HYNES & HOWES INSURANCE COUNSELORS, INC.
                          Notes to Financial Statements
                           September 30, 1997 and 1996


Note 14. Contingent Liability for Rescission of Capital Stock Sales:

         Since its inception, the Company has issued and sold 11,222,699 shares
         of its common stock.  Although most of these shares were registered
         with the State of Iowa, none of these shares were registered for sale
         under the federal securities law.  These shares were issued and sold in
         reliance either upon the exemption provided in Section 4 (2) or Section
         3 (a) (11) of the Securities Act of 1933.

         The Company feels that any possible shares and federal contingent
         liabilities that may have existed because of the issuance of securities
         which may not have been exempt from registration under the Securities
         Act of 1933 and unless the subject of an existing legal proceeding
         filed appropriately may now be extinguished as a result of the new Iowa
         Uniform Securities Act which became effective on January 1, 1976 under
         Section 613 of that Act, liability must now be ascertained by looking
         to the statute in effect at the time that the stock issue was sold.
         The two year statute of limitations in effect on January 14, 1973, at
         the time of the closing of the issue, has run as have the other
         applicable federal statutes of limitation. As a result, wit h the
         exception of the Federal and State Tolling Doctrines, possible
         contingent liabilities may no longer exist.

Note 15. 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 16: Conflicts of Interest:

         There were directors, officers, and stockholders of Hynes & Howes
         Insurance Counselors, Inc. who had investment interest in other
         affiliated companies.  These affiliated companies provided services to
         each other, they also used common management and provided financial
         assistance as needed.  Consequently, potential conflicts of interest
         exist and may result in either a benefit or a detriment to the
         operations of the Company.