FORM 10-QSB
Securities and Exchange Commission
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
U.S. SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-25958
INTEGRITY MUTUAL FUNDS, INC.
(Exact name of small business issuer as specified in its charter)
North Dakota 45-0404061
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1 North Main, Minot, North Dakota, 58703
(Address of principal executive offices)
(701) 852-5292
(Issuer's telephone number)
(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
As of July 25, 2003, there were 13,154,215 shares of common stock of
the registrant outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
1
FORM 10-QSB
INTEGRITY MUTUAL FUNDS, INC.
INDEX
Part I FINANCIAL INFORMATION Page No.
Item 1 Financial Statements
Condensed Consolidated Balance Sheets-
June 30, 2003 and December 31, 2002 3
Condensed Consolidated Statements of Operations-
Three months ended June 30, 2003 and 2002 4
Condensed Consolidated Statements of Operations-
Six months ended June 30, 2003 and 2002 5
Condensed Consolidated Statements of Cash Flows-
Six months ended June 30, 2003 and 2002 6
Notes to Condensed Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis or
Plan of Operations 10
Item 3 Controls and Procedures 17
Part II OTHER INFORMATION
Item 1 Legal Proceedings 17
Item 2 Material Changes in Instruments Defining the Rights
of Shareholders 17
Item 4 Submission of Matters to a Vote of Security Holders 18
Item 5 Other Information 18
Item 6 Exhibits and Reports on Form 8-K 19
Signatures 20
2
Part I. FINANCIAL INFORMATION
Item 1. INTEGRITY MUTUAL FUNDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2003 2002
-----------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,108,367 $ 1,007,619
Cash segregated for the exclusive benefit
of customers 114,634 319,275
Securities available-for-sale 23,845 109,456
Accounts receivable 951,421 1,111,989
Prepaids 49,990 90,604
-----------------------------
Total current assets $ 3,248,257 $ 2,638,943
-----------------------------
PROPERTY AND EQUIPMENT $ 1,799,733 $ 2,134,719
Less accumulated depreciation (541,905) (730,093)
-----------------------------
Net property and equipment $ 1,257,828 $ 1,404,626
-----------------------------
OTHER ASSETS
Deferred sales commissions $ 934,599 $ 1,159,165
Covenant not to compete (net of accumulated amortization
of $177,125 for 2002) - 40,875
Goodwill 6,989,616 7,234,317
Other assets (net of accumulated amortization
of $99,209 for 2003 and $89,749 for 2002) 421,530 215,983
------------------------------
Total other assets $ 8,345,745 $ 8,650,340
-----------------------------
TOTAL ASSETS $ 12,851,830 $ 12,693,909
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Service fees payable $ 77,314 $ 77,723
Accounts payable 11,396 26,499
Other current liabilities 667,918 1,131,440
Short-term borrowing 267,400 555,592
Current portion of long-term debt 172,248 17,298
-----------------------------
Total current liabilities $ 1,196,276 $ 1,808,552
-----------------------------
LONG-TERM LIABILITIES
Notes payable $ 1,352,117 $ 461,311
Subordinate debentures 595,000 595,000
Corporate notes 962,000 962,000
Subordinated commercial notes 561,000 561,000
Convertible debenture 250,000 250,000
Deferred tax liability 131,062 170,000
Less current portion (172,248) (17,298)
-----------------------------
Total long-term liabilities $ 3,678,931 $ 2,982,013
-----------------------------
TOTAL LIABILITIES $ 4,875,207 $ 4,790,565
-----------------------------
MINORITY INTEREST IN SUBSIDIARY - 355,371
-----------------------------
TEMPORARY CAPITAL - 1,000,000 shares of common stock,
$.0001 par value; put option
price of $.50 per share; see Note 4 $ 500,000 $ 500,000
-----------------------------
STOCKHOLDERS' EQUITY
Common stock - 1,000,000,000 shares authorized, $.0001 par value;
13,154,215 and 12,470,480 shares issued and outstanding,
respectively, after the 2:1 forward split effective July 1, 2002 $ 8,529,514 $ 8,325,179
Receivable - unearned ESOP shares (85,498) (88,845)
Gain on allocation of ESOP shares 35,499 36,350
Accumulated deficit (1,002,273) (1,198,551)
Accumulated other comprehensive loss (619) (26,160)
-----------------------------
Total stockholders' equity $ 7,476,623 $ 7,047,973
-----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,851,830 $ 12,693,909
=============================
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
INTEGRITY MUTUAL FUNDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
June 30,
-------------------------
2003 2002
-------------------------
OPERATING REVENUES
Fee income $ 679,448 $ 797,560
Commissions 2,375,286 2,929,376
-------------------------
Total revenue $ 3,054,734 $ 3,726,936
-------------------------
OPERATING EXPENSES
Compensation and benefits $ 453,397 $ 468,749
Commission expense 1,972,122 2,580,844
General and administrative expenses 404,515 477,990
Sales commissions amortized 110,673 116,037
Depreciation and amortization 25,518 24,992
-------------------------
Total operating expenses $ 2,966,225 $ 3,668,612
-------------------------
OPERATING INCOME $ 88,509 $ 58,324
-------------------------
OTHER INCOME (EXPENSES)
Interest and other income $ 59,741 $ 21,552
Interest expense (75,719) (75,792)
-------------------------
Net other income (expense) $ (15,978) $ (54,240)
-------------------------
INCOME BEFORE INCOME TAX BENEFIT (EXPENSE) $ 72,531 $ 4,084
INCOME TAX BENEFIT (EXPENSE) (75,583) 2,272
-------------------------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS $ (3,052) $ 6,356
DISCONTINUED OPERATIONS
Loss from operation of discontinued internet
segment (net of tax) $ (7,028) $ (3,258)
Gain from disposal of internet segment
(net of tax) 15,512 -
-------------------------
Gain (loss) from discontinued operations (net of tax) $ 8,484 $ (3,258)
-------------------------
NET INCOME $ 5,432 $ 3,098
=========================
NET INCOME (LOSS) PER SHARE:
Basic earnings per share
Continuing operations $ (.00) $ .00
Discontinued operations $ .00 $ (.00)
Diluted earnings per share
Continuing operations $ (.00) $ .00
Discontinued operations $ .00 $ (.00)
AVERAGE COMMON SHARES OUTSTANDING, AFTER 2:1
FORWARD STOCK SPLIT EFFECTIVE JULY 1, 2002:
Basic 13,516,700 13,930,253
Diluted 14,031,852 14,215,967
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
INTEGRITY MUTUAL FUNDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended
June 30,
-------------------------
2003 2002
-------------------------
OPERATING REVENUES
Fee income $ 1,393,888 $ 1,581,878
Commissions 5,080,312 5,649,116
-------------------------
Total revenue $ 6,474,200 $ 7,230,994
-------------------------
OPERATING EXPENSES
Compensation and benefits $ 846,327 $ 874,745
Commission expense 4,353,460 4,982,842
General and administrative expenses 743,032 899,974
Sales commissions amortized 201,531 230,507
Depreciation and amortization 50,443 49,730
-------------------------
Total operating expenses $ 6,194,793 $ 7,037,798
-------------------------
OPERATING INCOME $ 279,407 $ 193,196
-------------------------
OTHER INCOME (EXPENSES)
Interest and other income $ 84,019 $ 37,341
Interest expense (150,597) (151,535)
-------------------------
Net other income (expense) $ (66,578) $ (114,194)
-------------------------
INCOME BEFORE INCOME TAX BENEFIT (EXPENSE) $ 212,829 $ 79,002
INCOME TAX BENEFIT (EXPENSE) (122,331) (29,597)
-------------------------
NET INCOME FROM CONTINUING OPERATIONS $ 90,498 $ 49,405
DISCONTINUED OPERATIONS
Loss from operation of discontinued internet
segment (net of tax) $ (19,178) $ (7,866)
Gain from disposal of internet segment
(net of tax) 15,512 -
-------------------------
Loss from discontinued operations (net of tax) $ (3,666) $ (7,866)
-------------------------
NET INCOME $ 86,832 $ 41,539
=========================
NET INCOME (LOSS) PER SHARE:
Basic earnings per share
Continuing operations $ .01 $ .00
Discontinued operations $ (.00) $ (.00)
Diluted earnings per share
Continuing operations $ .01 $ .00
Discontinued operations $ (.00) $ (.00)
AVERAGE COMMON SHARES OUTSTANDING, AFTER 2:1
FORWARD STOCK SPLIT EFFECTIVE JULY 1, 2002:
Basic 13,401,716 14,056,676
Diluted 13,916,868 14,342,390
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
INTEGRITY MUTUAL FUNDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
-------------------------
2003 2002
-------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 86,832 $ 41,539
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 92,668 100,901
Sales commissions amortized/charged off 173,990 230,507
Loss on sale of available-for-sale securities 13,243
Minority interest 19,889 (7,559)
(Increase) decrease in:
Cash segregated for customers 204,641 (44,455)
Accounts receivable 157,964 (456,140)
Prepaids 40,170 38,461
Deferred sales commissions capitalized,
net of CDSC collected 50,577 (118,741)
Other assets (5,008) (34,425)
Increase (decrease) in:
Service fees payable (410) (3,578)
Accounts payable 15,329 (43,993)
Deferred tax (143,977) 13,496
Other liabilities (175,423) 379,082
---------------------------------
Net cash provided by operating activities $ 530,485 $ 95,095
---------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment $ (32,638) $ (57,796)
Purchase of available-for-sale securities (511) (527)
Proceeds from sale of available-for-sale securities 98,419 0
Purchase of other assets (179,109) 0
Proceeds from sale of subsidiary 337,875 0
Purchase of goodwill (3,223) (1,117,711)
---------------------------------
Net cash provided (used) by investing activities $ 220,813 $ (1,176,034)
---------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Redemption of common stock (5,664) (153,658)
Reduction of short-term debt (538,192) 0
Reduction of notes payable (9,218) (6,409)
Long-term borrowing 900,025 0
Repayments from ESOP 3,347 4,902
Return of capital - (17,150)
Redemption of subordinated debenture (50,000)
Gain (loss) on allocation of ESOP shares (848) (1,127)
---------------------------------
Net cash provided (used) by financing activities $ 349,450 $ (223,442)
---------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 1,100,748 $ (1,304,381)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 1,007,619 1,834,683
---------------------------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 2,108,367 $ 530,302
=================================
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Change in unrealized gain (loss) on
securities available-for-sale 25,541 (5,670)
Gain (loss) on allocation of ESOP shares (848) (1,127)
Purchase of goodwill with common stock 0 250,000
Purchase of goodwill with committed common stock 0 500,000
Purchase of goodwill with long-term liability 0 250,000
Purchase of other assets with common stock 210,000 0
Disposal of minority interest 335,482 0
Reduction in other assets 0 (63,254)
Reduction in common stock 0 (63,254)
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6
INTEGRITY MUTUAL FUNDS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 2003 and 2002
NOTE 1 - BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Integrity
Mutual Funds, Inc., a North Dakota corporation, and its subsidiaries
(collectively, the "Company"), included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission ("SEC"). These unaudited condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the footnotes thereto contained in the Annual Report
on Form 10-KSB for the year ended December 31, 2002 of Integrity Mutual Funds,
Inc., as filed with the SEC. The condensed consolidated balance sheet at
December 31, 2002, contained herein, was derived from audited financial
statements, but does not include all disclosures included in the Form 10-KSB
and applicable under accounting principles generally accepted in the United
States of America. Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America, but not required
for interim reporting purposes, have been condensed or omitted.
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (which are of a
normal recurring nature) necessary for a fair presentation of the financial
statements. The results of operations for the six months ended June 30, 2003
are not necessarily indicative of operating results for the entire year.
NOTE 2 - INCOME TAXES
The Company is amortizing deferred sales commissions over 5 years for income
tax purposes. The Company amortizes the commissions for financial reporting
purposes over 8 years (exception Integrity Fund of Funds, which are expensed).
The effects of these differences will create timing differences between when
the commissions are deducted for income tax purposes and expensed as
amortization for financial reporting purposes. Deferred tax assets or deferred
tax liabilities may result from these timing differences.
NOTE 3 - RECLASSIFICATION
Certain amounts in the 2002 condensed consolidated financial statements have
been reclassified to conform with the 2003 presentation. These
reclassifications had no effect on the Company's net income.
NOTE 4 - BUSINESS ACQUISITIONS
On January 15, 2002, the Company acquired 100% of the equity stock of Capital
Financial Services, Inc. ("CFS"), a full-service brokerage firm based in
Madison, Wisconsin. CFS is registered with the SEC as an investment advisor
and broker-dealer and also with the NASD as a broker-dealer. CFS specializes
in providing investment products and services to independent investment
representatives, financial planners, and investment advisors and currently
supports approximately 90 investment representatives and investment advisors.
The purchase consideration, taking into effect the 2 for 1 (2:1) forward stock
split effective July 1, 2002, was composed of $1,140,000 in cash, 1,500,000
shares of the Company common stock to be issued in three (3) annual
installments beginning at the date of purchase, a $250,000 convertible
debenture to be issued one year from the purchase date, as well as 500,000
options to purchase common stock of the Company at an option strike price of
$0.50 per share. Because there is no market for the Company's options and the
strike price is above the market price, the options have been determined to
have negligible value.
7
Pursuant to the terms of the purchase agreement whereby CFS was acquired,
1,500,000 shares of $.0001 par value common stock of the Company will be issued
in three (3) annual installments beginning at the date of purchase. The shares
will have a put right, whereby the installment shares may be put back to the
Company at the rate of up to 500,000 shares per year for three (3) consecutive
years at a price of $0.50 per share. The put right may be exercised at any
time within the ninety (90) day period following the first, second, and third
anniversaries of the purchase. The put rights are non-accumulative and each
installment will expire if not exercised during the scheduled redemption
period. In January of 2003, the put option on the first installment of shares
was exercised. As a result, the Company paid $250,000 to repurchase 500,000
shares.
Also pursuant to the terms of the purchase agreement whereby CFS was acquired,
on January 15, 2003, the Company issued convertible debentures divided among
the prior shareholders of CFS in the total amount of $250,000. The debenture
principal will be payable January 15, 2006 and will pay interest on the
principal sum from January 15, 2003 at the rate of four percent (4%) per annum
on a semi-annual basis beginning on July 15, 2003 and thereafter on January
15th and July 15th of each year until the principal balance is paid. All
payments will be applied first to interest and any remainder to reduction of
principal. The debenture will be convertible as follows: beginning on the
date of issuance and until the principal is paid in accordance with the terms
of this agreement, the holder of this convertible debenture shall have the
option to convert all or any portion of this convertible debenture to no par
value common stock of the Company at the rate of two shares for each one dollar
of convertible debenture (2 shares per $1.00 converted) issued by the debenture
holder.
The primary reasons for the acquisition were to acquire a full-service retail
brokerage distribution system as well as to acquire the investment advisory
service operations of CFS. The primary factors contributing to the purchase
price were the presence of an established group of approximately 90 investment
representatives and investment advisors, the existing relationship with a
reputable clearing firm, the fact that approximately 95% of the business of CFS
is processed as packaged products, i.e. mutual funds and insurance products,
and to capture the revenue stream of approximately $6.4 million. The estimated
fair value of the equity of CFS was recorded at $78,392. The excess purchase
price over the estimated fair value of the equity of CFS was $2,117,711, which
has been recorded as goodwill.
The operations and financial position of CFS were accounted for in the
condensed consolidated financial statements of the Company beginning January 1,
2002.
On May 30, 2003, the Company acquired 100% of the equity stock of Abbington
Capital Management, Inc. The purchase consideration was composed of 700,000
shares of the Company common stock determined to have a total value of
$210,000. The common stock is to be issued pursuant to the following delivery
schedule: 200,000 shares at closing, 200,000 shares on August 31, 2003,
200,000 shares on December 31, 2003, and 100,000 shares on April 30, 2004. As
a part of the transaction, the Company received a license for the Portfolio
Manager's Stock Selection Matrix, a quantitative investment model for managing
equity portfolios.
NOTE 5 - DISCONTINUED OPERATIONS
Effective June 26, 2003, the Company sold its 51% ownership in Magic Internet
Services, Inc. The purchase consideration for the Company's 51% ownership
consisted of $337,875, which the Company received at closing, as well as an
additional maximum payment of $36,975 to be received 90 days after closing.
The additional payment is subject to adjustment based on terms of the contract.
The Company currently expects to receive the full amount of the receivable.
8
The results of Magic Internet Services, Inc. are reported in the Company's
Consolidated Statements of Operations separately as discontinued operations.
In accordance with GAAP, the Consolidated Balance Sheets have not been
restated.
Summarized financial information for discontinued operations is as follows:
June 26, 2003 June 30, 2002
------------------------------------------------------------------------------------
Total revenues, net of interest expense $ 233,845 $ 281,761
------------------------------------------------------------------------------------
Loss from discontinued operations, net of tax $ (19,178) $ (7,866)
Gain on sale of stock of subsidiary, net of tax $ 15,512 $ 0
------------------------------------------------------------------------------------
Loss from discontinued operations, net of tax $ (3,666) $ (7,866)
------------------------------------------------------------------------------------
June 26, 2003 December 31, 2002
-------------------------------------------------------------------------------------
Total assets $ 753,006 $ 784,066
Total liabilities 68,532 55,988
-------------------------------------------------------------------------------------
Net assets of discontinued operations $ 684,474 $ 728,078
-------------------------------------------------------------------------------------
NOTE 6 - ACQUIRED INTANGIBLE ASSETS
Acquired intangible assets consisted of the following as of:
June 30, 2003 December 31, 2002
------------- -----------------
Amortized Intangible Assets
---------------------------
Carrying amount
Covenant not to compete $ - $ 218,000
--------------------------------------
Accumulated amortization - 177,125
--------------------------------------
Aggregate Amortization Expense
------------------------------
For the six month period ended
June 30, 2003 $ -
For the year ended
December 31, 2002 $ 54,500
The carrying amount of the covenant not to compete was included in the sale of
Magic Internet Services, Inc.
NOTE 7 - GOODWILL
The changes in the carrying amount of goodwill for the six month period ended
June 30, 2003 are as follows:
Mutual Fund Internet Broker-Dealer
Services Services Services Total
-----------------------------------------------------------------------------------------
Balance as of January 1, 2003 $ 4,350,656 $ 427,034 $ 2,456,627 $ 7,234,317
Goodwill acquired during the period 182,333 - - 182,333
Goodwill disposed of during the period - (427,034) - (427,034)
Impairment losses - - - -
Balance as of June 30, 2003 $ 4,532,989 $ - $ 2,456,627 $ 6,989,616
-----------------------------------------------------------------------------------------
9
The above segments are tested for impairment on an annual basis in the second
quarter and any impairment adjustments are reflected at that time. The annual
impairment assessments were completed on June 30, 2003 and resulted in no
impairment adjustments.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
GENERAL
Integrity Mutual Funds, Inc. derives a portion of its revenues and net income
from providing investment management, distribution, shareholder services,
accounting and related services to the Funds and others. ARM Securities
Corporation (ARM Securities), acquired effective May 1, 2000, and Capital
Financial Services, Inc. (CFS), acquired effective January 1, 2002, provide
another substantial portion of revenues through sales of mutual funds and
variable and fixed insurance products.
The Company organizes its current business units into two reportable segments:
mutual fund services, and broker-dealer services. The mutual fund services
segment acts as investment adviser, distributor and provider of administrative
service to sponsored and nonproprietary mutual funds. The broker-dealer segment
distributes shares of nonproprietary mutual funds and insurance products.
As disclosed in Note 5, the Company has classified the results of operations of
Magic Internet Services, Inc. (the Internet Services segment) as discontinued
operations. The information below has been revised to exclude the Internet
Services segment related to Magic Internet Services, Inc.
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and marketing strategies. Most of the
businesses were acquired as a unit and the management at the time of the
acquisitions were retained.
JUNE 30, 2003
Revenues from
external customers $ 909,673 $ 2,145,061 $ 3,054,734
Interest expense 75,719 - 75,719
Depreciation and
Amortization 24,326 1,192 25,518
Income (loss) from continued
operations (245,646) 242,594 (3,052)
-----------------------------------------------------------------------------------------
JUNE 30, 2002
Revenues from
external customers $ 1,102,104 $ 2,624,832 $ 3,726,936
Intersegment
Revenues 57,647 - 57,647
Interest expense 75,792 - 75,792
Depreciation and
Amortization 23,882 1,110 24,992
Income (loss) from continued
operations (6,226) 12,582 6,356
------------------------------------------------------------------------------------------
10
As of,
Six Months Ended
JUNE 30, 2003
Revenues from
external customers $ 1,801,994 $ 4,672,206 $ 6,474,200
Interest expense 149,837 760 150,597
Depreciation and
Amortization 48,089 2,354 50,443
Income (loss) from continued
operations (330,174) 420,672 90,498
Segment assets 12,176,111 1,477,583 13,653,694
Expenditures for
segment assets 31,502 1,136 32,638
-----------------------------------------------------------------------------------------
JUNE 30, 2002
Revenues from
external customers $ 2,030,406 $ 5,200,588 $ 7,230,994
Intersegment
Revenues 115,673 - 115,673
Interest expense 151,535 - 151,535
Depreciation and
Amortization 47,503 2,227 49,730
Income (loss) from continued
operations 55,931 (6,526) 49,405
Segment assets 11,324,904 1,351,126 12,676,030
Expenditures for
segment assets 57,536 260 57,796
-----------------------------------------------------------------------------------------
RECONCILIATION OF SEGMENT INFORMATION
As of Three Months
Ended June 30, 2003 June 30, 2002
Revenues
--------
Total revenues for reportable segments $ 3,054,734 $ 3,784,583
Elimination of intersegment revenues - (57,647)
------------------- -------------------
Consolidated total revenue $ 3,054,734 $ 3,726,936
=================== ===================
Profit
------
Total reportable segment profit $ 5,432 $ 3,098
=================== ===================
As of Six Months
Ended June 30, 2003 June 30, 2002
Revenues
--------
Total revenues for reportable segments $ 6,474,200 $ 7,346,667
Elimination of intersegment revenues - (115,673)
------------------- ------------------
Consolidated total revenue $ 6,474,200 $ 7,230,994
=================== ==================
Profit
------
Total reportable segment profit $ 86,832 $ 41,539
=================== ==================
Assets
------
Total assets for reportable segments $ 13,653,694 $ 12,676,030
Assets of discontinued segment $ - $ 765,878
Elimination of intercompany receivables (801,864) (1,140,495)
------------------- ------------------
Consolidated assets $ 12,851,830 $ 12,301,413
=================== ==================
11
A substantial portion of the Company's revenues depend upon the amount of
assets under its management/service. Assets under management/service can be
affected by the addition of new funds to the group, the acquisition of
another investment management company, purchases and redemptions of mutual
fund shares, and investment performance, which may depend on general market
conditions. The Company provides investment management, distribution,
shareholder services, fund accounting and other related administrative
services to the open-end investment companies known as "Integrity Mutual
Funds," "Ranson Managed Portfolios," and "The Integrity Funds," hereinafter
collectively referred to as "the Funds." Integrity Mutual Funds currently
consists of four (4) open-end investment companies including ND Tax-Free
Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc.,
and Integrity Fund of Funds, Inc. Ranson Managed Portfolios consists of one
open-end investment company containing four (4) separate portfolios including
The Kansas Municipal Fund, The Kansas Insured Intermediate Fund, The Nebraska
Municipal Fund, and The Oklahoma Municipal Fund. The Integrity Funds consists
of one open-end investment company containing two (2) separate portfolios
including The Integrity Equity Fund and The Integrity Income Fund.
ASSETS UNDER MANAGEMENT/SERVICE
By Investment Objective
In Millions
As of June 30, 2003 2002 % Change
--------------------------------------------------------------------------
FIXED INCOME
Tax-Free Funds $ 279.0 $ 299.4 (6.80)%
Corporate Bond Fund 1.1 0.0
--------------------------------------------------------------------------
TOTAL FIXED INCOME $ 280.1 $ 299.4 (6.40)%
--------------------------------------------------------------------------
EQUITY
Fund of Funds $ 7.1 $ 13.4 (47.0)%
Equity Fund 13.1 0.0
--------------------------------------------------------------------------
TOTAL EQUITY 20.2 13.4 50.7 %
--------------------------------------------------------------------------
TOTAL SPONSORED MUTUAL FUNDS - end of period $ 300.3 $ 312.8 (4.0)%
--------------------------------------------------------------------------
TOTAL ASSETS UNDER MANAGEMENT/SERVICE $ 300.3 $ 312.8 (4.0)%
==========================================================================
Average for the six month period $ 292.1 $ 318.3 (8.2)%
==========================================================================
Assets under the Company's management/service were $300.3 million at June 30,
2003, an increase of $4.3 million (1.5%) from December 31, 2002 and a decrease
of $12.5 million (4.0%) from June 30, 2002.
RESULTS OF OPERATIONS
Unless otherwise noted, the following discussions relate only to results from
continuing operations.
12
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
2003 2002 2003 2002
------------------------------------------------
Net income (loss) from
Continuing operations $ (3,052) $ 6,356 $ 90,498 $ 49,405
Net income (loss) from
Discontinued operations $ 8,484 $ (3,258) $ (3,666) $ (7,866)
Net income (loss) $ 5,432 $ 3,098 $ 86,832 $ 41,539
Earnings per share
Basic:
Continuing operations $ (0.00) $ 0.00 $ 0.01 $ 0.00
Discontinued operations $ 0.00 $ (0.00) $ (0.00) $ (0.00)
Net income (loss) $ 0.00 $ 0.00 $ 0.01 $ 0.00
Diluted:
Continuing operations $ (0.00) $ 0.00 $ 0.01 $ 0.00
Discontinued operation $ 0.00 $ (0.00) $ (0.00) $ (0.00)
Net income (loss) $ 0.00 $ 0.00 $ 0.01 $ 0.00
------------------------------------------------
Net income (loss) for the second quarter ended June 30, 2003 was net income of
$5,432 compared to net income of $3,098 for the same quarter in the previous
fiscal year.
Net income (loss) for the six months ended June 30, 2003 was net income of
$86,832 compared to net income of $41,539 for the same quarter in the previous
fiscal year.
OPERATING REVENUES
Total operating revenues for the second quarter ended June 30, 2003 were
$3,054,734, a decrease of 18.0% from June 30, 2002. The decrease is primarily
the result of slower market conditions, as well as a decrease in assets under
management/service.
Total operating revenues for the six months ended June 30, 2003 were
$6,474,200, a decrease of 10.5% from June 30, 2002. The decrease is primarily
the result of slower market conditions, as well as a decrease in assets under
management/service.
Fee income for the second quarter ended June 30, 2003 was a decrease of 14.8%
compared to June 30, 2002. The decrease is primarily the result of a decrease
in assets under management/service and to a lesser extent from the reduction
in fees charged to Class A shares converted from Class B shares. Beginning
January 2000, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and South
Dakota Tax-Free Fund, Inc. issued an additional class of shares, Class A shares
subject to Front End Sales Loads (FESLs). These shares are subject to a maximum
front-end sales load of 4.25% scaled down to a .75% minimum as the investment
amount increases. Shares subject to the CDSC (Class B shares) would
automatically convert to Class A shares (and would no longer be subject to the
higher Rule 12b-1 fees) approximately 8 years after the date on which such
Class B shares were purchased. The conversion would be made based on the
relative net asset values of Class A and Class B shares, without imposing any
load, fee or other charge.
Fee income for the six months ended June 30, 2003 was a decrease of 11.9%
compared to June 30, 2002. The decrease is primarily the result of a decrease
in assets under management/service and to a lesser extent from the reduction
in fees charged to Class A shares converted from Class B shares.
Commission income decreased 18.9%, to $2,375,286 for the second quarter ended
June 30, 2003 from $2,929,376 for the same period in 2002. The decrease is
primarily the result of slower market conditions.
Commission income decreased 10.1%, to $5,080,312 for the six months ended June
30, 2003 from $5,649,116 for the same period in 2002. The decrease is
primarily the result of slower market conditions.
13
OPERATING EXPENSES
Total operating expenses for the second quarter and six months ended June 30,
2003 were $2,966,225 and $6,194,793, respectively, a decrease of 19.1% and
12.0% from the same periods ended June 30, 2002. The 19.1% and 12.0%
decreases are a result of the net activity in the major expense categories as
described in the paragraphs that follow.
COMPENSATION AND BENEFITS
Total compensation and benefits for the second quarter ended June 30, 2003 were
$453,397, a decrease of 3.3% from June 30, 2002. The decrease results from the
net effect of an increase in Mutual Fund Services employee compensation and
benefits of $21,239, offset by a decrease in Broker-Dealer Services employee
compensation and benefits of $36,590.
Total compensation and benefits for the six months ended June 30, 2003 were
$846,327, a decrease of 3.2% from June 30, 2002. The decrease is the net
effect of an increase in Mutual Fund Services employee compensation and
benefits of $58,330 offset by a decrease in Broker-Dealer Services employee
compensation and benefits of $86,748.
COMMISSION EXPENSE
Total commission expense for the second quarter ended June 30, 2003 was
$1,972,122, a decrease of 23.6% from June 30, 2002. The decrease is related
to the decrease in commission income.
Total commission expense for the six months ended June 30, 2003 was
$4,353,460, a decrease of 12.6% from June 30, 2002. The decrease is related
to the decrease in commission income.
GENERAL AND ADMINISTRATIVE EXPENSES
Total general and administrative expenses for the second quarter ended June 30,
2003 were $404,515, a decrease of 15.4% from June 30, 2002. Total general and
administrative expenses for the six months ended June 30, 2003 were $743,032, a
decrease of 17.4% from June 30, 2002. The decreases are primarily attributable
to consolidation efficiencies relating to CFS, acquired effective January 1,
2002.
SALES COMMISSIONS AMORTIZED
Amortization of deferred sales commissions for the second quarter ended June
30, 2003 decreased 4.6% from June 30, 2002. Amortization of deferred sales
commissions for the six months ended June 30, 2003 decreased 12.6% from June
30, 2002. Sales commissions paid to brokers and dealers in connection with
the sale of shares of the Funds sold without a FESL are capitalized and
amortized on a straight line basis. The Company uses an amortization life of
eight years, which best approximates management's estimate of the average life
of investor's accounts in the Integrity Mutual Funds and Ranson Managed
Portfolios and coincides with conversion of Class B shares to Class A shares
as previously stated.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased slightly for the second quarter ended
June 30, 2003 and for the six months ended June 30, 2003 compared to the same
periods in 2002.
Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 142 - Goodwill and Other Intangible Assets.
Under SFAS 142, the Company no longer amortizes its goodwill and certain other
intangibles over their estimated useful life. Rather, they will be subject to
at least an annual assessment for impairment by applying a fair value based
test. There were no impairment adjustments made during the quarter ended June
30, 2003.
14
OTHER INCOME (EXPENSES)
Interest and other income increased $38,189 and $46,678 for the second quarter
and six months ended June 30, 2003 compared to the same period in 2002 due to
reimbursement income relating to CFS, offset by a realized loss on the
disposal of available-for-sale securities.
LIQUIDITY AND CAPITAL RESOURCES
Net cash from operating activities was $530,485 during the six month period
June 30, 2003 compared to $95,095 during the six month period ended June 30,
2002. A significant factor contributing to this variance is a decrease in
deferred sales commissions capitalized, net of CDSC collected, compared to
December 31, 2002.
Net cash provided by investing activities for the six months ended June 30,
2003 was $220,813 compared to net cash used by investing activities of
$1,176,034 for the six months ended June 30, 2002. The 2003 activity included
proceeds from the sale of available-for-sale securities and proceeds from the
sale of Magic Internet Services, Inc., while the 2002 activity included the
purchase of goodwill related to the acquisition of CFS.
Net cash provided by financing activities during the six months ended June 30,
2003 was $349,450. The major financing activities for the period were the
payment of $250,000 to repurchase 500,000 shares pursuant to the put privilege
that was exercised by the previous owners of Capital Financial Services, Inc,
the payment of $288,192 to reduce the balance on a commercial bank short-term
borrowing, as well as proceeds of $900,025 received from a long-term commercial
bank loan.
At June 30, 2003, the Company held $2,108,367 in cash and cash equivalents, as
compared to $1,007,619 at December 31, 2002. Liquid assets, which consist of
cash and cash equivalents, securities available-for-sale and current
receivables increased to $3,083,633 at June 30, 2003 from $2,229,064 at
December 31, 2002.
Although the Company has historically relied upon sales of its common stock and
debt instruments for liquidity and growth, management believes that the
Company's existing liquid assets, together with the expected continuing cash
flow from operations, a long-term commercial bank loan and lines of credit, and
proceeds expected to be generated from a private offering of preferred stock,
will provide the Company with sufficient resources to meet its cash
requirements during the next twelve months. Management expects that the
principal needs for cash may be to advance sales commissions on Funds subject
to contingent deferred sales charges, acquire additional investment management
or financial services firms, acquire the management rights to additional
outside mutual funds, repurchase shares of the Company's common stock, and
service debt.
FORWARD-LOOKING STATEMENTS
When used in this Form 10-QSB, in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases and in
other Company-authorized written or oral statements, the words and phrases
"can be", "expects," "anticipates," "may affect," "may depend," "believes,"
"estimate" or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. The Company cautions readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Such
statements are subject to certain risks and uncertainties, including those set
forth in this "Forward-Looking Statements" section, that could cause actual
results for future periods to differ materially from those presently
anticipated or projected. The Company does not undertake and specifically
disclaims any obligation to update any forward-looking statement to reflect
events or circumstances after the date of such statements.
15
Prior to the acquisition of ARM and CFS, the Company derived substantially
all of its revenues from fees relating to the management of, and provision of
services to, the Funds. The fees earned by the Company are generally
calculated as a percentage of assets under management/service. If the
Company's assets under management/service decline, or do not grow in
accordance with the Company's plans, fee revenues and earnings would be
materially adversely affected. Assets under management/service may decline
because redemptions of fund shares exceed sales of fund shares, or because of
a decline in the market value of securities held by the Funds, or a
combination of both.
ARM and CFS revenues are generated from commissions (FESLs) and regular service
fees received from various mutual fund and insurance companies. If sales of
mutual funds or annuities decline, commission revenues and earnings would be
adversely affected. If ARM or CFS's assets under service decline, service fee
revenues and earnings would be adversely affected. Lower securities market
levels may reduce sales of mutual funds or annuities, and assets under service
may contract, thus reducing service fee revenues and earnings.
In seeking to sell fund shares, and market its other services, the Company
operates in the highly competitive financial services industry. The Company
competes with approximately 8,000 open-end investment companies which offer
their shares to the investing public in the United States. In addition, the
Company also competes with the financial services and other investment
alternatives offered by stock brokerage and investment banking firms, insurance
companies, banks, savings and loan associations and other financial
institutions, as well as investment advisory firms. Most of these competitors
have substantially greater resources than the Company. The Company sells fund
shares principally through third party broker-dealers. The Company competes
for the services of such third party broker-dealers with other sponsors of
mutual funds who generally have substantially greater resources than the
Company. Banks in particular have increased, and continue to increase, their
sponsorship of proprietary mutual funds distributed through third party
distributors. Many broker-dealer firms also sponsor their own proprietary
mutual funds which may limit the Company's ability to secure the distribution
services of such broker-dealer firms. In seeking to sell fund shares, the
Company also competes with increasing numbers of mutual funds which sell their
shares without the imposition of sales loads. No-load mutual funds are
attractive to investors because they do not have to pay sales charges on the
purchase or redemption of such mutual funds' shares. This competition may
place pressure on the Company to reduce the FESLs and CDSCs charged upon the
sale or redemption of fund shares. However, reduced sales loads would make the
sale of fund shares less attractive to the broker-dealers upon whom the Company
depends for the distribution of fund shares. In the alternative, the Company
might itself be required to pay additional fees, expenses, commissions or
charges in connection with the distribution of fund shares which could have a
material adverse effect on the Company's earnings. The ability of the Company
to sell fund shares may also be affected by general economic conditions
including, amongst other factors, changes in interest rates and the inflation
rate. Interest and inflation rate changes may particularly impact the flow of
money into mutual funds which invest in fixed-income securities. Each of the
Funds except Integrity Fund of Funds, Inc. and the Integrity Equity Fund
invests substantially all of its assets in fixed-income securities.
General economic conditions, including interest and inflation rate changes, may
also adversely affect the market value of the securities held by the Funds,
thus negatively impacting the value of assets under management, and hence the
fees earned by the Company. The fact that the investments of each of the tax-
free funds are geographically concentrated within a single state makes the
market value of such investments particularly vulnerable to economic conditions
within such state. In addition, the states in which the investments of the
tax-free funds as a group are concentrated are themselves concentrated in
certain regions of the United States. The Company's fee revenues may therefore
be adversely affected by economic conditions within such regions.
16
Sales of fund shares with FESLs provide current distribution revenue to the
Company in the form of the Company's share of the FESLs and distribution
revenue over time in the form of 12b-1 payments. Sales of fund shares with
CDSCs provide distribution revenue over time in the form of 12b-1 payments and,
if shares are redeemed within 5 years, CDSCs. However, the Company pays
commissions on sales of fund shares with CDSCs, reflects such commissions as a
deferred expense on its balance sheet and amortizes such commissions over a
period of up to eight years, thereby recognizing distribution expenses.
Therefore, to the extent that sales of fund shares with CDSCs increases over
time relative to sales of shares with FESLs, current distribution expenses may
increase relative to current distribution revenues in certain periods, which
would negatively impact the Company's earnings in such periods. In addition,
the Company may need to find additional sources of funding if existing cash
flow and debt facilities are insufficient to fund commissions payable to
selling broker-dealers on CDSC shares.
ITEM 3 CONTROLS AND PROCEDURES
The Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer evaluated the effectiveness of the design and operation
of the Company's disclosure controls and procedures (as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) as of the end of the period covered by this report. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures are effective as of
June 30, 2003.
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation, including any corrective actions with regard to
significant deficiencies or material weaknesses.
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
The North Dakota Attorney General Office and the North Dakota Securities
Commission have raised issues concerning the Company's status as a North Dakota
venture capital corporation, as well as reporting requirements with respect to
certain investments made by the Company. To date, no legal action has been
filed by the North Dakota Attorney General Office or the North Dakota
Securities Commission. The Company is in continuing discussions concerning
these issues. A potential consequence of this matter may include a requirement
to reorganize the Company as a regular business corporation. Such
reorganization, if undertaken, would require a meeting and consent of the
Company's shareholders. Since this matter is in preliminary stages, no
opinion as to the potential consequences can be provided.
ITEM 2: MATERIAL CHANGES IN INSTRUMENTS DEFINING THE RIGHTS OF
SHAREHOLDERS
On May 31, 2002, the shareholders of the Company approved an amendment of the
Company's Articles of Incorporation which increased the authorized common
shares of the Company from 20,000,000 shares of no par common stock to
1,000,000,000 shares of $.0001 par value common stock. On May 31, 2002, the
shareholders also approved an amendment of the Company's Articles of
Incorporation which authorized 100,000,000 shares of $.0001 par value
preferred stock. Preferred shares have a preference over the common shares
with respect to future dividends, voting rights, and liquidation in the event
of dissolution. The Board of Directors may establish a class or series,
setting forth the designation of the class or series and fixing the relative
rights and preferences of the class or series of the preferred shares. The
increase in the authorized shares of common stock and the authorization for
preferred stock will not have any immediate effect on the rights of existing
shareholders, however, the Board of Directors will have the authority to issue
authorized shares of common stock and create classes of preferred stock within
the authorized limits of preferred stock without requiring future shareholder
approval of such issuances, except as may be required by applicable law or
regulations, the Company's governing documents or the rules of any stock
17
exchange, Nasdaq, or any automated inter-dealer quotation system on which the
Company's common stock may then be traded. The Company's shareholders can,
therefore, experience a reduction in their ownership interest in the Company
with respect to earnings per share (if any), voting, liquidation value, and
book and market value if the additional authorized shares are issued. The
holders of the Company's common stock have no preemptive rights, which means
that current shareholders do not have a prior right to purchase any new issue
of common stock in order to maintain their proportionate ownership in the
Company.
On May 31, 2002, the shareholders of the Company approved a two for one (2:1)
forward stock split of the issued and outstanding common stock of the Company
which took effect on July 1, 2002. The forward stock split increased the
number of issued and outstanding shares of common stock of the Company as of
July 1, 2002 from approximately 6,700,000 to approximately 13,400,000. Except
for changes in the number of shares of stock issued and outstanding, the
rights and privileges of holders of shares of common stock remain the same,
both before and after the forward stock split. Commencing on July 1, 2002,
each currently outstanding common stock certificate was deemed for all
corporate purposes to evidence ownership of the increased number of shares
resulting from the forward stock split. New stock certificates reflecting the
number of shares resulting from the stock split will be issued only as
currently outstanding certificates are transferred or upon request of
individual shareholders.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held on May 30, 2003, the following
proposals were adopted by the margins indicated:
1. To elect a Board of Directors to hold office until the next annual
meeting of shareholders and until their successors are elected and
qualified.
Number of Votes Cast for:
Vance A. Castleman 10,103,156
Peter A. Quist 10,153,480
Myron D. Thompson 10,153,480
Robert E. Walstad 10,098,520
Richard H. Walstad 10,091,100
2. To approve appointment of Brady Martz & Associates, P.C. as independent
auditor for the Company for the fiscal year ending December 31, 2003.
For 10,214,630
Against 176,810
Abstain 56,372
ITEM 5: OTHER INFORMATION
Effective as of May 1, 2003, Mark Anderson was hired to fill the positions of
President and Chief Operating Officer of the Company, replacing Robert
Walstad. Mr. Walstad will continue as Chief Executive Officer and Chairman
of the Company's board of directors. Also effective as of May 1, 2003, the
Company hired Jerry Szilagyi as Senior Vice President for Business Development.
On June 3, 2003, the Company announced the consolidation of its two wholly
owned broker dealer firms, Capital Financial Services, Inc. (CFS) and ARM
Securities Corporation (ARM) into one firm - Capital Financial Services, Inc.
The consolidation is designed to increase operating efficiency and promote cost
savings. Capital Financial Services, Inc. is a full-service brokerage firm
that specializes in providing investment products and services to independent
investment representatives, financial planners, and investment advisors.
18
On June 30, 2003, the Company announced it had signed an agreement with
Willamette Asset Managers of Portland, Oregon to acquire management rights to
the four stock funds in the Willamette Family of Funds. The four funds have
combined assets of approximately $60 million. The agreement, which is subject
to shareholder and regulatory approval, is expected to close in mid-September
of 2003. The purchase agreement calls for total consideration of
approximately $1,400,000. The majority of the purchase price, or
approximately $900,000, has been placed in an escrow account and is to be
paid out on the closing date. The escrow account is classified as cash and
cash equivalents on the June 30, 2003 balance sheet. The remaining
consideration of approximately $500,000 is to be paid as follows: $350,000
within 5 business days of the one year anniversary of the closing date, and
$150,000 within 5 business days of the two year anniversary of the closing
date. The total purchase price will be paid by utilizing a commercial bank
loan and lines of credit as well as available cash on hand.
On July 1, 2003, the Company announced it had signed an agreement with Forum
Financial Group of Portland, Maine to acquire management rights to the Maine
and New Hampshire Tax-Saver Bond Funds. The two funds have combined assets
of approximately $50 million. The agreement, which is subject to shareholder
and regulatory approval, is expected to close in September of 2003. The
purchase agreement calls for total consideration of approximately $875,000,
which will be paid using proceeds expected to be generated from a private
offering of preferred stock. Approximately $500,000 of the purchase price
will be paid on the closing date, with the remaining portion of the purchase
price to be placed in an escrow account that will be paid out on the first
anniversary of the closing date.
Effective July 10, 2003, the names of the Company's wholly-owned subsidiaries,
ND Resources, Inc. and ND Money Management, Inc. have been changed to
Integrity Fund Services, Inc. and Integrity Money Management, Inc.,
respectively.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Index to Exhibits on page 21 for a descriptive response to this
item.
(b) Reports on Form 8-K
None
19
INTEGRITY MUTUAL FUNDS, INC. AND SUBSIDIARIES
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.
Date: August 14, 2003 By /s/ Robert E. Walstad
------------------------
Robert E. Walstad
Chief Executive Officer,
Chairman, and Director
(Principal Executive Officer)
20
INTEGRITY MUTUAL FUNDS, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
The following documents are filed as part of this Report:
Exhibit
-------
EX-31.1 CEO Certification of Periodic Financial Reports
EX-31.2 CFO Certification of Periodic Financial Reports
EX-32.1 CEO Certification of Periodic Financial Reports
EX-32.2 CFO Certification of Periodic Financial Reports
21
1