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 SEPTEMBER 30, 2001 OR [ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _________ to __________ Commission file number 333-66859 INTREPID CAPITAL CORPORATION (Exact name of Registrant as specified in its Charter) DELAWARE 59-3546446 (State of Incorporation) (I.R.S. Employer Identification No.) 3652 SOUTH THIRD STREET, SUITE 200, JACKSONVILLE BEACH, FLORIDA 32250 (Address of principal executive offices) (Zip Code) (904) 246-3433 (Registrant's telephone number) 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 October 31, 2001, there were 2,350,246 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, 2001 PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS Consolidated Balance Sheets of Intrepid Capital Corporation and Subsidiaries as of September 30, 2001 and December 31, 2000................................. 3 Consolidated Statements of Operations of Intrepid Capital Corporation and Subsidiaries for the Three and Nine Month Periods Ended September 30, 2001 and 2000................................................... 4 Consolidated Statements of Cash Flows of Intrepid Capital Corporation and Subsidiaries for the Nine Month Periods Ended September 30, 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 Discontinued Operations..................................................................... 9 Liquidity and Capital Resources............................................................. 9-10 Results of Operations....................................................................... 10-12 Expected Impact of Recently Announced Accounting Standards.................................. 13 PART II - OTHER INFORMATION ITEM 1 AND ITEM 6.OTHER INFORMATION Other Information........................................................................... 13 SIGNATURES....................................................................................... 14 2 ITEM 1. FINANCIAL INFORMATION INTREPID CAPITAL CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets September 30, 2001 and December 31, 2000 (unaudited) ASSETS 2001 2000 ----------- ---------- Current assets: Cash and cash equivalents $ 217,993 419,616 Investments, at fair value 54,306 59,999 Accounts receivable 69,439 83,629 Prepaid and other assets 71,082 271,347 Assets of discontinued operation (note 2) 1,137,543 1,528,187 ----------- ---------- Total current assets 1,550,363 2,362,778 Equipment and leasehold improvements, net of accumulated depreciation of $200,588 in 2001 and $137,470 in 2000 306,854 364,480 Goodwill, less accumulated amortization of $6,447 in 2001 and $4,396 in 2000 34,575 36,626 ----------- ---------- Total assets $ 1,891,792 2,763,884 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 147,871 105,117 Accrued expenses 372,919 223,313 Current portion of notes payable 241,572 327,778 Advances from shareholder 287,110 -- Other 119,654 108,832 Liabilities of discontinued operation (note 2) 229,128 281,305 ----------- ---------- Total current liabilities 1,398,254 1,046,345 Notes payable, less current portion 422,317 547,222 ----------- ---------- Total liabilities 1,820,571 1,593,567 =========== ========== Stockholders' equity: Common stock, $.01 par value. Authorized 15,000,000 shares; issued 2,350,246 and 2,318,996 shares at September 30, 2001 and December 31, 2000, respectively 23,502 23,190 Treasury stock, at cost - 1,000 shares (3,669) (3,669) Additional paid-in capital 2,686,915 2,687,227 Accumulated deficit (2,635,527) (1,536,431) ----------- ---------- Total stockholders' equity 71,221 1,170,317 ----------- ---------- $ 1,891,792 2,763,884 =========== ========== See accompanying notes to consolidated financial statements. 3 INTREPID CAPITAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations Three and Nine month periods ended September 30, 2001 and 2000 (unaudited) THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30 ENDED SEPTEMBER 30 2001 2000 2001 2000 ----------- ---------- ---------- ---------- Revenues: Commissions $ 331,354 412,508 1,025,509 1,438,271 Asset management fees 198,679 165,473 602,578 513,599 Investment banking revenues 74,738 74,583 341,386 140,874 Net trading (losses) profits (1,072) (6,528) 3,246 102,695 Dividend and interest income 6,079 12,651 24,366 51,587 Other 10,204 1,659 47,867 23,431 ----------- ---------- ---------- ---------- Total revenues 619,982 660,346 2,044,952 2,270,457 ----------- ---------- ---------- ---------- Expenses: Salaries and employee benefits 455,657 532,131 1,625,729 1,752,167 Brokerage and clearing 64,866 70,021 199,888 292,043 Advertising and marketing 86,695 30,565 173,283 110,692 Professional and regulatory fees 79,994 101,288 212,376 282,369 Occupancy and maintenance 90,985 86,777 272,263 279,273 Depreciation and amortization 21,759 30,143 65,169 89,606 Interest expense 16,632 26,165 52,334 64,406 Other 61,383 59,016 197,999 232,190 ----------- ---------- ---------- ---------- Total expenses 877,971 936,106 2,799,041 3,102,746 ----------- ---------- ---------- ---------- Loss from continuing operations before income taxes (257,989) (275,760) (754,089) (832,289) Income tax benefit -- -- -- (152,776) ----------- ---------- ---------- ---------- Loss from continuing operation (257,989) (275,760) (754,089) (679,513) Discontinued operations (note 2): Income (loss) from discontinued operation 15,849 105,657 (17,260) 281 Loss on sale of discontinued operation (327,747) -- (327,747) -- ----------- ---------- ---------- ---------- Income (loss) on discontinued operation (311,898) 105,657 (345,007) 281 Net loss $ (569,887) (170,103) (1,099,096) (679,232) =========== ========== ========== ========== Basic loss per share from continuing operations $ (0.11) (0.13) (0.32) (0.31) Basic income (loss) per share from discontinued operations 0.01 0.05 (0.01) -- Basic loss per share on sale of discontinued operations (0.14) -- (0.14) -- ----------- ---------- ---------- ---------- Basic net loss per share $ (0.24) (0.08) (0.47) (0.31) =========== ========== ========== ========== Weighted average shares outstanding 2,350,246 2,214,525 2,336,510 2,214,525 =========== ========== ========== ========== See accompanying notes to consolidated financial statements. 4 INTREPID CAPITAL CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows Nine month periods ended September 30, 2001 and 2000 (unaudited) 2001 2000 ----------- ---------- Cash flows from operating activities: Net loss $(1,099,096) (679,232) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 65,169 89,606 Loss on sale of discontinued operations 327,747 -- Sales of investments and securities sold, not yet purchased, net 8,939 493,270 Net trading profits (3,246) (102,695) Change in assets and liabilities: Accounts receivable 14,190 11,848 Prepaid and other assets 200,265 (67,385) Accounts payable and accrued expenses 192,360 (95,166) Other liabilities 10,822 20,187 Discontinued operations - working capital changes 10,720 (58,921) ----------- ---------- Net cash used in operating activities (272,130) (388,488) ----------- ---------- Cash flows from investing activities- purchase of equipment (5,492) (103,307) ----------- ---------- Cash flows from financing activities: Principal payments on notes payable (211,111) -- Advances from shareholder 287,110 -- ----------- ---------- Net cash provided by financing activities 75,999 -- ----------- ---------- Net decrease in cash and cash equivalents (201,623) (491,795) Cash and cash equivalents at beginning of period 419,616 1,094,700 ----------- ---------- Cash and cash equivalents at end of period $ 217,993 602,905 =========== ========== Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 43,422 68,856 =========== ========== See accompanying notes to consolidated financial statements. 5 INTREPID CAPITAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements September 30, 2001 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OPERATIONS (A) ORGANIZATION AND BASIS OF PRESENTATION Intrepid Capital Corporation (ICAP), incorporated in 1998, is a Florida-based financial services holding company that conducts its business through its two wholly owned subsidiaries: Intrepid Capital Management, Inc. (ICM) and Allen C. Ewing & Co. (Ewing). 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 Securities and Exchange Commission (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 and nine month periods ended September 30, 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 and Ewing. Also included are the accounts of Enviroq Corporation (Enviroq) and Sprayroq, Inc. (Sprayroq) which were controlled by ICAP and 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 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 and nine month periods ended September 30, 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 and nine month periods ended September 30, 2001 and 2000. 6 INTREPID CAPITAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements September 30, 2001 (2) DISCONTINUED OPERATIONS On September 19, 2001, ICAP signed an agreement in principle with Sprayroq of Ohio, Inc., an unrelated party, whereby Sprayroq of Ohio, Inc. agreed to purchase all of the issued and outstanding capital stock of Sprayroq, Enviroq's 50% owned subsidiary. Enviroq's operations consisted solely of its investment in Sprayroq, and ICAP has reported its operations as discontinued for all periods presented. The sale of Sprayroq was completed on October 30, 2001 and ICAP received on that date its share of the purchase price which consisted of cash in the amount of $584,496 and two promissory notes in the aggregate principal amount of $323,919. A loss on sale of discontinued operations of $327,747 was accrued during the three month period ended September 30, 2001 as follows: Loss on sale of discontinued operation: Proceeds Cash $ 584,496 Notes 323,919 ------------- 908,415 Net book value of assets of discontinued operation (1,106,162) Accrued severance costs (130,000) ------------- $ (327,747) ============= Enviroq's assets and liabilities as of September 30, 2001, adjusted for the loss on sale of discontinued operations, consisted of the following: Assets: Cash and cash equivalents $ 32,594 Accounts receivable 259,639 Inventories and other assets 80,739 Equipment, net of accumulated depreciation 83,599 Goodwill, net of accumulated amortization 680,972 ------------ $ 1,137,543 ============ Liabilities: Accounts payable and accrued expenses $ 144,716 Other 21,187 Minority interest 63,225 ------------ $ 229,128 ============ 7 INTREPID CAPITAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements September 30, 2001 (3) RELATED PARTY TRANSACTIONS 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 September 30, 2001. For the nine months ended September 30, 2001 and 2000, ICM received $32,248 and $27,448, respectively, for such services. As of September 30, 2001, ICAP had received advances from its largest shareholder amounting to $287,110. At an interest rate of 6.50%, the advances have no set maturity and are expected to be repaid as future cash flows become available. (4) SEGMENTS During 2001 and 2000, ICAP operated in two principal segments, investment advisory services and broker-dealer services, which includes investment banking revenues. The operations of Enviroq formerly constituted a separate operating segment which have been reclassified as discontinued operations. 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 from operations for each of the reportable segments are summarized as follows for the three and nine month periods ended September 30, 2001 and 2000: Three months ended September 30 Nine months ended September 30 2001 2000 2001 2000 --------- ---------- ---------- ---------- Revenues: Investment advisory services segment $ 197,796 170,810 607,155 527,781 Broker-dealer services segment 421,392 488,972 1,419,548 1,724,799 Corporate 69,767 62,200 225,167 182,783 Intersegment revenues (68,973) (61,636) (206,918) (164,906) --------- ---------- ---------- ---------- $ 619,982 660,346 2,044,952 2,270,457 ========= ========== ========== ========== Net loss from operations: Investment advisory services segment $ (50,968) (42,491) (153,118) (185,648) Broker-dealer services segment (24,834) (31,865) (71,910) (68,994) Corporate (182,187) (201,404) (529,061) (424,871) --------- ---------- ---------- ---------- $(257,989) (275,760) (754,089) (679,513) ========= ========== ========== ========== The total assets for each of the reportable segments are summarized as follows as of September 30, 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 ------------ ----------- Assets: Investment advisory services segment $ 116,256 131,655 Broker-dealer services segment 475,853 573,747 Other 162,140 530,295 Discontinued operation 1,137,543 1,528,187 ------------ ----------- $ 1,891,792 2,763,884 ============ =========== 8 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. Discontinued Operations Because of its inconsistency with ICAP's mission, ICAP considered several disposition opportunities for Sprayroq. On September 19, 2001, ICAP signed an agreement in principle with Sprayroq of Ohio, Inc., an unrelated party, whereby Sprayroq of Ohio, Inc. agreed to purchase all of the issued and outstanding capital stock of Sprayroq, Enviroq's 50% owned subsidiary. Enviroq's operations consisted solely of its investment in Sprayroq, and ICAP has reported its operations as discontinued for all periods presented. A loss on sale of discontinued operations of $327,747 was accrued during the three month period ended September 30, 2001. Revenues from Enviroq were $466,696 and $858,015 for the three month periods ended September 30, 2001 and 2000, respectively, and were $1,054,714 and $1,345,975 for the nine month periods ended September 30, 2001 and 2000, respectively. Income (loss) from discontinued operation for Enviroq were $15,849 and $105,657 for the three month periods ended September 30, 2001 and 2000, respectively, and were ($17,260) and $281 for the nine month periods ended September 30, 2001 and 2000, respectively. Liquidity and Capital Resources ICAP's current assets consist generally of cash and accounts receivable. ICAP has financed its operations with funds provided by stockholder capital, advances from its largest shareholder, and the sale of trading securities. ICAP has developed a growth strategy plan that includes both internal and external growth through sales and marketing and acquisitions. ICAP consummated the sale of Sprayroq on October 30, 2001 and received cash proceeds of $584,496 and two promissory notes in the aggregate principal amount of $323,919. ICAP used proceeds from the sale to repay notes payable of approximately $389,000 and advances from shareholder of approximately $183,000. In October 2001, a significant investment banking fee was earned by the broker-dealer services segment resulting in cash proceeds of $558,148. ICAP believes that its broker-dealer services segment will generate additional high-margin investment banking revenues during the remaining three months of 2001 and into the first three months of 2002. One specific significant investment banking fee is expected to be earned during these periods totaling more than $300,000. ICAP is evaluating a variety of options to enhance its liquidity and capital resources. ICAP's scope of options includes the issuance of equity securities in private placements and strategic acquisitions. If additional funds are raised through the issuance of equity securities, the percentage of ownership of the current stockholders of ICAP will be reduced. 9 For the nine months ended September 30, 2001, ICAP incurred significant operating losses and negative cash flows from operations. While management believes it will be able to meet its capital needs through the above sources and financing alternatives, there can be no assurances that sources will be sufficient or 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 adverse effect on ICAP's business, results of operations and financial condition. For the nine months ended September 30, 2001, net cash used in operating activities was $272,130, primarily attributable to ICAP's net loss for the period offset by decreases in accounts receivable and other assets, including the receipt of a federal income tax refund of $193,167. Net cash used in investing activities was $5,492, which is primarily due to the purchase of equipment. Net cash provided by financing activities was $75,999, which is primarily due to advances from ICAP's largest shareholder offset by 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 September 30, 2001, Ewing's regulatory net capital was $134,442, which is $84,442 in excess of its minimum net capital requirement of $50,000. Results of Operations Three Months Ended September 30, 2001 Compared to the Three Months Ended September 30, 2000 Total revenues were $619,982 for the three months ended September 30, 2001, compared to $660,346 for the three months ended September 30, 2000, representing a 6.1% decrease. Commissions decreased $81,154, or 19.7%, to $331,354. 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 and volatile market conditions. Asset management fees increased $33,206, or 20.1%, to $198,679. 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 $79.3 million at June 30, 2001, compared to $76.8 million at June 30, 2000. The increase in asset management fees for the three months ended September 30, 2001 relates directly to an increase in AUM and the average fee rate per account. AUM was $74.1 million at September 30, 2001, compared to $77.8 million at September 30, 2000. The net decrease in AUM during the three months ended September 30, 2001 is primarily attributable to client withdrawals during the period. Investment banking revenues remained essentially flat at $74,738 for the three months ended September 30, 2001 compared to $74,583 for the three months ended September 30, 2000. 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. 10 Net trading losses decreased $5,456, or 83.6%, to $1,072. Net trading losses consist of unrealized losses in ICAP's investment in trading securities, which includes an investment in Intrepid Capital, L.P. The decrease is primarily attributable to the performance of assets invested in Intrepid Capital, L.P. Dividend and interest income decreased $6,572, or 51.9%, to $6,079. The decrease is primarily attributable to a decrease in interest received from the lower average cash balances invested in money markets. Total expenses were $877,971 for the three months ended September 30, 2001, compared to $936,106 for the three months ended September 30, 2000, representing a 6.2% decrease. Salaries and employee benefits decreased $76,474, or 14.4%, to $455,657. 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 commission expenses as a result of decreased securities transactions. Brokerage and clearing expenses decreased $5,155, or 7.4%, to $64,866. 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. The net decrease is primarily attributable to decreased transaction volume. Advertising and marketing expenses increased $56,130, or 183.6%, to $86,695. The increase is primarily attributable to an increase in ICM's advertising and marketing expenses associated with a new advertising and marketing campaign aimed to attract prospective clients and inform them of ICM's superior investment performance. Professional and regulatory expenses decreased $21,294, or 21.0%, to $79,994. The decrease is primarily attributable to the elimination of Ewing's market making operations in December 2000. Other expenses decreased $2,367, or 4.0%, to $61,383 due to decreased general and administrative expenses. Nine Months Ended September 30, 2001 Compared to the Nine Months Ended September 30, 2000 Total revenues were $2,044,952 for the nine months ended September 30, 2001, compared to $2,270,457 for the nine months ended September 30, 2000, representing a 9.9% decrease. Commissions decreased $412,762, or 28.7%, to $1,025,509. 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 and volatile market conditions. Asset management fees increased $88,979, or 17.3%, to $602,578. 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 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, $84.6 million and $79.3 million at December 31, 2000, March 31, 2001 and June 30, 2001, respectively, compared to $92.5 million, $84.5 million and $76.8 million at December 31, 1999, March 31, 2000 and June 30, 2000, respectively. The increase in asset management fees for the nine months ended September 30, 2001 relates directly to an increase in AUM and the 11 average fee rate per account. AUM was $74.1 million at September 30, 2001, compared to $77.8 million at September 30, 2000. Investment banking revenues increased $200,512, or 142.3%, to $341,386. 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 and merger and acquisition services. A significant fee was earned during the nine months ended September 30, 2001, accounting for approximately 24.9% of total investment banking revenues earned during the period. Net trading profits decreased $99,449, or 96.8%, to $3,246. Net trading profits consist of realized and unrealized gains from 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 as a result of the elimination of Ewing's market making operations. Dividend and interest income decreased $27,221, or 52.8%, to $24,366. The decrease is primarily attributable to a decrease in interest received from the lower average cash balances invested in money markets. Total expenses were $2,799,041 for the nine months ended September 30, 2001, compared to $3,102,746 for the nine months ended September 30, 2000, representing a 9.8% decrease. Salaries and employee benefits decreased $126,438, or 7.2%, to $1,625,729. 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 commission expenses as a result of decreased securities transactions, with such decrease partially offset by increased fixed salaries. Brokerage and clearing expenses decreased $92,155, or 31.6%, to $199,888. 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 first quarter of 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. Advertising and marketing expenses increased $62,591, or 56.5%, to $173,283. The increase is primarily attributable to an increase in ICM's advertising and marketing expenses associated with a new advertising and marketing campaign aimed to attract prospective clients and inform them of ICM's superior investment performance. Professional and regulatory expenses decreased $69,993, or 24.8%, to $212,376. The decrease is primarily attributable to the elimination of Ewing's market making operations in December 2000. Other expenses decreased $34,191, or 14.7%, to $197,999 due to decreased general and administrative expenses. 12 Expected Impact of Recently Announced Accounting Standards In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, "Business Combinations" (FAS 141), and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (FAS 142). FAS 141, effective immediately, requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. FAS 142, effective January 1, 2002, will require that goodwill and intangible assets with indefinite useful lives no longer be amortized but instead be tested for impairment at least annually. Furthermore, under FAS 141, any goodwill and intangible assets determined to have indefinite useful lives that are acquired in a purchase business combination completed after June 30, 2001 will not be amortized. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will continue to be amortized until the adoption of FAS 142, however FAS 141 will require, upon adoption of FAS 142, that goodwill acquired in a prior purchase business combination be evaluated and any necessary reclassifications be made in order to conform to the new criteria in FAS 141 for recognition apart from goodwill. Any impairment loss will be measured as of the date of the adoption and recognized as a cumulative effect of a change in accounting principles in the first interim period of 2002. ICAP is currently evaluating, but has not yet determined the impact that FAS 141 and FAS 142 will have on its financial statements. 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 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: None. (b) Reports on Form 8-K: None. 13 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: November 14, 2001 By /s/ Michael J. Wallace ---------------------------------------------- Michael J. Wallace, Chief Accounting Officer Dated: November 14, 2001 14