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, 1999 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 $7,036 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, 1999
increased $18,647 compared to the year ended September 30, 1998.
Operating income increased $22,239. This was primarily due to an
increase in profit on sale of real estate contracts.
Operating expenses increased $3,592. The increase resulted from the
following:
Rent increased $600. Thirteen months rent was paid in 1999 and twelve
months rent was paid during 1998.
Legal fees increased $6,033 due to more legal work being required on
sale of property on installment contracts than in 1998.
Other operating expenses decreased $3,041.
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, 1999.
(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, 1999, 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, 1999, 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 50 President July 1998 Next Annual
Shareholders'
Meeting
Kendra Jeffries 30 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 five (5) 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, 1999
September 30,
1999 1998 1997 1996 1995
1. Net Operating
Revenues $ 104,619 $ 82,380 $ 116,385 $ 172,045 $ 176,577
2. Income (Loss) from
Operations $ 35,287 $ 16,640 $ 3,554 $ 15,397 $ 13,662
Per Share Earnings
(Loss) $ .00 $ .00 $ .00 $ .00 $ .00
3. Working Capital $ 2,844 $ 34,545 $ 10,099 $ (18,162) $ (2,881)
4. Total Assets 731,356 $ 684,561 $ 667,979 $1,697,069 $1,730,796
5. Long Term Obligations
Mortgage Payable $ .00 $ .00 $ .00 $ 991,555 $1,034,062
Commission Payable .00 .00 .00 .00 .00
6. Cash Dividends per
Common Share $ .00 $ .00 $ .00 $ .00 $ .00
Hynes & Howes Insurance Counselors, Inc.
Davenport, Iowa
Independent Auditor's Report
We have audited the balance sheet of Hynes & Howes Insurance Counselors, Inc.
as of September 30, 1999, and the related statements of income, retained
earnings, paid-in-capital, and cash flows for the years ended September 30,
1999. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements of Hynes & Howes
Insurance Counselors, Inc. as of September 30, 1998 and 1997, were audited by
other auditors who have ceased operation and whose report dated December 18,
1998, expressed an unqualified opinion on these statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we 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.
We believe that our audit provides a reasonable basis for our opinion.
As discussed in Note 12 to the financial statements, the company has restated
its September 30, 1998 financial statements during the current year to reflect
income from installment sales contracts, in conformity with generally accepted
accounting principles. The other auditors reported on the September 30, 1998
financial statements before the restatement.
In our opinion, the September 30, 1999 financial statements referred to above
present fairly, in all material respects, the financial position of Hynes &
Howes Insurance Counselors, Inc. as of September 30, 1999, and the results of
its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
Shapley, Shapley & Moorhead, P.C.
Certified Public Accountants
Davenport, Iowa
November 30, 1999
HYNES & HOWES INSURANCE COUNSELORS, INC.
Balance Sheet
September 30, 1999 and 1998
September 30,
Assets 1999 1998
Current Assets:
Cash in Bank $ 5,963 $ 34,183
Other Current Assets (Note 4) 8,425 8,050
Total Current Assets $ 14,388 $ 42,233
Other Assets:
Investments in Affiliated Company (Note 2) $ 2,877 $ 2,720
Real Estate Contracts Receivable (Note 5) 680.481 639,608
Real Estate On Hand (Note 6) 25,344 0
Equipment (Note 7) 8,266 0
Total Other Assets $ 716,968 $ 642,328
Total Assets $ 731,356 $ 684,561
Notes to Financial Statements are an integral part of these statements.
HYNES & HOWES INSURANCE COUNSELORS, INC.
Balance Sheet
September 30, 1999 and 1998
September 30,
Liabilities & Stockholders' Equity 1999 1998
Current Liabilities:
Buyers Escrow $ 7,468 $ 7,688
Accounts Payable 4,076 0
Total Current Liabilities $ 11,544 $ 7,688
Total Liabilities $ 11,544 $ 7,688
Stockholders' Equity:
Capital Stock, no par value, 100,000,000
Shares Authorized, 11,260,675 shares
Issued $ 3,780,765 $ 3,780,765
Paid in Capital 100 100
Retained Earnings (Deficit) (3,027,801) (3,070,740)
Treasury Stock, at Cost (33,252) (33,252)
Total Stockholders' Equity $ 719,812 $ 676,873
Total Liabilities and Stockholders' Equity $ 731,356 $ 684,561
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, 1999, 1998 and 1997
Year Ended September 30,
1999 1998 1997
Balance at Beginning of Year $ (3,070,740) $ (3,087,380) $ (3,082,995)
Income (Loss) for the Year 35,287 16,640 (4,385)
Increase in carrying value
of affiliate 157 0 0
Unrealized gains in installment
sales contracts from prior
years (Note 12)
Balance at End of Year $ (3,027,801) $ (3,070,740) $ (3,087,380)
Statement of Paid-In Capital
For the Years Ended September 30, 1999, 1998 and 1997
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, 1999, 1998 and 1997
Year Ended September 30,
1999 1998 1997
Operating Income:
Interest Income $ 72,714 $ 81,008 $ 115,571
Other Income 31,905 1,372 814
Total Operating Income 104,619 $ 82,380 $ 116,385
Operating Expenses:
Interest Expense $ 0 $ 0 $ 41,517
Legal and Audit Fees 8,519 2,556 13,905
Management Fees (Note 3) 39,000 39,000 35,750
Repairs and Maintenance 9,015 12,244 13,799
Other Operating Expenses 12,798 11,940 7,860
Total Operating Expenses $ 69,332 $ 65,740 $ 112,831
Income From Operations $ 35,287 $ 16,640 $ 3,554
Other Income (Expenses):
Gain on Repossessions $ 0 $ 0 $ 629
Loss on Sale of Real Estate 0 0 (8,568)
Total Other Income (Expenses) $ 0 $ 0 $ (7,939)
Income (Loss) Before Income Taxes $ 35,287 $ 16,640 $ (4,385)
Provision for Income Taxes
(Note 13) 0 0 0
Net Income (Loss) $ 35,287 $ 16,640 $ (4,385)
Earnings (Loss) Per Common Share
(Note 8) $ .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, 1999, 1998 and 1997
Increase (Decrease) in Cash and Cash Equivalent
Year Ended September 30,
1999 1998 1997
Cash Flow from Operating Activities:
Interest Received $ 72,714 $ 81,008 $ 115,571
Miscellaneous Income Received 1,391 1,372 814
Interest Paid 0 0 (41,517)
Legal, Audit and Management
Fees Paid (50,769) (41,556) (49,655)
Repairs and Maintenance Paid (4,939) (12,244) (13,799)
Cash Paid to Suppliers for
Operating Expenses (11,880) (11,940) (7,860)
Net Cash Provided by
Operating Activities $ 6,517 $ 16,640 $ 3,554
Cash Flows from Investing Activities:
Principal Collected on Sale of
Tanglefoot Apartments Contract 0 0 1,572,240
Principal Collected on
Real Estate Contracts 368,673 5,561 12,827
Purchase of Real Estate Contracts (367,426) (31,848) (526,413)
Sale (Purchase) of Real Estate 0 31,848 (31,848)
Payments on Real Estate Mortgages 0 0 (991,555)
Buyers Escrow Collected (Paid) (219) 442 (6,650)
Apartment Building Escrow
Received (Paid) 0 0 0
(Purchase) Redeem Tax Certificates (1,237) 1,365 (1,459)
Acquisition of Equipment (9,184) 0 0
Purchase of Real Estate (25,344) (500) 500
Net Cash Provided (Used) by
Investing Activities $ (34,737) $ 6,868 $ 27,642
Cash Flows from Financing Activities:
Proceeds (Payments) from Loans $ 0 $ 0 $ (27,000)
Net Cash Provided (Used) by
Financing Activities $ 0 $ 0 $ (27,000)
Net Increase (Decrease) in Cash and
Cash Equivalents $ (28,220) $ 23,508 $ 4,196
Cash and Cash Equivalents at Beginning
of Year 34,183 10,675 6,479
Cash and Cash Equivalents at
End of Year $ 5,963 $ 34,183 $ 10,675
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, 1999, 1998 and 1997
Reconciliation of Net Income to Cash Provided by Operating Activities
Year Ended September 30,
1999 1998 1997
Net Income (Loss) $ 35,287 $ 16,640 $ (4,385)
Adjustments to Reconcile Net Income to
Net Cash Provided (Used) by:
Gain on Repossession 0 0 (629)
Loss (Gain) on Sale of Real Estate (30,514) 0 8,568
Depreciation 918 0 0
Increase in Prepaid Expense (3,250) 0 0
Increase in Accounts Payable 4,076 0 0
Total Adjustments $ (28,770) $ 0 $ 7,939
Net Cash Provided (Used) by Operating
Activities $ 6,517 $ 16,640 $ 3,554
Notes to Financial Statements are an integral part of these statements.
HYNES & HOWES INSURANCE COUNSELORS, INC.
Notes to Financial Statements
Years Ended September 30, 1999 and 1998
Note 1 - Summary of Significant Accounting Policies
Nature of operations: The Company invests in real estate, primarily
single family residences, which it then resells on contract. The
Company operates exclusively in the Quad City metropolitan area of
Eastern Iowa and Western Illinois. The Company has a concentration of
credit risk, in that all of its creditors live and work in the Quad
City area.
Accounting Policies: The books and records of the Company are
maintained on the accrual basis of accounting. The Company uses the
equity method of accounting for investments in affiliated companies.
Investments in contracts receivable are stated at the collectible
balance. All gains and losses are recognized in the year of sale.
Earnings per share are computed on the basis of weighted average number
of common shares outstanding. Cash and cash equivalents are considered
to be any investment with maturity of three months or less.
Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2 - Investment in Affiliated Company
Investment at September 30, 1999 and 1998 consisted of a 3% ownership
of Triton Investments, Ltd common stock. Cost of the stock was $1,700.
The Company uses the equity method of accounting for investment in
affiliated company, although the investment is below the 20% level of
ownership. The level of control exercised by common officers and
directors warrant this adoption. These values may be substantially
affected by the operations of the affiliated. Future intercompany
transactions may also affect the value of these investments.
HYNES & HOWES INSURANCE COUNSELORS, INC.
Notes to Financial Statements
Years Ended September 30, 1999 and 1998
Note 3 - Related Party Transactions
The Company has entered into a management consultant agreement with Oak
Helm Partners. The Company pays a retainer fee of $3,250 per month.
The Company occupies office space in a building located at 2920
Harrison Street, Davenport, Iowa, owned by the Heather Trust. The
Company rents approximately 700 square feet of space with furnishings
at a monthly rate of $600. There is no written lease agreement. The
Company made 13 payments in the year ended September 30, 1999.
Note 4 - Other Current Assets
1999 1998
Real estate contracts receivable
current portion (Note 5) $ 3,807 $ 7,920
Real estate tax certificates 1,368 130
Total $ 5,175 $ 8.050
Note 5 - Real Estate Contracts Receivable
1999 1998
Contracts receivable $ 684,288 $ 647,528
Less current portion (Note 4) (3,807) (7,920)
Long-term portion $ 680,481 $ 639,608
At September 30, 1999 and 1998 there were eighteen contracts
receivable. The monthly payment of principal and interest was $7,036
at September 30, 1999 and $7,189 at September 30, 1998. Interest rates
on these contracts varies from 10% to 12.5%.
Management is of the opinion that an allowance for uncollectibility is
not necessary due to the collateral value of the properties.
HYNES & HOWES INSURANCE COUNSELORS, INC.
Notes to Financial Statements
Years Ended September 30, 1999 and 1998
Note 6 - Real Estate Held For Investment
Consists of a single family home located at 623 North Division Street,
Davenport, Iowa. The property was acquired through repossession of a
contract receivable, and is carried at cost.
Note 7 - Equipment
1999 1998
Office equipment $ 9,184 $ 0
Accumulated depreciation (918) 0
Book value $ 8,266 $ 0
Depreciation expense (A) $ 918 $ 0
(A) Depreciation is calculated using 5 year, straight line rates.
Note 8 - Common Stock
The Company is authorized to issue 100,000,000 shares of no par value
common stock. Shares outstanding at September 30, 1999 and 1998 were
11,260,675. The Company has purchased 37,976 shares of treasury stock,
leaving 11,222,669 shares issued and outstanding.
Earnings Per Share 1999 1998
Net Income $ 35,287 $ 16,640
Average number of shares
outstanding 11,222.699 11,222,699
Earnings Per Share $ 0.003144 0.001488
HYNES & HOWES INSURANCE COUNSELORS, INC.
Notes to Financial Statements
Years Ended September 30, 1999 and 1998
Note 9 - Stock Held in Escrow
At September 30, 1999 and 1998 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.
Note 10 - 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.
HYNES & HOWES INSURANCE COUNSELORS, INC.
Notes to Financial Statements
Years Ended September 30, 1999 and 1998
Note 11 - 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 12 - Restatement of September 30, 1998
The financial statements of the Company were audited by another
auditor, who issued his report dated December 18, 1998, which expressed
an unqualified opinion on those statements. The prior auditor has
ceased operations. During the course of the audit for the year ended
September 30, 1999, it was discovered that an error was made in
reporting sales of real estate contracts. $7,495 of deferred gross
profit at September 30, 1998 was not recognized as income. This is a
departure from generally accepted accounting principles. The Company
has restated its retained earnings at October 1, 1998 to recognize the
income.
Note 13 - Provision for Income Taxes
Due to loss carryforwards from previous years, a provision for income
taxes has not been made. For income tax purposes, the Company is
reporting gain on the sale of 3 real estate contracts on the
installment method. The total deferred profit is $7,494, and does not
result in any deferred income tax.
[ARTICLE] 5
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] SEP-30-1999
[PERIOD-END] SEP-30-1999
[CASH] 5,963
[SECURITIES] 2,877
[RECEIVABLES] 680,481
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 8,425
[PP&E] 9,184
[DEPRECIATION] 918
[TOTAL-ASSETS] 731,356
[CURRENT-LIABILITIES] 7,468
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 3,780,765
[OTHER-SE] 100
[TOTAL-LIABILITY-AND-EQUITY] 731,356
[SALES] 0
[TOTAL-REVENUES] 104,619
[CGS] 0
[TOTAL-COSTS] 69,332
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] 35,287
[INCOME-TAX] 0
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 35,287
[EPS-BASIC] 0
[EPS-DILUTED] 0
</TABLE>
