UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended: September 30, 1998
------------------
Commission File No.: 33-11309
--------
THE IDAHO COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
IDAHO 82-0410913
- --------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
9512 Fairview Avenue, Boise, Idaho 83704
- ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(208) 375-8099
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
1,618 shares of no par value common stock
were outstanding at 09-30-98.
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
The financial information set forth herein is unaudited and reflects all
adjustments which are, in the opinion of management, necessary to the
presentation of a fair statement of the interim period presented.
(The remainder of this page intentionally left blank.)
THE IDAHO COMPANY
CONDENSED BALANCE SHEETS
September 30, 1998 December 31, 1997
- ------------------------------------------------------------------------------
ASSETS
Cash $ 3,021 $ 64,898
Loans receivable 1,255,145 1,343,585
Less allowance for loan losses (100,000) (81,465)
---------- ----------
Net loans 1,155,145 1,262,120
Short term market investments 1,865 1,865
Interest and other receivables 46,225 21,088
Prepaid expenses 12,558 10,609
Other investments 125,000 25,000
Fixed assets 27,600 2,222
Other real estate owned 271,443 0
Other assets 39,829 0
---------- ----------
Total Assets $1,682,686 $1,387,802
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts payable 65,506 0
Accrued expenses $ 8,280 $ 10,780
Payroll tax payable 4,286 5,391
Fees collected, unearned 0 3,352
Notes payable 503,891 269,877
---------- ----------
581,963 289,400
Excess of net assets acquired over
cost, net of accumulated accretion
of $98,225 at September 30, 1998 and
$80,891 at December 31, 1997 17,334 34,668
---------- ----------
Total Liabilities 599,297 324,068
STOCKHOLDERS' EQUITY
Common stock, no par value,
Authorized 500,000 shares; 1,618
shares issued and outstanding 982,825 982,825
Retained earnings 100,564 80,909
---------- ----------
1,083,389 1,063,734
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $1,682,686 $1,387,802
========== ==========
THE IDAHO COMPANY
CONDENSED STATEMENTS OF OPERATIONS
Nine Nine
Quarter Months Quarter Months
Ended Ended Ended Ended
Sept 30, Sept 30, Sept 30, Sept 30,
1998 1998 1997 1997
- --------------------------------------------------------------------------
REVENUE
Consulting Income $ 0 $ 0 $ 0 $ 922
Loan Fees 11,330 37,914 1,477 10,762
Interest Income - Loans 51,047 111,767 35,465 114,846
Interest Income - Other 4,745 13,478 2,789 3,184
Late Fees 952 3,807 0 0
Premiums 9,696 24,089 0 0
Negative Goodwill
& Other Income 17,413 102,452 5,775 19,604
-------- --------- ---------- ----------
Total Revenue 95,183 293,507 45,508 149,318
EXPENSES
Operating Expenses 100,317 255,316 47,730 133,001
Provision for Loan Loss 4,992 18,536 844 1,872
--------- -------- -------- --------
Total Expenses 105,309 273,852 48,574 134,873
NET INCOME (LOSS) $ (10,126) $ 19,655 $ (3,068) $ 14,445
======== ======== ======== ========
AVERAGE NUMBER SHARES
OUTSTANDING 1,618 1,618 1,618 1,618
BASIC AND DILUTED INCOME
(LOSS) PER SHARE OF
COMMON STOCK $ (6.26) $ 12.15 $ (1.90) $ 8.93
THE IDAHO COMPANY
STATEMENTS OF CASH FLOWS
Nine Months Ended
- -------------------------------------------------------------------------------
September 30, 1998 September 30, 1997
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 19,655 $ 14,445
Net cash used in operating activities:
Accretion of excess of net assets
acquired over cost (17,334) (17,334)
Provision for loan losses 18,536 1,872
Depreciation expense 2,166 0
Changes in operating assets
and liabilities:
Accounts payable 65,506 0
Interest and other receivables (25,137) 1,606
Prepaid expenses (1,949) (2,477)
Other assets (39,829) (2,478)
Accrued expenses (2,500) 5,234
Payroll tax payable (1,105) 862
Fees collected, unearned (3,352) (7,535)
Interest payable 0 (350)
------- -------
Total adjustments (4,998) (20,598)
NET CASH (USED IN)
OPERATING ACTIVITIES 14,657 (6,154)
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans receivable disbursed (2,690,824) (288,391)
Loans receivable collected 2,679,610 655,298
Purchase of other investments (100,000) 0
Other real estate owned (171,789) 0
Purchase of fixed assets (27,545) 0
NET CASH PROVIDED BY (USED IN) -------- --------
INVESTING ACTIVITIES (310,548) 366,907
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds form issuance of debt 1,035,000 0
Principal payments on debt (800,986) (184,921)
NET CASH PROVIDED BY (USED IN) -------- --------
FINANCING ACTIVITIES 234,014 (184,921)
INCREASE (DECREASE) IN CASH (61,877) 175,829
CASH AT BEGINNING OF PERIOD 64,898 15,636
-------- --------
CASH AT END OF PERIOD $ 3,021 $ 191,465
======== ========
SUPPLEMENTAL SCHEDULE OF
NON-CASH ACTIVITIES
Other real estate owned $ 99,654 0
THE IDAHO COMPANY
NOTES TO FINANCIAL STATEMENTS
Quarter Ended September 30, 1998
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited, condensed financial statements have been prepared in
accordance with the instructions to Form 10-Q, and therefore, do not include
all information and footnotes necessary for a complete presentation of the
results of operations, the financial position, and cash flows, in conformity
with generally accepted accounting principles. This report on Form 10-Q for
the three months ended September 30, 1998 should be read in conjunction with
the Company's annual report on form 10-K for the year ended December 31, 1997.
The accompanying unaudited condensed financial balance sheets, statements of
operations and cash flows reflect all normal recurring adjustments which are,
in management's opinion, necessary for a fair presentation of the Company's
financial position, results of operation, and cash flows. The results of
operations for the interim period ended September 30, 1998 are not
necessarily indicative of the results to be expected for the full year.
NOTE 2 NET EARNINGS PER SHARE
On December 31, 1997, the Company adopted the provisions FAS No. 128,
Earnings Per Share. FAS 128 requires the presentation of both basic and
diluted earnings per share (EPS). Basic EPS is the amount of net income or
loss divided by the weighted average number of shares of common stock
outstanding. Diluted EPS is the amount of income or loss for the period
divided by the weighted average number of shares plus all potentially
dilutive common shares. The earnings were the same for both the basic and
diluted EPS caluclations.
NOTE 3 YEAR 2000
Throughout 1998, the Company has been developing a plan to deal with Year 2000
compliance issues. The Company does not see any hurdles which are not easily
surmountable in order to be ready for the Year 2000.
The Company's operations require only two personal computers, one of which
will need to be replaced by year 2000. The Idaho Company will be contacting
its building lessor to insure all non-IT systems for internal environment
controls will be unaffected by the year 2000 changeover. Steps are being
taken to evaluate all third parties with whom the Company does business, in
order to determine any effects of the Year 2000 problem on those
relationships. These relationships are important for day to day business
transactions (for example cash and line of credit accounts with various
financial institutions). The Company's plan is to dtermine whether or not
these third parties have developed a Year 2000 Readiness Plan. Status of
plan development will then affect the amount of risk involved. It is
expected that risk will be minimal.
Costs surrounding Year 2000 readiness are considered by the Company as
insubstantial, amounting to the cost of replacing one personal computer.
Any costs related to Year 2000 readiness are being expensed as incurred.
NOTE 4 NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted Financial Accounting Standards No. 130 (SFAS 130), Reporting
Comprehensive Income, effective January 1, 1998. SFAS 130 establishes
standards for reporting and displaying comprehensive earnings and its
components in financial statements. As of September 30, 1998, the Company
has no items to report as components of comprehensive income.
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, Disclosures about Segments of an Enterprise and Related Information.
The provisions of this statement require disclosure of financial reports
issued to shareholders. This statement is effective for fiscal years
beginning after December 15, 1997, however, it is not required to be applied
for interim reporting in the initial year of application.
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities. This statement
addresses the accounting for derivative instruments including certain
derivative instruments embedded in other contracts, and hedging activities.
This statement is effective for fiscal quarters of all fiscal years beginning
after June 15, 1999. The Company is currently studying the future effects of
adopting this standard.
NOTE 5 INCOME TAXES
The Company has net operating loss carryforwards from prior years which will
exceed the income generated in the first nine months of 1998. The deferred
tax asset related to these carryfowards was fully reserved for as of
December 31, 1997. Accordingly, no income tax expense is being reported
for the period ended September 30, 1998.
NOTE 6 OTHER INVESTMENTS
The Company has two non-interest convertible debt instruments in software
companies located in Idaho Falls, Idaho, each valued at $25,000. The Company
has also taken a $75,000 preferred stock interest in a mid-market brokerage
firm headquartered in Boise, Idaho.
NOTE 7 POLICY ON OTHER REAL ESTATE OWNED
Other real estate owned is carried at the lower of cost or net realizable
value. Real estate may be considered to be in-substance foreclosed and
included herein when specific criteria are met. When property is acquired
through foreclosure, or substantially foreclosed, any excess of the related
loan balance over net realizable value is charged to the allowance for loan
losses. Subsequent write downs or losses upon sale, if any, are charged to
other real estate expense.
One loan totaling $99,654 was foreclosed on in February. The Company bought
out a first deed of trust totaling $171,789 in order to assume first position
on the property.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS. The quarter ended September 30, 1998 resulted in net
loss of $(10,126) compared to net loss of $(3,068) for the quarter ended
September 30, 1997. The nine months ended September 30, 1998 however
resulted in a net income of $19,655 compared to net income of $14,445 for
the nine months ended September 30, 1997. The Company is just short of its
projected year to date numbers, due to the following two factors. First,
for the second quarter 1998, the Company foreclosed on a parcel of real estate
This property is on the market for sale and has office space that will be
leased in the meantime. Second, an SBA loan is in the process of foreclosure.
This loan is in non-accrual status and the guaranteed portion of the loan
was repurchased from the secondary market. Between these two items, the
Company has approximately $440,000 in non-earning assets as of September 30,
1998. The management estimates that any losses on the two foreclosures will
be immaterial.
The increase in operating expenses mirrors the increase in volume of business
transactions, as well as one additional employee, an office in Idaho Falls,
Idaho, continued financial support for the Small Business Investment Company,
and the continuation of a severance package to a past employee.
Inflation has had no significant impact upon the operating overhead, lending
or investing activities of the Company.
LIQUIDITY AND CAPITAL RESOURCES. As of September 30, 1998, the Company held
$3,021 in cash accounts (including interest bearing accounts) to fund loans
and operating expenses. The Company has three available lines of credit in
the amounts of:
(1) $300,100 at a rate of Prime plus 1.5 percent;
(2) $150,000 at a rate of Prime plus 1.5 percent;
(3) $1,250,000 at Prime rate or Adjusted LIBOR plus
Applicable Margin.
Also, the Company has an operating lease line of $750,000 at a sub-prime
adjusted daily. At September 30, 1998, loans receivable totaled $1,255,145
net of guaranteed portions of SBA loans and loan participations with other
lending institutions. No extraordinary capital expenditures were anticipated
at quarter end. Management believes that existing cash, the lines of credit,
and cash generated from operations will be sufficient to allow the Company to
meet its obligations as they come due.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K. None.
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.
FOR THE IDAHO COMPANY
Diane Rigby
President
Date: September 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE IDAHO
COMPANY'S BALANCE SHEET AT DECEMBER 31, 1997, AND STATEMENT OF INCOME FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 3021
<SECURITIES> 126865
<RECEIVABLES> 1301370
<ALLOWANCES> 100000
<INVENTORY> 0
<CURRENT-ASSETS> 323830
<PP&E> 47279
<DEPRECIATION> 19679
<TOTAL-ASSETS> 1682686
<CURRENT-LIABILITIES> 599297
<BONDS> 0
0
0
<COMMON> 982825
<OTHER-SE> 100564
<TOTAL-LIABILITY-AND-EQUITY> 1682686
<SALES> 0
<TOTAL-REVENUES> 293507
<CGS> 0
<TOTAL-COSTS> 230904
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 18536
<INTEREST-EXPENSE> 24412
<INCOME-PRETAX> 19655
<INCOME-TAX> 0
<INCOME-CONTINUING> 19655
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19655
<EPS-PRIMARY> 12.15
<EPS-DILUTED> 12.15
</TABLE>
