<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, 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
(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, 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
SEPTEMBER 30, 1998
Page Number
PART I
Condensed Consolidated Financial Statements:
Balance Sheet -
September 30, 1998 2
Statements of Income and Comprehensive Income -
Three Months and Nine Months Ended
September 30, 1998 and 1997 3
Statements of Cash Flows -
Nine Months Ended September 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
September 30, 1998
ASSETS
Current Assets
Cash $ 16,454,780
Marketable Securities, at Fair Value 1,815,400
Receivables - Net 152,257
Income Tax Prepayments 7,610
Total Current Assets 18,430,047
Marketable Securities and
Other Investments, at Fair Value 6,242,847
Property, Plant and Equipment, Net 999,468
TOTAL ASSETS $ 25,672,362
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities $ 267,440
Deferred Income Taxes 135,100
Total Current Liabilities 402,540
Provision for Estimated Title and
Escrow Losses 993,928
Minority Interests 2,302,903
Excess of Fair Value of Net Assets
Acquired Over Cost 50,690
Deferred Income Taxes 985,100
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 2,466,052
Accumulated Other Comprehensive Income 1,796,927
Treasury Stock, at Cost (2,366,344)
Total Stockholders' Equity 20,937,201
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,672,362
See Notes to Consolidated Financial Statements
2
<PAGE>
M CORP
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
For The Three For The Nine
Months Ended Months Ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Operating Revenues $1,391,425 $ 877,848 $3,771,440 $8,203,433
Operating Expenses
Salaries and Payroll
Costs 249,986 210,905 687,432 593,904
Other Expenses 216,904 199,166 1,148,455 1,151,298
466,890 410,071 1,835,887 1,745,202
Operating Income 924,535 467,777 1,935,553 6,458,231
Minority Portion of
Income) Loss (48,507) 17,117 (134,995) (352,480)
Income Before Income
Taxes 876,028 484,894 1,800,558 6,105,751
Income Tax Expense (315,000) (200,000) (520,000) (2,450,000)
Net Income 561,028 284,894 1,280,558 3,655,751
Other Comprehensive Income (Loss)
Increase (Decrease) in
Unrealized Holding Gains,
Net of Income Taxes (953,106) 56,720 (1,145,529) (2,250,655)
Comprehensive Income (Loss) $ (392,078) $ 341,614 $ 135,029 $1,405,096
</TABLE>
See Notes To Consolidated Financial Statements
3
<PAGE>
M CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Nine
Months Ended
September 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash Provided (Used) By
Operating Activities $ 799,099 $ (371,156)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds From Sales and Redemptions
of Property, Plant and Equipment 13,905 6,994
Capital Expenditures Paid in Cash (63,401) (31,784)
Cash Received on Principal of
Notes Receivable 11,466 1,372
Cash Purchases of Minority Interests (8,551) (711)
Cash Used for Purchases of Marketable
Securities Available for Sale (76,462) (521,953)
Cash Received on Disposition of Marketable
Securities Available For Sale 592,148 5,383,074
Net Cash Provided By Investing
Activities 469,105 4,836,992
NET INCREASE IN CASH 1,268,204 4,465,836
CASH - BEGINNING OF PERIOD 15,186,576 9,617,085
CASH - END OF PERIOD $16,454,780 $14,082,921
See Notes to Consolidated Financial Statements
4
<PAGE>
M CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
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, 1998
and the results of the Company's operations for the three months and nine
months ended September 30, 1998 and 1997 and cash flows for the nine months
ended September 30, 1998 and 1997.
The results of operations for the three months and nine months ended
September 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, its wholly owned subsidiaries and its majority owned subsidiaries.
All significant intercompany transactions and balances have been eliminated
in consolidation.
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 65% 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, 1998.
The net unrealized holding gain at September 30, 1998, net of the estimated
income tax effects and minority interests in the unrealized holding gains,
is included in Accumulated Other Comprehensive Income at September 30, 1998
in accordance with the provisions of Financial Accounting Standards No. 130.
5
<PAGE>
M CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE INCOME STATEMENT
SEPTEMBER 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 NINE MONTHS
ENDED ENDED
September 30, September 30,
1998 AND 1997 1998 AND 1997
INCREASES (DECREASES)
Revenues $513,577 58.5% $(4,431,993) (54.2%)
Expenses 56,819 13.9% 90,685 5.2%
Net Income 276,134 96.9% (2,375,193) (64.9%)
Revenues decreased $4,431,993 in the first nine months of 1998 as compared
with the first nine months of 1997 due primarily 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.
The Company recognized a gain on the merger during 1997 in the pretax amount
of approximately $5,351,000. During the first nine months of 1998 the Company
recognized gains on the disposition of investments in the pretax amount of
$368,939. During the first nine months of 1998 the Company recognized a gain
on the contribution of assets in kind to a charitable organization in the
amount of $417,420 as compared with a similar gain in the amount of $408,000
recognized during the first nine months of 1997. The gains recognized during
the first nine months of 1997 were the primary reason for the decrease in
revenues and the decrease in net income in the first nine months of 1998
as compared with the first nine months of 1997. Operating expenses increased
$90,685 (5.2%) in the first nine months of 1998 as compared with the first
nine months of 1997 due primarily to increases in payroll and payroll costs
associated with the Company's title insurance agency business. The provision
for income tax expense decreased $1,930,000 (78.8%) in the first nine months
of 1998 as compared with the first nine months of 1997 due to to the decrease
in pretax income.
6
<PAGE>
M CORP
PART II
OTHER INFORMATION
SEPTEMBER 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
On September 9, 1998 a meeting of shareholders was held at which
the Company's entire Board of Directors was elected. Directors
elected to the Board were G. Robert Crotty, Jr., R. Bruce Robson
and Sheila M. McCann. 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 1998.
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
None
7
<PAGE>
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, 1998 s/K. King
K. King
Assistant Secretary-Treasurer
Date: October 30, 1998 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-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 16,454,780
<SECURITIES> 1,815,400
<RECEIVABLES> 152,257
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,430,047
<PP&E> 999,468
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,672,362
<CURRENT-LIABILITIES> 402,540
<BONDS> 0
<COMMON> 3,262,004
0
0
<OTHER-SE> 17,675,197
<TOTAL-LIABILITY-AND-EQUITY> 25,672,362
<SALES> 0
<TOTAL-REVENUES> 3,771,440
<CGS> 0
<TOTAL-COSTS> 1,835,887
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,800,558
<INCOME-TAX> 520,000
<INCOME-CONTINUING> 1,280,558
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,280,558
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
