Washington

91-0669906

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer Identification No.)

10 North Post Street

325 Peyton Building

Spokane, Washington 99201

(509) 444-7700

(Address of principal executive offices)

(Registrant’s telephone number,

including area code)

PART I.  FINANCIAL INFORMATION

      Item 1.  Consolidated Financial Statements (Unaudited)

           Consolidated balance sheet

1-2

           Consolidated statement of operations

3

           Consolidated statement of cash flows

4-5

           Notes to unaudited financial statements

6-8

      Item 2.  Management's Discussion and Analysis of Financial Condition and

      Results of Operations

           Financial condition and liquidity

9-10

           Results of operations

10-12

      Item 3.  Quantitative and Qualitative Disclosures About Market Risk

13

      Item 4.  Controls and Procedures

13

PART II.  OTHER INFORMATION

      Item 1.  Legal Proceedings

13

      Item 2.  Changes in Securities and Use of Proceeds

13

      Item 3.  Defaults Upon Senior Securities

13

      Item 4.  Submission of Matters to a Vote of Security Holders

13

      Item 5.  Other Information

14

      Item 6.  Exhibits and Reports on Form 8-K

14

Signatures

15

April 30,

2004

July 31,

2003

ASSETS

   Cash and cash equivalents

$

586,288

$

705,564

   Receivables

      Contracts, mortgages, finance notes, and loans receivable, net

5,960,009

7,107,189

         Less allowance for loan losses

(379,552

)

(609,100

)

5,580,457

6,498,089

      Accrued interest

26,814

42,790

      Other

250,994

275,481

5,858,265

6,816,360

   Investment in rental properties, net

9,265,612

11,344,735

   Impairment on rental properties

(2,081,680

)

(643,680

)

7,183,932

10,701,055

   Other investments

      Property held for sale and development

3,229,562

4,367,608

   Other assets

      Furniture and equipment, net

64,224

76,292

      Prepaid and other, net

214,655

215,901

      Deferred tax asset, net

1,231,524

284,834

      Federal income tax refund receivable

—

54,204

1,510,403

631,231

         TOTAL ASSETS

$

18,368,450

$

23,221,818

April 30,

2004

July 31,

2003

LIABILITIES

   Notes payable to banks

$

2,812,500

$

3,692,500

   Installment contracts, mortgage notes, and notes payable

      Related parties

200,000

—

      Unrelated

4,560,858

5,583,266

   Debenture bonds

7,265,652

8,527,183

   Accrued expenses and other liabilities

      Related parties

91,880

100,933

      Unrelated

853,212

873,546

         Total liabilities

15,784,102

18,777,428

STOCKHOLDERS' EQUITY

   Preferred stock

      Class A preferred stock, $100 par value, authorized 20,000

         shares; issued and outstanding 3,000 shares

300,000

300,000

      Preferred stock, authorized 10,000,000 no par value shares;

         no shares issued and outstanding

—

—

   Common stock

      Original class, authorized 2,500,000 no par value shares; $3

         stated value; issued and outstanding, 1,078,279 and

         1,080,337 shares

3,234,837

3,241,070

      Class B, authorized 30,000 no par value shares; no shares

         issued and outstanding

—

—

   Additional paid-in capital

1,832,823

1,830,941

   Retained earnings (deficit)

(2,783,312

)

(927,621

)

         Total stockholders' equity

2,584,348

4,444,390

         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

18,368,450

$

23,221,818

Three Months Ended April 30,

Nine Months Ended April 30,

2004

2003

2004

2003

Income

   Rental

$

271,761

$

354,119

$

894,278

$

1,062,160

   Interest, including loan fees of

      $12,765 and $60,850

      and $18,490 and $194,967

139,939

288,611

389,693

1,213,155

   Gain (loss) on sale of real estate

(245,626

)

(179,156

)

170,270

(206,126

)

   Other, net

2,908

2,905

5,150

22,384

168,982

466,479

1,459,391

2,091,573

Expense

   Rental operations

      Depreciation and amortization

89,214

115,650

305,462

360,053

      Interest

60,177

64,377

216,222

236,998

      Other

155,107

192,016

551,405

524,125

304,498

372,043

1,073,089

1,121,176

   Interest, net of amount capitalized

210,291

313,654

690,087

1,202,388

   Salaries and commissions

117,512

366,656

344,273

895,485

   General and administrative

95,097

86,634

313,486

581,017

   Depreciation and amortization

6,226

7,017

19,367

31,448

   Contract discount

—

318,066

—

318,066

   Provision for loan loss

—

—

365,470

558,872

   Provision for impaired asset

1,438,000

—

1,438,000

—

2,171,624

1,464,070

4,243,772

4,708,452

         Income (loss) before income

            tax (benefit) provision

(2,002,642

)

(997,591

)

(2,784,381

)

(2,616,879

)

Income tax (benefit) provision

(680,899

)

(339,181

)

(946,690

)

(889,739

)

         NET INCOME (LOSS)

(1,321,743

)

(658,410

)

(1,837,691

)

(1,727,140

)

Less preferred stock dividends

—

—

(18,000

)

(18,000

)

         Income (loss) available to

            common stockholders

$

(1,321,743

)

$

(658,410

)

$

(1,855,691

)

$

(1,745,140

)

Net income (loss) per common  

   share basic and diluted

$

(1.23

)

$

(0.61

)

$

(1.72

)

$

(1.61

)

Weighted-average common shares

   outstanding basic and diluted

1,078,764

1,082,216

1,079,728

1,083,019

Nine Months Ended April 30,

2004

2003

CASH FLOWS FROM OPERATING ACTIVITIES

   Cash received from rentals and other

$

925,161

$

1,148,598

   Interest received

405,669

1,366,015

   Cash paid to suppliers and employees

(1,227,768

)

(2,629,678

)

   Interest paid, net of amounts capitalized

(592,933

)

(1,099,425

)

   Income taxes refunded

54,204

631,505

         Net cash used by operating activities

(435,667

)

(582,985

)

CASH FLOWS FROM INVESTING ACTIVITIES

   Proceeds from sales of real estate and fixed assets

4,478,223

3,714,314

   Collections on contracts, mortgages, finance notes, and loans

      receivable

365,143

15,289,383

   Investment in contracts, mortgages, notes, and loans

      receivable

(141,092

)

(1,740,821

)

   Additions to rental properties, property held for sale, property

      under development, furniture, and equipment

(1,075,164

)

(1,170,692

)

         Net cash provided by investing activities

3,627,110

16,092,184

CASH FLOWS FROM FINANCING ACTIVITIES

   Net borrowings under line of credit agreements

(880,000

)

(10,888,738

)

   Proceeds from installment contracts, mortgage notes,

      and notes payable

1,200,000

—

   Payments on installment contracts, mortgage notes,

      and notes payable

(2,022,408

)

(2,254,030

)

   Redemption of debenture bonds

(1,585,960

)

(1,761,322

)

   Purchase and retirement of common stock

(4,351

)

(9,785

)

   Payment of dividends on preferred stock

(18,000

)

(18,000

)

         Net cash used by financing activities

(3,310,719)

(14,931,875

)

         NET CHANGE IN CASH AND CASH EQUIVALENTS

(119,276

)

577,324

Cash and cash equivalents, beginning of year

705,564

367,469

Cash and cash equivalents, end of period

$

586,288

$

944,793

Nine Months Ended April 30,

2004

2003

RECONCILIATION OF NET INCOME (LOSS) TO NET

   CASH USED BY OPERATING ACTIVITIES

   Net income (loss)

$

(1,837,692

)

$