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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998 Commission file number 33-4001
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CORNERSTONE MORTGAGE INVESTMENT GROUP, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 43-1393535
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
201 Progress Parkway
Maryland Heights, Missouri 63043
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 515-2000
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date, August 7, 1998:
COMMON STOCK, $.01 Par Value - 1,000 Shares
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<TABLE>
CORNERSTONE MORTGAGE INVESTMENT GROUP, INC.
INDEX
<CAPTION>
Page
Number
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet 3
Statement of Operations 4
Statement of Changes in Stockholder's Equity 5
Statement of Cash Flows 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. OTHER INFORMATION 9
SIGNATURES 10
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
CORNERSTONE MORTGAGE INVESTMENT GROUP, INC.
BALANCE SHEET
(Unaudited)
<CAPTION>
June 30, December 31,
1998 1997
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ASSETS
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<S> <C> <C>
CASH $ 52,386 $ 48,726
RECEIVABLE FROM TRUSTEE 17,400 3,660
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TOTAL ASSETS $ 69,786 $ 52,386
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<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
<S> <C> <C>
LIABILITIES:
PAYABLE TO EDWARD D. JONES & CO., L.P. $ 479,449 $ 478,870
ACCRUED EXPENSES 3,500 3,500
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TOTAL LIABILITIES 482,949 482,370
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STOCKHOLDER'S EQUITY:
COMMON STOCK - $.01 par value, 1,000 shares
authorized, issued and outstanding 10 10
PAID-IN-CAPITAL 300,490 300,490
RETAINED DEFICIT (713,663) (730,484)
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TOTAL STOCKHOLDER'S EQUITY (413,163) (429,984)
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TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 69,786 $ 52,386
========= =========
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The accompanying notes are an integral part of these financial statements.
</TABLE>
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
CORNERSTONE MORTGAGE INVESTMENT GROUP, INC.
STATEMENT OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
REVENUES:
Residual interest in certificates $19,857 $11,738 $19,857 $11,738
------- ------- ------- -------
EXPENSES:
Professional fees 2,457 3,114 2,457 3,114
Registration, filing and other fees 579 147 579 147
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TOTAL EXPENSES 3,036 3,261 3,036 3,261
INCOME BEFORE INCOME TAXES 16,821 8,477 16,821 8,477
PROVISION FOR (BENEFIT FROM)
INCOME TAXES - - - -
------- ------- ------- -------
NET INCOME $16,821 $ 8,477 $16,821 $ 8,477
======= ======= ======= =======
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The accompanying notes are an integral part of these financial statements.
</TABLE>
4
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
CORNERSTONE MORTGAGE INVESTMENT GROUP, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
(Unaudited)
<CAPTION>
Six Months Ended June 30, 1998 and 1997
Common Paid-In- Retained
Stock Capital Deficit Total
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<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 $10 $300,490 $(738,594) $(438,094)
NET INCOME - - 8,477 8,477
--- -------- --------- ---------
BALANCE, JUNE 30, 1997 $10 $300,490 $(730,117) $(429,617)
=== ======== ========= =========
BALANCE, DECEMBER 31, 1997 $10 $300,490 $(730,484) $(429,984)
NET INCOME - - 16,821 16,821
--- -------- --------- ---------
BALANCE, JUNE 30, 1998 $10 $300,490 $(713,663) $(413,163)
=== ======== ========= =========
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The accompanying notes are an integral part of these financial statements.
</TABLE>
5
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
CORNERSTONE MORTGAGE INVESTMENT GROUP, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended June 30,
1998 1997
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<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES:
Net income $ 16,821 $ 8,477
Adjustments to reconcile net income to net
cash provided by operating activities -
Increase in payable to Edward D. Jones & Co., L.P. 579 148
Increase in receivable from trustee (13,740) (3,660)
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Net cash provided by operating activities 3,660 4,965
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Net increase in cash 3,660 4,965
CASH, beginning of period 48,726 43,762
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CASH, end of period $ 52,386 $48,727
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The accompanying notes are an integral part of these financial statements.
</TABLE>
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CORNERSTONE MORGAGE INVESTMENT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
BASIS OF PRESENTATION
The financial information included herein is unaudited. However, in
the opinion of management, such information includes all adjustments,
consisting solely of normal recurring adjustments, which are necessary for a
fair presentation of the results of interim operations. These interim
results should be read in connection with the annual Form 10-K.
The results of operations for the three and six months ended June 30,
1998, are not necessarily indicative of the results to be expected for the
full year.
FUTURE OPERATIONS
Cornerstone Mortgage Investment Group, Inc. (the "Company" or
"Cornerstone") was incorporated in the state of Delaware on January 9, 1986,
as a wholly-owned, limited purpose subsidiary of Edward D. Jones & Co., L.P.
("EDJ"), a Missouri limited partnership. EDJ organized the Company and
currently owns all the issued and outstanding capital stock of the Company.
Cornerstone was organized for the limited purpose of issuing and
selling secured mortgage bonds (the "Bonds"), which are collateralized by
Government National Mortgage Association (GNMA), Federal Home Loan Mortgage
Corporation (FHLMC) and Federal National Mortgage Association (FNMA)
Certificates.
Due to revisions of the Internal Revenue Code enacted, effective
January 1, 1987, Cornerstone no longer issues bonds. Cornerstone will
continue operations until such time as the Bonds previously issued are
retired or mature.
7
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Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
CORNERSTONE MORTGAGE INVESTMENT GROUP, INC.
MANAGEMENT'S FINANCIAL DISCUSSION
Residual interest in certificates of $19,857 and $11,738 was earned during
the three and six months ended June 30, 1998 and June 30, 1997, respectively.
No series were issued during these periods.
Expenses for the three months ended June 30, 1998 and June 30, 1997,
were $3,036 and $3,261, respectively. These expenses relate to professional,
registration, filing and other fees.
The outstanding principal balance and remaining collateral value
relating to series issued by Cornerstone are $4,249,000 and $4,260,344 as of
June 30, 1998.
8
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Part II. OTHER INFORMATION
CORNERSTONE MORTGAGE INVESTMENT GROUP, INC.
Item 1: Legal Proceedings:
There are no pending legal proceedings.
Item 2. Changes in Securities:
No change.
Item 3. Default upon Senior Securities:
No default.
Item 4. Submission of Matters to a Vote of Security Holders:
Nothing to report.
Item 5. Other Information:
Nothing to report.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description of Exhibit
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4.1 Indenture dated as of June 15, 1986, between the Company
and The Bank of New York, as successor Trustee,
relating to Secured Mortgage Bonds (incorporated by
reference to Exhibit 4(a) to Registration Statement
on Form S-1, as amended, File No. 33-4001).
4.2 First Supplemental Indenture dated August 28, 1986
(incorporated by reference to Exhibit 1 to the
Current Report on Form 8-K filed on September 19,
1986).
4.3 Second Supplemental Indenture dated September 26, 1986
(incorporated by reference to Exhibit 1 to the
Current Report on Form 8-K filed on October 6, 1986).
4.4 Third Supplemental Indenture dated October 31, 1986
(incorporated by reference to Exhibit 1 to the
Current Report on Form 8-K filed on November 12,
1986).
(b) Reports on Form 8-K
No reports were filed on Form 8-K for the quarter ended June 30, 1998.
9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORNERSTONE MORTGAGE INVESTMENT GROUP, INC.
(Registrant)
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<S> <C> <C>
/s/ John C. Heisler Chairman of the Board,
----------------------- Chief Financial Officer,
John C. Heisler Chief Accounting Officer
and Director August 10, 1998
/s/ Philip R. Schwab President, Chief Executive
----------------------- Officer and Director August 10, 1998
Philip R. Schwab
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Cornerstone Mortgage Investment Group, Inc. for the
quarter ended June 30, 1998 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-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 52,386
<SECURITIES> 0
<RECEIVABLES> 17,400
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 69,786
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 69,786
<CURRENT-LIABILITIES> 482,949
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> (413,173)
<TOTAL-LIABILITY-AND-EQUITY> 69,786
<SALES> 19,857
<TOTAL-REVENUES> 19,857
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,036
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 16,821
<INCOME-TAX> 0
<INCOME-CONTINUING> 16,821
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,821
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
