UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED
For the fiscal year ended: December 31, 1998
-----------------------
Commission file number: 33-11309
------------
THE IDAHO COMPANY
(Exact name of registrant as specified in its charter)
Idaho 82-0410913
(State or other jurisdiction of (Internal Revenue Service Employer
incorporation or organization) Identification Number)
9512 Fairview Avenue
P. O. Box 6812
Boise, ID 83707
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (208) 375-8099
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Common Stock - without par value
- ------------------------------------------------------------------------
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (s. 229. 405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part II of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
Registrant at December 31, 1998 was zero. There currently is no market
for the Company's stock.
The number of Registrant's no par value common stock outstanding at
December 31, 1998 was 1,618.
1
THE IDAHO COMPANY
TABLE OF CONTENTS
Item PART I Page
1. Business 3
2. Properties 3
3. Legal Proceedings 3
4. Submission of Matters to a Vote of Security Holders 3
PART II
5. Market for the Registrant's Common Equity and 4
Related Stockholder Matters
6. Selected Financial Data 4
7. Management's Discussion and Analysis of Financial 5
Condition and Results of Operations
7a. Quantitative and Qualitative Disclosures About Market Risk 6
8. Financial Statements and Supplementary Data 7
9. Changes in and Disagreements with Accountants on 20
Accounting and Financial Disclosure
PART III
10. Directors and Executive Officers of the Registrant 21
11. Executive Compensation 22
12. Security Ownership of Certain Beneficial Owners 22
and Management
13. Certain Relationships and Related Transactions 22
PART IV
14. Exhibits, Financial Statement Schedules and 23
Reports on Form 8-K
2
Significant Financial and Accounting Developments
The Company has restated its 1998 financial statements as described in note
12.
For purposes of this Form 10-K/A, and in accordance with Rule 12b-15 under
the Securities Exchange Act of 1934, as amended, The Idaho Company has
amended and restated in its entirety each item of the 1998 Form 10-K,
which has been affected by the restatement. In order to preserve the
nature and character of the disclosures set forth in such items as
originally filed, no attempt has been made to update such disclosures
except to reflect the effects of the restatement.
PART I
Item 1. Business
The Idaho Company (the Company) was incorporated under the laws of the
State of Idaho on November 28, 1986. The Company is a for-profit Business
and Industrial Development Company organized to promote economic growth in
Idaho. The Company achieves this objective by lending to, investing in,
arranging financing for, and consulting with new, emerging, and expanding
businesses.
On September 30, 1992, the Company was granted an exemption from the
reporting requirements of the Investment Company Act of 1940 subject to
continued compliance with sections 9, 10, 15, 16(a), 17(g), 17(i), 18, 21,
23, 35, 36, 37, and, to the extent necessary to enforce the provisions of
the Act, sections 38 through 53. In addition, the Company was exempted
from certain provisions of rule 17g-1. The exemption allows the Company to
make loans to and investments in Idaho small businesses in excess of forty
percent of the Company's assets without incurring reporting requirements
under the Act.
The Company pursues a program of lending and equity investing, loan
placement, and management consulting to help small businesses attain
greater financial stability.
Direct loans and investments totaling $4,608,015 were entered into during
the year ended December 31, 1998. Lending activity resulted in the
creation or retention of 114 jobs in the State of Idaho. The Company
also arranged for $3,010,406 in financing from other sources mainly for
long-term real estate transactions.
Item 2. Properties
The Company leases office space at 9512 Fairview Avenue, Boise, Idaho
83704.
Item 3. Legal Proceedings
There are no legal proceedings involving the Company.
Item 4. Submission Of Matters To A Vote Of Security Holders
No matters were submitted to a vote of security holders during the quarter
ended December 31, 1998.
3
PART II
Item 5. Market For The Registrant's Common Equity And Related Stockholder
Matters
There is no established public trading market for the Company's stock.
Shareholders as of December 31, 1998, numbered two.
No shareholder is entitled, as a matter of right, to purchase or subscribe
for any unissued or treasury stock of the Company, and no shareholder is
notes, certificates or indebtedness, debentures, or other obligations
convertible into stock of the Company.
The Company declared a cash dividend to its shareholders based upon its
profitability. This dividend was made without the approval of the
Director of the State Department of Finance, however a policy will be
approved during 1999 for future use.
Item 6. Selected Financial Data
Year Year Year
Ended Ended Ended
1998 1997 1996
(restated)
---------- ---------- --------
Revenues $ 344,995 $ 178,093 $ 177,811
Net income (loss) (47,354) 5,384 42,629
Basic and diluted (29.27) 3.32 26.35
net income per share
Total assets $2,197,642 $1,387,803 $1,318,166
Cash dividends declared
per common share 46.35 -- --
Year Year
Ended Ended
1995 1994
----------- ---------
Revenues $ 154,123 $ 58,739
Net income 31,070 1,827
Basic and diluted 19.20 1.13
net income per share
Total assets $1,101,130 $1,117,595
Cash dividends declared
per common share -- --
4
Item 7. Management's Discussion And Analysis Of Financial Condition And
Results Of Operation.
Nearly all of the Company's assets are employed in loans to Idaho
businesses earning market rates of interest. At December 31, 1998, other
than one SBA guaranteed loan in the amount of $168,364 that is in
liquidation, there were no loans 30 or more days past due in the portfolio.
The Company created or retained an estimated 114 jobs in the State of Idaho
during 1998.
The Company abandoned its financial backing of the development of
Littlewood Capital Resources, L.P., a limited partnership, which would
become licensed as a Small Business Investment Corporation (SBIC). With
the abandonment of this SBIC, the Company has begun investing in equity
positions of startup companies throughout Idaho, and currently holds
equity positions in three such companies.
Year
Ended Year Year
1998 Ended Ended
(as restated) 1997 1996
---------- ----------- ----------
Interest income 212,148 148,415 156,048
Loan fees 43,600 19,831 16,636
Consulting fee income 1,313 1,341 983
Other income 87,934 8,506 4,144
---------- ------------ ----------
344,995 178,093 177,811
Operating expense 415,461 195,821 158,294
---------- ------------ ----------
415,461 195,821 158,294
Accretion of excess 23,112 23,112 23,112
at net assets ---------- ------------ ----------
acquired over cost
Net income (loss) ($47,354) 5,384 42,629
======== ======== ========
Results Of Operations
The primary sources of revenue for the Company during 1998, 1997, and 1996
were interest earned on loans, loan fees, and premiums received on the
sale of those loans. This year will stand out as the year of growth in
average outstanding loan balances and gross revenues never before seen in
the history of the Company. Major expense categories in 1998 and 1997 were
payroll, interest expense, severance, and rent.
Operations for 1998, 1997, and 1996 resulted in net income (loss) of
($47,354) (as restated), $5,384,and $42,629, respectively. As restated,
the sale of the Other Real Estate Owned was to a company owned by an
officer and the majority stockholder of the Company. Cash proceeds of
$425,502 were received as consideration with $154,059 in excess of the
carrying value of the real estate owned and is being restated as a
contribution of capital by the major shareholder instead of gain on sale
as originally reported. During 1998, the Company saw increased expenses
in payroll and interest expense as it grew its loan volume from the
previous year. These two expenses totaled $201,580 as compared to $92,433
in the previous year.
5
1998 was a year in experimentation with personnel. Two employees were
hired and subsequently dismissed and thus, higher than normal salary
expense for 1998 without sufficient income to compensate for the expense. This
had a major negative impact on net income for 1998 that will not be felt
again in future years.
Inflation has had little impact upon the operating overhead, lending or
investing activities of the Company during 1998, 1997 and 1996. Interest
rates have remained stable with loan volumes increasing during 1998.
Liquidity And Capital Resources
The Company has substantially all available capital invested in loans.
Liquidity for operations and additional lending is provided through income,
$1,500,000 in unsecured lines of credit and $800,000 in secured line of
credit. The Company has $532,168 in secured and $437,232 in unsecured
borrowings at year end. Principal payments on the Company's loans
receivable are applied to reducing the line. The Company's lines of credit
mature and are renewable one year from the date of contract or mature
within five years of the specific obligation. If additional funds are
raised, the Company will be able to increase net income commensurately,
provided the Company maintains its current overhead structure.
No material commitments for capital equipment existed at year end 1998.
No unusual capital expenditures are anticipated at this time. On
December 25, 1998 the Company declared $75,000 in dividends and
paid them on January 13, 1999. Management anticipates that cash
will be generated from operations in amounts sufficient to allow the
Company to meet its obligations as they come due and to further
strengthen the financial stability of the Company. The Company
had commitments to fund loans in the amount of $29,366 at December
31, 1998.
Item 7A - Quantitative and Qualitative Disclosures About Market Risk
The Company participates in commercial loans. This is subject to specific
policies that are focused on preserving principal, maintaining proper
liquidity to meet operating needs, and maximizing yields.
The Company's operations may be subject to a variety of market risks, the
most material of which is the risk of changing interest rates. Most
generally, interest rate risk is the volatility in financial performance
attributable to changes in market interest rates, which may result in
either fluctuation of net interest income or changes to the economic value
of the equity of the Company.
After a review of its commercial loans as of December 31, 1998, the
Company has determined that its current exposure to interest rate risk
would not result in a significant impact to the financial statements taken
as a whole.
6
Item 8. Financial Statements And Supplementary Data
Independent Auditors' Report
The Board of Directors
The Idaho Company:
We have audited the accompanying balance sheets of The Idaho Company (the
Company) as of December 31, 1998 and 1997, and the related statements of
operations, stockholders' equity, and cash flows for each of the years in
the three-year period ended December 31, 1998. 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 audits.
We conducted our audits 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 audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of
December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31,
1998, in conformity with generally accepted accounting principles.
As discussed in Note 12, the accompanying financial statements have been
restated.
KPMG LLP
Salt Lake City, Utah
March 12, 1999, except
as to Note 12, which
is dated January 26, 2000
7
THE IDAHO COMPANY
Balance Sheets
December 31, 1998 and 1997
Assets 1998
(as restated
see note 12) 1997
---------- ----------
Cash $ 6,206 64,898
Loans receivable (notes 3 and 9) 2,087,908 1,343,585
Less allowance for loan losses (note 4) 87,500 81,464
---------- ----------
Net loans 2,000,408 1,262,121
Accounts receivable 15,450 --
Interest receivable 20,428 21,088
Prepaid expense 14,811 10,609
Other investments 114,365 26,865
Office equipment and vehicles, net (note 6) 25,974 2,222
---------- ----------
$2,197,642 1,387,803
========== ==========
Liabilities and Stockholders' Equity
Accounts payable $ 33,612 --
Accrued expenses 8,440 10,780
Payroll tax payable 4,194 5,391
Dividends payable 75,000 --
Deferred fees -- 3,352
Notes payable (note 5) 969,400 269,877
---------- ----------
1,090,646 289,400
Excess of net assets acquired over cost,
net of accumulated accretion of $104,003
in 1998 and $80,891 in 1997 11,556 34,668
---------- ----------
Total liabilities 1,102,202 324,068
Stockholder's equity:
Common stock, no par value. Authorized 500,000
shares; 1,618 shares issued and outstanding 982,825 982,825
Contributed capital (note 12) 154,059 --
Retained earnings (deficit) (41,444) 80,910
---------- ----------
Total stockholders' equity 1,095,440 1,063,735
Commitments and contingencies (notes 5 and 10) ---------- ----------
$2,197,642 1,387,803
========== ==========
8
See accompanying notes to financial statements.
THE IDAHO COMPANY
Statements of Income
Years Ended December 31, 1998, 1997, and 1996
1998
(as restated)
see note 12) 1997 1996
---------- ---------- ----------
Revenues:
Interest income $ 212,148 148,415 156,048
Loan Fees 43,600 19,831 16,636
Consulting fees 1,313 1,341 983
Other income (note 9) 87,934 8,506 4,144
---------- ---------- ----------
344,995 178,093 177,811
Expenses:
Operating expense 210,088 102,533 79,664
Payroll 141,028 86,609 72,378
Interest expense 60,552 5,824 6,252
Depreciation 3,793 855 --
---------- ---------- ----------
415,461 195,821 158,294
Other - accretion of excess of net
assets acquired over cost 23,112 23,112 23,112
---------- ---------- ----------
Net income (loss) $ (47,354) 5,384 42,629
========== ========== ==========
Basic and diluted
net income (loss) per share $ (29.27) 3.32 26.35
========== ========== ==========
Average number of shares outstanding 1,618 1,618 1,618
========== ========== ==========
See accompanying notes to financial statements.
9
THE IDAHO COMPANY
Statements of Stockholders' Equity
Years ended December 31, 1998, 1997, and 1996
Common Contri- Retained Stock-
stock buted earnings holders'
Shares Amount capital (deficit) equity
--------- -------- --------- --------- -----------
Balances at December 31, 1995 1,618 $ 982,825 -- 32,897 1,015,722
Net income -- -- -- 42,629 42,629
--------- -------- --------- --------- -----------
Balances at December 31, 1996 1,618 982,825 -- 75,526 1,058,351
Net income -- -- -- 5,384 5,384
--------- -------- --------- --------- -----------
Balances at December 31, 1997 1,618 982,825 -- 80,910 1,063,735
Contributed capital related to sale
of real estate (as restated -
see note 12) -- -- 154,059 -- 154,059
Net loss (as restated -
see note 12) -- -- -- (47,354) (47,354)
Dividend (as restated -
see note 12) -- -- -- (75,000) (75,000)
--------- -------- --------- --------- -----------
Balances at December 31, 1998 1,618 $ 982,825 154,059 (41,444) 1,095,440
========= ======== ========= ========= ===========
See accompanying notes to financial statements.
10
THE IDAHO COMPANY
Statements of Cash Flows
Years ended December 31, 1998, 1997, and 1996
1998
(as restated
see note 12) 1997 1996
--------- --------- ---------
Cash flows from operating activities:
Net income (loss) (47,354) 5,384 42,629
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation expense 3,793 855 --
Accretion of excess of net assets
acquired over cost (23,112) (23,111) (23,112)
Provision for loan losses 18,536 5,758 12,070
Changes in operating assets and liabilities:
Accounts receivable (15,450) -- --
Interest receivable 660 2,816 (7,322)
Prepaid expense (4,202) (2,094) 900
Accounts payable 33,612 -- --
Accrued expenses (2,340) 6,871 959
Payroll tax payable (1,197) 3,072 752
Deferred fees (3,352) (7,535) 10,887
--------- --------- --------
Net cash provided by (used in)
operating activities (40,406) (7,984) 37,763
--------- --------- ---------
Cash flows from investing activities:
Loans receivable disbursed (4,608,015) (1,161,579) (1,344,114)
Loans receivable collected 3,764,038 1,163,811 1,008,324
Capital expenditures (27,545) (3,077) --
Purchase of other real estate owned (171,789) -- --
Proceeds from sale of other real
estate owned 271,443 -- --
Purchase of other investments (100,000) (26,865) --
---------- --------- ---------
Net cash used in investing activities(871,868) (27,710) (335,790)
--------- --------- ---------
Cash flows from financing activities:
Net proceeds under notes payable under line
credit agreements 699,523 84,956 184,921
Contributed capital 154,059 -- --
--------- --------- ---------
Net cash provided by financing activities853,582 84,956 184,921
--------- -------- ---------
Net increase (decrease) in cash (58,692) 49,262 (113,106)
Cash at beginning of year 64,898 15,636 128,742
--------- --------- ---------
Cash at end of year 6,206 64,898 15,636
========= ========= =========
Supplemental Disclosure of Cash Flow Information
Cash paid during year for interest 60,552 5,824 6,252
Supplemental Schedule of Non-Cash Activities
Transfer of loans receivable to
other real estate owed 99,654 -- --
Write off of other investments 12,500 -- --
See accompanying notes to financial statements.
11
(1) Description of Company
The Idaho Company (the Company), incorporated under the laws of the state
of Idaho on November 28, 1986, is a for-profit corporation. The Company
was formed to promote economic growth and to stimulate, develop, and
advance the business prosperity of Idaho and its citizens. The Company
achieves these objectives by lending to, investing in, arranging financing
for, and consulting with new, emerging, and expanding businesses.
The dividend policy must be approved by the Director of the Department of
Finance of the State of Idaho. The Company is not obligated to pay a
dividend or dividend in kind.
The Company is a licensed Business and Industrial Development Company
(BIDCO). As such, it is regulated by the State of Idaho Department of
Finance and is subject to periodic asset quality examinations. On
September 30, 1992, the Company was granted an exemption from registration
as an investment company under the Investment Company Act of 1940,
conditioned upon satisfying certain requirements, which have been met as
of December 31, 1998.
(2) Summary of Significant Accounting Policies
(a) Loans
The Company makes commercial loans to Idaho small businesses to stimulate
economic activity through job creation. Accrual of interest is discontinued
when reasonable doubt exists as to collectibility. All loans greater
than 90 days delinquent are subject to nonaccrual of interest. Interest
accruals are resumed on such loans only when they are brought fully current
with respect to principal and interest and when, in the judgment of
management, the loans are fully collectible.
The Company considers a loan to be impaired when the accrual of interest
has been discontinued. The amount of the impairment is measured based on
the present value of expected future cash flows discounted at the notes
effective interest rate. Impairment losses are included in the allowance
for loan losses through a provision for loan losses.
The Company originates loans to customers under a program that generally
provides for SBA guarantees of 75 percent to 90 percent of each loan.
Historically, the Company has sold the guaranteed portion of each loan to
a third-party and has retained the unguaranteed portion in its own
portfolio. The Company allocates basis of the loans sold and the
retained portions based upon their relative fair market value.
The Company may be required to refund a portion of the sales premium
received, if the borrower defaults or the loan prepays within 90 days
of the settlement date. At December 31, 1998, the Company had received
premiums of $11,594, subject to such recourse.
12
(b) Allowance for Loan Losses
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans and other investments are charged against
the allowance for loan losses when management believes that the
collectibility of the principal is unlikely. The allowance is an amount
that management believes will be adequate to absorb possible losses on
existing loans and other investments that may become uncollectible, based
on conditions existing at the balance sheet date using evaluations of the
collectibility of loans and other investments and prior loan loss
experience. The evaluations take into consideration such factors as
changes in the nature and volume of the loan portfolio, overall portfolio
quality, review of specific problem loans, and current economic conditions
that may affect the borrower's ability to pay.
(c) Office Equipment and Vehicles
Office equipment and vehicles are stated at cost. Depreciation on
equipment and vehicles is calculated on the straight-line method over the
following estimated useful lives:
Office equipment 3 years
Vehicles 5 years
(d) Income Taxes
The Company accounts for income taxes using the asset and liability method,
under which deferred tax assets and deferred tax liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
carryforwards. Deferred tax assets and deferred tax liabilities are
measured using enacted tax rates expected to apply to taxable income in
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and deferred tax liabilities
of a change in tax rates is recognized in income in the period that
includes the enactment date.
(e) Excess of Net Assets Acquired Over Cost
The excess of net assets acquired over cost is accreted on a straight-line
basis over a five year life.
13
(f) Net Earnings Per Share
On December 31, 1997, the Company adopted the provisions SFAS No. 128,
Earnings Per Share. SFAS 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 calculations. The basic and diluted weighted average number
of shares used for calculating EPS for the years ending December 31, 1998
and 1997, was 1,618.
(g) Other Investments
The Company has two noninterest bearing convertible debt instruments
issued by software companies located in Idaho Falls, Idaho, one valued at
$25,000 and second valued at $12,500. The Company also has a $75,000
nonvoting preferred stock interest in a mid-market brokerage firm located
in Boise, Idaho and a $1,865 investment in Farmer Mac stock.
(h) Use of Estimates
The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance
sheet and revenues and expenses for the period. Actual results could
differ from those estimates.
(i) Reclassifications
Certain amounts reported in 1997 have been reclassified to conform with
the 1998 presentation.
14
(3) Loans Receivable
The Company's loan portfolio is diversified among a variety of industry
classifications as follows:
December 31,
--------------------
1998 1997
-------- --------
Retail $39,978 316,568
Manufacturing 760,786 17,998
Agriculture 21,717 368,433
Food processing - 37,200
Distribution - 5,600
Construction - 425,244
Transportation 13,495 39,638
Finance 375,263 21,272
Medical 5,995 62,533
Hospitality 25,448 19,010
Natural resources - 3,379
Trade 749,951 26,710
Development 95,275 -
-------- --------
$2,087,908 1,343,585
=========== ==========
Loans within the portfolio have maturities ranging from one to ten years as
of December 31, 1998 and 1997. At December 31, 1998, the Company had loan
receivables balances totaling $1,097,273 with two customers. As of
December 31, 1998 and 1997, loans designated to nonaccrual status were
$168,364 and $97,167, respectively.
(4) Allowance for Loan Loss
Allowance for loan loss activity is summarized as follows:
Years ended December 31,
------------------------------
1998 1997 1996
------- ------- ------
Balances, beginning of period $ 81,464 75,706 63,636
Provision for loan losses 18,536 5,758 12,070
Write-offs (12,500) - -
------- ------- ------
Balances, end of period $ 87,500 81,464 75,706
======= ======= ======
15
(5) Notes Payable
Notes payable consist of the following at December 31:
1998 1997
-------- --------
Note payable under a revolving line of credit to a
financial institution, due July 1999. The interest
rate is either the LIBOR rate for fixed periods of
30, 60, or 90 days as selected by the Company plus
applicable margin based on the Company's debt/worth
ratio or the financial institution's prime rate
(8.125 percent at December 31, 1998). The note is
secured by qualified accounts receivable and chattel
paper. The Company may borrow up to $750,000.
The agreement is subject to certain minimum financial
covenants. 200,000 -
Note payable under a revolving line-of-credit to a
financial institution, due July 1999. The interest
rate is the financial institution's prime rate (7.75
percent at December 31, 1998). The note is unsecured.
The Company may borrow up to $500,000. The agreement
is subject to certain minimum financial covenants. 437,232 -
Note payable under wholesale lease line to a financial
institution due February 2004 with monthly payments
varying based on the underlying lease agreements. The
interest rate is the financial institution's internal
transfer rate plus 2.2 percent (8 percent at December 31,
1998). The note is secured by equipment and chattel paper.
The Company may borrow up to $750,000. 332,168 -
Note payable under revolving line of credit to a financial
institution due June 99. The interest rate is the Wall
Street Journal prime rate plus 1.5 percent (10 percent at
December 31, 1997). The note is unsecured. The Company
may borrow up to $300,000. - 269,877
------- -------
$969,400 269,877
======= =======
The aggregate principal maturities of the notes payable subsequent to
December 31, 1998 are as follows:
1999 $817,517
2000 112,568
2001 39,315
-------
$969,400
=======
16
At December 31, 1998, the Company was in violation of certain financial
debt covenants on notes payable under revolving line of credit agreement
with a financial institution in the amounts of $200,000 and $437,237,
respectively. Covenants in violation included the debt service coverage
ratio, nonperforming loan percentage, and nonperforming loan to capital
percentage. The Company received a waiver from the financial institution
for fiscal year ending December 31, 1998 only. The Company is attempting
to negotiate modification to the covenants with the financial institution
in order to be in compliance.
(6) Office Equipment and Vehicles
The components of office equipment and vehicles at December 31, are
as follows:
1998 1997
------ ------
Office equipment $ 20,717 19,734
Vehicles 26,562 -
------ ------
47,279 19,734
Less accumulated depreciation (21,305) (17,512)
------ ------
$ 25,974 2,222
====== ======
(7) Income Taxes
No provision has been made in the financial statements for income
taxes because of utilization of net operating losses and related
decrease in valuation allowance.
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets are presented below:
December 31,
------------------
1998 1997
------ ------
Deferred tax assets:
Allowance for loan losses $36,750 34,215
Net operating loss carryforward 111,916 171,232
------- -------
Total deferred tax assets 148,666 205,447
Less valuation allowance (148,666) (205,447)
------- -------
Net deferred tax asset $ - -
======= =======
The net change in the total valuation allowance for the years ended
December 31, 1998 and 1997, was a decrease of $56,781 and an increase of
$11,591, respectively.
For income tax return purposes, the Company has available, net
operating loss carryforwards of $270,538 which expire between 2002
and 2012.
17
(8) Disclosures About the Fair Values of Financial Instruments
The carrying value for short-term financial instruments that mature
or reprice frequently at market rates, approximates fair value.
Such financial instruments include: cash, accounts and interest
receivable, notes payable under revolving lines of credit, accounts
payable, and accrued liabilities, payroll taxes payable, dividends payable,
amounts due stockholder, and deferred fees. The difference between the fair
market value and the carrying value for loans receivable and other
investments is not considered significant.
(9) Related Party Transactions
The Company participates out originated loans to a financial
institution in which a stockholder of the Company an ownership
interest. Total participated loans for the years ending December
31, 1998 and 1997, were $700,000 and $-0-, respectively.
(10) Commitments and Contingencies
The Company had funds committed for loans and unfunded lines of
credit as of December 31, 1998 of $29,366.
Certain facilities are leased under various short-term operating
leases. Rental expense was $16,989, $10,085, and $7,875 for the
years ended December 31, 1998, 1997, and 1996, respectively.
(11) Year 2000
The Company has developed a plan to deal with Year 2000 compliance
issues. The Company's operations require only two personal
computers, one of which will need to be replaced by Year 2000. The 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. Status of plan development will affect the amount of
risk involved. It is expected that risk will be minimal. The Plan provides
for the conversion efforts to be completed by the end of fiscal year 1999.
Costs surrounding Year 2000 readiness are considered by the Company as
insignificant, amounting to the cost of replacing one personal computer.
Any costs related to Year 2000 readiness are being expensed as incurred.
18
(12) Restatement
During the fourth quarter of 1998, the Company sold other real estate
owned to a company owned by an officer and the majority stockholder of
the Company. Cash proceeds of $425,502 received as consideration, net
of a $50,000 dividend declared to the majority stockholder coincident to
the sale, resulted in a gain as originally reported of $104,059. The
accompanying financial statements have been restated to reflect;
1.) an increase in dividends declared and payable of $50,000 and
2.), the amount of consideration in excess of the carrying value of the
real estate owned ($154,059) as a contribution of capital by the majority
shareholder. Accordingly, the accompanying restated financial statements
reflect a net loss for 1998 of $47,354 or $29.27 per share as compared with
net income of $56,705 or $35.05 per share as previously reported. Total
stockholders' equity as previously reported is not affected by the
restatement.
(The remainder of this page intentionally left blank)
19
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
KPMG LLP, serve as accountants for the year ended December 31, 1998 and
have served as independent accountants since June 23, 1994. There have
been no disagreements with the Company's accountants on accounting and
financial disclosures except that the Company and KPMG LLP disagreed as to
the accounting treatment related to gain recognition of a real estate
transaction in the Company's 1998 financial statements; however, the
disagreement was ultimately resolved to the satisfaction of KPMG LLP.
(The remainder of this page intentionally left blank)
20
PART III
Item 10. Directors And Executive Officers Of The Registrant
It is expected that the number of directors serving on the board will
continue to be fewer than the total number permitted.
Principal Occupation During Director Term
Name the Past Five Years Since Expires Age
Grant R. Caldwell Retired CPA and Managing 1994 1999 74
Partner, KMG Main Hurdman
Director, Zions
Bancorporation
A. Wayne Mittleider Vice President, 1994 1999 51
Affordable Housing
Past Executive Director,
Idaho Housing Agency
John P. Rigby Data Analyst, 1994 1999 42
Past Database Analyst,
Past Data Analyst,
Past Database Administrator, Idaho Power Company
Secretary/Treasurer, The Idaho Company
Jeff Jones Executive Vice President, 1998 2001 49
Past Vice President Branch Manager,
Bank of Eastern Idaho
Past Vice President Relationship Manager,
Wells Fargo Bank
William F. Rigby Chairman and CEO, 1994 2000 68
The Idaho Company
Chairman, CEO, and President,
Bank of Eastern Idaho,
Bank of Idaho Holding Co.
Fred T. Thompson, Jr. Director, 1994 2000 67
Bank of Eastern Idaho
Director, Bank of Idaho Holding Co
Diane Rigby President, The Idaho 1994 2001 33
Company, Director,
Bank of Eastern Idaho
Director, Bank of Idaho Holding Co.
Past Manager, Analytical Support,
Zions Bancorporation
Past Asst. Controller, Asst. Vice President
Bank of Eastern Idaho
(d) Family Relationships
William F. Rigby is the father to John P. Rigby and Diane Rigby.
21
Item 11. Executive Compensation.
None.
Item 12. Security Ownership Of Certain Beneficial Owners And Management.
The following directors hold all shares issued and outstanding as of
December 31, 1998.
Shares of Percent of
Common Stock Outstanding
Name of Beneficial Owner Owned
William F. Rigby 1,078 67%
PO Box 1487
Idaho Falls, ID 83403
Fred T. Thompson, Jr. 540 33%
2390 Stroke Drive
Lake Havasu City, AZ 98607
Aggregate Shares: 1,618 100%
Item 13. Certain Relationships And Related Transactions.
During the fourth quarter of 1998, the Company sold other real estate
owned to a nonaffiliated company owned by an officer and majority
stockholder of the Company. Cash proceeds of $425,502 received as
consideration, net of a $50,000 dividend declared to the majority
stockholder coincident to the sale, resulted in a gain as originally
reported of $104,059. The accompanying financial statements have been
restated to reflect; 1.) an increase in dividends declared and payable of
$50,000 and 2.), the amount of consideration in excess of the carrying
value of the real estate owned ($154,059) as a contribution of capital by
the majority shareholder. Accordingly, the accompanying restated
financial statements reflect a net loss for 1998 of $47,354 or $29.27 per
share as compared with net income of $56,705 or $35.05 per share as
previously reported. Total stockholders' equity as previously reported is
not affected by the restatement.
22
PART IV
Item 14. Exhibits, Financial Statement Schedules, And Reports On Form 8-K
(a) The following documents are part of this report and appear on
the pages indicated:
(1) Financial Statements;
Independent Auditors' Report ...7
Balance sheets - December 31, 1998 and 1997 ...8
Statements of Income -
Years ended December 31, 1998, 1997, 1996 ...9
Statements of Stockholders' Equity -
Years ended December 31, 1998, 1997, 1996 ...10
Statements of Cash Flows -
Years ended December 31, 1998, 1997, 1996 ...11
Notes to Financial Statements ...12
(2) Financial Statement Schedules:
Schedules are omitted because the information is either not required, not
applicable, or is included in the accompanying financial statements.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended December
31, 1998.
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
executed on its behalf by the undersigned, thereunto duly authorized.
The Idaho Company
------------------------------
Diane Rigby
President
Supplemental information to be furnished with reports filed pursuant to
Section 15(d) of the Act by registrants which have not registered
securities pursuant to Section 12 of the Act: None
Pursuant to the requirements of the Securities Exchange Act if 1934, this
report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
By (Signature and Title) Date:
Grant R. Caldwell, Director
Wayne Mittleider, Director
Diane Rigby, President and Director
John Rigby, Secretary/Treasurer and Director
William F. Rigby, Chairman of Board and Director
Fred T. Thompson, Jr., Director
24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from The Idaho
Company's Balance Sheet at December 31, 1998, and Statement of Income for the
twelve months ended December 31, 1998, and is qualified in its entirety by
refernece to such Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 6206
<SECURITIES> 114365
<RECEIVABLES> 2087908
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<INVENTORY> 0
<CURRENT-ASSETS> 2057303
<PP&E> 47279
<DEPRECIATION> (21305)
<TOTAL-ASSETS> 2197642
<CURRENT-LIABILITIES> 1090646
<BONDS> 0
0
0
<COMMON> 982825
<OTHER-SE> 112615
<TOTAL-LIABILITY-AND-EQUITY> 2197642
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<TOTAL-COSTS> 415641
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<INTEREST-EXPENSE> 60552
<INCOME-PRETAX> (47354)
<INCOME-TAX> 0
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<NET-INCOME> (47354)
<EPS-BASIC> (29.27)
<EPS-DILUTED> (29.27)
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