<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to __________________
Commission file number 000-29342
---------
WADE COOK FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 91-1772094
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
14675 Interurban Avenue South
Seattle, Washington, 98168
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (206) 901-3000
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. Yes [x] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
64,224,685 shares of Common Stock, $0.01 par value, outstanding as of
May 14, 1998
<PAGE>
WADE COOK FINANCIAL CORPORATION
Form 10-Q
Index
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION Page
----
Item 1. Condensed Consolidated Balance Sheets
as of March 31, 1998 and December 31, 1997 . . . . . . . . . . . . 3
Condensed Consolidated Statement of Income
and Retained Earnings for the quarters ended
March 31, 1998 and March 31, 1997. . . . . . . . . . . . . . . . . 4
Condensed Consolidated Cash Flow Statements
for the quarters ended March 31, 1998 and March 31, 1997 . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation . . . . . . . . . . . . . . . . . . . . . . . 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk . . . . 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . .10
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . . . .11
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . . .11
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . .11
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . . .11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . .11
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements. (The notes to these financial statements are an
integral part hereof.)
Wade Cook Financial Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-----------------------------
<S> <C> <C>
Assets:
Current Assets:
Cash and cash equivalents $ 828,617 $ 540,763
Marketable securities 5,416,848 6,162,733
Receivables, trade 1,813,235 3,283,183
Inventory 2,005,408 1,312,366
Receivables, related parties 1,027,517 992,263
Other current assets 242,754 486,855
-----------------------------
Total Current Assets 11,334,379 12,778,163
-----------------------------
Property and equipment, net of depreciation 11,300,081 10,425,159
-----------------------------
Goodwill, net of amortization 3,148,154 2,637,669
-----------------------------
Other Assets:
Non-marketable investments 9,748,148 7,330,460
Receivables, related 5,055,302 3,892,505
Other 3,300,027 4,340,182
-----------------------------
Total Other Assets 18,103,477 15,563,147
-----------------------------
Total Assets $ 43,886,091 $ 41,404,138
-----------------------------
-----------------------------
Liabilities and Shareholders' Equity:
Current liabilities:
Current portion of long-term debt 1,104,437 1,445,000
Book overdrafts 2,017,468 2,156,305
Accounts payable and accrued expenses 6,345,445 6,450,485
Margin loans in investment accounts 1,482,093 2,766,824
Taxes payable 4,703,926 5,417,063
Deferred revenue 5,538,690 4,764,441
Payables, related parties 2,118,603 827,752
-----------------------------
Total Current Liabilities 23,310,662 23,827,870
Long-Term Debt 1,290,871 821,182
-----------------------------
Total Liabilities 24,601,533 24,649,052
-----------------------------
Minority Interest 1,055,001 687,945
-----------------------------
3
<PAGE>
Shareholders' Equity:
Preferred stock - -
Common stock 683,459 682,459
Paid-in capital 4,246,562 3,651,386
Prepaid advertising (500,000) (500,000)
Retained earnings 13,799,536 12,233,296
-----------------------------
Total Shareholders' Equity 18,229,557 16,067,141
Total Liabilities, Minority Interest, and Shareholders'
Equity $ 43,886,091 $ 41,404,138
-----------------------------
-----------------------------
</TABLE>
Wade Cook Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
March 31, March 31,
1998 1997
----------------------------
<S> <C> <C>
Revenues, net of returns and discounts $ 34,390,452 $ 18,588,388
----------------------------
Costs and expenses:
Costs of revenue 15,607,017 7,550,409
Selling, general and administrative 17,263,125 8,760,351
----------------------------
Total operating costs 32,870,142 16,310,760
----------------------------
Income from operations 1,520,310 2,277,628
Other income (expenses):
Gain (loss) on trading securities 857,695 (157,974)
Interest expense (136,352) (94,176)
Other 167,947 15,483
----------------------------
Income before income taxes 2,409,600 2,040,961
Provision for income taxes 843,360 713,986
----------------------------
Net income $ 1,566,240 $ 1,326,975
----------------------------
----------------------------
Earnings per share $ 0.02 $ 0.07
Weighted average number of common shares 64,345,923 20,072,592
</TABLE>
The notes to these financial statements are an integral part hereof.
4
<PAGE>
Wade Cook Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flow
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
March 31, March 31,
1998 1997
------------------------------
<S> <C> <C>
Cash provided by operations $ 3,372,375 $ 4,279,779
Cash used in investing activities (4,490,661) (5,849,351)
Cash used in financing activities:
Proceeds from issuance of subsidiary's minority interest - (53,505)
Net borrowings 1,406,140 1,477,610
------------------------------
Net increase (decrease) in cash $ 287,854 $ (145,467)
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
Notes to Interim Financial Statements
March 31, 1998
1. Basis for Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
three month period ended March 31, 1998 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1998.
For further information, refer to "Factors Affecting Future Results," and
to the financial statements and footnotes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
Certain items in the 1997 consolidated financial statements have been
reclassified to comply with the condensed consolidated financial statements
presentation for 1998.
2. Earnings per Share
Basic earnings per share are computed by dividing net income by the
weighted average number of common shares outstanding. The 1997 number of
shares and earnings per share have been restated to reflect the 3 for 1
stock splits in September and December of 1997.
3. Acquisitions
During 1998, Wade Cook Financial Corporation (WCFC) completed the
acquisition of Information Quest, Inc. (IQI), Quantum Marketing, Inc.
(QMI), Get Ahead Bookstores, Inc. (Get Ahead), and Publishers Distribution
Center, Inc. (PDC).
5
<PAGE>
In January 1998, the Company acquired IQI, a Nevada corporation, the
producer of the IQ Pager, which provides subscribers with paging service
for stock related information. WCFC exchanged 45,000 shares of restricted
common stock for 50,000 shares of IQI, representing all of the issued and
outstanding shares of IQI. On the date of acquisition, the market value of
the stock issued was $188,415. The acquisition was accounted for as a
purchase, resulting in assets of $475,408, liabilities of $156, and a
negative goodwill of $286,837.
In January 1998, WCFC acquired QMI, a Nevada corporation. QMI provides
local marketing through its website on the Internet and retail centers
located in Tacoma and Seattle, Washington and Newport Beach and Santa
Ana, California. QMI also provides consumers with online terminals with
access to stock market information through the Wealth Information Network.
WCFC exchanged 45,000 shares of restricted common stock for 24,000,000
shares of QMI, representing all of the authorized capital stock of QMI. On
the date of acquisition, the market value of the stock issued was $188,415.
The acquisition was accounted for as a purchase, resulting in goodwill of
$188,415.
In January 1998, WCFC acquired Get Ahead, a Nevada corporation, a retail
distributor of financial education, personal development, and inspirational
products, including books, audio tapes, and video tapes located in QMI
financial education centers. WCFC paid $1.00 for an assignment of all
interest, rights, and claims in Get Ahead.
In January 1998, WCFC acquired PDC, a distributor of books and other
publications focusing primarily on the Latter Day Saints and small
independent publisher markets. PDC is located in Salt Lake City, Utah.
WCFC exchanged 10,000 shares of restricted common stock for 91,500 shares
of common stock of PDC which represents all of the issued and outstanding
capital stock of PDC. On the date of acquisition, the market value of the
stock issued was $41,800. The acquisition was accounted for as a purchase,
resulting in assets of $133,764, liabilities of $644,513, and goodwill of
$475,696.
4. Pro-forma information
The following unaudited pro-forma financial information is presented for
the quarter ended March 31, 1998 and 1997, as if the IQI, QMI, Get Ahead,
and PDC acquisitions had been combined as of the beginning of the period.
IQI, QMI, Get Ahead, and PDC amounts represent historical values without
acquisition adjustments as described in Note 3.
<TABLE>
<CAPTION>
For the quarter ended March 31, 1998
Balance sheet WCFC IQI QMI Get Ahead PDC Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets $41,230,452 $1,589,069 $748,092 $184,714 $ 133,764 $43,886,091
Liabilities 22,863,917 273 832,690 260,140 644,513 24,601,533
Stockholder's equity 18,366,535 1,588,796 (84,598) (75,426) (510,749) 19,284,558
Income statement
- ----------------
Revenues 32,517,151 1,638,796 190,242 11,858 32,405 34,390,452
Expenses 31,587,451 765,377 274,841 87,285 109,258 32,824,212
--------------------------------------------------------------------------------------
Net income $ 929,700 $ 873,419 $(84,599) $(75,427) $ (76,853) $ 1,566,240
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
EPS $0.02
-----
-----
6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the quarter ended March 31, 1997
Balance sheet WCFC IQI* QMI* Get Ahead* PDC Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets $23,081,684 $-- $-- $-- $ 257,018 $23,338,702
Liabilities 17,612,494 -- -- 644,513 18,257,007
Stockholder's equity 5,469,190 -- -- -- (387,495) 5,081,695
Income statement
- ----------------
Revenues 18,588,388 -- -- -- 38,244 18,626,632
Expenses 17,261,413 -- -- -- 161,498 17,422,911
--------------------------------------------------------------------------------------
Net income 1,326,975 -- -- -- $ (123,254) $ 1,203,721
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
EPS $0.06
-----
-----
</TABLE>
* - The company had not begun operations as of March 31, 1997.
5. Pending litigation
On March 5, 1998, the Company was informed by the County of Fresno,
California, Office of the District Attorney Business Affairs Unit (BAU)
that the BAU believes the seminar sales contracts used by the Company in
California were not in compliance with sections 1678.20 through 1693 of the
California Civil Code, which provides for a notice of three day right of
cancellation on seminar sales solicitation contracts. The Company has
retained local counsel and has not yet determined any impact on its
financial statements. The Company has made no provision for losses, if
any. There have been no developments in this ongoing investigation.
On May 1, 1998, the Attorney General of Texas filed a Petition for An Order
to Show Cause in the District Court of Bexar County, Texas. The State of
Texas contends that WCFC has engaged in false, deceptive and misleading
acts and practices in the course of trade and commerce as defined in the
Texas Deceptive Trade Practices-Consumer Protection Act. The Company has
retained legal counsel and has not yet determined any impact on its
financial statements. The Company has made no provision for losses, if
any.
6. Commitments
In March 1998, the Company entered into an agreement to purchase the Best
Western McCarran House in Sparks, Nevada. The agreement provides for a
purchase price of $5,250,000 and assumption of a promissory note in
the amount of $3,475,205. The Company is committed to make improvements
and upgrades to the property at an estimated cost of $1,810,180. As of
March 31, 1998, WCFC has deposited $989,553, which has been recorded as
an investment in hotel properties.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
NOTE REGARDING FORWARD LOOKING INFORMATION
This Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as
7
<PAGE>
amended (the "Exchange Act"). The forward-looking statements contained herein
are subject to certain risks and uncertainties, including those discussed herein
and in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, that could cause actual results to differ materially from
those projected or discussed. Investors are cautioned not to place undue
reliance on these forward-looking statements, which reflect management's
analysis as of the date hereof. The Company undertakes no obligation to
publicly release the results of any revision to these forward-looking statements
that may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events
UNAUDITED BALANCE SHEET FOR THE PERIOD ENDED MARCH 31, 1998
Liquidity and Capital Resources
The Company's total assets increased to $43,886,091 at March 31, 1998,
compared to $41,404,138 at December 31, 1997. The Company's liabilities were
reduced to $24,601,533 at March 31, 1998, down from $24,649,052 at December 31,
1997. Stockholder's equity increased to $18,229,557 at March 31, 1998, up from
$16,067,141 at December 31, 1997, primarily due to the first quarter net income.
During the 1998 first three months, cash and cash equivalents increased by
$287,854 primarily due to the profitable quarter and reduction in receivables.
The marketable securities portfolio decreased to $5,416,848 at March 31, 1998,
down from $6,162,733 at December 31, 1997, primarily due to the sale of
securities.
Non-marketable investments increased from $7,330,460 at December 31, 1997
to $9,748,148 at March 31, 1998. The increase was primarily due to additional
investments in hotel properties. The Company's non-marketable investments
include the following:
<TABLE>
<CAPTION>
Investment
Description of Investment (in dollars)
Segment
- -----------------------------------------------------------------
<S> <C> <C>
Oil/gas Oil and gas properties $ 650,000
Hotel/motel Hotel and motel investments 5,311,414
Real estate Investments in land 1,856,303
Private companies Various industries 1,930,431
----------
Total $9,748,148
----------
----------
</TABLE>
Inventory, which consists primarily of books, tapes and supplies, increased
to $2,005,408 at March 31, 1998, up from $1,312,366 at December 31, 1997. The
increase can be attributed to the inventory held by subsidiaries which were
acquired during the last quarter of 1997.
Current liabilities decreased to $23,310,662 at March 31, 1998 from
$23,827,870 at December 31, 1997.
Results of Operations
Revenues for the three months ended March 31, 1998 were $34,390,452
compared to $18,588,388 for the same period ended March 31, 1997, an increase of
$15,802,064 or 85% for the quarterly period. The increase in revenues is
attributed to increase in advertising, marketing, and promotions; increase in
markets; and
8
<PAGE>
improved name recognition of Wade B. Cook, Wade Cook Seminars, and other
products bearing the aforementioned name.
The cost of revenues increased by $8,056,608 or 107% for the first quarter
of 1998 over the same period in 1997. During efforts to continue its growth,
the Company incurred additional expenses in creating and promoting new products
and services for future benefit. The Company incurred additional expenses of
about $2,000,000 in the first quarter of 1998 on special promotional materials
in addition to the budgeted amounts. Had the Company not incurred this
additional expense, cost of revenues would have been up 80% to coincide with the
85% increase in sales.
The 1998 first quarter income from operations was $1,520,310; a decrease of
$757,318 over the operating income of $2,277,628 recorded in the 1997 first
quarter. Although revenues rose 85%, the decrease in operating income can be
attributed to the losses incurred by many of the Company's newly acquired
subsidiaries.
Selling, general and administrative expenses increased by $8,502,774, from
$8,760,351 for the first quarter of 1997 to $17,263,125 for the first quarter of
1998. The increase was primarily due to increased advertising and payroll and
related expenses.
During the first quarter in 1998, gain on trading securities rose to
$857,695 up substantially from a loss of $157,974 from the same period in 1997.
The gain on trading securities was related to better management of the brokerage
accounts used by instructors to demonstrate trades during seminars, coupled with
an upturn in the stock and securities market during the first quarter of 1998
Effects of Inflation
The Company believes that inflation will not have a material effect on the
Company's results of operations.
Seasonality
The Company's business is not seasonal.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not Required.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
The following is a description of material pending legal proceedings to
which the Company or any of its subsidiaries is a party or which any of their
properties is subject:
INVESTIGATION BY THE U.S. SECURITIES AND EXCHANGE COMMISSION. The Company is
subject to a private investigation by the Securities and Exchange Commission
("SEC") in the Matter of Wade Cook Seminars, Inc. The SEC is investigating the
possible violation of Sections 5(a), 5(c) and 17(a) of the Securities Act,
Section
9
<PAGE>
1(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 203(a) and
206(1) and (2) of the Investment Advisers Act. The SEC has stated that the
investigation should not be construed as an indication by the SEC or its staff
that any violations of law have occurred, nor should it be construed as an
adverse reflection on the merits of the securities involved or on any person or
entity. The Company does not believe it or its executive officers and directors
have violated applicable laws, and the Company intends to continue to cooperate
with the investigation. The Company does not believe it or its executive officer
and directors have violated applicable laws.
INVESTIGATION BY THE STATE OF WASHINGTON. The Assistant Attorney General for
the State of Washington's Department of Financial Institutions, Securities
Division commenced an investigation of Mr. Cook, WCSI, and the Company in
September, 1996. Since that time, the State of Washington's Department of
Financial Institutions, Securities Division has issued subpoenas to Mr. Cook,
WCSI, the Company, the General Counsel, and the former General Counsel
requesting information related to the investigation. The Company has not been
informed as to basis for the State of Washington's investigation. The Company
does not believe it or its executive officer and directors have violated
applicable laws.
WADE COOK SEMINARS, INC. V. CHARLES MELLON, ANTHONY ROBBINS, OPTIONS
MANAGEMENT, INC. AND ROBBINS RESEARCH INTERNATIONAL, INC. On October 4, 1996,
WCSI and Mr. Cook filed a complaint in King County Superior Court, State of
Washington against Robbins Research International, Inc, Anthony Robbins, Charles
Mellon, and Options Management, Inc. seeking damages and injunctive relief for
unfair competition, misappropriation of trade secrets, breach of a non-compete
agreement, and inducement to breach the non-compete agreement. On November 26,
1997, WCSI and Mr. Cook's unfair competition and misappropriation of trade
secrets claims were dismissed in a hearing on a Motion for Summary Judgment
brought by the Defendant. The Company and Mr. Cook are appealing the decision to
the Ninth Circuit Court of Appeals. WCSI and Mr. Cook filed for a voluntary
dismissal on the non-compete issues and were granted a dismissal without
prejudice.
WADE B. COOK V. ANTHONY ROBBINS, ROBBINS RESEARCH INTERNATIONAL, INC. AND
CHARLES MELLON. On June 18, 1997, Mr. Cook filed a copyright infringement suit
in the United States District Court, Western District of Washington, against
Anthony Robbins and Robbins Research International, Inc. seeking damages and
injunctive relief. Charles Mellon, a former speaker for Wade Cook Seminars,
Inc., was added as a defendant on August 5, 1997. Mr. Cook alleges Anthony
Robbins copied or caused to be copied significant portions of his best selling
book, Wall Street Money Machine. Mr. Cook authored and copyrighted the book
which he claims defendants used in creating their new seminar entitled
"Financial Power". A trial is scheduled for September 28, 1998.
LITIGATION WITH ART AND ITEX. On February 4, 1998, WCFC filed a complaint
against Associated Reciprocal Traders, Ltd. ("ART") and its parent corporation,
ITEX, in the King County Superior Court, State of Washington in Seattle,
Washington. On the same day, Associated Reciprocal Traders, Ltd. filed a
complaint against WCFC in the King County Superior Court, State of Washington in
Kent, Washington. Both complaints have been consolidated and are related to a
dispute over the ownership of 1,800,000 shares of common stock that originally
was issued as 100,000 shares of common stock of WCFC on September 10, 1996 in
exchange for $500,000 worth of media credits for radio spots to Associated
Reciprocal Traders, Ltd. pursuant to an agreement dated December 29, 1995. A
trial date has been set in this matter for June 11, 1998.
COUNTY OF FRESNO. On March 5, 1998, the Company was informed by the County of
Fresno, California, Office of the District Attorney Business Affairs Unit (BAU)
that the BAU believes the seminar sales contracts used by
10
<PAGE>
the Company in California were not in compliance with sections 1678.20 through
1693 of the California Civil Code which provides for a notice of three day right
of cancellation on seminar sales solicitation contracts. WCFC currently
provides its customers seven days to cancel all sales contracts. The Company
has retained local counsel and is cooperating with the BAU to resolve the
matter. According to the BAU, potential penalties for such actions could include
restitution and civil penalties up to $2,500 for each violation. The Company has
not yet determined any impact on its financial statements and has made no
provision for losses, if any.
ATTORNEY GENERAL FOR THE STATE OF TEXAS. On May 1, 1998, the Attorney General
of Texas filed a Petition for An Order to Show Cause in the District Court of
Bexar County, Texas for the 288th Judicial District. The State of Texas
contends that WCFC has engaged in false, deceptive and misleading acts and
practices in the course of trade and commerce as defined in the Texas Deceptive
Trade Practices-Consumer Protection Act. The State of Texas contends that WCFC
is deceptive by failing to disclose the high degree of financial risk involved
in using its financial strategies, the actual losses suffered by WCFC itself in
using these strategies, the amount and percentage of total income earned by WCFC
from trading in securities, the falsity of some of the information posted on the
WIN bulletin board and disseminated at seminars, the superficial and incomplete
explanations of financial strategies provided at the seminars and on tapes, and
the use of the seminars to solicit sales rather than to educate. In addition,
the State of Texas alleges that WCFC represents on the WIN bulletin board that
stock trades have been transacted by the Company or Wade Cook personally, when
in fact, they have not. Moreover, the State of Texas contends that WCFC's sales
contracts fail to have the statutorily required notice of the three day right to
cancel. The petition seeks a temporary injunction, restitution and penalties
against the Company.
The Company currently provides its customers seven days to cancel all sales
contracts. The Company believes that it has not intentionally engaged in false,
deceptive and misleading business practices and has retained local counsel to
contest this lawsuit.
TEXAS UNAUTHORIZED PRACTICE OF LAW COMMITTEE. In March 1998, the District 4
Subcommittee of the Unauthorized Practice of Law Committee in the State of
Texas sent a request to Mr. Christopher M. Carde, the former General Counsel,
Mr. Dale E. Cook, a former employee, and United Support Association, Inc.
(USA). The Committee requested that the parties sign an agreement to
voluntarily cease and desist in activities which may constitute the
unauthorized practice of law. The Committee alleged that USA offered to set
up Nevada corporations, Living Trusts, Keogh Plans and Corporate Pension
Plans, Family Limited Partnerships, Massachusetts Business Trusts, and
Charitable Remainder Trusts. The Committee further alleged that USA advised
clients about legal structuring, legal advantages and legal strategies
associated with such entities, and provided specific proposals for
structuring an individual's assets and businesses. The Company declined to
enter into a voluntary cease and desist on behalf of the individuals named in
the request since they no longer work for the Company. The Company believes
that it has not engaged in the unlawful practice of law and has declined to
sign a voluntary cease and desist order. The Company can give no assurances
as to the possibility of future inquiries by the Committee or the outcome of
such inquiries.
OTHER PROCEEDINGS. The Company and its subsidiaries are also parties to various
legal proceedings arising in the ordinary course of business, none of which is
expected to materially affect the financial position, results of operation or
cash flow of the Company.
11
<PAGE>
Item 2. Changes in Securities.
On January 15, 1998, the Company issued 3,224,997 shares of restricted
common stock to the shareholders of Ideal Travel Concepts, Inc. (Ideal Travel)
for the acquisition of Ideal Travel.
In January 1998, the Company issued 13,675 shares of restricted common
stock to employees and management as a holiday bonus. Each employee on record
as of December 22, 1997 received 25 shares of restricted common stock. All
management personnel on record as of December 22, 1997 received 50 shares of
restricted common stock.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the quarter
covered by this report.
Item 5. Other Information.
WCFC announced a common stock repurchase program on February 26, 1998. As
of April 30, 1998, the Company had repurchased 134,000 shares of common stock in
the open market at varying prices.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27 - Financial Data Schedule - March 31, 1998
Exhibit 27.1 - Financial Data Schedule - December 31, 1997 - Restated
(b) Reports on Form 8-K
Wade Cook Financial Corporation filed a report on Form 8-K on
February 28, 1998.
12
<PAGE>
SIGNATURES
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.
Wade Cook Financial Corporation
May 14, 1998 /s/ Wade B. Cook
- ------------ -------------------------------------
(Date) Wade B. Cook, Chief Executive Officer
May 14, 1998 /s/ Wade B. Cook
- ------------ -------------------------------------
(Date) Wade B. Cook , Interim Chief Financial Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 828617
<SECURITIES> 5416848
<RECEIVABLES> 1813235
<ALLOWANCES> 0
<INVENTORY> 2005408
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