<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, 1999
[ ] 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, 1999
$1.00 Par Value Common Stock 1,565,749 Shares
Transitional Small Business Disclosure Format (Check One): Yes ; No X
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M CORP
INDEX
SEPTEMBER 30, 1999
Page Number
PART I
Condensed Consolidated Financial Statements:
Balance Sheet -
September 30, 1999 2
Statements of Income and Comprehensive Income -
Three Months and Nine Months Ended
September 30, 1999 and 1998 3
Statements of Cash Flows -
Nine Months Ended September 30, 1999 and 1998 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, 1999
ASSETS
Current Assets
Cash $ 18,195,459
Marketable Securities, at Fair Value 1,528,694
Receivables - Net 81,265
Income Tax Prepayments 113,292
Total Current Assets 19,918,710
Marketable Securities and
Other Investments, at Fair Value 5,061,519
Property, Plant and Equipment, Net 941,403
TOTAL ASSETS $ 25,921,632
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities $ 304,520
Deferred Income Taxes 139,400
Total Current Liabilities 443,920
Provision for Estimated Title and
Escrow Losses 933,538
Minority Interests 2,283,201
Excess of Fair Value of Net Assets
Acquired Over Cost 42,470
Deferred Income Taxes 442,300
STOCKHOLDERS' EQUITY
Common Stock - $1.00 Par Value,
5,000,000 shares authorized,
3,750,295 shares issued 3,750,295
Capital Surplus 18,266,853
Retained Earnings 1,018,815
Accumulated Other Comprehensive Income 1,115,584
Treasury Stock, at Cost (2,375,344)
Total Stockholders' Equity 21,776,203
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,921,632
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,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Operating Revenues $ 779,323 $1,391,425 $2,611,725 $3,771,440
Operating Expenses
Salaries and Payroll
Costs 242,992 249,986 770,321 687,432
Other Expenses 235,189 216,904 670,143 1,148,455
478,181 466,890 1,440,464 1,835,887
Operating Income 301,142 924,535 1,171,261 1,935,553
Minority Portion of
(Income) Loss (12,699) (48,507) (57,092) (134,995)
Income Before Income
Taxes 288,443 876,028 1,114,169 1,800,558
Income Tax Expense (105,000) (315,000) (425,000) (520,000)
Net Income 183,443 561,028 689,169 1,280,558
Other Comprehensive Income (Loss)
Increase (Decrease) in
Unrealized Holding Gains,
Net of Income Taxes (67,816) (953,106) (313,872) (1,145,529)
Comprehensive Income (Loss) $ 115,627 $ (392,078) $ 375,297 $ 135,029
</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,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash Provided (Used) By
Operating Activities $ 204,978 $ 799,099
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Proceeds From Sales and Redemptions
of Property, Plant and Equipment - 13,905
Capital Expenditures Paid in Cash (36,645) (63,401)
Cash Received on Principal of
Notes Receivable - 11,466
Cash Purchases of Minority Interests (2,977) (8,551)
Cash Used for Purchases of Marketable
Securities Available for Sale (28,652) (76,462)
Cash Received on Disposition of Marketable
Securities Available For Sale 137,603 592,148
Net Cash Provided By Investing
Activities 69,329 469,105
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Purchases of Treasury Stock
and Redemption of Common Stock (10,220) -
Net Cash (Used) By
Financiang Activities (10,220) -
NET INCREASE IN CASH 264,087 1,268,204
CASH - BEGINNING OF PERIOD 17,931,459 15,186,576
CASH - END OF PERIOD $18,195,459 $16,454,780
See Notes to Consolidated Financial Statements
4
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M CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
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, 1999
and the results of the Company's operations for the three months and nine
months ended September 30, 1999 and 1998 and cash flows for the nine months
ended September 30, 1999 and 1998.
The results of operations for the three months and nine months ended
September 30, 1999 and 1998 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 45% 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, 1999.
The net unrealized holding gain at September 30, 1999, 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, 1999
in accordance with the provisions of Financial Accounting Standards No. 130.
5
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M CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE INCOME STATEMENT
SEPTEMBER 30, 1999
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,
1999 AND 1998 1999 AND 1998
INCREASES (DECREASES)
Revenues $(612,102) (44.0%) $(1,159,715) (30.7%)
Expenses 11,291 2.4% (395,423) (21.6%)
Net Income (377,585) (67.3%) (591,389) (46.2%)
Revenues decreased $1,159,715 (30.7%) in the first nine months of 1999 as
compared with the first nine months of 1998 due primarily to gains in the
amount of approximately $786,359 recognized by the Company on the disposition
of securities, including a gain of approximately $417,000 recognized
on the contribution of assets in kind to a charitable organization during
the first nine months of 1998. No such contributions were made during the
first nine months of 1999. Revenues from the Company's title insurance
operations decreased $410,025 (23.3%) in the first nine months of 1999 as
compared with the first nine months of 1998. The decrease was primarily due
to a decrease in revenues of one of the Company's consolidated subsidiaries
resulting from the pirating of key employees by the competition in a manner
which the Company considers unfair. Operating expenses decreased $395,423
(21.6%) in the first nine months of 1999 as compared with the first nine
months of 1998 due primarily to charitable contributions made by the Company
during 1998. The provision for income tax expense decreased $95,000 (18.3%)
in the first nine months of 1999 as compared with the first nine months of
1998 due primarily to the decrease in pretax income.
6
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M CORP
PART II
OTHER INFORMATION
SEPTEMBER 30, 1999
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
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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 29, 1999 s/S. C. Lee
S. C. Lee
Assistant Secretary-Treasurer
Date: October 29, 1999 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-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 18,195,459
<SECURITIES> 1,528,694
<RECEIVABLES> 194,557
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,918,710
<PP&E> 941,403
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,921,632
<CURRENT-LIABILITIES> 443,920
<BONDS> 0
<COMMON> 3,750,295
0
0
<OTHER-SE> 18,025,908
<TOTAL-LIABILITY-AND-EQUITY> 25,921,632
<SALES> 0
<TOTAL-REVENUES> 2,611,725
<CGS> 0
<TOTAL-COSTS> 1,440,464
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,114,169
<INCOME-TAX> 425,000
<INCOME-CONTINUING> 689,169
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 689,169
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
