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 June 30, 1998
[ ] 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 81-0268769
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
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 June 30, 1998
$1.00 Par Value Common Stock 1,078,358 Shares
Transitional Small Business Disclosure Format (Check One): Yes ; No X
<PAGE>
M CORP
INDEX
Page Number
PART I
Condensed Consolidated Financial Statements:
Balance Sheet -
June 30, 1998 2
Statements of Income and Comprehensive Income -
Three Months and Six Months Ended June 30, 1998
and 1997 3
Statements of Cash Flows -
Six Months Ended June 30, 1998 and 1997 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
<PAGE>
M CORP
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
ASSETS
Current Assets
Cash $ 15,597,324
Marketable & Government Securities,
at Fair Value 1,953,159
Receivables - Net 116,758
Prepaid Expenses 8,900
Total Current Assets 17,676,141
Noncurrent Investments, at Fair Value 8,094,034
Property, Plant and Equipment, Net 1,004,492
TOTAL ASSETS $ 26,774,667
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Expenses $ 237,157
Deferred Income Taxes 198,200
Total Current Liabilities 435,357
Provision for Estimated Title and
Escrow Losses 1,008,655
Minority Interests 2,343,031
Excess of Fair Value of Net Assets
Acquired Over Cost 52,745
Deferred Income Taxes 1,605,600
STOCKHOLDERS' EQUITY
Common Stock, $1.00 Par Value,
5,000,000 shares authorized,
3,262,004 shares issued 3,262,004
Capital Surplus 15,778,562
Retained Earnings 1,905,024
Accumulated Other Comprehensive Income 2,750,033
Treasury Stock, at Cost (2,366,344)
Total Stockholders' Equity 21,329,279
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 26,774,667
See Notes to Consolidated Financial Statements
2
<PAGE>
M CORP
CONSOLIDATED STATEMENTS OF INCOME
For The Three Months For the Six Months
Ended Ended
June 30, June 30,
1998 1997 1998 1997
Operating Revenues $1,441,941 $ 850,251 $2,380,015 $7,325,585
Operating Expenses
Salaries and Payroll
Costs 224,278 192,096 437,446 382,999
Other Expenses 749,570 246,426 931,551 952,132
973,848 438,522 1,368,997 1,335,131
Operating Income 471,093 411,729 1,011,018 5,990,454
Minority Portion of
(Income) (53,290) (60,245) (86,488) (369,597)
Income Before Income
Taxes 417,803 351,484 924,530 5,620,857
Income Tax Expense (5,000) 1,000 (205,000) (2,250,000)
Net Income 412,803 352,484 719,530 3,370,857
Other Comprehensive Income
Increase (Decrease) in
Unrealized Holding Gains
Net of Income Taxes (467,253) 206,054 (192,423) (2,307,375)
Comprehensive Income $ (54,450) $ 558,53 $ 527,107 $1,063,482
See Notes To Consolidated Financial Statements
3
<PAGE>
M CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Six Months Ended
June 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash Provided (Used) By Operating
Activities $ 413,030 $ (203,027)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures Paid In Cash (24,341) (23,650)
Proceeds From Sales and Redemptions
of Property, Plant and Equipment - 6,994
Cash Received on Principal of
Notes Receivable 11,466 906
Cash Purchases of Minority Interests (5,947) (555)
Cash Used for Purchases of Marketable &
Government Securities Available for Sale (27,272) (515,694)
Cash Received on Dispostion of Marketable
Securities Available for Sale 43,812 5,383,074
Net Cash Provided (Used)
By Investing Activities (2,282) 4,851,075
NET INCREASE IN CASH 410,748 4,648,048
CASH - BEGINNING OF PERIOD 15,186,576 9,617,085
CASH - END OF PERIOD $15,597,324 $14,265,133
See Notes to Consolidated Financial Statements
4
<PAGE>
M CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 June 30, 1998 and
the results of the Company's operations for the three months and six months
ended June 30, 1998 and 1997 and cash flows for the six months ended June 30,
1998 and 1997.
The results of operations for the three months and six months ended June 30,
1998 and 1997 are not indicative of the results to be expected for the full
year.
The consolidated financial statements include the accounts of the Company and
its majority owned subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation.
M Corp is engaged in the title insurance business and in the ownership and
rental of properties.
GNI, Inc. owns approximately 65% of the Company's issued and outstanding
common stock.
The Company adopted the provisions of Statement of Finanacial 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 Availabe-For-Sale investments are carried at fair value in the
Company's balance sheet at June 30, 1998.
The net unrealized holding gain at June 30, 1998, net of the estimated
income tax effects and minority interests in the unrealized holding gains,
is included in Accumulated Other Comprehensive Income in accordance with
the provisions of Financial Accounting Standards N0. 130.
5
<PAGE>
M CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE INCOME STATEMENT
JUNE 30, 1998
A summary of the period to period changes in items included in the statements
of income is shown below.
COMPARISON OF
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1998 AND 1997 1998 AND 1997
INCREASES (DECREASES)
Operating
Revenues $ 594,690 69.9% $(4,945,570) (67.5%)
Operating
Expenses 535,326 122.1% 33,836 2.5%
Net Income 60,319 17.1% (2,651,327) (78.6%)
Revenues decreased $4,945,570 in the first six months of 1998 as compared
with the first six months of 1997 due to the gain recognized by the Company
on the merger of Security Bancorp with and into WesterFed Financial
Corporation which was completed during the first quarter of 1997. During
1997, the Company recognized a gain on the merger in the pretax amount of
approximately $5,351,000. No such gain was recognized during the first six
months of 1998. During the first six months of 1998 the Company recognized
a gain on the contribution of assets in kind to a charitable organization
in the amount of approximately $417,000 as compared with a similar gain in
the amount of $408,000 recognized during the first six months of 1997.
The gains recognized during the first six months of 1997 were the primary
reason for the decrease in revenues and the decrease in net income in
the first six months of 1998 as compared with the first six months of 1997.
The provision for income tax expense decreased $2,045,000 (90.9%) in the
first six months of 1998 as compared with the first six months of 1997 due to
the decrease in pretax income.
6
<PAGE>
M CORP
PART II
OTHER INFORMATION
JUNE 30, 1998
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
None
7
<PAGE>
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: August 7, 1998 s/Kathleen King
Kathleen King,
Assistant Secretary-Treasurer
Date: August 7, 1998 s/Jerry K. Mohland
Jerry K. Mohland,
Accountant
8
<PAGE>
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 15,597,324
<SECURITIES> 1,953,159
<RECEIVABLES> 116,758
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,676,141
<PP&E> 1,004,492
<DEPRECIATION> 0
<TOTAL-ASSETS> 26,774,667
<CURRENT-LIABILITIES> 435,357
<BONDS> 0
<COMMON> 3,262,004
0
0
<OTHER-SE> 18,067,275
<TOTAL-LIABILITY-AND-EQUITY> 26,774,667
<SALES> 0
<TOTAL-REVENUES> 2,380,015
<CGS> 0
<TOTAL-COSTS> 1,368,997
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 924,530
<INCOME-TAX> 205,000
<INCOME-CONTINUING> 719,530
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 719,530
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
