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UNITED STATES
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 SEPTEMBER 30, 1999
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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
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date, Novemeber
11, 1999:
COMMON STOCK, $.01 Par Value - 1,000 Shares
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CORNERSTONE MORTGAGE INVESTMENT GROUP, INC.
INDEX
Page
Number
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
2
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
CORNERSTONE MORTGAGE INVESTMENT GROUP, INC.
BALANCE SHEET
(UNAUDITED)
<CAPTION>
September 30, December 31,
1999 1998
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ASSETS
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<S> <C> <C>
CASH $ 60,375 $ 52,386
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TOTAL ASSETS $ 60,375 $ 52,386
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<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
<S> <C> <C>
LIABILITIES:
PAYABLE TO EDWARD D. JONES & CO., L.P. $ 391,652 $ 423,577
ACCRUED EXPENSES 3,206 3,206
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TOTAL LIABILITIES 394,858 426,783
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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 (634,983) (674,897)
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TOTAL STOCKHOLDER'S EQUITY (334,483) (374,397)
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TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 60,375 $ 52,386
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The accompanying notes are an integral part of these financial statements.
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3
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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 Nine Months Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
REVENUES:
Residual income $ 1 $ - $ 41,386 $ 19,856
------ ------ -------- --------
EXPENSES:
Professional fees - - 1,120 2,457
Registration, filing and
other fees - 652 352 1,231
------ ------ -------- --------
TOTAL EXPENSES - 652 1,472 3,688
INCOME (LOSS) BEFORE INCOME
TAXES 1 (652) 39,914 16,168
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PROVISION FOR (BENEFIT FROM)
INCOME TAXES - - - -
------ ------ -------- --------
NET INCOME (LOSS) 1 (652) $ 39,914 $ 16,168
====== ====== ======== ========
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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>
Nine Months Ended September 30, 1999 and 1998
Common Paid-In- Retained
Stock Capital Deficit Total
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<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 $ 10 $300,490 $(730,484) $(429,984)
NET INCOME - - 16,168 16,168
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BALANCE, SEPTEMBER 30, 1998 $ 10 $300,490 $(714,316) $(413,816)
====== ======== ========= =========
BALANCE, DECEMBER 31, 1998 $ 10 $300,490 $(674,897) $(374,397)
NET INCOME - - 39,914 39,914
------ -------- --------- ---------
BALANCE, SEPTEMBER 30, 1999 $ 10 $300,490 $(634,983) $(334,483)
====== ======== ========= =========
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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>
Nine Months Ended September 30,
1999 1998
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<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES:
Net income $ 39,914 $ 16,168
Adjustments to reconcile net income to net
cash provided by operating activities:
Decrease in payable to
Edward D. Jones & Co., L.P. (31,925) (15,874)
Increase in receivable from trustee - 3,660
Decrease in Accrued Expenses - (294)
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Net cash provided by operating activities 7,989 3,660
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Net increase in cash 7,989 3,660
CASH, beginning of period 52,386 48,726
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CASH, end of period $ 60,375 $ 52,386
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The accompanying notes are an integral part of these financial statements.
6
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CORNERSTONE MORTGAGE 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 nine months ended
September 30, 1999, 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" or the "Partnership"), 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. No series have
been issued since October 30, 1987.
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 income from Cornerstone certificates of $41,386
and $19,856 was recognized during the nine months ended September 30,
1999 and September 30, 1998, respectively. The majority of residual
interest income is recorded in the second quarter. Residual interest
income was $1 and $0 for the three months ended September 30, 1999 and
September 30, 1998, respectively.
Expenses for the nine months ended September 30, 1999 and
September 30, 1998, were $1,472 and $3,688, respectively. Expenses for
the three months ended September 30, 1999 and September 30, 1998, were
$0 and $652, respectively. These expenses relate to professional,
registration, filing and other fees.
Series 1 and 3 were retired in the third quarter of 1999. Series
2 was retired in the first quarter of 1999. There is no outstanding
principal balance or remaining collateral value as of September 30,
1999. The Partnership plans to liquidate Cornerstone during fourth
quarter 1999.
In 1997, the Partnership began the process of identifying the
software applications expected to be impacted by the Year 2000 system
issue. The Partnership does not believe the costs of addressing these
issues will have a material impact on the Partnership's financial
position or on its results of operations.
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 September
30, 1999.
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)
/s/ John C. Heisler Chairman of the Board,
------------------ Chief Financial Officer,
John C. Heisler Chief Accounting Officer
and Director November 11, 1999
/s/ Philip R. Schwab President, Chief Executive
------------------ Officer and Director November 11, 1999
Philip R. Schwab
10
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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 September 30, 1999 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-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 60,375
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 60,375
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 60,375
<CURRENT-LIABILITIES> 394,858
<BONDS> 0
<COMMON> 10
0
0
<OTHER-SE> (334,493)
<TOTAL-LIABILITY-AND-EQUITY> 60,375
<SALES> 41,386
<TOTAL-REVENUES> 41,386
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,472
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 39,914
<INCOME-TAX> 0
<INCOME-CONTINUING> 39,914
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,914
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
