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, 1996
------------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
-------------------- ---------------------
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 (IRS Employer Identification No.)
incorporation or organization
102 S. 17th Street, Suite 201 / P. O. Box 6812, Boise, ID 83707
- ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (208) 344-6308
-------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Title of each class Name of each exchange on which registered
Common Stock - without par value None
- -------------------------------- ------------------------------------------
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, 1996 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,
1996 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
Related Stockholder Matters 4
6. Selected Financial Data 4
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
8. Financial Statements and Supplementary Data 7
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 19
PART III
10. Directors and Executive Officers of the Registrant 20
11. Executive Compensation 21
12. Security Ownership of Certain Beneficial Owners 21
and Management
13. Certain Relationships and Related Transactions 21
PART IV
14. Exhibits, Financial Statement Schedules and 22
Reports on Form 8-K
2
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 corporation
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.
The Company has pursued a program of lending and equity investing, loan
placement, and management consulting to help small businesses attain greater
financial stability.
Direct loans and investments totalling $1,344,114 were entered into during
the year ended December 31, 1996. Lending activity resulted in the creation
or retention of jobs in the State of Idaho.
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.
On June 15, 1994, 97.7 percent of the then issued and outstanding shares of the
Company's common stock were acquired by an individual in a tender offer. The
consideration paid for the tendered shares totalled $957,780. On February
28, 1995, a 101 for 1 reverse stock split was enacted, reducing the number of
shares outstanding to 1,618. The Company's common stock was changed from $10
par value to no par value. A capital addition of $22,938 was made by the
majority shareholder for payment of fractional shares.
Item 2. PROPERTIES
The Company leases office space at 102 S. 17th Street, Suite 201, Boise,
Idaho 83702.
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, 1996.
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, 1996, 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 entitled,
as a matter of right, to purchase or subscribe for any bonds, notes,
certificates or indebtedness, debentures, or other obligations convertible into
stock of the Company.
The Company does not intend to pay, nor obligate itself to pay, a cash dividend
or dividend in kind to its shareholders unless that payment is consistent with
capital requirements and profitability and has been approved by the Director
of the Department of Finance of the State of Idaho.
Item 6. SELECTED FINANCIAL DATA
Period Period
June 16, Jan. 1,
1994 1994
Year Year through through
Ended Ended December 31, June 15,
1996 1995 1994 1994
------ ------ ------ ------
Revenues $ 177,811 $ 154,123 $ 58,739 $ 36,059
Income (loss) before
extraordinary item 42,629 31,070 1,827 (112,128)
Extraordinary item -
forgiveness of note payable -0- -0- -0- -0-
Net income (loss) 42,629 31,070 1,827 (112,128)
Net income (loss) per common share
before extraordinary item 26.35 19.20 1.13 (.69)
Net income (loss) per common share 26.35 19.20 1.13 (.69)
Total assets 1,318,166 1,101,130 1,117,595 1,134,667
Year Year
Ended Ended
1993 1992
------ ------
Revenues $ 94,951 $ 90,108
Income (loss) before
extraordinary item (46,226) (34,673)
Extraordinary item -
forgiveness of note payable -0- 24,000
Net income (loss) (46,226) (34,673)
Net income (loss) per common share
before extraordinary item (.28) (.36)
Net income (loss) per common share (.28) (.36)
Total assets 1,215,175 1,342,651
4
On July 15, 1988, Idaho Power Company granted the Company a non interest bearing
note payable in 60 monthly installments of $2,817 beginning on August 1, 1988.
On September 28, 1992, Idaho Power forgave $24,000 of the note, substantially
all of the remaining principal, resulting in an extraordinary gain.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Nearly all of The Idaho Company's assets are employed in loans to Idaho
businesses earning market rates of interest. There was one loan 30 or more days
past due in the portfolio as of December 31, 1996. The Company created or
retained an estimated 45 jobs in 1996.
The Company is currently working to raise a minimum of $3 million/maximum of
$10 million to form Idaho Venture Fund, a limited partnership which would become
licensed as a Small Business Investment Corporation (SBIC). As presently
proposed, The Idaho Company, or an affiliate to be formed, would become the
general partner and earn a management fee for its services. Limited partnership
interests are being offered to accredited investors in Idaho in accordance with
the Company's Regulation D filing, reviewed and passed upon by the Idaho
Department of Finance in 1995.
Financial statement information included herein is identified as "predecessor"
for periods prior to June 15, 1994, and as "successor" for the periods
thereafter. For purposes of comparability, the accompanying management's
discussion and analysis combines the successor period beginning June 16, 1994
through December 31, 1994 with the predecessor period January 1, 1994 through
June 15, 1994 in order to compare full year periods of operations. Information
in the following table is derived from the Company's financial statements.
Year
Period Ended Ended
----------------------- --------
Year Year Successor Predecessor Pro forma
Ended Ended December 31, June 15, combined
1996 1995 1994 1994 1994
-------- -------- -------- -------- --------
Interest income $156,048 122,582 50,424 33,806 84,230
Consulting fee income 983 6,215 2,103 8,318 12,515
Loan fees 16,636 25,378 925 - 925
Other income 4,144 2,075 1,175 150 1,325
-------- -------- -------- -------- --------
177,811 154,123 58,739 36,059 94,798
Operating expense 158,294 146,165 68,468 126,573 195,041
Depreciation - - - 1,614 1,614
Write off of investment - - - 20,000 20,000
-------- -------- -------- -------- --------
158,294 146,165 68,468 148,187 216,655
Accretion of excess cost 23,112 23,112 11,556 - 11,556
over purchase price -------- -------- -------- -------- --------
Net income (loss) $ 42,629 31,070 1,827 (112,128) (110,301)
======== ======== ======= ======== ========
5
RESULTS OF OPERATIONS
The primary sources of revenue for the Company during 1996, 1995 and 1994 were
interest earned on loans and loan fees. Average outstanding loan balances
increased, boosting interest earnings during 1996 and 1995. Major expense
categories in 1996 and 1995 were insurance, accounting, payroll, and allowance
for loan loss. Major expense categories in 1994 included insurance, payroll,
allowance for loan losses, professional fees, and write off of the Company's
investment in preferred stock.
Operations for 1996 and 1995 resulted in net income of $42,629 and $31,070,
respectively. This compares to a net loss of $110,301 for the 1994 combined
successor and predecessor periods. During 1994, the Company began accreting the
excess of cost over purchase price (negative goodwill) at a rate of $1,926 per
month, which will continue through June 30, 1999. The net loss for the year
ended December 31, 1994 was partially due to increases in professional fees
associated with the change in ownership and control of the Company, increases in
the provision for loan losses, and write off of the Company's investment in
preferred stock.
Inflation has had little impact upon the operating overhead, lending or
investing activities of the Company during 1996, 1995, and 1994. Interest rates
have remained stable as loan volumes have increased during 1996 and 1994.
No material commitments for capital equipment existed at year end 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has substantially all available capital invested in loans.
Liquidity for operations and additional lending is provided through a $300,100
unsecured line of credit, with utilization of $184,921 at year end. Principal
payments on the Company's loans receivables are applied to reducing the line.
The current portion of loans receivable, as of December 31, 1996 totalled
$516,906. The Company's line of credit matures on March 31, 1997. If
additional funds are raised, the Company will be able to increase net income
commensurately, provided the Company maintains its current overhead structure.
No unusual capital expenditures are anticipated at this time. The Company does
not intend to declare nor pay dividends in the foreseeable future. As such,
management anticipates that cash will be generated from operations in amounts
sufficient to allow the Company to meet its obligations as they come due.
6
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<AUDIT-REPORT>
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, 1996 and 1995, and the related statements of
operations, stockholders' equity, and cash flows for the years ended December
31, 1996 and 1995, and the periods January 1, 1994 to June 15, 1994
(predecessor) and June 16, 1994 to December 31, 1994 (Successor). 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,
1996 and 1995 and the results of its operations and its cash flows for the
years ended December 31, 1996 and 1995, and the periods January 1, 1994 to
June 15, 1994 and June 16, 1994 to December 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in note 1 to the financial statements, effective June 15, 1994, an
individual acquired 97.7 percent of the outstanding common stock of the Company
in a business combination accounted for as a purchase. As a result of the
acquisition, the financial information for the periods after the acquisition are
presented on a different cost basis than that for the period before the
acquisition and, therefore, is not comparable.
KPMG Peat Marwick, LLP
Salt Lake City, Utah
January 3, 1997
7
THE IDAHO COMPANY
Balance Sheets
December 31,
-----------
Assets 1996 1995
------ ------------ ------------
Cash $ 15,636 128,742
Loans receivable (note 3) 1,345,817 1,010,027
Less allowance for loan losses (note 4) 75,706 63,636
------------ ------------
Net loans 1,270,111 946,391
Interest receivable 23,904 16,582
Prepaid expense 8,515 9,415
------------ ------------
$ 1,318,166 1,101,130
============ ============
Liabilities and Stockholders' Equity
- ------------------------------------
Accrued expenses $ 3,909 2,950
Payroll tax payable 2,319 1,567
Deferred fees 10,887 -
Note payable (note 5) 184,921 -
------------ ------------
202,036 4,517
Excess of net assets acquired over cost,
net of accumulated accretion of $57,780
in 1996 and $34,668 in 1995 57,779 80,891
------------ ------------
Total liabilities 259,815 85,408
Stockholder's equity (note 1):
Common stock, no par value. Authorized
500,000 shares; 1,618 shares issued
and outstanding 982,825 982,825
Retained earnings 75,526 32,897
------------ ------------
Total stockholders' equity 1,058,351 1,015,722
Commitments and contingencies (note 7)
------------ ------------
$ 1,318,166 1,101,130
============ ============
See accompanying notes to financial statements.
</TABLE
8
THE IDAHO COMPANY
Statements of Operations
Successor Predecessor
-------------------------------------- -----------
| For the
For the | period
period | January 1,
June 16, 1994 | 1994
Years ended December 31, through | through
------------------------ December 31, | June 15,
1996 1995 1994 | 1994
------------ ------------ ------------ | ---------
|
Revenues: |
Interest income $ 156,048 122,582 50,424 | 33,806
Loan fees 16,636 25,378 925 | -
Consulting fees 983 4,088 6,215 | 2,103
Other income 4,144 2,075 1,175 | 150
------------ ------------ ------------ | ---------
177,811 154,123 58,739 | 36,059
Expenses: |
Operating expense 158,294 146,165 68,468 | 126,573
Write off of investment - - - | 20,000
Depreciation - - - | 1,614
------------ ------------ ------------ | ---------
158,294 146,165 68,468 | 148,187
Other - accretion of excess |
of net assets acquired |
over cost 23,112 23,112 11,556 | -
------------ ------------ ------------ | ---------
|
Net income (loss) $ 42,629 31,070 1,827 | (112,128)
============ ============ ============ | =========
|
Net income (loss) per share $ 26.35 19.20 1.13 | (0.69)
============ ============ ============ | =========
Average number of shares |
outstanding 1,618 1,618 1,618 | 163,453
============ ============ ============ | =========
See accompanying notes to financial statements.
9
THE IDAHO COMPANY
Statements of Stockholders' Equity
Retained
earnings Net
Common stock (accumu- stock-
------------------- lated holders'
Shares Amount deficit) equity
-------- --------- -------- ----------
Predecessor
- -----------
Balances at December 31, 1993 163,453 $1,634,530 (420,431) 1,214,099
Net loss for the period January 1,
1994 through June 15, 1994 - - (112,128) (112,128)
------- ---------- -------- ---------
Balances at June 15, 1994 163,453 $1,634,530 (532,559) 1,101,971
======= ========== ======== =========
===========================================================================
Successor
- ---------
Capitalization (note 1) 1,618 $ 983,125 - 983,125
Net income for the period June 16,
1994 through December 31, 1994 - - 1,827 1,827
-------- ---------- -------- ----------
Balances at December 31, 1994 1,618 983,125 1,827 984,952
Reverse stock split - fractional
share payments - (23,238) - (23,238)
Common stock issuance - 22,938 - 22,938
Net income - - 31,070 31,070
-------- ---------- -------- ----------
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
======== ========== ======== ==========
See accompanying notes to financial statements.
10
THE IDAHO COMPANY
Statements of Cash Flows
Successor
-------------------------------------
For the
period
June 16, 1994
Years ended December 31, through
------------------------ December 31,
1996 1995 1994
------------ ------------ ------------
Increase (Decrease) in Cash
- ---------------------------
and Cash Equivalents
--------------------
Cash flows from operating activities:
Net income (loss) $ 42,629 31,070 1,827
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation - - -
Accretion of excess of net
assets acquired over cost (23,112) (23,112) (11,556)
Provision for loan losses 12,070 12,998 16,235
Write off of investment - - -
Changes in operating assets
and liabilities:
Accounts receivable - 275 (275)
Interest receivable (7,322) (6,842) 2,125
Prepaid expense 900 4,585 (14,000)
Other assets - - 685
Accounts payable - - (29,495)
Accrued expenses 959 (15,044) 15,628
Payroll tax payable 752 498 234
Deferred fees 10,887 - -
----------- ----------- -----------
Net cash provided by (used in)
operating activities 37,763 4,428 (18,592)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of interest bearing deposits - - (107,361)
Maturities of interest bearing deposits - 36,908 788,383
Loans receivable disbursed (1,344,114) (1,388,928) (928,350)
Loans receivable collected 1,008,324 1,341,084 288,677
Purchase of office equipment - - -
----------- ----------- -----------
Net cash provided by (used in)
investing activities (335,790) (10,936) 41,349
----------- ----------- -----------
11
THE IDAHO COMPANY
Statements of Cash Flows (continued)
Successor
--------------------------------------
For the
period
June 16, 1994
Years ended December 31, through
------------------------ December 31,
1996 1995 1994
------------ ------------ -----------
Cash flows from financing activities:
Principal payment on note payable $ (709,054) (9,577) (257,523)
Proceeds from issuance of note payable 893,975 - 267,100
Common stock fractional share
payments - (23,238) -
Proceeds from common stock - 22,938 -
----------- ----------- ----------
Net cash provided by (used in)
financing activities 184,921 (9,877) 9,577
----------- ----------- ----------
Increase (decrease) in cash (113,106) (16,385) 32,334
Cash at beginning of period 128,742 145,127 112,793
----------- ----------- ----------
Cash at end of period $ 15,636 128,742 145,127
=========== =========== ==========
Supplemental Schedule of Cash Flow Information
Interest paid $ 6,252 204 1,839
Supplemental Disclosure of Noncash Activity
Push down of excess of net assets
acquired over cost consisting
of a reduction of stockholders'
equity ($118,846), net of the
elimination of office equipment
($3,287) $ - - 115,559
See accompanying notes to financial statements.
12
THE IDAHO COMPANY
Statements of Cash Flows
Predecessor
|------------
| For the
| period
| January 1,
|1994 through
| June 15,
| 1994
|------------
Increase (Decrease) in Cash |
- --------------------------- |
and Cash Equivalents |
-------------------- |
|
Cash flows from operating activities: |
Net income (loss) | (112,128)
Adjustments to reconcile net income |
(loss) to net cash provided by |
(used in) operating activities: |
Depreciation | 1,614
Accretion of excess of net |
assets acquired over cost | -
Provision for loan losses | 11,812
Write off of investment | 20,000
Changes in operating assets |
and liabilities: |
Accounts receivable | -
Interest receivable | (1,531)
Prepaid expense | 18,935
Other assets | (685)
Accounts payable | 29,495
Accrued expenses | 2,366
Payroll tax payable | (241)
Deferred fees | -
|-----------
Net cash provided by (used in) |
operating activities | (30,363)
|-----------
Cash flows from investing activities: |
Purchase of interest bearing deposits ) | (565,754)
Maturities of interest bearing deposits | 447,272
Loans receivable disbursed | -
Loans receivable collected | 157,343
Purchase of office equipment | (3,522)
|-----------
Net cash provided by (used in) |
investing activities | 35,339
|-----------
13
THE IDAHO COMPANY
Statements of Cash Flows (continued)
Predecessor
|-------------
| For the
| period
| January 1,
| 1994 through
| June 15,
| 1994
| ------------
|
Cash flows from financing activities: |
Principal payment on note payable | -
Proceeds from issuance of note payable | -
Common stock fractional share |
payments | -
Proceeds from common stock | -
| -----------
Net cash provided by (used in) |
financing activities | -
| -----------
Increase (decrease) in cash | 4,976
|
Cash at beginning of period | 107,817
| -----------
Cash at end of period | 112,793
| ===========
|
Supplemental Schedule of Cash Flow Information |
|
Interest paid | -
|
|
|
Supplemental Disclosure of Noncash Activity |
|
Push down of excess of net assets |
acquired over cost consisting |
of a reduction of stockholders' |
equity ($118,846), net of the |
elimination of office equipment |
($3,287) $ - | -
See accompanying notes to financial statements.
14
THE IDAHO COMPANY
Notes to Financial Statements
(1) Basis of Presentation and Company Background
--------------------------------------------
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 Company is not obligated to pay a dividend or dividend in kind unless the
payment has been approved by the Director of the Department of Finance of the
State of Idaho and is consistent with capital requirements and profitability.
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 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, 1996.
On June 15, 1994, 97.7 percent of the Company's then outstanding common stock
was acquired by an individual in a tender offer for cash consideration in the
amount of $957,780. As a result of the change in ownership and control, the
accompanying financial statements are presented on a "push-down accounting"
basis for the successor period, in order to comply with Securities and Exchange
Commission reporting requirements. Push-down accounting requires that the
purchase price be allocated to the Company's net assets based upon their fair
values at the date of acquisition. In doing so, the excess of the estimated
fair value of the net assets acquired over the purchase price has been
recorded, first, as a reduction to the Company's nonmonetary assets (office
equipment), and second, as excess of net assets acquired over cost. The
purchase price of $957,780, plus the minority stockholders' interest in the
historical carrying value of the Company's net assets of $25,345 was allocated
to the Company's net assets.
(2) Summary of Significant Accounting Policies
------------------------------------------
(a) Loans
-----
The Company makes commercial loans to Idaho small businesses to
stimulate economic activity through job creation. Loans are reported
at the principal amount outstanding, net of an allowance for estimated
loan losses. 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
15
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 allowance for loan losses is established through a provision for
loan losses charged to expense. Loans 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 that may become uncollectible, based on
conditions existing at the balance sheet date using evaluations of the
collectibility of loans 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.
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.
(b) Income Taxes
------------
The Company accounts for income taxes using the asset and liability
method, under which deferred tax assets and 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 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
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(c) 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.
(d) Income (Loss) Per Share
-----------------------
Income (loss) per share is computed by dividing the net income (loss)
by the average number of shares outstanding during the period.
16
(e) Reverse Stock Split
-------------------
In October of 1994 the Company's Board of Directors approved a 101 for
1 reverse stock split of the Company's issued and outstanding shares.
The reverse split occurred on February 28, 1995, and resulted in a
reduction of the pre-split issued and outstanding shares of 163,453 to
post-split issued and outstanding shares of 1,618. The reverse stock
split has been given retroactive effect to June 16, 1994 in the
accompanying successor financial statements. Additionally, effective
with the reverse stock split, the Company amended its articles of
incorporation to eliminate the par value feature of its authorized
common stock in favor of a no par value feature. Such amendment has
also been reflected in the accompanying successor financial statement.
On February 28, 1995, the Company reacquired all fractional common
shares created by the reverse stock split for approximately $23,000.
(f) 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.
(3) Loans Receivable
---------------
The Company's loan portfolio is diversified among a variety of
industry classifications as follows:
December 31,
------------
1996 1995
------------ -------------
Retail $ 172,398 60,183
Manufacturing 80,017 179,040
Agriculture 518,494 206,727
Food Processing 60,287 112,771
Distribution 36,000 11,300
Construction 230,588 268,320
Transportation 41,594 51,808
Finance 29,553 20,966
Contractors 31,703 30,000
Medical 93,961 -
Hospitality 41,071 52,945
Natural resources 10,151 15,967
---------- ----------
$1,345,817 1,010,027
========== ==========
17
Loans within the portfolio have maturities ranging from one to five
years as of December 31, 1996 and 1995. The largest loan to an
individual customer at December 31, 1996 is $150,000.
As of December 31, 1996 and 1995, loans designated to nonaccrual
status were $91,752 and $-0-, respectively. At the original contract
rates, additional interest income of approximately $3,500 and $-0- for
1996 and 1995, respectively, would have been recognized had all
nonaccrual loans performed as originally agreed.
(4) Allowance for Loan Losses
-------------------------
Allowance for loan loss activity is summarized as follows:
Successor Predecessor
---------------------------------------|----------
| For the
For the | period
period | January 1,
June 16, 1994 | 1994
Years ended December 31, through | through
----------------------- December 31,| June 15,
1996 1995 1994 | 1994
------------ ------------ ----------- | --------
|
Balances, beginning of period $ 63,636 50,638 34,403 | 31,403
|
Provision for loan losses 12,070 12,998 16,235 | 11,812
|
Write off of loans - - - | (8,812)
|
------------ ------------ ----------- | --------
Balances, end of period $ 75,706 63,636 50,638 | 34,403
============ ============ =========== | ========
(5) Note Payable
------------
At December 31, 1996, the Company had a revolving credit line with a Bank that
provided for unsecured borrowings up to $300,100 which will expire March 31,
1997. The credit line bears interest of 1 1/2 percent over Wall Street Journal
Prime interest rate.
(6) Income Taxes
------------
No provision has been made in the financial statements for income taxes
because of utilization of net operating losses.
18
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets are presented below:
December 31,
------------
1996 1995
------------ ------------
Deferred tax assets:
Allowance for loan losses $ 31,796 24,996
Net operating loss carryforward 162,060 130,240
------------ ------------
Total deferred tax assets 193,856 155,236
Less valuation allowance (193,856) (155,236)
------------ ------------
Net deferred tax asset $ - -
============ ============
The net change in the total valuation allowance for the periods ended
December 31, 1996 and 1995 was an increase (decrease) of $38,620 and
($4,387), respectively.
For tax return purposes, the Company has available net operating loss
carryforwards of $385,855, which expire between 2002 and 2011.
(7) Commitments and Contingencies
-----------------------------
The Company has funds committed for loans and unfunded lines of credit as
of December 31, 1996 of $79,000.
</AUDIT-REPORT>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
KPMG Peat Marwick, LLP, serve as accountants for the year ended December 31,
1996 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.
19
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
Director the Past Five Years Since Expires Age
-------- --------------------------- -------- ------- ---
Grant R. Caldwell Retired certified public 1994 1999 72
accountant and managing partner,
KMG Main Hurdman, Salt Lake City,
UT. Director, Zions Bancorporation,
Salt Lake City, UT
Ted E. Ellis Mayor of Garden City, ID. 1986 1999 69
Chairman of The Idaho Company
Robert Grover Certified public accountant and 1994 1997 41
partner, Keller, Young & Grover,
LLP, Boise, ID
Eugene D. Heil President & CEO, The Idaho 1989 1998 62
Company
Wayne Mittleider Past Executive Director, Idaho 1994 1999 49
Housing Agency, Boise, ID
Charles M. Rice Director, Polysi, Inc., 1996 1999 72
Idaho Falls, ID
Diane Rigby Manager, Analytical Support and 1994 1998 32
Safekeeping Services, Zions Bank,
Salt Lake City, UT
John P. Rigby Database Administrator, Idaho 1994 1999 38
Power Company, Boise, ID
William F. Rigby Chairman and CEO, Bank of Eastern 1994 1997 66
Idaho, Idaho Falls, ID. Vice
President, The Idaho Company,
Boise, ID
Dan G. Simkins President and Chief Operating 1994 1998 56
Officer, Bank of Eastern Idaho,
Idaho Falls, ID
Fred T. Thompson, Jr. Retired partner and manager, 1994 1997 66
GPOD of Idaho (potato dealer),
Shelley, ID
20
Item 11. EXECUTIVE COMPENSATION.
Eugene D. Heil, President, CEO, and director, was paid $37,400 annual salary and
pension/retirement contributions totalling $3,750 in 1996. All other directors,
including those serving in officer capacities, serve without compensation.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following directors hold all shares issued and outstanding as of December
31, 1996.
Shares of Percent of
Common Stock Outstanding
Name of Beneficial Owner Owned Shares
- ------------------------ ------------- ------------
William F. Rigby 1,078 67%
P. O. 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.
None.
21
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, 1996 and 1995 . . . 8
Statements of Operations -
Years ended December 31, 1996 and 1995;
Periods June 16, 1994 to December 31, 1994
and January 1, 1994 to June 15, 1994 . . . 9
Statements of Stockholders' Equity
Years ended December 31, 1996 and 1995;
Periods June 16, 1994 to December 31, 1994
and January 1, 1994 to June 15, 1994 . . .10
Statements of Cash Flows -
Years ended December 31, 1996 and 1995;
Periods June 16, 1994 to December 31, 1994
and January 1, 1994 to June 15, 1994 . . .11
Notes to Financial Statements . . .13
(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, 1996.
22
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.
(Registrant) The Idaho Company
-------------------
By (Signature and Title)
--------------------------------
Eugene D. Heil, President & CEO
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 of 1934, this report
has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By (Signature and Title) Date:
---------------------------------- ----------
/s/John Rigby, Secretary/Treasurer
03/02/97 By --------------------------------------------
/s/Grant R. Caldwell, Director
03/03/97 By --------------------------------------------
/s/Ted E. Ellis, Chairman and Director
03/02/97 By --------------------------------------------
/s/Rob Grover, Director
03/02/97 By --------------------------------------------
/s/Eugene D. Heil, President & CEO; Director
(date) By --------------------------------------------
/s/Wayne Mittleider, Director
03/02/97 By --------------------------------------------
/s/Charles M. Rice, Director
03/07/97 By --------------------------------------------
/s/Diane Rigby, Director
03/03/97 By --------------------------------------------
/s/John Rigby, Secretary/Treasurer; Director
03/10/97 By --------------------------------------------
/s/William F. Rigby, Vice President & Director
03/04/97 By --------------------------------------------
/s/Dan G. Simkins, Director
03/02/97 By --------------------------------------------
/s/Fred T. Thompson, Jr.
23