SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended September 30, 1998 Commission file Number 0-7376
Hynes & Howes Insurance Counselors, Inc.
(Exact name of registrant as specified in its' charter)
Iowa 42-0948341
(State or other jurisdiction I.R.S. Employer Identification No.
of incorporation or organization)
2920 Harrison St., Davenport, Iowa 52803
(Address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code (319) 326-6401
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange on which registered
None None-filing pursuant to Section 12 (g)
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, No Par Value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all annual,
quarterly and other reports required to be filed with the Commission and (2) has
been subject to the filing requirements for at least the past ninety (90) days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
11,222,699
Item 1. Business
(a) Hynes & Howes Insurance Counselors, Inc. (hereafter the "Registrant)
was an independent insurance agency handling principally all types of
casualty, fire and surety insurance. Registrant was organized as a
corporation under the laws of the State of Iowa on June 28, 1969, as
Hynes & Howes Insurance Company. Because it became apparent this name
created confusion as to the business of Registrant, an amendment to the
Articles of the Incorporation was filed on November 17, 1970, with the
Secretary of the State of Iowa changing the name to Hynes & Howes
Insurance Counselors, Inc. This action was ratified by the
stockholders at a meeting February 5, 1971.
At the annual stockholders meetings for 1973, 1974, 1975, 1976, 1977,
1978, and 1979, a proposal was made to amend the Articles of
Incorporation to change the name of the registrant from Hynes & Howes
Insurance Counselors, Inc., to the United Insurance Counselors
Corporation. The Iowa Business Corporation Act requires an affirmative
vote of the majority of the outstanding shares of the corporation to
effectuate such amendment. Although a quorum was present at each of
these annual meetings, fifty per cent (50%) required to change the
Articles of Incorporation were not represented, and the proposal could
not be acted upon.
(b) The general insurance agency and brokerage business was highly
competitive. Registrant competed locally and regionally with many
direct-line writers of fire, casualty and surety insurance who were
much larger than Registrant in all respects including premium volume,
capital and personnel employed. Registrant was also in competition
with thousands of independent insurance agencies, some of whom had
higher premium volume and more employees than Registrant. Registrant
was not a significant factor in the total volume of general insurance
business.
Registrant has sold Davenport agency to Ralph Parry Insurance Agency
Ltd. in January 1981.
(At the present time, the Registrant does not have any plans to acquire
any insurance agencies.)
At fiscal year end, Registrant, in its business has no employees. The
Trustee of the Frank B. Howes Trust which holds 36.5% of the
outstanding common stock, Janice Howes died in July 1983, and John
Howes became Trustee of the Frank B. Howes Trust.
During the fiscal year ending September 30, 1980, the Viking Agency and
the Hansen and Hansen, Inc. general insurance agencies, were sold on
contract to R.A.P. Enterprises, Inc., Ralph A. Parry, former president
of Registrant and the former manager of the Davenport agency owned by
Registrant is the owner of R.A.P. Enterprises, Inc.
During the fiscal year ending September 30, 1981, the Davenport
agencies were sold to Ralph A. Parry Insurance Agency, Ltd., as of
January 1, 1981. Also owned by Ralph A. Parry.
The intention at this time is to continue to loan on and invest in real
estate properties and equities.
(c) Line of Business
The Registrant has not engaged in more than one line of business which
meets the requisites of item 1 (c) (A), (B) or (C) for business with
sales and revenues which do not exceed $50,000.00.
Registrant and its subsidiaries are not engaged in material operations
in foreign countries, nor does Registrant or its subsidiaries have a
material portion of sales or revenues derived from customers in foreign
countries.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE STATEMENT OF OPERATIONS
Liquidity
Registrant receives approximately $7,189 of cash each month from
payments of principal and interest on Real Estate Contracts Receivable.
Registrant has very little liquidity because most of these payments are used to
pay management fees and other operating expenses.
Capital Resources
The principal assets of the registrant at September 30, 1998 are
eighteen real estate contracts receivable.
Results of Operations
The income from operations for the year ended September 30, 1998
increased $13,086 compared to the year ended September 30, 1997.
Operating income decreased $34,005. This was primarily due to a
decrease in interest income. Tanglefoot Apartment contract which was paid off
during 1997 and a large part of the proceeds received were used to pay off the
real estate mortgage payable resulting in less proceeds to be invested in assets
earning interest.
Operating expenses decreased $47,091. The decrease resulted from the
following:
Interest expense decreased $41,517 due to the payoff of the mortgage on
the apartment complex. There should be no interest expense in the future.
Management fees increased $3,250. Only eleven months management fees
were paid in 1997 and twelve months fees were paid during 1998.
Legal fees decreased $11,349 due to less legal work being required.
Selling the apartment complex and acquiring real estate contracts during 1997
required more legal work being performed than in 1998.
Other operating expenses increased $4,080.
Item 3. Properties
The Registrant has its offices at 2920 Harrison Street, Davenport,
Iowa. The Company rents approximately 700 square feet of space with
furnishings at a monthly rate of 600.00 dollars.
Registrant feels this office space is of adequate size and capacity to
handle the business of Registrant and its anticipated growth for
foreseeable future needs.
Item 4. Parents and Subsidiaries of the Registrant
The Frank B. Howes Trust, which holds 36.5 per cent of the Registrant's
outstanding common stock, is the parent of the Registrant. This
percentage includes 3,000,000 shares which is held in escrow by the
Insurance Department of Iowa. The escrow arrangement was required by
the Commissioner of Insurance of the State of Iowa in order to gain
approval of Registrant's new stock issue of April 1971. Under the
terms of this arrangement, those shares could not be sold for a period
of five (5) years or until Registrant attained certain profitable
operating goals for three (3) consecutive years. The escrow
arrangement also required that should Registrant dissolve during this
period, the shares held in escrow will not participate in the assets of
Registrant legally available for distribution until after there has
been paid or irrevocable set aside for all other shares an amount equal
to the other shares at the per offering price of $1.25, adjusted for
stock splits and stock dividends. As of April 6, 1976, five (5) years
elapsed.
The Insurance Department of Iowa, Securities Division has indicated
that under the terms of the Escrow Agreement the approval of the
Commissioner of Insurance was required. The Insurance Department,
reviewing the condition of the Registrant, did conclude that the
requisite approval of the Commissioner would not be forthcoming at that
time, and furthermore, that the Insurance Department will act as escrow
agent for the shares of the Frank B. Howes Trust.
Item 5. Legal Proceedings
None
Item 6. Increases and Decreases in Outstanding Securities and Indebtedness
(a) In the fiscal year, Registrant has not issued any new shares or
otherwise created additional outstanding securities; neither has it
reduced outstanding securities by purchase or acquisition of treasury
shares. Therefore, there were 11,222,600 shares of Registrant's stock
outstanding on September 30, 1998.
(b) None
(c) None
Item 7. Changes in Securities and Changes in Security for Registered Securities
None
Item 8. Defaults upon Senior Securities
None
Item 9. Approximate Number of Equity Security Holders
The approximate number of holders of each class of equity securities of
Registrant, as of September 30, 1998, is indicated in the following
table:
(2) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Common Stock, Approximately 4,774
no par value
Item 10. Submission of Matters to a Vote of Security Holders
On February 3, 1986, Harold L. Luebken was elected a member of the
Board of Directors and to the office of President.
On July 12, 1983, Dan B. Davis was elected to the Board of Directors.
Item 11. Executive Officers of the Registrant
(a) The following table indicates, as of September 30, 1998, the names and
ages of the executive officers of Registrant. Their term of office
with Registrant held by such person:
Position and
Office with Held Office Term of
Name Age Registrant Since Office
Jan Forrest 49 President July 1998 Next Annual
Shareholders'
Meeting
Kendra Jeffries 29 Secretary February 1997 Next Annual
Shareholders'
Meeting
There are no family relationships among the executives of the
registrant.
There is no arrangement or understanding between any executive officer
and any other person to which he was selected as an officer.
(b) The following is a brief account of the business experiences during
the past five (5) years of each executive officer.
1. Jan Forrest has been involved in the real estate business for the
past five (5) years. She has been actively involved in property
management during that period.
2. Kendra Jeffries has worked for four (4) years for a real estate
investment property company, buying and selling real estate for
the company.
Item 12. Indemnification of Directors and Officers
Provisions regarding indemnification of directors and officers of
Registrant, pursuant to Chapter 496A of the Iowa Code of 1973, were
detailed in Item 17 --Indemnification of Directors and Officers, pages
59--63 of Registrant's Form 10 filed with the Securities and Exchange
Commission August 23, 1973.
Item 13. Financial Statements and Exhibits Filed
(a) Financial Statements and audited financial statements are herewith
included.
Exhibits
None
(b) Reports on Form 8-K
1. Registrants filed a Form 8 Amendment to the Form 10-K filed
December, 1991.
2. Registrants filed a Form 8 Amendment to the Form 10-K filed
December, 1993, on April 04, 1993, reporting on February 17, 1994
Brigitta Anderson had resigned from the Board of Directors.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
HYNES & HOWES INSURANCE COUNSELORS, INC.
By:
Jan M. Forrest, President
This corporation has no treasurer.
Dated By:
Jan M. Forrest, Director
HYNES & HOWES INSURANCE COUNSELORS, INC.
Statistical Data for Form 10
September 30, 1998
September 30,
1998 1997 1996 1995 1994
1. Net Operating
Revenues $ 82,380 $116,385 $ 172,045 $ 176,577 $ 186,951
2. Income (Loss) from
Operations $ 16,640 $ 3,554 $ 15,397 $ 13,662 $ 12,414
Per Share Earnings
(Loss) $ .00 $ .00 $ .00 $ .00 $ .00
3. Working Capital $ 34,545 $ 10,099 $ (18,162) $ (2,881) $ 4,364
4. Total Assets $684,561 $667,979 $1,697,069 $1,730,796 $1,867,319
5. Long Term Obligations
Mortgage Payable $ .00 $ .00 $ 991,555 $1,034,062 $1,072,540
Commission Payable .00 .00 .00 .00 81,000
6. Cash Dividends per
Common Share $ .00 $ .00 $ .00 $ .00 $ .00
Hynes & Howes Insurance Counselors, Inc.
Davenport, Iowa
Independent Auditor's Report
I have audited the accompanying balance sheets of Hynes & Howes Insurance
Counselors, Inc. as of September 30, 1998 and 1997, and the related statements
of operation, retained earnings, paid-in-capital, and cash flows for the years
ended September 30 , 1998 and 1997 and 1996. These financial statements are the
responsibility of the company's management. My responsibility is to express an
opinion on these financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Hynes & Howes Insurance Counselors,
Inc. at September 30, 1998 and 1997, and the results of its operations and its
cash flow for the years ended September 30, 1998, and 1997 and 1996, in
conformity with generally accepted accounting principles.
Everette E. Wilson
Certified Public Accountant
December 18, 1998
HYNES & HOWES INSURANCE COUNSELORS, INC.
Comparative Balance Sheet
September 30, 1998 and 1997
September 30,
Assets 1998 1997
Current Assets:
Cash in Bank $ 34,183 $ 10,675
Other Current Assets (Note 3) 8,050 7,170
Total Current Assets $ 42,233 $ 17,845
Investments:
Investments in Affiliated Company (Note 4) $ 2,720 $ 2,720
Real Estate Contracts Receivable (Note 3) 639,608 615,566
Real Estate On Hand 0 31,848
Total Investments $ 642,328 $ 650,134
Total Assets $ 684,561 $ 667,979
Notes to Financial Statements are an integral part of these statements.
HYNES & HOWES INSURANCE COUNSELORS, INC.
Comparative Balance Sheet
September 30, 1998 and 1997
September 30,
Liabilities & Stockholders' Equity 1998 1997
Current Liabilities:
Buyers Escrow $ 7,688 $ 7,246
Other Current Liabilities 0 500
Total Current Liabilities $ 7,688 $ 7,746
Total Liabilities $ 7,688 $ 7,746
Stockholders' Equity:
Capital Stock, no par value, 100,000,000
Shares Authorized, 11,260,675 shares
Issued (Note 5) $ 3,780,765 $ 3,780,765
Paid in Capital (Note 6) 100 100
Retained Earnings (Deficit) (3,070,740) (3,087,380)
Treasury Stock, at Cost (33,252) (33,252)
Total Stockholders' Equity $ 676,873 $ 660,233
Total Liabilities and Stockholders' Equity $ 684,561 $ 667,979
Notes to Financial Statements are an integral part of these statements.
HYNES & HOWES INSURANCE COUNSELORS, INC.
Statement of Retained Earnings (Deficit)
For the Years Ended September 30, 1998, 1997 and 1996
Year Ended September 30,
1998 1997 1996
Balance at Beginning of Year $ (3,087,380) $ (3,082,995) $ (3,098,392)
Income (Loss) for the Year 16,640 (4,385) 15,397
Balance at End of Year $ (3,070,740) $ (3,087,380) $ (3,082,995)
Statement of Paid-In Capital
For the Years Ended September 30, 1998, 1997 and 1996
Balance at Beginning
and End of Year $ 100 $ 100 $ 100
Notes to Financial Statements are an integral part of these statements.
HYNES & HOWES INSURANCE COUNSELORS, INC.
Statement of Operations
For the Years Ended September 30, 1998, 1997 and 1996
Year Ended September 30,
1998 1997 1996
Operating Income:
Interest Income $ 81,008 $ 115,571 $ 171,544
Other Income 1,372 814 501
Total Operating Income $ 82,380 $ 116,385 $ 172,045
Operating Expenses:
Interest Expense $ 0 $ 41,517 $ 101,493
Legal and Audit Fees 2,556 13,905 7,155
Management Fees (Note 9) 39,000 35,750 39,000
Repairs and Maintenance 12,244 13,799 824
Other Operating Expenses 11,940 7,860 8,176
Total Operating Expenses $ 65,740 $ 112,831 $ 156,648
Income From Operations $ 16,640 $ 3,554 $ 15,397
Other Income (Expenses):
Gain on Repossessions $ 0 $ 629 $ 0
Loss on Sale of Real Estate 0 (8,568) 0
Total Other Income (Expenses) $ 0 $ (7,939) $ 0
Income (Loss) Before Income Taxes $ 16,640 $ (4,385) $ 15,397
Provision for Income Taxes
(Note 13) 0 0 0
Net Income (Loss) $ 16,640 $ (4,385) $ 15,397
Earnings (Loss) Per Common Share
(Note 10) $ .00 $ (.00) $ .00
Notes to Financial Statements are an integral part of these statements.
HYNES & HOWES INSURANCE COUNSELORS, INC.
Statement of Cash Flow
For the Years Ended September 30, 1998, 1997 and 1996
Increase (Decrease) in Cash and Cash Equivalent
Year Ended September 30,
1998 1997 1996
Cash Flow from Operating Activities:
Interest Received $ 81,008 $ 115,571 $ 171,544
Miscellaneous Income Received 1,372 814 501
Interest Paid 0 (41,517) (101,493)
Legal, Audit and Management
Fees Paid (41,556) (49,655) (46,155)
Repairs and Maintenance Paid (12,244) (13,799) (824)
Cash Paid to Suppliers for
Operating Expenses (11,940) (7,860) (8,176)
Net Cash Provided by
Operating Activities $ 16,640 $ 3,554 $ 15,397
Cash Flows from Investing Activities:
Principal Collected on Sale of
Tanglefoot Apartments Contract 0 1,572,240 9,907
Principal Collected on
Real Estate Contracts 5,561 12,827 791
Purchase of Real Estate Contracts (31,848) (526,413) 0
Sale (Purchase) of Real Estate 31,848 (31,848) 0
Payments on Real Estate Mortgages 0 (991,555) (42,507)
Buyers Escrow Collected (Paid) 442 (6,650) (20,603)
Apartment Building Escrow
Received (Paid) 0 0 (13,013)
Purchase (Redeem) Tax Certificates 1,365 (1,459) (72)
Down Payment on Real Estate (500) 500 0
Net Cash Provided (Used) by
Investing Activities $ 6,868 $ 27,642 $ (65,497)
Cash Flows from Financing Activities:
Proceeds (Payments) from Loans $ 0 $ (27,000) $ 27,000
Net Cash Provided (Used) by
Financing Activities $ 0 $ (27,000) $ 27,000
Net Increase (Decrease) in Cash and
Cash Equivalents 23,508 $ 4,196 $ (23,100)
Cash and Cash Equivalents at Beginning
of Year 10,675 6,479 29,579
Cash and Cash Equivalents at
End of Year $ 34,183 $ 10,675 $ 6,479
Notes to Financial Statements are an integral part of these statements.
HYNES & HOWES INSURANCE COUNSELORS, INC.
Statement of Cash Flows
For the Years Ended September 30, 1998, 1997 and 1996
Reconciliation of Net Income to Cash Provided by Operating Activities
Year Ended September 30,
1998 1997 1996
Net Income (Loss) $ 16,640 $ (4,385) $ 15,397
Adjustments to Reconcile Net Income to
Net Cash Provided (Used) by:
Gain on Repossession 0 (629) 0
Loss on Sale of Real Estate 0 8,568 0
Total Adjustments $ 0 $ 7,939 $ 0
Net Cash Provided (Used) by Operating
Activities $ 16,640 $ 3,554 $ 15,397
Notes to Financial Statements are an integral part of these statements.
HYNES & HOWES INSURANCE COUNSELORS, INC.
Notes to Financial Statements
September 30, 1998 and 1997
Note 1. Summary of Significant Accounting Policies:
Accounting policies adopted by Hynes & Howes Insurance Counselors, Inc.
conform to generally accepted accounting principles. Policies
considered significant are briefly described below:
Investment in Affiliated Companies - The Company used the equity method
of accounting for investments in affiliated companies, although the
stock holdings are below the 20% level of ownership, the control that
was exercised by common officers and directors warranted this adoption.
Investment in Contracts Receivable - Investments in Contracts
Receivable are stated at the collectible balance of the contracts.
When assets were sold on contract the gains on the sales were
recognized in the year of the sale.
Earnings Per Share - Earnings per share are computed on the basis of
the weighted average number of common shares outstanding. There were
no common stock equivalents outstanding during the years ended
September 30, 1998, 1997 and 1996.
HYNES & HOWES INSURANCE COUNSELORS, INC.
Notes to Financial Statements
September 30, 1998 and 1997
Note 2. Indeterminable Value of Investments in Affiliated Companies
Basis for carrying value of these investments is detailed in Note 5 of
this report. However, these values may be substantially affected by
the operations of affiliated companies in whom the company has direct
or indirect investments. Future intercompany transactions may also
affect the value of these investments.
HYNES & HOWES INSURANCE COUNSELORS, INC.
Notes to Financial Statements
September 30, 1998 and 1997
Note 3. Other Current Assets:
Other Current Assets consisted of the following:
9/30/98 9/30/97
Real Estate Contracts Receivable -
Current 7,920 5,675
Real Estate Tax Certificates 130 1,495
Total $ 8,050 $ 7,170
HYNES & HOWES INSURANCE COUNSELORS, INC.
Notes to Financial Statements
September 30, 1997 and 1996
Note 3. Other Current Assets: (continued)
At September 30, 1998, there are eighteen (18) contracts
receivable with a combined balance of $647,528. The monthly
payment of principal and interest is $7,189. Interest rates on
these contracts varies from 10% to 12% per annum.
Management is of the opinion that an allowance for
uncollectibility is not necessary due to the collateral value of
the houses.
HYNES & HOWES INSURANCE COUNSELORS, INC.
Notes to Financial Statements
September 30, 1998 and 1997
Note 4. Investment in Affiliated Company:
Investment in affiliated company at September 30, 1998 and 1997
consisted of a 3% ownership of Triton Investments, Ltd. common stock.
Cost of the stock was $1,700 and the equity in assets is $2,720.
The Company uses the equity method of accounting for investment in
affiliated company, although the stock holding is below the 20% level
of ownership, the control that was exercised by common officers and
directors warranted this adoption.
HYNES & HOWES INSURANCE COUNSELORS, INC.
Notes to Financial Statements
September 30, 1998 and 1997
Note 5. Capital Stock
Hynes & Howes Insurance Counselors, Inc. is authorized to issue
100,000,000 shares of no par value common stock. Shares outstanding at
September 30, 1998 and 1997 were 11,222,699 shares.
Number of Shares
September 30,
1998 1997
Number of shares issued 11,260,675 11,260,675
Less Treasury Stock 37,976 37,976
Balance outstanding at end of year 11,222,699 11,222,699
Note 6. Paid-In-Capital
During the year ended September 30, 1973, a stockholder purchased
shares of stock in the Company and later gave the Company a check for
$100, stating that he wanted it to be put into Paid-in-Capital. He
received no shares of stock for the $100.
Note 7. Earnings Per Share
Earnings per share were computed by dividing the net income (loss) by
the weighted average number of shares outstanding during the respective
years.
The average number of shares outstanding for each of the three years
ended September 30, 1998 were 11,222,699. This is the number of shares
used in computing the earnings per share.
Note 8. Stock Held in Escrow
At September 30, 1998 and 1997 there were 3,546,000 shares of the
Company's common stock held in trust. Those shares were owned by the
Frank B. Howes Trust and by directors or former directors of the
Company. The Trust agreement was required by the Commissioner of
Insurance of the State of Iowa in order to gain approval of the
Company's stock issue of April, 1971. Under terms of this agreement
these shares were to be released after a period of five years or when
the Company attains certain profitable goals for three consecutive
years and upon written approval from the Commissioner of Insurance of
the State of Iowa. It is also required that should the Company
dissolve during this period that the pro-rated distribution of assets
to stockholders would be done on a basis which would pay these
shareholders less per share than would be distributable to the
shareholders of the new issue. The Company's earnings to date have not
been sufficient to qualify for the release of these shares held in
escrow. The condition requiring that these shares be held in escrow
for five years has been fulfilled, however, the Commissioner of
Insurance of the State of Iowa has not granted the written approval for
the release of these shares at this time. The shares will continue to
be held in escrow until written approval for their release is granted
by the Commissioner.
HYNES & HOWES INSURANCE COUNSELORS, INC.
Notes to Financial Statements
September 30, 1998 and 1997
Note 9. Management Fees
The Company entered into a Management Consultant Retainer Agreement
with John Howes on October 1, 1972. Since John Howes no longer desires
to provide the management consultants services required in the
agreement, the Company has agreed that the Management Consultant
Retainer Agreement be assigned, transferred and conveyed to Oak Helm
Partners who assumed all rights and duties of the Agreement as of
August 1, 1991. Oak Helm Partners received management fees of $35,750
for the year ended September 30, 1997 and $39,000 for each of the years
ended September 30, 1998 and 1996.
Note 10. Provision for Income Taxes
Due to loss carry forwards from previous years, a provision for income
taxes has not been made. There will be no material effect on the
Company upon its adoption of SFAS No. 96, Accounting for Income Taxes.
HYNES & HOWES INSURANCE COUNSELORS, INC.
Notes to Financial Statements
September 30, 1998 and 1997
Note 11. Contingent Liability for Rescission of Capital Stock Sales:
Since its inception, the Company has issued and sold 11,222,699 shares
of its common stock. Although most of these shares were registered
with the State of Iowa, none of these shares were registered for sale
under the federal securities law. These shares were issued and sold in
reliance either upon the exemption provided in Section 4 (2) or Section
3 (a) (11) of the Securities Act of 1933.
The Company feels that any possible shares and federal contingent
liabilities that may have existed because of the issuance of securities
which may not have been exempt from registration under the Securities
Act of 1933 and unless the subject of an existing legal proceeding
filed appropriately may now be extinguished as a result of the new Iowa
Uniform Securities Act which became effective on January 1, 1976 under
Section 613 of that Act, liability must now be ascertained by looking
to the statute in effect at the time that the stock issue was sold.
The two year statute of limitations in effect on January 14, 1973, at
the time of the closing of the issue, has run as have the other
applicable federal statutes of limitation. As a result, wit h the
exception of the Federal and State Tolling Doctrines, possible
contingent liabilities may no longer exist.
Note 12. Contingent Liability on Pending Litigation:
On November 2, 1973, in U. S. District Court a Final Judgment of
permanent Injunction was brought against the Company because of
complaint filed by the Securities and Exchange Commission. The
Injunction enjoins the Company from failing to file timely and proper
reports as required by Section 12 (a) of the Securities Exchange Act of
1934. The Company is currently complying with filing requirements,
however, it may be subject to subsequent court action and potential
fine if there are future filing deficiencies.
Note 13: Conflicts of Interest:
There were directors, officers, and stockholders of Hynes & Howes
Insurance Counselors, Inc. who had investment interest in other
affiliated companies. These affiliated companies provided services to
each other, they also used common management and provided financial
assistance as needed. Consequently, potential conflicts of interest
exist and may result in either a benefit or a detriment to the
operations of the Company.
[ARTICLE] 5
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1998
[PERIOD-END] SEP-30-1998
[CASH] 34,183
[SECURITIES] 2,720
[RECEIVABLES] 639,608
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 8,050
[PP&E] 0
[DEPRECIATION] 0
[TOTAL-ASSETS] 684,561
[CURRENT-LIABILITIES] 7,688
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 3,780,765
[OTHER-SE] 100
[TOTAL-LIABILITY-AND-EQUITY] 684,561
[SALES] 0
[TOTAL-REVENUES] 82,380
[CGS] 0
[TOTAL-COSTS] 65,740
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] 16,640
[INCOME-TAX] 0
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 16,640
[EPS-PRIMARY] 0
[EPS-DILUTED] 0
</TABLE>
