<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
SEPTEMBER 1, 1999
CLARK/BARDES HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 000-24769 52-2103926
(State or other (Commission (IRS employer
jurisdiction of file number) identification no.)
incorporation or
organization)
102 S. WYNSTONE PARK DRIVE, SUITE 200
NORTH BARRINGTON, IL 60010
(Address and zip code of principal executive offices)
Registrant's telephone number, including area code:
(847) 304-5800
<PAGE> 2
On September 16, 1999, Clark/Bardes Holdings, Inc. ("CBH") filed with the SEC a
current Report on Form 8-K reporting, among other things, the acquisition of The
Wamberg Organization, Inc. and Wamberg Financial Corporation on September 1,
1999. CBH indicated in such report that it would file certain audited financial
information by amendment, as permitted under Form 8-K, Item 7. The purpose of
this amendment is to include such audited financial information.
ITEM 7. PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENT OF BUSINESS ACQUIRED
The Independent Auditor's Reports and the following
audited financial statements of The Wamberg
Organization and Wamberg Financial Corporation are
included herein:
(i) Independent Auditor's Reports;
(ii) Balance Sheets as of December 31, 1998
and 1997;
(iii) Statements of Income (Loss) and Retained
Earnings (Accumulated Deficit) for the years
ended December 31, 1998, and 1997;
(iv) Statements of Cash Flows for the years ended
December 31, 1998, and 1997; and
(v) Notes to Financial Statements.
The required unaudited financial statements of The
Wamberg Organization and Wamberg Financial
Corporation were filed with the SEC on September 16,
1999 as part of the Form 8-K.
(b) PRO FORMA FINANCIAL INFORMATION
The required unaudited pro forma financial statements
of CBH and Wamberg Financial Corporation were filed
with the SEC on September 16, 1999 as part of the
Form 8-K.
(c) EXHIBITS
The following Exhibits are filed herewith:
23.1 Consent of Independent Public Accountants.
2
<PAGE> 3
23.2 Consent of Independent Public Accountants.
23.3 Consent of Independent Public Accountants.
3
<PAGE> 4
INDEPENDENT AUDITOR'S REPORT
Board of Directors
The Wamberg Organization, Inc.
North Barrington, Illinois
We have audited the accompanying balance sheet of THE WAMBERG ORGANIZATION, INC.
as of December 31, 1998, and the related statements of income and retained
earnings and cash flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides 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 WAMBERG ORGANIZATION, INC.
as of December 31, 1998, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ Blackman Kallick Bartelstein, LLP
January 29, 1999
4
<PAGE> 5
INDEPENDENT AUDITOR'S REPORT
Board of Directors
The Wamberg Organization, Inc.
North Barrington, Illinois
We have audited the accompanying balance sheet of THE WAMBERG ORGANIZATION, INC.
as of December 31, 1997, and the related statements of income and retained
earnings and cash flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides 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 WAMBERG ORGANIZATION, INC.
as of December 31, 1997, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ Blackman Kallick Bartelstein, LLP
August 12, 1999
5
<PAGE> 6
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Wamberg Financial Corporation
North Barrington, Illinois
We have audited the accompanying balance sheets of WAMBERG FINANCIAL CORPORATION
as of December 31, 1998 and 1997, and the related statements of income (loss)
and accumulated deficit and cash flows for the years then ended. 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 WAMBERG FINANCIAL CORPORATION
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ Blackman Kallick Bartelstein, LLP
August 24, 1999
6
<PAGE> 7
THE WAMBERG ORGANIZATION, INC.
Balance Sheet
December 31, 1998
<TABLE>
<CAPTION>
ASSETS (Notes 5 and 7)
<S> <C>
CURRENT ASSETS
Cash and cash equivalents (Notes 1 and 3) $ 329,179
Receivables
Clients 3,190,349
Employees 14,203
Prepaid expenses and deposits 54,150
---------------
Total Current Assets 3,587,881
PROPERTY AND EQUIPMENT (Net of accumulated
depreciation and amortization) (Notes 1 and 4) 335,127
---------------
$ 3,923,008
===============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Checks issued in excess of funds on deposit $ 1,586,342
Accounts payable 402,786
Accrued income taxes 61,200
Other accrued expenses 60,213
---------------
Total Liabilities $ 2,110,541
===============
STOCKHOLDER'S EQUITY
Common stock - $.01 par value; authorized -
100,000 shares; issued - 100 shares 1
Additional paid-in capital 999
Retained earnings 1,811,467
---------------
Total Stockholder's Equity 1,812,467
---------------
$ 3,923,008
===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 8
THE WAMBERG ORGANIZATION, INC.
Statement of Income and Retained Earnings
Year Ended December 31, 1998
<TABLE>
<CAPTION>
% of
Amount Revenue
----------------- -------------
<S> <C> <C>
REVENUE (Note 6) $ 9,537,755 100.00%
----------------- -------------
OPERATING EXPENSES
Selling 1,676,806 17.58
General and administrative 3,787,004 39.71
---------------- -----------
Total Operating Expenses 5,463,810 57.29
---------------- -----------
INCOME FROM OPERATIONS 4,073,945 42.71
---------------- -----------
OTHER EXPENSE (INCOME)
Interest expense 3,320 .03
Interest Income (16,935) (.17)
---------------- -----------
Total Other Income, Net (13,615) (.14)
---------------- -----------
INCOME BEFORE INCOME TAXES 4,087,560 42.86
INCOME TAXES 87,859 .92
---------------- -----------
NET INCOME 3,999,701 41.94%
===========
RETAINED EARNINGS, BEGINNING OF YEAR 3,519,901
LESS DIVIDENDS DECLARED (5,708,135)
----------------
RETAINED EARNINGS, END OF YEAR $ 1,811,467
================
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE> 9
THE WAMBERG ORGANIZATION, INC.
Statement of Cash Flows
Year Ended December 31, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,999,701
-----------
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 66,292
Gain on sale of assets 44,247
(Increase) decrease in
Accounts receivable 1,514,031
Prepaid expenses and deposits (21,143)
Increase (decrease) in
Accounts payable (802,179)
Accrued expenses 72,915
-----------
Total Adjustments 874,163
-----------
Net Cash Provided by Operating Activities 4,873,864
-----------
NET CASH USED IN INVESTING ACTIVITIES - Capital expenditures (250,338)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Checks issued in excess of funds on deposit 1,104,317
Payments of dividends (5,708,135)
-----------
Net Cash Used in Financing Activities (4,603,818)
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 19,708
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 309,471
-----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 329,179
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE> 10
THE WAMBERG ORGANIZATION, INC.
Notes to Financial Statements
Year Ended December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents
For purposes of the statement of cash flows, the company considers certificates
of deposit to be cash equivalents.
Depreciation and Amortization
The company's policy is to depreciate the cost of property and equipment over
their estimated useful lives as defined under tax guidelines. As a result,
straight-line and accelerated methods are used according to the following
tabulation:
<TABLE>
<CAPTION>
Years Method
------ ------
<S> <C> <C>
Equipment 5 200% declining balance
Computer equipment 5 200% declining balance
Computer software 5 Straight-line
Transportation equipment 5 200% declining balance
Furniture and fixtures 7 200% declining balance
Leasehold improvements 39 Straight-line
</TABLE>
Income Taxes
The company has elected to be taxed as an S corporation under provisions of the
Internal Revenue Code. Accordingly, the accompanying financial statements do not
reflect income taxes, except for state replacement tax.
Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
10
<PAGE> 11
THE WAMBERG ORGANIZATION, INC.
Notes to Financial Statements
Year Ended December 31, 1998
NOTE 2 - INDUSTRY OPERATIONS
The company markets and sells bank and corporate owned life insurance to
business entities primarily throughout the United States. The company receives
its commissions from the insurance companies, which provide the benefit plans to
the company's clients. Commission payments are structured so that the company
generally receives a higher percentage of the premiums in the first year.
NOTE 3 - CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
<TABLE>
<S> <C>
Cash $ 4,953
Certificates of deposit 324,226
---------------
$ 329,179
===============
</TABLE>
The company maintains its cash and cash equivalents in bank deposit accounts
which, at times, may exceed federally insured limits. The company has not
experienced any losses in such accounts. The company believes it is not exposed
to any significant credit risk on cash and cash equivalents.
NOTE 4 - PROPERTY AND EQUIPMENT
As of December 31, 1998, property and equipment were composed of the following:
<TABLE>
<S> <C>
Equipment $ 46,244
Computer equipment 97,536
Computer software 8,642
Furniture and fixtures 365,783
Leasehold improvements 77,841
Transportation equipment 85,145
---------------
681,191
Accumulated depreciation
and amortization (346,064)
---------------
$ 335,127
===============
</TABLE>
11
<PAGE> 12
THE WAMBERG ORGANIZATION, INC.
Notes to Financial Statements
Year Ended December 31, 1998
NOTE 5 - OPERATING LEASES
The company has entered into leases for its office facilities, automobiles, an
airplane and certain equipment. The airplane is leased from an entity that is
100% owned by the stockholder of the Wamberg Organization.
Net rental expense for all operating leases for the year ended December 31, 1998
was approximately $240,600, of which $168,000 was for the airplane lease.
The following is a schedule by year of future minimum rental payments required
under operating leases that have initial or remaining noncancelable lease terms
in excess of one year, as of December 31, 1998:
<TABLE>
<S> <C>
Year Ending December 31:
1999 $ 244,807
2000 86,087
2001 37,819
2002 34,951
2003 13,283
----------------
Total Future Minimum Rental Payments Required $ 416,947
================
</TABLE>
The office facilities, the airplane and certain equipment leases require the
company to pay its pro rata share of operating or maintenance costs. It is
anticipated that the airplane lease, which expires in 2000, will be renewed
under the same or similar terms. The scheduled future minimum rental payments
included above for the airplane lease are $168,000 and $28,000 for the years
ending December 31, 1999 and 2000, respectively.
NOTE 6 - RELATED PARTY
The stockholder of the company owns approximately 23.4% of a plan administrator.
For the year ended December 31, 1998, the company received $1,893,626 in
revenues through this administrator. The company also received $100,000 from the
administrator as reimbursement for certain expenses for the year ended December
31, 1998.
See additional related party disclosures in Notes 5, 7 and 8.
12
<PAGE> 13
THE WAMBERG ORGANIZATION, INC.
Notes to Financial Statements
Year Ended December 31, 1998
NOTE 7 - CONTINGENCIES
The company has jointly and severally guaranteed loans by Community Bank of Oak
Park River Forest to the sole stockholder of the company in the amounts of
$3,000,000, $3,800,000 and $750,000 as of December 31, 1998. The proceeds of the
loans were used to purchase additional stock in a related company and to
purchase land and building. As of December 31, 1998, the outstanding balances of
these loans were $1,950,000, $3,800,000 and $750,000, respectively. These loans
are secured by substantially all assets of the company, including commissions
and fees receivable.
Additionally, the company is required to maintain on deposit with Community Bank
of Oak Park River Forest a certificate of deposit greater than or equal to
$300,000 as collateral on behalf of the stockholder. See Note 3.
NOTE 8 - SUBSEQUENT EVENTS
In January of 1999, the company received payment from the plan administrator,
which is approximately 23.4% owned by the stockholder of the company, in the
amount of $7,400,000. This payment was in exchange for 19% of 10 years of gross
future renewal commission and fee revenue of in-force or existing business as of
June 30, 1998. The 10-year period began upon consummation of the transaction
through payment by the plan administrator.
NOTE 9 - YEAR 2000 ISSUE (UNAUDITED)
The year 2000 (Y2K) issue is the result of computer programs using a two-digit
format, as opposed to four digits, to indicate the year. Such computer systems
will be unable to interpret dates beyond 1999, which would cause a system
failure or application efforts, leading to disruptions in operations. The
company has done an internal review of its systems to determine major areas of
exposure to Y2K issues. The nature of the company's operations, sales of an
intangible product, does not create vendor or supplier dependencies, which would
require an external review of such to determine Y2K exposure. The company
believes that the majority of its systems are Y2K-compliant and that those areas
of uncertainty will be resolved prior to the year 2000.
13
<PAGE> 14
THE WAMBERG ORGANIZATION, INC.
Balance Sheet
December 31, 1997
ASSETS (Notes 5 and 7)
<TABLE>
CURRENT ASSETS
<S> <C>
Cash and cash equivalents (Notes 1 and 3) $ 309,471
Receivables
Clients 4,694,006
Employees 24,577
Prepaid expenses and deposits 33,007
---------------
Total Current Assets 5,061,061
PROPERTY AND EQUIPMENT (Net of accumulated
depreciation and amortization) (Notes 1 and 4) 195,328
---------------
$ 5,256,389
===============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Checks issued in excess of funds on deposit $ 482,025
Accounts payable 1,204,965
Other accrued expenses 48,498
---------------
Total Liabilities 1,735,488
---------------
STOCKHOLDER'S EQUITY
Common stock - $.01 par value; authorized -
100,000 shares; issued - 100 shares 1
Additional paid-in capital 999
Retained earnings 3,519,901
---------------
Total Stockholder's Equity 3,520,901
---------------
$ 5,256,389
===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE> 15
THE WAMBERG ORGANIZATION, INC.
Statement of Income and Retained Earnings
Year Ended December 31, 1997
<TABLE>
<CAPTION>
% of
Amount Revenue
----------------- -------------
<S> <C> <C>
REVENUE (Note 6) $ 8,232,720 100.00%
----------------- -------------
OPERATING EXPENSES
Selling 2,077,985 25.24
General and administrative 3,101,979 37.68
----------------- ------------
Total Operating Expenses 5,179,964 62.92
----------------- ------------
INCOME FROM OPERATIONS 3,052,756 37.08
----------------- ------------
OTHER INCOME (EXPENSE)
Interest expense (9,657) (.12)
Interest income 11,968 .15
----------------- ------------
Total Other Income, Net 2,311 .03
----------------- ------------
INCOME BEFORE INCOME TAXES 3,055,067 37.11
INCOME TAXES 7,104 .09
----------------- ------------
NET INCOME 3,047,963 37.02%
=============
RETAINED EARNINGS, BEGINNING OF YEAR 868,064
LESS DIVIDENDS DECLARED (Note 9) (396,126)
-----------------
RETAINED EARNINGS, END OF YEAR $ 3,519,901
=================
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE> 16
THE WAMBERG ORGANIZATION, INC.
Statement of Cash Flows
Year Ended December 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,047,963
---------------
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 69,328
(Increase) decrease in
Accounts receivable (3,442,319)
Prepaid expenses and deposits 32,225
Increase (decrease) in
Accounts payable 892,102
Accrued expenses (1,427)
---------------
Total Adjustments (2,450,091)
---------------
Net Cash Provided by Operating Activities 597,872
---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net repayments from stockholders 409,646
Capital expenditures (95,913)
---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Checks issued in excess of funds on deposit 297,866
Net repayments under line of credit (900,000)
---------------
Net Cash Used in Financing Activities (602,134)
---------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 309,471
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR -
---------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 309,471
===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE> 17
THE WAMBERG ORGANIZATION, INC.
Notes to Financial Statements
Year Ended December 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents
For purposes of the statement of cash flows, the company considers certificates
of deposit to be cash equivalents.
Depreciation and Amortization
The company's policy is to depreciate the cost of property and equipment over
their estimated useful lives as defined under tax guidelines. As a result,
straight-line and accelerated methods are used according to the following
tabulation:
<TABLE>
Years Method
----- ------
<S> <C> <C>
Equipment 5 200% declining balance
Computer equipment 5 200% declining balance
Computer software 5 Straight-line
Transportation equipment 5 200% declining balance
Furniture and fixtures 7 200% declining balance
Leasehold improvements 39 Straight-line
</TABLE>
Income Taxes
The company has elected to be taxed as an S corporation under provisions of the
Internal Revenue Code. Accordingly, the accompanying financial statements do not
reflect income taxes, except for state replacement tax.
Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
17
<PAGE> 18
THE WAMBERG ORGANIZATION, INC.
Statement of Cash Flows
Year Ended December 31, 1997
NOTE 2 - INDUSTRY OPERATIONS
The company markets and sells bank and corporate owned life insurance to
business entities primarily throughout the United States. The company receives
its commissions from the insurance companies, which provide the benefit plans to
the company's clients. Commission payments are structured so that the company
generally receives a higher percentage of the premiums in the first year.
NOTE 3 - CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
<TABLE>
<S> <C>
Cash $ 500
Certificates of deposit 308,971
---------------
$ 309,471
===============
</TABLE>
The company maintains its cash and cash equivalents in bank deposit accounts
which, at times, may exceed federally insured limits. The company has not
experienced any losses in such accounts. The company believes it is not exposed
to any significant credit risk on cash and cash equivalents.
NOTE 4 - PROPERTY AND EQUIPMENT
As of December 31, 1997, property and equipment were composed of the following:
<TABLE>
<S> <C>
Equipment $ 39,087
Computer equipment 216,935
Computer software 3,874
Transportation equipment 85,145
Furniture and fixtures 270,268
Leasehold improvements 34,126
---------------
649,435
Accumulated depreciation and
amortization (454,107)
---------------
$ 195,328
===============
</TABLE>
18
<PAGE> 19
THE WAMBERG ORGANIZATION, INC.
Statement of Cash Flows
Year Ended December 31, 1997
NOTE 5 - OPERATING LEASES
The company has entered into leases for its office facilities, automobiles, an
airplane and certain equipment. The airplane is leased from an entity that is
100% owned by the stockholder of the Wamberg Organization.
Net rental expense for all operating leases for the year ended December 31, 1997
was approximately $202,000, of which $168,000 was for the airplane lease. In
addition, the company paid for the operating expenses of the airplane, which
totaled $421,600 in 1997.
The following is a schedule by year of future minimum rental payments required
under operating leases that have initial or remaining noncancelable lease terms
in excess of one year, as of December 31, 1997:
<TABLE>
<S> <C>
Year Ending December 31:
1998 $ 217,517
1999 207,025
2000 48,304
2001 1,452
----------------
Total Future Minimum Rental Payments Required $ 474,298
================
</TABLE>
The office facilities and certain equipment leases also require the company to
pay its pro rata share of operating or maintenance costs. The scheduled future
minimum rental payments included above for the airplane lease are $168,000,
$168,000 and $28,000 for the years ending December 31, 1998, 1999 and 2000,
respectively.
NOTE 6 - RELATED PARTY
The stockholder of the company owned approximately 60% (as of December 31, 1997)
of a firm, Clark/Bardes Holdings, Inc. (CBH), that provides a variety of
compensation and benefit services to U.S. corporations, banks, healthcare and
not-for-profit organizations, including the evaluation, design, marketing,
funding and administration of compensation and benefit programs for -executives
and other employed professionals. For the year ended December 31, 1997, the
company received $1,492,481 in revenues through CBH. The stockholder's interest
in CBH was subsequently reduced to 23.4%.
See additional related party disclosures in Notes 5, 7, 8 and 9.
19
<PAGE> 20
THE WAMBERG ORGANIZATION, INC.
Statement of Cash Flows
Year Ended December 31, 1997
NOTE 7 - CONTINGENCIES
The company has jointly and severally guaranteed loans by Community Bank of Oak
Park River Forest to the sole stockholder of the company in the amount of
$3,000,000, as of December 3 1, 1997. The proceeds of the loan were used to
purchase additional stock in a related company. The outstanding balance on this
loan was $2,600,000 as of December 31, 1997.
These loans are secured by substantially all assets of the company, including
commissions and fees receivable.
Additionally, the company is required to maintain on deposit with Community Bank
of Oak Park River Forest a certificate of deposit greater than or equal to
$300,000 as collateral on behalf of the stockholder. See Note 3.
NOTE 8 - SUBSEQUENT-EVENTS
In January of 1999, the company received payment from CBH in the amount of
$7,504,000. This payment was in exchange for 27.5% of 10 years of gross future
renewal commission and fee revenue of in-force or existing business as of June
30, 1998. The 10-year period began upon consummation of the transaction through
payment by CBH.
In August of 1999, the company entered into an agreement to sell the assets and
stock of the organization to CBH for $25,850,000. The sale price includes future
payments in the aggregate amount of $11,900,000 contingent upon certain
operating performance results through the year 2002.
The company also entered into an agreement in August of 1999 to sell the rights
to all renewal commissions owing to the company on and after January 1, 2019 to
an entity related through common ownership. The purchase price for such sale of
renewal commissions is to be determined pursuant to an appraisal to be conducted
as mutually agreed upon by the parties.
NOTE 9 - NONCASH FINANCING TRANSACTION
During the year ended December 31, 1997, the company declared dividends of
$396,126, in lieu of repayment of a receivable from stockholder.
NOTE 10 - YEAR 2000 ISSUE (UNAUDITED)
The year 2000 (Y2K) issue is the result of computer programs using a two-digit
format, as opposed to four digits, to indicate the year. Such computer systems
will be unable to interpret
20
<PAGE> 21
THE WAMBERG ORGANIZATION, INC.
Statement of Cash Flows
Year Ended December 31, 1997
dates beyond 1999, which could cause a system failure or application errors,
leading to disruptions in operations. The company has done an internal review of
its systems to determine major areas of exposure to Y2K issues. The nature of
the company's operations, sales of an intangible product, does not create vendor
or supplier dependencies, which would require an external review of such to
determine Y2K exposure. The company believes that the majority of its systems
are Y2K-compliant and that any Y2K issues encountered will not result in
significant costs and/or interruption of business.
21
<PAGE> 22
WAMBERG FINANCIAL CORPORATION
Balance Sheets
December 31, 1998 and 1997
ASSETS
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
<S> <C> <C>
AIRPLANE $ 1,214,745 $ 1,214,745
Less accumulated depreciation (219,329) (118,100)
----------------- ----------------
Net Fixed Assets 995,416 1,096,645
OTHER ASSETS 325 525
----------------- -----------------
$ 995,741 $ 1,097,170
================= =================
LIABILITIES AND STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES
Checks issued in excess of funds on deposit $ 65,781 $ 67,855
Accounts payable 4,358 8,151
Long-term debt due within one year (Note 3) 102,532 100,676
----------------- -----------------
Total Current Liabilities 172,671 176,682
LONG-TERM DEBT (Net of portion included in current liabilities)
(Note 3) 1,209,668 1,312,200
----------------- -----------------
Total Liabilities 1,382,339 1,488,882
-------------------- -----------------
STOCKHOLDER'S EQUITY (DEFICIT)
Common stock - No par value; authorized -
1,000 shares; issued - 100 shares 140,000 140,000
Accumulated deficit (526,598) (531,712)
----------------- -----------------
Total Stockholder's Deficit (386,598) (391,712)
----------------- -----------------
$ 995,741 $ 1,097,170
================= =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE> 23
WAMBERG FINANCIAL CORPORATION
Statements of Income (Loss) and Accumulated Deficit
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
-------------------- -------------------
<S> <C> <C>
RENTAL INCOME (Note 4) $ 631,190 $ 596,825
OPERATING EXPENSES 514,152 500,990
----------------- -----------------
INCOME FROM RENTAL ACTIVITY 117,038 95,835
INTEREST EXPENSE 111,924 144,031
----------------- -----------------
NET INCOME (LOSS) 5,114 (48,196)
ACCUMULATED DEFICIT, BEGINNING OF YEAR (531,712) (483,516)
----------------- -----------------
ACCUMULATED DEFICIT, END OF YEAR $ (526,598) $ (531,712)
================= =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE> 24
WAMBERG FINANCIAL CORPORATION
Statements of Cash Flows
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 5,114 $ (48,196)
----------------- -----------------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Depreciation and amortization 101,429 101,429
Decrease in accounts payable (3,793) (7,843)
----------------- -----------------
Total Adjustments 97,636 93,586
----------------- -----------------
Net Cash Provided by Operating Activities 102,750 45,390
----------------- -----------------
NET CASH USED IN INVESTING ACTIVITIES-
Capital expenditures - (63,263)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
(Repayments of) checks issued in excess of funds on deposit (2,074) 67,855
Principal payments on long-term debt (100,676) (79,441)
----------------- -----------------
Net Cash Used in Financing Activities (102,750) (11,586)
----------------- -----------------
NET DECREASE IN CASH - (29,459)
CASH, BEGINNING OF YEAR - 29,459
----------------- -----------------
CASH, END OF YEAR $ - $ -
================= =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest $ 111,924 $ 144,031
================= =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE> 25
WAMBERG FINANCIAL CORPORATION
Notes to Financial Statements
Years Ended December 31, 1998 and 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Depreciation
The company's policy is to depreciate the cost of the airplane over twelve years
by use of the straight-line method.
Income Taxes
The company has elected to be taxed as an S corporation under provisions of the
Internal Revenue Code. Accordingly, the accompanying financial statements do not
reflect income taxes associated with operations, except for state replacement
tax.
Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 - INDUSTRY OPERATIONS
The company is primarily engaged in the rental of its airplane to an entity that
is 100% owned by the stockholder of Wamberg Financial Corporation. The related
party pays for substantially all of the company's operating costs and
maintenance of the airplane as part of the rental agreement.
25
<PAGE> 26
THE WAMBERG ORGANIZATION, INC.
Statement of Cash Flows
Year Ended December 31, 1997
NOTE 3 - LONG-TERM DEBT
<TABLE>
<CAPTION>
1998 1999
---------------- ----------------
<S> <C> <C>
Note payable to the stockholder, payable in an initial monthly installment
of $20,369 of principal and interest, 106 monthly installments of $17,571
of principal and interest and a final installment of the remaining
principal and interest in 2006; interest at 2.2% plus the rate listed for
"1-Month" Commercial Paper (5.14% and 5.49% as of December 31, 1998 and
1997, respectively) $ 1,312,200 $ 1,412,876
Less current maturities (102,532) (100,676)
-------------- --------------
$ 1,209,668 $ 1,312,200
============== ==============
</TABLE>
The company has guaranteed debt owed to General Electric Capital Corporation (GE
Capital) by the stockholder in the amount of $1,375,303 as of December 31, 1998.
This subordinate stockholder debt is also collateralized by the company's
airplane.
In April of 1999, the company traded in the existing airplane on a new airplane.
In conjunction with the trade-in, the existing debt to stockholder was paid off
and replaced with a new financing arrangement with Banc One Leasing Corporation.
The stockholder in turn, paid off the GE Capital debt and the company guarantee
of such debt was removed. This transaction resulted in the recording of a new
airplane and debt in the amounts of $3,493,954 and $3,800,000, respectively. The
new note is collateralized by the newly purchased airplane and guaranteed by the
stockholder of the company. See Note 5.
Maturities on this new long-term debt as of April 1999 are as follows:
Year Ending December 31:
<TABLE>
<S> <C>
1999 $ 98,710
2000 156,794
2001 167,928
2002 179,853
2003 192,625
Later years 3,004,090
----------------
$ 3,800,000
================
</TABLE>
26
<PAGE> 27
THE WAMBERG ORGANIZATION, INC.
Statement of Cash Flows
Year Ended December 31, 1997
NOTE 4 - OPERATING LEASES
The scheduled future minimum rental payments to be received under the airplane
lease agreement were $168,000 and $28,000 for the years ending December 31, 1999
and 2000, respectively. Operating cost reimbursements included in income as part
of this agreement were $453,500 and $421,600 for the years ended December 31,
1998 and 1997, respectively. Base rental receipts were $168,000 in both years.
NOTE 5 - SUBSEQUENT EVENTS
In August of 1999, the stockholder of the company entered into an agreement to
sell the stock of the company to Clark/Bardes, Inc. for $50,000. The stockholder
of the company owned approximately 23.4% and 60% of Clark/Bardes, Inc. as of
December 31, 1998 and 1997, respectively. Upon the sale of the stock of the
company, Clark/Bardes, Inc. received consent from BancOne to transfer and become
guarantor of the debt as discussed in Note 3.
NOTE 6 - YEAR 2000 ISSUE (UNAUDITED)
The year 2000 (Y2K) issue is the result of computer programs using a two-digit
format, as opposed to four digits, to indicate the year. Such computer systems
will be unable to interpret dates beyond 1999, which could cause a system
failure or application errors, leading to disruptions in operations. The company
has done an internal review of its systems to determine major areas of exposure
to Y2K issues. The nature of the company's operations, rental of an airplane,
does not create vendor or supplier dependencies, which would require an external
review of such entities to determine Y2K exposure. The company believes that the
majority of its systems are Y2K-compliant and that any Y2K issues encountered
will not result in significant costs and/or interruption of business.
27
<PAGE> 28
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLARK/BARDES HOLDINGS, INC.
/s/ MELVIN G. TODD
------------------------------------------------
Melvin G. Todd
President
Date: October 4, 1999
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
23.1 Consent of Independent Public Accountants.
23.2 Consent of Independent Public Accountants.
23.3 Consent of Independent Public Accountants.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
[BLACKMAN KALLICK BARTELSTEIN, LLP LOGO]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the current
report of Clark/Bardes Holdings, Inc. (Form 8-K) of our report
dated January 29, 1999 relating to the financial statements of
The Wamberg Organization, Inc. for the year ended December
31, 1998.
/s/ BLACKMAN KALLICK BARTELSTEIN, LLP
Chicago, Illinois
September 15, 1999
<PAGE> 1
EXHIBIT 23.2
[BLACKMAN KALLICK BARTELSTEIN LOGO]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the current
report of Clark/Bardes Holdings, Inc. (Form 8-K) of our report
dated August 12, 1999 relating to the financial statements of
The Wamberg Organization, Inc. for the year ended December
31, 1997.
/s/ BLACKMAN KALLICK BARTELSTEIN,LLP
Chicago, Illinois
September 15, 1999
<PAGE> 1
EXHIBIT 23.3
[BLACKMAN KALLICK BARTELSTEIN, LLP LOGO]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the current
report of Clark/Bardes Holdings, Inc. (Form 8-K) of our report
dated August 24, 1999 relating to the financial statements of
The Wamberg Financial Corporation for the years ended
December 31, 1998 and 1997.
/s/ BLACKMAN KALLICK BARTELSTEIN, LLP
Chicago, Illinois
September 15, 1999
