HYNES & HOWES INSURANCE COUNSELORS, INC.
                          Notes to Financial Statements
                     Years Ended September 30, 1999 and 1998


Note 11 - Contingent Liability on Pending Litigation

         On November 2, 1973, in U. S. District Court a Final Judgment of
         permanent Injunction was brought against the Company because of
         complaint filed by the Securities and Exchange Commission.  The
         Injunction enjoins the Company from failing to file timely and proper
         reports as required by Section 12 (a) of the Securities Exchange Act of
         1934.  The Company is currently complying with filing requirements,
         however, it may be subject to subsequent court action and potential
         fine if there are future filing deficiencies.

Note 12 - Restatement of September 30, 1998

         The financial statements of the Company were audited by another
         auditor, who issued his report dated December 18, 1998, which expressed
         an unqualified opinion on those statements.  The prior auditor has
         ceased operations.  During the course of the audit for the year ended
         September 30, 1999, it was discovered that an error was made in
         reporting sales of real estate contracts.  $7,495 of deferred gross
         profit at September 30, 1998 was not recognized as income.  This is a
         departure from generally accepted accounting principles.  The Company
         has restated its retained earnings at October 1, 1998 to recognize the
         income.

Note 13 - Provision for Income Taxes

         Due to loss carryforwards from previous years, a provision for income
         taxes has not been made.  For income tax purposes, the Company is
         reporting gain on the sale of 3 real estate contracts on the
         installment method.  The total deferred profit is $7,494, and does not
         result in any deferred income tax.