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, 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 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, 1999
$1.00 Par Value Common Stock 1,567,259 Shares
Transitional Small Business Disclosure Format (Check One): Yes ; No X
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M CORP
INDEX
Page Number
PART I
Condensed Consolidated Financial Statements:
Balance Sheet -
June 30, 1999 2
Statements of Income and Comprehensive Income -
Three Months and Six Months Ended June 30, 1999
and 1998 3
Statements of Cash Flows -
Six Months Ended June 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
AS OF JUNE 30, 1999
ASSETS
Current Assets
Cash $ 17,964,868
Marketable Securities, at Fair Value 1,767,752
Receivables, Net 85,628
Income Tax Prepayments 44,142
Prepaid Expenses 10,300
Total Current Assets 19,872,690
Noncurrent Investments, at Fair Value 5,076,509
Property, Plant and Equipment, Net 933,034
TOTAL ASSETS $ 25,882,233
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Expenses $ 306,772
Deferred Income Taxes 185,900
Total Current Liabilities 492,672
Provision for Estimated Title and
Escrow Losses 945,859
Minority Interests 2,279,981
Excess of Fair Value of Net Assets
Acquired Over Cost 44,525
Deferred Income Taxes 448,400
STOCKHOLDERS' EQUITY
Common Stock, $1.00 Par Value,
5,000,000 shares authorized,
3,750,905 shares issued 3,750,905
Capital Surplus 18,267,463
Retained Earnings 835,372
Accumulated Other Comprehensive Income 1,183,400
Treasury Stock, at Cost (2,366,344)
Total Stockholders' Equity 21,670,796
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,882,233
See Notes to Consolidated Financial Statements
2
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M CORP
CONSOLIDATED STATEMENTS OF INCOME
For The Three Months For the Six Months
Ended Ended
June 30, June 30,
1999 1998 1999 1998
Operating Revenues $ 876,756 $1,441,941 $1,832,402 $2,380,015
Operating Expenses
Salaries and Payroll
Costs 257,597 224,278 527,329 437,446
Other Expenses 246,876 749,570 434,954 931,551
504,473 973,848 962,283 1,368,997
Operating Income 372,283 471,093 870,119 1,011,018
Minority Portion of
(Income) (17,420) (53,290) (44,393) (86,488)
Income Before
Income Taxes 354,863 417,803 825,726 924,530
Income Tax Expense (130,000) (5,000) (320,000) (205,000)
Net Income 224,863 412,803 505,726 719,530
Other Comprehensive Income
Increase (Decrease) in
Unrealized Holding Gains
Net of Income Taxes (106,485) (467,253) (246,056) (192,423)
Comprehensive Income $ 118,378 $ (54,450) $ 259,670 $ 527,107
See Notes To Consolidated Financial Statements
3
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M CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Six Months Ended
June 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net Cash Provided By
Operating Activities $ 413,030 $ 413,030
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures Paid In Cash (6,645) (24,341)
Cash Purchases of Minority Interests (2,107) (5,947)
Cash Received on Principal of Notes Receivable - 11,466
Cash Used for Purchases of Marketable
Securities Available for Sale (21,652) (27,272)
Cash Received on Dispostion of Marketable
Securities Available for Sale 6,373 43,812
Net Cash (Used)
By Investing Activities (24,031) (2,282)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends Paid In Cash (393,412) -
Net Cash (Used)
By Financiang Activities (393,412) -
NET INCREASE IN CASH 33,496 410,748
CASH - BEGINNING OF PERIOD 17,931,372 15,186,576
CASH - END OF PERIOD $17,964,868 $15,597,324
See Notes to Consolidated Financial Statements
4
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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, 1999 and
the results of the Company's operations for the three months and six months
ended June 30, 1999 and 1998 and cash flows for the six months ended June 30,
1999 and 1998.
The results of operations for the three months and six months ended June 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 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 45% 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, 1999.
The net unrealized holding gain at June 30, 1999, 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, 1999
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,
1999 AND 1998 1999 AND 1998
INCREASES (DECREASES)
Operating
Revenues $ (568,185) (39.3%) $ (547,613) (23.0%)
Operating
Expenses (469,375) (48.2%) (406,714) (29.7%)
Net Income (187,940) (45.5%) (213,804) (29.7%)
Revenues decreased $547,613 (23.0%) in the first six months of 1999 as
compared with the first six months of 1998 due primarily to gains in the
amount of approximately $417,000 recognized by the Company on the
contribution of assets in kind to a charitable organization during the first
six months of 1998. No such contributions were made and no such gains
recognized during the first six months of 1999. Revenues from the Company's
title insurance operations decreased $157,971 (13.7%) in the first six
months of 1999 as compared with the first six 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 $406,714 in the first six months of 1999 as
compared with the first six months of 1998 due primarily to charitable
contributions made by the Company during 1998. The provision for income tax
expense increased $115,000 (56.1%) in the first six months of 1999 as
compared with the first six months of 1998 due primarily to income tax
deductions related to the contributions made during 1998 and referred to
above.
6
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M CORP
PART II
OTHER INFORMATION
JUNE 30, 1999
ITEM 1 LEGAL PROCEEDINGS
No legal proceedings presently pending by or against M Corp and
its consolidated subsidiaries are described herein as management
believes that the outcome of such litigation should not have a
material adverse effect on the financial position of the Company
and its subsidiaries taken as a whole.
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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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 9, 1999 s/P. Cunningham
P. Cunningham,
Assistant Secretary-Treasurer
Date: August 9, 1999 s/Jerry K. Mohland
Jerry K. Mohland,
Accountant
8
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<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-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 17,964,868
<SECURITIES> 1,767,752
<RECEIVABLES> 85,628
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,872,690
<PP&E> 933,034
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,882,233
<CURRENT-LIABILITIES> 492,672
<BONDS> 0
<COMMON> 3,750,905
0
0
<OTHER-SE> 17,919,891
<TOTAL-LIABILITY-AND-EQUITY> 25,882,233
<SALES> 0
<TOTAL-REVENUES> 1,832,402
<CGS> 0
<TOTAL-COSTS> 962,283
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 870,119
<INCOME-TAX> 320,000
<INCOME-CONTINUING> 505,726
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 505,726
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
