-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QB9L8L+YFnZ6uBsPzXsDOkSoROfAWGQit9Oh6mAJLuNQDC6CbR60wMNzNfLjzbej SIZ2/3KZ0NpnXBj8d795mA== 0000809365-00-000005.txt : 20000307 0000809365-00-000005.hdr.sgml : 20000307 ACCESSION NUMBER: 0000809365-00-000005 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 20000306 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDAHO CO CENTRAL INDEX KEY: 0000809365 STANDARD INDUSTRIAL CLASSIFICATION: INVESTORS, NEC [6799] IRS NUMBER: 820410913 STATE OF INCORPORATION: ID FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 033-11309 FILM NUMBER: 561568 BUSINESS ADDRESS: STREET 1: 9512 FAIRVIEW AVENUE STREET 2: P O BOX 6821 CITY: BOISE STATE: ID ZIP: 83707 BUSINESS PHONE: 2083758099 MAIL ADDRESS: STREET 1: P O BOX 6812 CITY: BOISE STATE: ID ZIP: 83707 10-K/A 1 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 EX-27 2
5 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. 12-MOS DEC-31-1998 DEC-31-1998 6206 114365 2087908 87500 0 2057303 47279 (21305) 2197642 1090646 0 0 0 982825 112615 2197642 0 344995 0 415641 0 18536 60552 (47354) 0 (47354) 0 0 0 (47354) (29.27) (29.27)
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