<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-1008
M CORP
(Exact name of small business issuer as specified in its charter)
Montana
(State or other jurisdiction of incorporation or organization)
81-0268769
(IRS Employer Identification No.)
128 Second Street South, Great Falls, Montana 59405
(Address of principal executive offices)
(406) 727-2600
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Class Outstanding at September 30, 1996
$1.00 Par Value Common Stock 867,358 Shares
Transitional Small Business Disclosure Format (Check One): Yes ; No X
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M CORP
INDEX
SEPTEMBER 30, 1996
Page Number
PART I
Condensed Consolidated Financial Statements:
Balance Sheet -
September 30, 1996 2
Statements of Income -
Three Months and Nine Months Ended
September 30, 1996 and 1995 3
Statements of Cash Flows -
Nine Months Ended September 30, 1996 and 1995 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of the
Consolidated Statements of Income 6
PART II
Other Information 7
Signatures 8
1
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M CORP
CONSOLIDATED BALANCE SHEET
September 30, 1996
ASSETS
Current Assets
Cash $ 9,381,237
Marketable Securities, at Fair Value 2,534,372
Receivables - Net 96,047
Total Current Assets 12,011,656
Marketable Securities and Other Investments 10,257,457
Noncurrent Receivables 11,942
Property, Plant and Equipment, Net 1,301,960
TOTAL ASSETS $ 23,583,015
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities $ 227,448
Income Taxes Payable 13,631
Deferred Income Taxes 349,000
Total Current Liabilities 590,079
Provision for Estimated Title and
Escrow Losses 1,074,173
Minority Interests 2,197,998
Excess of Fair Value of Net Assets
Acquired Over Cost 67,130
Deferred Income Taxes 2,692,700
STOCKHOLDERS' EQUITY
Common Stock - $1.00 Par Value, (5,000,000
shares authorized, 3,051,004 shares issued) 3,051,004
Additional Paid-In-Capital 1,934,562
Retained Earnings 10,239,351
Unrealized Gains on Investments 4,102,362
Treasury Stock, at Cost (2,366,344)
Total Stockholders' Equity 16,960,935
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 23,583,015
See Notes to Consolidated Financial Statements
2
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M CORP
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
For The Three For The Nine
Months Ended Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Operating Revenues $ 768,466 $ 768,672 $2,384,801 $2,107,695
Operating Expenses
Salaries and Payroll
Costs 196,742 284,208 578,947 655,254
Other Expenses 212,989 211,232 628,103 638,460
409,731 495,440 1,207,050 1,293,714
Operating Income 358,735 273,232 1,177,751 813,981
Gain (Loss) on Sales of
Equipment - 10,500 - 47,853
Minority Portion of
(Income) (27,506) (30,626) (84,233) (72,746)
Income Before Income
Taxes 331,229 253,106 1,093,518 789,088
Income Tax Expense (120,000) (92,000) (410,000) (280,000)
Net Income $ 211,229 $ 161,106 $ 683,518 $ 509,088
Earnings Per Common
Share and Common Stock
Equivalents: $ 0.24 $ .19 $ 0.79 $ .59
Dividends Per Share $ - $ .10 $ - $ .10
</TABLE>
See Notes To Consolidated Financial Statements
3
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M CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Nine
Months Ended
September 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash Provided By Operating
Activities $ 643,016 $ 9,651
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds From Sales of Property,
Plant and Equipment 5,523 93,762
Cash Received on Principal of
Notes Receivable 107,388 2,790
Cash Purchases of Minority Interests (2,329) (2,049)
Capital Expenditures Paid in Cash - (29,481)
Cash Used for Purchases of Marketable
Securities Available for Sale (184,209) (24,795)
Cash Received on Disposition of Marketable
Securities Available For Sale 372,453 84,515
Net Cash Provided By Investing
Activities 298,826 124,742
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Payments Received From Affiliates 306,878 -
Dividends Paid in Cash - (11,560)
Cash Purchases of Treasury Stock - (3,322)
Net Cash Provided (Used) By Financing Activities 306,878 (14,882)
NET INCREASE IN CASH $ 1,248,720 $ 119,511
CASH - BEGINNING OF PERIOD 8,132,517 7,782,896
CASH - END OF PERIOD $ 9,381,237 $ 7,902,407
See Notes to Consolidated Financial Statements
4
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M CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
In the opinion of management, all adjustments necessary (consisting of
only normal recurring accruals) have been made to the unaudited financial
statements to present fairly the financial position as of September 30, 1996
and the results of the Company's operations for the three months and nine
months ended September 30, 1996 and 1995 and cash flows for the nine months
ended September 30, 1996 and 1995.
The results of operations for the three months and nine months ended
September 30, 1996 and 1995 are not necessarily indicative of the results
to be expected for the full year.
The consolidated financial statements include the accounts of the
Company, its wholly owned subsidiaries and its majority owned subsidiaries.
All significant intercompany transactions and balances have been eliminated
in consolidation.
Earnings Per Share -
Earnings per common share and common stock equivalents has been computed
in the accompanying unaudited financial statements based upon the weighted
average number of common stock and common stock equivalent shares outstanding
during each period; 867,358 shares in 1996 and 867,703 shares in 1995. Options
granted by the Company are considered common stock equivalents for purposes
of the computation of earnings per share in the accompanying unaudited
financial statements.
Lines of Business -
The Company is engaged in the title insurance agency business and in
the ownership and rental of properties.
GNI, Inc. owns approximately 80% of the Company's issued and outstanding
common stock.
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 115 (SFAS No. 115) effective January 1, 1994. The
Company has classified its investments, both current and noncurrent, in debt
and equity securities as Available-For-Sale, in accordance with the various
classifications of securities contained in SFAS No. 115.
In accordance with SFAS No. 115, the Company's portfolios, current and
noncurrent, of Available-For-Sale investments are carried at fair value in
the Company's balance sheet at September 30, 1996. The net unrealized holding
gains at September 30, 1996, net of the estimated income tax effects and
minority interests in the unrealized holding gains, is reported as a
separate component of stockholders' equity at September 30, 1996.
5
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M CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE INCOME STATEMENT
SEPTEMBER 30, 1996
A summary of the period to period changes in items included in the
statements of income is shown below.
COMPARISON OF
THREE MONTHS NINE MONTHS
ENDED ENDED
September 30, September 30,
1996 AND 1995 1996 AND 1995
INCREASES (DECREASES)
Operating
Revenues $ (206) (.0%) $ 277,106 13.1%
Operating
Expenses (85,709) (17.3%) (86,664) (6.7%)
Net Income 50,123 31.1% 174,430 34.3%
Operating revenues increased $277,106, 13.1%, in the first nine months of
1996 as compared with the first nine months of 1995. During the first nine
months of 1996, the Company realized net gains on the disposition of available-
for-sale investments in the amount of $135,728 whereas a net loss in the amount
of $19,392 was incurred on the disposition of available-for sale investments
during the first nine months of 1995. Revenues from the Company's title
insurance operations increased $144,710, 13.1%, in the first nine months of
1996 as compared with the first nine months of 1995 due primarily to an
increase in the real estate economies within which the Company operates.
The provision for income tax expense increased $130,000, 46.4%, in the first
nine months of 1996 as compared with the first nine months of 1995 due
primarily to the increase in pre-tax income.
6
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M CORP
PART II
OTHER INFORMATION
SEPTEMBER 30, 1996
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES
None
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
third quarter of 1996. However, on October 29, 1996, a meeting of
shareholders was held at which the company's entire Board of
Directors was elected. The Company's shareholders also authorized
the Board of Directors to select an independent certified public
accounting firm to audit the Company's financial statements for
1996.
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
None
7
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M CORP
SIGNATURES
In accordance with the requirements of
the Exchange Act, the registrant has caused
this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
M CORP
Registrant
Date: October 30, 1996 s/N. Scott Atchison
N. Scott Atchison
Assistant Secretary-Treasurer
Date: October 30, 1996 s/Jerry K. Mohland
Jerry K. Mohland,
Accountant
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the unaudited financial statements contained in the Company's Form
10-QSB and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 9,381,237
<SECURITIES> 2,534,372
<RECEIVABLES> 96,047
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,011,656
<PP&E> 1,301,960
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,583,015
<CURRENT-LIABILITIES> 590,079
<BONDS> 0
<COMMON> 3,051,004
0
0
<OTHER-SE> 13,909,931
<TOTAL-LIABILITY-AND-EQUITY> 23,583,015
<SALES> 0
<TOTAL-REVENUES> 2,384,801
<CGS> 0
<TOTAL-COSTS> 1,207,050
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,093,518
<INCOME-TAX> 410,000
<INCOME-CONTINUING> 683,518
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 683,518
<EPS-PRIMARY> .79
<EPS-DILUTED> .79
</TABLE>
