florida.
INTREPID CAPITAL CORPORATION
/s/ Mark Travis
-----------------------------
Mark Travis
Its: President
|
Pmt Date Loan Payment Accrued In Balance Chng Balance
07-Jul-03 92,949.43 0.00 (92,949.43) 92,949.43
1 15-Jul-03 8,121.96 203.72 7,918.24 85,031.19
2 15-Aug-03 8,121.96 708.59 7,413.37 77,617.82
3 15-Sep-03 8,121.96 646.82 7,475.14 70,142.68
4 15-Oct-03 8,121.96 584.52 7,537.44 62,605.24
5 15-Nov-03 8,121.96 521.41 7,600.25 55,004.99
6 15-Dec-03 8,121.96 458.37 7,663.59 47,341.40
7 15-Jan-03 8,121.96 394.51 7,727.45 39,613.95
8 15-Feb-03 8,121.96 330.12 7,791.84 31,822.11
9 15-Mar-03 8,121.96 265.18 7,856.78 23,965.33
10 15-Apr-03 8,121.96 199.71 7,922.25 16,043.88
11 15-May-03 8,121.96 133.69 7,988.27 8,054.81
12 15-Jun-03 8,121.96 67.15 8,054.81 0.00
|
Exhibit 10.2
PROMISSORY NOTE
$250,000.00 Jacksonville Beach, FL October 22, 2003
FOR VALUE RECEIVED, INTREPID CAPITAL CORPORATION, INC., a Delaware corporation (the "Company"), promises to pay to the order of FORREST TRAVIS (the "Holder") the principal sum of two hundred fifty thousand and 00/100 U.S. Dollars ($250,000.00) with interest in arrears on the unpaid principal balance from time to time outstanding from the date hereof until due and payable at the rate provided in Section 1(a) hereof. The Holder of this Note, by acceptance hereof, agrees to and shall be bound by the provisions of this Note.
1. TERMS OF NOTE. The payment terms of this Note shall be as follows:
(a) Interest. This Note shall bear interest on the outstanding principal balance hereof at the rate of six percent (6%) per annum (computed on the basis of a 365 or 366 day year, as the case may be). Interest on this Note shall accrue from the date of issuance of this Note set forth above.
(b) Payment and Maturity. The principal of this Note and accrued interest at the rate provided in Section 1(a) hereof shall be payable in generally level quarterly installments of principal and interest on January 15, April 15, July 15 and October 15 of each year through October 15, 2006, all as more specifically provided in the amortization schedule attached hereto as Schedule 1. All payments of principal and interest hereunder shall be made by the Company in lawful money of the United States of America at the address of the Holder appearing on the books of the Company, or such other place as the Holder hereof shall designate to the Company in writing. If not sooner paid as aforesaid, the entire balance of this Note, including both principal and unpaid interest, shall be due and payable in full on the third anniversary of this Note.
(c) Voluntary Prepayment. The Company has the right to prepay this Note in whole or in part at any time during the term of this Note without premium or penalty. Any such partial prepayment shall be applied first against accrued interest and then against the principal sums last maturing hereunder.
2. SECURITY INTEREST. The Company grants to Holder and the Holder accepts from Company a secured interest in the proceeds (cash and non-cash) of the Company's billed and uncollected advisory fees, as well as all future unbilled advisory fees This security interest shall remain in force until all of the Company's indebtedness to the Holder under this Note is satisfied.
3. RESTRICTIONS. The Holder by its acceptance of this Note acknowledges that it is aware that this Note has not been registered under the Securities Act or the securities laws of any state or other jurisdiction. The Holder represents and warrants to the Company that it has acquired this Note for investment and not with a view to or for sale in connection with any distribution of this Note or with any intention of distributing or selling this Note.
The Holder acknowledges that it has no right to demand that the Company register this Note.
4. DEFAULT. It shall be an event of default ("Event of Default") hereunder if the Company shall (a) fail to make when due payment of the principal of or any interest on this Note and such failure continues for a period of thirty (30) business days after the date such payment was due; (b) default in the performance of any of the obligations, covenants or agreements legally imposed by the terms of this Note; (c) apply for or consent in writing to the appointment of a receiver, trustee, or liquidator of the Company; (d) file a voluntary petition in bankruptcy or admit in writing the Company's inability to pay the Company's debts as they come sue; (e) make general assignments for the benefit of creditors; (f) file a petition or answer seeking reorganization or rearrangement with creditors or taking advantage of any insolvency law; or (g) file an answer admitting the material allegations of a petition filed against the Company in any bankruptcy, reorganization, insolvency or similar proceedings. At the option of the Holder, the whole indebtedness evidenced hereby may be declared due and payable upon the occurrence of an Event of Default, whereupon the entire unpaid principal balance of this Note and all interest accrued thereon from the last payment due shall thereupon at once mature and become due and payable without presentation or demand for payment or notice of the intent to exercise such option or notice of the exercise of such option by the Holder, or notice of any kind, all of which are hereby expressly waived by the Company and may be collected by suit or other legal proceedings.
5. COSTS AND EXPENSES OF COLLECTION. If there shall be an Event of Default on this Note, the Company shall be liable for all costs, expenses, and reasonable attorneys' and paralegal's fees and expenses incurred by the Holder in connection with the collection of the sums evidenced hereby, including all such costs, expenses, and fees incurred in on any appeal or in any administrative or bankruptcy proceeding.
6. USURY. It is the intention of the parties hereto to comply with the usury laws applicable to this loan, if any. Accordingly, it is agreed that notwithstanding any provision to the contrary in this Note, no such provision shall require the payment or permit the collection of interest in excess of the maximum permitted by law. ("Excess Interest"). If any Excess Interest is provided for, contracted for, charged for or received, then the provisions of this paragraph shall govern and control and the Company shall not be obligated to pay the amount of such Excess Interest. Any such Excess Interest which may have been collected shall be, at the Holder's option, either applied as a credit against the then unpaid principal amount hereof or refunded to the Company. The effective rate of interest shall be automatically subject to reduction to the maximum lawful contract rate allowed under the usury laws as now or hereafter construed. It is further agreed that without limitation of the foregoing, all calculations of the rate of interest contracted for, charged for or received under this Note which are made for the purposes of determining whether such rate exceeds the maximum lawful rate shall be made, to the extent permitted by law, by amortizing, prorating, allocating and spreading in equal parts during the full stated term of this Note all interest contracted for, charged for or received from the Company or otherwise by the Holder.
7. HEADINGS. The descriptive headings of this Note are inserted for convenience only and do not constitute a part of this Note.
8. GOVERNING LAW. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the state of Florida, excluding those laws relating to the resolution of conflicts between the laws of different jurisdictions.
9. WAIVER OF TRIAL BY JURY. THE COMPANY AND THE HOLDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE COMPANY OR HOLDER.
IN WITNESS WHEREOF, the Company has caused this Note to be executed under the seal by its duly authorized officer as of the date set forth above.
COMPANY
INTREPID CAPITAL CORPORATION
By: /s/ Mark F. Travis
-----------------------------------
Mark F. Travis
Chief Executive Officer/President
By: /s/ Donald C. White
-----------------------------------
Donald C. White
Chief Financial Officer
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HOLDER
FORREST TRAVIS
/s/ Forrest Travis
--------------------------------------------
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SCHEDULE 1
AMORTIZATION SCHEDULE
TOTAL PRINCIPAL INTEREST REMAINING
DATE PAYMENT PORTION PORTION BALANCE
---- ------- --------- -------- ----------
January 15, 2004 $ 23,873.00 $19,205.00 $3,668.00 $230.795.00
April 15, 2004 $ 23,873.00 $19,487.00 $3,386.00 $211.308.00
July 15, 2004 $ 23,873.00 $19,773.00 $3,100.00 $191,535.00
October 15, 2004 $ 23,873.00 $20,062.00 $2,811.00 $171,473.00
January 15, 2005 $ 23,873.00 $20,357.00 $2,516.00 $151,116.00
April 15, 2005 $ 23,873.00 $20,656.00 $2,217.00 $130,460.00
July 15, 2005 $ 23,873.00 $20,959.00 $1,914.00 $109,501.00
October 15, 2005 $ 23,873.00 $21,267.00 $1,606.00 $ 88,234.00
January 15, 2006 $ 23,873.00 $21,579.00 $1,294.00 $ 66.655.00
April 15, 2006 $ 23,873.00 $21,895.00 $ 978.00 $ 44.760.00
July 15, 2006 $ 23,873.00 $22,217.00 $ 656.00 $ 22.543.00
October 15, 2006 $ 23,873.00 $22,543.00 $ 330.00 $ 0.00
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Exhibit 10.3
STATE OF FLORIDA
COUNTY OF DUVAL
UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE
This Unconditional Guaranty of Payment and Performance is executed by MARK TRAVIS (hereinafter referred to as "Guarantor"), in favor of ROBIN SHEPHERD STUDIOS, INC., d/b/a The Robin Shepherd Group (hereinafter "TRSG"), for the purpose of seeking to induce TRSG to enter into that certain Promissory Note dated of even date herewith (hereinafter collectively the "Note") with INTREPID CAPITAL CORPORATION (hereinafter "Principal"). Guarantor does hereby unconditionally guaranty to TRSG the full and prompt payment when due of any and all obligations of the Principal under the Note. Guarantor does hereby agree that if amounts due under the Note are not paid by Principal in accordance with the terms of the Note, or if any and all sums which are now or may hereafter become due from Principal to TRSG are not paid by Principal, Guarantor will immediately make such payments. Guarantor further agrees to pay TRSG all expenses (including reasonable attorneys' fees) paid or incurred by TRSG in endeavoring to collect the indebtedness, to enforce the obligations of the Principal guarantied hereby, or any portion thereof, or to enforce this Guaranty;
Guarantor hereby waives and agrees not to assert or take advantage of
(a) the defense of the statute of limitations in any action hereunder or for the
collection of the monies due pursuant t the Note or the performance of any
obligation hereby guarantied; (b) any defense that may arise by reason of the
incapacity, lack of authority, death or disability of Guarantor or any other
person or entity; (c) any defense based upon a breach of the Note by TRSG; (d)
any defense based upon failure of TRSG to commence an action against Principal;
end (e) any other legal or equitable defenses whatsoever to which Guarantor
might otherwise be entitled.
This is a guaranty of payment and performance and not of collection. The liability of Guarantor under this Guaranty shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Principal or any other person. Guarantor waives any right to require that an action be brought against Principal or any other person. In the event of a breach or default by the Principal under the Note, TRSG shall have the right to enforce its rights, powers and remedies thereunder or hereunder or under any other instrument now or hereafter evidencing, securing or otherwise relating to the Note, In any order and all rights, powers and remedies available to TRSG in such event shall be nonexclusive and cumulative of all other rights, powers and remedies provided thereunder or hereunder or by law or In equity. Accordingly, Guarantor hereby authorizes and empowers TRSG upon breach or default of the Note by Principal, at its sole discretion, and without notice to Guarantor, to exercise any right or remedy which TRSG may have. If the obligations guarantied hereby are partially performed or paid by reason of the election of TRSG to pursue any of the remedies available to TRSG, or if such obligations are otherwise partially performed or paid, this Guaranty shall nevertheless remain in full force and effect, and Guarantor shall remain liable for all obligations guarantied hereby, even though any rights which Guarantor may have against Principal may be destroyed or diminished by the exercise of any such remedy. Until all of the obligations of Principal to TRSG have been paid and performed in full, Guarantor shall have no right of subrogation to TRSG against Principal, and Guarantor hereby waives any rights to enforce any remedy which TRSG may have against Principal.
Guarantor hereby subordinates all claims that Guarantor may have against Principal to all claims which TRSG has against Principal.
The undersigned Guarantor further waives any claim, right, or remedy which such Guarantor may now have or hereafter acquire against the Principal that arises hereunder and/or from the performance by
the Guarantor hereunder including, without limitation, any claim, remedy, or right of subrogation, reimbursement, exoneration, indemnification, or participation in any claim, right, or remedy of TRSG against the Principal, whether or not such claim, right, or remedy arises in equity, under contract, by statute, under common law, or otherwise.
This Guaranty may not be changed orally, and no obligation of Guarantor can be released or waived by TRSG, except by writing, signed by the party giving such notice, election or demand, and shall be delivered personally, or sent by registered or certified United States mail, postage prepaid, to the other party at the address set forth below, or at such other address within the continental United States of America as may have theretofore been designated in writing. The effective date of such notice shall be the date of personal service or the date on which the notice is deposited in the mail. For the purposes of this Guaranty:
The address of TRSG is:
The Robin Shepherd Group
Mr. Jeffrey A. Hite
500 Bishopgate Lane
Jacksonville, Florida 32204
The address of Guarantor is:
c/o Intrepid Capital Corporation 3652 South Third Street, Suite 200 Jacksonville Beach, Florida 32250
The provisions of this Guaranty shall be binding upon Guarantor and his successors, successors-in-title, heirs, legal representatives and assigns. This Guaranty shall in no event be impaired by any change which may arise by reason of the death of Guarantor, or by reason of the dissolution of Principal.
BY ACCEPTANCE HEREOF, GUARANTOR AGREES THAT NEITHER GUARANTOR, NOR ANY ONE OR MORE OF THE UNDERSIGNED, OR ANY ASSIGNEE, SUCCESSOR, HEIR, OR LEGAL REPRESENTATIVE OF ANY OF THE SAME (ALL OF WHOM ARE HEREINAFTER REFERRED TO AS THE "PARTIES") SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE BASED UPON OR ARISING OUT OF THIS GUARANTY, ANY RELATED AGREEMENT OR INSTRUMENT, OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG THE PARTIES. NONE OF THE PARTIES WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY NEGOTIATED BY THE PARTIES WITH TRSG, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. TRSG HAS IN NO WAY AGREED WITH OR REPRESENTED TO ANY OF THE PARTIES THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty in Duval County, Florida under seal on the 7th day Of July, 2003.
/s/ Jeffrey A. Hite
-------------------------------------
Print Name Jeffrey A. Hite
/s/ Michael T. Russell
------------------------------------
Print Name Michael T. Russell
/s/ Mark Travis
---------------------
MARK TRAVIS
"Guarantor"
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Exhibit 31.1
Section 302 Certification
I, Mark F. Travis, certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of Intrepid Capital Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 12, 2003
By: /s/ Mark F. Travis
----------------------------
Mark F. Travis, President and
Chief Executive Officer
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Exhibit 31.2
Section 302 Certification
I, Donald C. White, certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of Intrepid Capital Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 12, 2003
By: /s/ Donald C. White
-----------------------------------------
Donald C. White, Chief Financial Officer
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Exhibit 32.1
SECTION 906 CERTIFICATION
I, Mark F. Travis, the Chief Executive Officer of Intrepid Capital Corporation (the "Company"), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1. The Quarterly Report on Form 10-QSB of the Company for the quarter ended September 30, 2003 (the "Periodic Report") fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 12, 2003
By: /s/ Mark F. Travis
---------------------------------------
Mark F. Travis, Chief Executive Officer
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Exhibit 32.2
SECTION 906 CERTIFICATION
I, Donald C. White, the Chief Financial Officer of Intrepid Capital Corporation (the "Company"), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1. The Quarterly Report on Form 10-QSB of the Company for the quarter ended September 30, 2003 (the "Periodic Report") fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 12, 2003
By: /s/ Donald C. White
----------------------------------------
Donald C. White, Chief Financial Officer
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