<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 June 30, 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.
64,238,678 shares of Common Stock, $0.01 par value, outstanding as of
June 22, 1998.
1
<PAGE>
WADE COOK FINANCIAL CORPORATION
Form 10-Q
Index
PART I. FINANCIAL INFORMATION Page
----
Item 1. Condensed Consolidated Balance Sheets
as of June 30, 1998 and December 31,1997. . . . . . . . . . .3
Condensed Consolidated Statement of Income
for the quarters and six month period ended
June 30, 1998 and June 30, 1997 . . . . . . . . . . . . . . .5
Condensed Consolidated Cash Flow Statements
for the six month period ended June 30, 1998
and June 30, 1997 . . . . . . . . . . . . . . . . . . . . . .6
Notes to Financial Statements . . . . . . . . . . . . . . . .6
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 . . . . . . . . . . . . . . . . . . . . . .9
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . 10
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders . . . . 10
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . 10
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>
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 974,832 $ 540,763
Marketable securities 4,448,047 6,162,733
Receivables, trade 1,725,453 3,283,183
Inventory 2,226,182 1,312,366
Receivables, related parties 1,075,797 992,263
Other current assets 2,303,193 486,855
----------- -----------
Total current assets 12,753,504 12,778,163
----------- -----------
Property and equipment, net of depreciation 12,053,768 10,425,159
----------- -----------
Goodwill, net of amortization 2,470,916 2,637,669
----------- -----------
Other assets:
Non-marketable securities 10,261,176 7,330,460
Receivables, related parties 4,589,675 3,892,505
Other 1,360,797 4,340,182
----------- -----------
Total other assets 16,211,648 15,563,147
----------- -----------
Total assets $43,489,836 $41,404,138
----------- -----------
----------- -----------
Liabilities and shareholders' equity:
Current liabilities:
Current portion of long-term debt 1,129,473 1,445,000
Book overdrafts 1,930,102 2,156,305
Accounts payable and accrued expenses 5,820,825 6,450,485
Margin loan in investment accounts 1,443,999 2,766,824
Taxes payable 4,603,744 5,417,063
Deferred revenue 5,631,245 4,764,441
Payables, related parties 3,044,420 827,752
----------- -----------
Total current liabilities 23,603,808 23,827,870
Long-term debt 778,042 821,182
----------- -----------
Total liabilities 24,381,850 24,649,052
----------- -----------
Minority interest 1,069,548 687,945
----------- -----------
Shareholders' equity
Preferred stock - -
Common stock 695,792 682,459
Paid-in capital 4,259,935 3,651,386
3
<PAGE>
Prepaid advertising (500,000) (500,000)
Retained earnings 14,070,626 12,233,296
----------- -----------
18,526,353 16,067,141
Less: common stock in treasury at cost:
234,000 shares 487,915 -
----------- -----------
Total shareholders' equity 18,038,438 16,067,141
----------- -----------
Total liabilities, minority interest, and shareholders'
equity $43,489,836 $41,404,138
----------- -----------
----------- -----------
</TABLE>
[This space intentionally left blank]
4
<PAGE>
Wade Cook Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
--------------------------------- ---------------------------------
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenue, net of returns and discounts $23,969,567 $24,814,099 $55,009,168 $40,472,440
----------- ----------- ----------- -----------
Costs and expenses:
Cost of revenue 9,024,213 9,225,631 22,407,381 15,255,346
Selling, general and administrative 14,665,806 9,162,750 31,326,400 16,962,046
----------- ----------- ----------- -----------
Total operating costs 23,690,019 18,388,381 53,733,781 32,217,392
----------- ----------- ----------- -----------
Income from operations 279,548 6,425,718 1,275,387 8,255,048
----------- ----------- ----------- -----------
Other income (expense):
Interest and dividends 175,216 54,342 351,814 102,820
Gain (loss) on trading securities (52,970) 744,220 804,725 498,746
Interest expense (164,965) (54,586) (301,317) (148,762)
Undistributed income (loss) from
hotel operations (252,011) - (252,011) -
Other 33,964 19,363 25,313 73,868
----------- ----------- ----------- -----------
Total other income (260,766) 763,339 628,524 526,672
----------- ----------- ----------- -----------
Income before income taxes 18,782 7,189,057 1,903,911 8,781,720
Provision for income taxes 6,574 2,515,819 666,369 3,073,251
----------- ----------- ----------- -----------
Income from continuing operations $ 12,208 $ 4,673,238 $ 1,237,542 $ 5,708,469
----------- ----------- ----------- -----------
Discontinued operations:
Income from operations of Entity
Planners, Inc. to be disposed of (net
of income taxes of $314,682 in 1998
and $313,808 in 1997) 243,504 291,393 584,410 582,786
Operating income of Entity Planners,
Inc. during phase-out period (net of
income tax of $8,280) 15,378 - 15,378 -
----------- ----------- ----------- -----------
258,882 291,393 599,788 582,786
----------- ----------- ----------- -----------
Net income $ 271,090 $ 4,964,631 $ 1,837,330 $ 6,291,255
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
5
<PAGE>
Earnings per share
Income from continuing operations $ - * $ 0.08 $ 0.02 $ 0.09
Income from discontinuing operations - 0.00 0.01 0.01
Income during phase-out period - - - -
----------- ----------- ----------- -----------
Net income $ - $ 0.08 $ 0.03 $ 0.10
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of shares 64,256,852 60,017,736 64,256,852 60,017,736
----------- ----------- ----------- -----------
</TABLE>
* - not meaningful
Wade Cook Financial Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flow
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------
JUNE 30, JUNE 30,
1998 1997
----------------------------
<S> <C> <C>
Cash provided by operations $ 5,826,907 $ 6,668,262
Cash used in investing activities (4,320,053) (3,640,075)
Cash used in financing activities:
Proceeds from issuance of subsidiary's minority interest - (72,655)
Net borrowings (1,072,785) (2,037,702)
----------------------------
Net increase in cash $ 434,069 $ 917,830
----------------------------
----------------------------
</TABLE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
1. BASIS FOR PRESENTATION
The accompanying unaudited condensed consolidated financial statements for
Wade Cook Financial Corporation ("WCFC" or the "Company") and its
subsidiaries 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 six month period ended June 30, 1998
are not necessarily indicative of the results that may be expected for the
year ending December 31, 1998. For further information, refer to the
financial statements and footnotes included in the Company's Annual Report
on Form 10-K as amended 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.
6
<PAGE>
In January of 1998, WCFC signed a letter of intent to purchase the common
stock of Publishers Distribution Center, Inc. (PDC). The Form 10-Q for the
period ended March 31, 1998 included the balance sheet accounts and results
of operations for Publishers Distribution Center, Inc. (PDC).
Subsequently, PDC failed to transfer shares under the letter of intent
whereby WCFC in July of 1998 withdrew from operations.
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 3:1 stock
splits in September and December of 1997.
3. DISCONTINUED OPERATIONS
On June 15, 1998, the Company adopted a formal plan to sell Entity
Planners, Inc. The anticipated disposal date is approximately July 1,
1998. No assets are expected to be sold in the disposal of Entity
Planners, Inc.
No estimated loss on disposal is expected, and the gain is not determinable
at this time.
Operating results of Entity Planners, Inc. for the six months ended June
30, 1998 are shown separately in the accompanying income statement. The
income statement for the six months ended June 30, 1997 has been restated
and operating results of Entity Planners, Inc. are also shown separately.
Net sales of Entity Planners, Inc. for the six months ended June 30, 1998
and June 30, 1997 are $6,102,263 and $5,860,094, respectively. These
amounts are not included in net sales in the accompanying income
statement.
The Company sold all of the common stock in its wholly owned subsidiary
Entity Planners, Inc., a Nevada corporation ("EPI") and licensed various
rights to the Company's intellectual property relating to entity
structuring, asset protection, estate planning and tax reduction to Berry,
Childers and Associates, an Arkansas limited liability company ("B&C")
pursuant to a Stock Purchase Agreement dated June 30, 1998. Said
intellectual property has been licensed from Mr. Cook.
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
This report on Form 10-Q for the period ending June 30, 1998 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 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 as amended 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 $43,489,836 at June 30, 1998
compared to $41,404,138 at December 31, 1997. The Company's liabilities were
reduced to $24,381,850 at June 30, 1998, down from $24,649,052 at December 31,
1997. Stockholder's equity increased to $ 18,038,438 at June 30, 1998, up
7
<PAGE>
from $16,067,141 at December 31, 1997, primarily due to the net income for
the period ending June 30, 1998. In addition, during the three months ended
June 30, 1998, the Company reacquired 234,000 shares of its common stock for
$487,915 (classified as treasury stock) pursuant to the Company's publicly
announced stock buy-back plan to repurchase up to 1,000,000 share of its
common stock.
The Company has current liabilities which exceed current assets by
$10,850,304, creating a current ratio of .54:1, partly due to the
classification of deferred revenue of $5,631,245. The Company anticipates
that existing cash, together with continued positive cash flow from
operations will provide the resources needed to satisfy the Company's working
capital requirement in subsequent periods.
During the first six months of 1998, cash and cash equivalents increased by
$434,069 primarily due to income from operations, the reduction of trade
receivables, and the selling of securities. Trade accounts receivables
decreased by $1,557,730, for the period ending June 30, 1998 compared to the
period ending December 31, 1997. The reduction in trade receivables is
attributed to a decrease in sales during the quarter ended June 30, 1998.
The marketable securities portfolio decreased to $4,448,047 at June 30,
1998, down from $6,162,733 at December 31, 1997, primarily due to the sale of
securities. Inventory, which consists primarily of books, tapes and
supplies, increased to $2,226,182 at June 30, 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. The
Company's other current assets increased by $1,816,338 at June 30, 1998
compared to December 31, 1997, primarily due to a deposit refund receivable
from the Company's former credit card processor totaling $2,050,000.
For the six months ended June 30, 1998, the Company increased its property,
plant and equipment by $1,628,609 (net of depreciation) from $10,425,159 for
the year ended December 31, 1997. The increase is primarily due to the purchase
of land and buildings in Memphis, Tennessee for its travel business, and Orange
County, California for one of its education centers. The building in Tennessee
will also produce rental income, as a portion of the office space is being
leased to unrelated parties.
Non-marketable investments increased from $7,330,460 at December 31, 1997
to $10,261,176 at June 30, 1998. The increase was primarily due to additional
investments in hotel properties. The Company's non-marketable investments at
June 30, 1998 include the following:
<TABLE>
<CAPTION>
INVESTMENT
SEGMENT DESCRIPTION OF INVESTMENT (IN DOLLARS)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Oil/gas Oil and gas properties $ 650,000
Hotel/motel Hotel and motel investments 5,552,240
Real estate Investments in undeveloped land 2,113,854
Private companies Various industries 1,945,082
-------------
Total non-marketable investments $10,261,176
-------------
-------------
</TABLE>
Current liabilities decreased to $23,603,808 at June 30, 1998 from
$23,827,870 at December 31, 1997. The Company continued to reduce long-term
commitments to $778,042 at June 30, 1998, down from $821,182 at December 31,
1997.
8
<PAGE>
RESULTS OF OPERATIONS
Revenues from continuing operations for the quarter ended June 30, 1998 are
$23,969,567 compared to $24,814,099 for the same period ended June 30, 1997, a
decrease of 3.40% for the quarterly period.
The cost of revenues decreased by $201,418 or 2.18% for the second
quarter ended June 30, 1998 over the same period in 1997. The decrease
corresponds to the decrease in sales over the same period.
Selling, general and administrative expenses increased by $5,503,056 from
$9,162,750 for the second quarter of 1997 to $14,665,806 for the second
quarter of 1998. The increase was primarily due to increased promotional
mailings, outside legal and accounting fees, and payroll and related expenses,
which were up 62%, 91%, and 62%, respectively.
The 1998 second quarter income from continuing operations was $12,208; a
decrease of $4,661,030 over the income from continuing operations of $4,673,238
recorded in the 1997 second quarter. The decrease in operating income can be
attributed to the losses incurred by many of the Company's newly acquired
subsidiaries. In addition, many of the Company's more recent investments have
been in hotel projects, which are either in the construction phase or are in the
initial year of operations.
During the second quarter in 1998, trading securities was down $52,970 for
the quarter, but was up $804,725 for the six months ended June 30, 1998. The
overall gain on trading securities was related to better management of the
brokerage accounts used by instructors to demonstrate trades during seminars,
coupled with general increases in the market prices of securities held by the
Company for the six months ended June 30, 1998.
EFFECT OF INFLATION
Management believes inflation will not have a significant effect on
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 previously unreported material threatened
or pending legal proceedings and updated information regarding previously
reported material threatened or pending legal proceedings to which the Company
or any of its subsidiaries is a party or which any of their properties is
subject:
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, ART filed a complaint against WCFC. Both
complaints have been consolidated and relate to a dispute over the ownership of
1,800,000 shares of WCFC that originally was issued to ART on September 10,
1996, in exchange for $500,000 worth of media credits for radio air spots
pursuant to an agreement dated December 29, 1995. ART is seeking to cause WCFC
to deliver the total 1,800,000 shares of WCFC to ART and to lift the stop
transfer order placed on the stock in 1997. A trial has been scheduled for
August of 1999.
9
<PAGE>
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.
Item 2. Changes in Securities.
On May 8, 1998, the Company issued or became obligated to issue 13,333
shares of restricted common stock to Max Tanner as consideration in part for
6,000,000 shares of the common stock, par value $.001, of Convenience Store
Specialties, Inc. The WCFC common stock was issued in reliance on an exemption
from registration of such stock contained in Section 4(2) of the Securities Act
of 1933, the rules and regulations promulgated thereunder by the Securities and
Exchange Commission, and the laws of the State of Nevada.
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.
The Company sold all stock in its wholly owned subsidiary Entity Planners,
Inc., a Nevada corporation ("EPI") and licensed various rights to the Company's
intellectual property relating to entity structuring, asset protection, estate
planning and tax reduction to Berry, Childers and Associates, an Arkansas
limited liability company ("B&C") pursuant to a Stock Purchase Agreement dated
June 30, 1998. The agreement provides for an aggregate purchase price of
$20,000,000 including $250,000 for the shares of EPI and $17,470,000 in
licensing fees payable to WCFC in the future. Mr. Cook will receive $2,280,000
of the purchase price for exclusively licensing the products listed in the
license to the purchasers. No advanced payments were paid by B&C. Under the
terms of the Agreement, B&C shall pay to WCFC an amount equal to seventy-five
percent (75%) of Net Sales as defined in the agreement or thirty percent (30%)
of Gross Sales during the term of the 5-year license up to a maximum price of
$20,000,000.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 10.45 - Share Exchange Agreement , dated January 1, 1998,
between WCFC & Quantum Marketing, Inc.
Exhibit 10.46 - Stock Assignment Agreement dated January 1, 1998,
between WCFC & Glendon H. Sypher.
Exhibit 10.47 - Contract for Sale of Real Estate dated
January 20, 1998 by and between Ideal Travel
Concepts, Inc. and/or assigns and Kenneth B.
Lenoir (re: acquisition of Memphis property).
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K.
None
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10-Q, period ending June 30, 1998 to be
signed on its behalf by the undersigned duly authorized.
Wade Cook Financial Corporation
August 7, 1998 /s/ Wade B. Cook
- --------------------- ---------------------------------------
(Date) Wade B. Cook, Chief Executive Officer
August 7, 1998 /s/ Cynthia Britten
- --------------------- ---------------------------------------
(Date) Cynthia Britten, Chief Accounting
Officer
11
<PAGE>
Share Exchange Agreement
THIS AGREEMENT (the "Agreement" and/or the "Share Exchange") is entered into on
the date signed below ("Agreement Date") and shall take effect as of January 1,
1998 ("Effective Date"), between Wade Cook Financial Corporation ("WCFC"), a
Nevada corporation, and Quantum Marketing, Inc., a Nevada corporation ("QMI").
REPRESENTATION
A. WCFC is a corporation organized and existing under the laws of the State of
Nevada.
B. The authorized capital stock of WCFC consists of One Hundred Forty Million
(140,000,000) shares of Common stock, par value $0.01, of which approximately
Sixty One Million Two Thousand Five Hundred Eighty Three (61,002,583) shares
are duly issued and outstanding as of the Agreement Date, and Five Million
shares of preferred stock, par value $ 10.00, none of which are issued and
outstanding.
C. The authorized capital stock of QMI consists of Twenty Four Million
(24,000,000) shares of Common stock, par value $0.001, of which all are issued
and outstanding as of the Agreement Date, and One Million (1,000,000) shares
Preferred stock, par value $0.001, none of which are issued and outstanding.
D. WCFC and QMI enter into this Agreement whereby WCFC will acquire all of the
issued and outstanding stock of QMI by issuing 45,000 restricted shares of
Common stock of WCFC to the shareholders of QMI in exchange for 24,000,000
shares of Common stock of QMI. WCFC and QMI intend the exchange to qualify
as a tax-free reorganization under Section 368(a)(1)(B) of the Internal Revenue
Code of 1986, as amended.
AGREEMENT
In consideration of the foregoing recitals, the covenants and conditions set
forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Share Exchange; Effectiveness
The shareholders of shares of Common Stock of QMI shall exchange all of their
shares for his or her proportionate share of 45,000 newly issued shares of
Common Stock of WCFC in accordance with the terms and conditions of this
Agreement. Upon the execution of this Agreement by QMI and WCFC and the receipt
by WCFC of all shares
Page 1
<PAGE>
issued in QMI, the date for the effectiveness of this Agreement (the "Effective
time of the Share Exchange") shall revert back to January 1, 1998.
2. Exchange of Shares; At the Effective Time of the Share Exchange:
A. Each shareholder of QMI shall be issued his or her proportionate share(s)
of fully paid and nonassessable common stock of WCFC as stated in section 1.
Each shareholder of QMI shall sign an Investment Letter attached hereto as
Exhibit A pursuant to Rule 144 upon receiving WCFC shares.
B. All shares of capital stock of QMI that are tendered to WCFC shall be
retained by WCFC and QMI shall become a wholly owned subsidiary of WCFC.
3. Shares in QMI
In the event QMI becomes a publicly traded company, Robert T. Hondel shall have
the option to exchange his shares in WCFC for shares in QMI, at the closing
price on the day before the date of exchange, for as long as legally possible,
but in no instance more than 90 days from the date of vesting or the date QMI
has shares available for trading, whichever is later.
4. Implementation
Each of WCFC and QMI shall take, or cause to be taken, all action or do, or
cause to be done, all things necessary, proper or advisable under the laws of
the State of Nevada to consummate and make effective the Share Exchange.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement as of the date first set forth above.
QUANTUM MARKETING, INC.
By: /s/ Robert T. Hondel /s/ Robert T. Hondel
Name: Robert T. Hondel Robert T. Hondel, under
Its: President Power of Attorney for Meda Ann Hondel
WADE COOK FINANCIAL CORPORATION
By: /s/ Wade B. Cook
Name: Wade B. Cook,
Its: Chairman and Chief Executive Officer
Page 2
<PAGE>
STOCK ASSIGNMENT AGREEMENT
THIS STOCK PURCHASE ASSIGNMENT (the "Assignment") for the transfer of all
interest in Get Ahead Bookstores, Inc., a Nevada corporation (the "Corporation")
is made effective January 1, 1998, between Wade Cook Financial Corporation, a
Nevada corporation ("Buyer") and Glendon H. Sypher, a resident of the State of
Washington ("Seller").
RECITALS
WHEREAS, the parties hereto desire to complete the Assignment upon the terms and
conditions hereinafter stated in order for the Corporation to become a wholly
owned subsidiary of the Buyer;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, it is agreed as follows:
AGREEMENT
1. Sale of Stock. Seller hereby agrees to assign all interests, rights and
claims in the Corporation to Buyer.
2. Purchase Price. The purchase price for the Assignment shall be One Dollar
and no cents ($1.00).
3. Operation of Business. Seller shall continue to manage and direct the
operation of the Corporation including service on the Board of Directors as
agreed under the terms and conditions set forth in the Employment Agreement
effective September 15, 1997 and/or as subsequently modified.
4. Representations and Warranties of Seller. Seller represents and warrants to
Buyer as follows:
a. Stock. Seller represents that none of the stock in the Corporation has
been issued, however, to the extent that there are any issued and
outstanding shares in the Corporation, Seller hereby assigns said interest to
Buyer.
5. Indemnification. Purchaser agrees to indemnify and hold Seller harmless
from and against all damages that Seller may suffer, sustain, incur or become
subject to whether directly or indirectly, arising out of, based upon,
resulting from or in connection with the operation of the Corporation or
ownership of the assets of the Corporation before the Closing Date, including
without limitation liabilities arising from the sale of products sold by
Seller before the Closing Date.
Page 1 of 3
<PAGE>
6. Survival of Representations and Warranties. Each party hereto covenants
and agrees that its representations and warranties contained in this
Agreement, and in any document delivered or to be delivered pursuant to this
Agreement in connection with Closing hereunder, shall survive Closing.
7. Successors. This Agreement shall inure to the benefit of and be binding
upon the parties hereto, their successors, heirs, personal representatives,
and assigns.
8. Notices. All notices, requests, demands, and other communications which are
required or may be given under this Agreement shall be in writing, unless
otherwise specified in this Agreement, and shall be deemed to have been duly
given if delivered personally or sent by certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Seller: Glendon H. Sypher
P.O. Box 553
Fall City, WA 98024
If to Buyer: Kiman Lucas, Esq.
General Counsel
Wade Cook Financial Corporation
14675 Interurban Avenue South
Seattle, WA 98168-4664
or to such other addresses any party shall have specified by notice in writing
to the other.
9. Applicable Law. This Agreement and the legal relations between the
parties hereto shall be governed by and in accordance with the law of the State
of Washington.
10. Attorney's Fees. In any action or proceeding brought by any party against
the other, the substantially prevailing party shall, in addition to other
allowable costs, by entitled to an award of reasonable attorney's fees.
11. Headings. The section and other headings contained in this Agreement
are for reference purposes only and shall not affect the meaning and
interpretation of this Agreement.
12. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument.
Page 2 of 3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
Assignor:
/s/ Glendon H. Sypher
Glendon H. Sypher
Assignee:
Wade Cook Financial Corporation
By: /s/ Wade B. Cook
Name: Wade B. Cook
Its: Chairman and Chief Executive Officer
Page 3 of 3
<PAGE>
[LETTERHEAD]
MEMPHIS, TENN., Jan. 20 1998
RECEIVED OF IDEAL TRAVEL CONCEPTS, INC. AND/OR ASSIGNS
the sum of $25,000.00 Dollars to be deposited with Escrow Agent upon
acceptance of contract as earnest money and in part payment for the purchase
of the following described real estate (called "Property") situated in the
County of Shelby, and State of Tennessee:
Office Building and commercial lot known municipally as 8650-8652 Macon
Road, Memphis, Shelby County, Tennessee, and all permanent improvements
thereon. Building contains approximately 16,000 square feet and lot
contains approximately 2 acres. Tax Parcel ID No. 091011 00018.
Seller covenants and agrees to sell and convey Property, with all
improvements thereon, or cause it to be conveyed, by good and sufficient
warranty deed, to Purchaser, or to such person or persons as Purchaser may
designate; Purchaser, however, shall not be released from any of Purchaser's
agreements and undertakings as set forth herein, unless otherwise stated; and
Purchaser covenants and agrees to purchase and accept Property for the total
price of ($1,425,000.00) One Million Four Hundred Twenty-Five Thousand and
No/100 Dollars, upon terms as follows:
All cash at closing of which the earnest money deposit is a part.
See attached Addendum "A" for other provisions of this contact.
Seller warrants plumbing, heating, electrical, and air conditioning systems
are in working order at the time of closing.
Seller agrees to have the above described property inspected by a licensed
and bonded termite control operator; have treated if infestation is found,
remedy and repair any insecurities in the visible foundation timbers caused by
termites or other wood destroying insects.
Closing to be on or before March 31, 1998. Possession of premises is to be
given at closing.
Rents, if any, and all taxes for the current year and interest (and FHA
Mortgage Insurance Premium, if any) upon any debt secured by Property and
assumed by Purchaser are to be prorated as of date of closing, and all prior
unpaid taxes or liens including front foot assessments are to be paid by
Seller, unless otherwise specified. Fire and any additional hazard insurance
premiums on the improvements on Property are to be prorated unless cancelled
(cancelled) (prorated) as of date of closing. If prorated, Purchaser is to
pay Seller the unearned premiums for such insurance. (It is recommended that
Seller notify his insurance company of the existence of this contract of sale.)
IF THIS CONTRACT REQUIRES FHA OR VA FINANCING, THE SELLERS AGREE TO PAY THE
DISCOUNT ON THE NEW LOAN, NOT TO EXCEED N/A %.
Title is to be conveyed subject to all restrictions, easements and covenants
of record, and subject to zoning ordinances or laws of any governmental
authority.
<PAGE>
The improvements on Property are to be delivered in as good condition as they
are as of the date of this contract, ordinary wear and tear excepted, and if
not in such condition when final settlement is made, Seller is obligated to
put them in such condition, or to compensate Purchaser for his failure to do
so, but in the event of destruction by fire, or otherwise, Seller's liability
shall in no event be more than the appraised value of the improvements so
destroyed.
Deferred payments, if any, are to be evidenced by promissory note(s) of
Purchaser payable on or before maturity, bearing interest at N/A per cent per
annum, and secured by a deed of trust on Property in the form generally used
by banks and title insurance companies in Memphis, Tennessee. Settlement and
payment of balance, if any, of cash payment shall be made upon presentation
of a good and valid warranty deed with the usual covenants and conveying a
good and merchantable title, after allowing fifteen days from completion of
title search or the delivery of abstracts for examination of title. At the
election of Purchaser, Seller agrees promptly to furnish, for examination only,
either title search or adequate abstracts of title, taxes, and judgments,
covering Property, or at Seller's option, a policy of title insurance by
STEWART TITLE COMPANY OF MEMPHIS for the amount of the above pruchase
price, insuring marketability of title and paid for by Seller. Adequate
abstracts of title, taxes and judgments are those required by STEWART TITLE
COMPANY OF MEMPHIS as the basis for the issuance of a policy of title
insurance. In the event of controversy regarding title, a title insurance
policy covering Property, issued by STEWART TITLE COMPANY OF MEMPHIS for the
above purchase price, shall constitute and be accepted by Purchaser as
conclusive evidence of good and merchantable title.
If the title is not good and cannot be made good within a reasonable time
after written notice has been given that the title is defective, specifically
pointing out the defects, then the above earnest money shall be returned to
Purchaser and the usual commission shall be paid to the undersigned Agent by
Seller. If the title is good and Purchaser shall fail to pay for Property as
specified herein, Seller shall have the right to elect to declare this
contract cancelled, and upon such election, the earnest money shall be
retained by and divided equally between Seller and Agent, as liquidated
damages and commission respectively, but in no event shall Agent's share
exceed the regular commission. The right given Seller to make the above
election shall not be Seller's exclusive remedy, and either party shall have
the right to elect to affirm this contract and enforce its specific
performance or recover full damages for its breach. Seller's retention of
such earnest money shall not be evidence of an election to declare this
contract cancelled, as Seller shall have the right to retain his portion of
earnest money to be credited against damages actually sustained. Seller
agrees to pay the undersigned Agent a commission of 4% of the sale price.
Unless otherwise specified herein such commission is to be paid in cash out
of the net proceeds of the sale at time of closing this transaction. Failure
to close shall not relieve Seller of his obligation to pay a commission as
provided herein. If property is being exchanged, each party hereto agrees to
furnish either title search or adequate abstracts of title and pay the Agent
the commission on the real estate each contracts herein to convey, and
otherwise fulfill obligations incumbent upon Seller as outlined above. Any
abstracts covering Property only will become the property of Purchaser
subject to rights of mortgage holder.
Seller is to pay for preparation of deed, recording of purchase money trust
deed, if any, title search or abstract, state tax and Register's fee on trust
deed, and notary fee on deed. Seller authorizes Agent to order title search
or abstract for which Seller agrees to pay. Purchaser is to pay for
preparation of note, or notes, and trust deed, notary fee on trust deed,
recording of deed, state tax and Register's fee on deed, and expense of title
examination or title insurance, if any. Seller and Purchaser are to share
equally in paying closing fee and loan transfer fee, if any, in connection
with transaction. If Purchaser obtains a loan on Property, he is to pay all
expenses incident thereto.
Should there be any tax, insurance or other accrual items on deposit with the
holder of any debt secured by Property and assumed by Purchaser, at the time
of closing Purchaser shall reimburse Seller therefor.
This instrument when signed only by the prospective Purchaser shall
constitute an offer which shall not be withdrawable in less than 48 hours
from the date hereof.
Purchaser accepts Property in its existing condition, no warranties or
representations having been made by Seller or Agent which are not expressly
stated herein.
As used herein, where applicable: "Seller" and "Purchaser" include the
plural; the masculine includes the feminine or neuter gender.
WITNESS the signatures of all parties the day and year above written.
<TABLE>
<S> <C>
Subject to clearance of any check given, IDEAL TRAVEL CONCEPTS, INC. A FLA. CORP.
the undersigned Agent acknowledges ----------------------------------------
receipt of the above mentioned earnest
money which is held in trust subject X/s/ Tracy A. Childers, President
to the terms of this contract. ----------------------------------------
TRACY A. CHILDERS, PRES. Purchaser
STEWART TITLE COMPANY OF MEMPHIS ----------------------------------------
By /s/ Dan Whipple X/s/ Kenneth B. Lenoir
----------------------------------- ----------------------------------------
Broker CRYE-LEIKE, INC. KENNETH B. LENOIR Seller
-----------------
Telephone (901) 758-5670
----------------------------
</TABLE>
[LOGO]
<PAGE>
ADDENDUM "A"
ADDENDUM "A" TO REAL ESTATE SALE CONTRACT BETWEEN IDEAL TRAVEL CONCEPTS, INC.
AND/OR ASSIGNS, PURCHASER AND KENNETH B. LENOIR, SELLER DATED JANUARY 20,
1998.
EARNEST MONEY DEPOSIT. Purchaser shall deposit $25,000.00 as earnest money
with Crye-Leike, Inc., Escrow Agent or with the Title company of Purchaser's
choice within twenty-four (24) hours after contract accepted by Seller and
Purchaser.
FINANCING CONTINGENCY. Contract contingent upon Purchaser obtaining
satisfactory financing for purchase of property. Purchaser shall have thirty
(30) days (unless extended in writing by both parties) from the effective
date of this contract to obtain satisfactory financing. Should Purchaser not
obtain satisfactory financing during this thirty (30) day period, Purchaser
shall notify Seller in writing, contract shall be null and void, earnest
money shall be refunded and neither party shall have any further obligation
to the other. When satisfactory financing is obtained, Purchaser shall
notify Seller in writing and both shall proceed to close on or before close
date above.
INSPECTION BY PURCHASER. Seller agrees Purchaser shall have forty five (45)
days (unless extended in writing by both parties) from the effective date of
this contract to inspect the property (the "Inspection Period"). During the
inspection period, Purchaser may elect to terminate this agreement for any
reason. Should Purchaser elect to terminate the contact during the inspection
period, contract shall be null and void, earnest money shall be refunded and
neither party shall have any further obligation to the other. As soon as
purchaser has completed its inspection of the property, it will notify Seller
in writing and both parties shall proceed to close by or before close date
above.
LEASE-BACK OF SPACE BY SELLER. Seller agrees to lease-back the 16,000 square
feet in the building for Seller's company from Purchaser under lease with the
following terms:
LESSEE: Mercantile Trust Company, Inc., a Tennessee Corporation;
LEASE INCEPTION DATE: Date of close of this sale contract;
TERM: Nine (9) months;
RATE: $14.00 per rentable square foot (Net Lease Basis);
NET LEASE: Lessee (Seller) pays all utilities, janitorial, building
insurance and real estate taxes, elevator and HVAC systems
regular maintenance, trash removal and grounds maintenance;
Lessor (Purchaser) responsible for maintenance and repair of
roof and exterior of building including parking lots;
OTHER TERMS: As agreed in lease document by both Seller and Purchaser
prior to sale close;
Page 1 of 2
<PAGE>
Lease-back document to be signed by both parties at closing and this lease to
become Addendum "B" to this contract.
SUB-LEASE BY PURCHASER. Seller agrees to sub-lease approximately 2000 square
feet on the first or second floor to Purchaser (Sub-lessee) for its travel
business under terms as follows:
SUB-LESSEE: Ideal Travel Concepts, Inc.;
INCEPTION DATE: Date of close of this sale contact;
TERM: Nine (9) months;
RATE: $16.00 per usable square foot full service basis;
OTHER TERMS: Sub-Leasee shall be given occupancy and use of the third
floor storage area of the building under this sub-lease to
build out as needed for additional offices. Other terms as
agreed in sub-lease document by Seller and Purchaser prior
to close. (SEE THIRD FLOOR BUILDING CODES BELOW)
Sub-Lease document shall be executed at close by Seller (Sub-lessor) and
Purchaser (Sub-lessee) and be attached to this contract as Addendum "C".
ATTACHMENTS WITH PROPERTY. Seller agrees the generator is part of the
property in this sale.
ENVIRONMENTAL. Seller warrants that it is not aware of any environmental
problems on the property or improvements. Should Purchaser's lender require
an environmental report(s), cost of report(s) shall be paid by Purchaser.
BUILDING CODES. Contract contingent upon property meeting all Memphis and
Shelby County building codes.
SURVEY. Purchaser shall obtain a survey of the property from a state licensed
survey not less than ten (10) days prior to closing. One-half (1/2) of cost
of survey shall be reimbursed to Purchaser by Seller at closing.
TIME IS OF THE ESSENCE. Time is of the essence with respect to this contract.
Contract contingent upon acceptance by both Seller and Purchaser by close of
business on January 28, 1998.
Seller and Purchaser were represented by Crye-Leike, Inc., Commercial
Division whose agent is Dan Whipple.
Executed multiple originals on this 28th day of January, 1998.
The effective date of this contract is 28th day of January, 1998.
X/s/ Tracy A. Childers - PRESIDENT X/s/ Kenneth B. Lenoir
- ------------------------------- -------------------------------
Purchaser Seller
EIN# 59-3193464 EIN# ###-##-####
-------------------------- --------------------------
THIRD FLOOR BUILDING CODES. Purchaser acknowledges and agrees that Purchaser
assumes total responsibility for city and county building codes on the third
floor and that any improvements to property by Purchaser after close will
meet all existing city and county building codes.
RECEPTION AREA FURNITURE. Seller and Purchaser agree that the furniture,
fixtures and decorations in the reception area and first floor hallway are
part of the property conveyed in this sale.
EXTERIOR REPAIRS TO BUILDING. Seller agrees to fill and seal any holes in
exterior surface of building and paint all external wood trim prior to
closing. Repairs not to exceed $10,000.00 dollars.
Page 2 of 2
<PAGE>
ADDENDUM "B"
ADDENDUM "B" TO REAL ESTATE SALE CONTRACT BETWEEN IDEAL TRAVEL CONCEPTS, INC.
AND/OR ASSIGNS, PURCHASER AND KENNETH B. LENOIR, SELLER DATED JANUARY 20,
1998.
FINANCING CONTINGENCY EXTENSION. Seller and Purchaser agree that the
financing contingency period shall be extended for fifteen (15) days or until
March 14, 1998.
Purchaser agrees to use its best efforts to remove both the FINANCING and
INSPECTION contingencies before MARCH 10, 1998. Purchaser shall notify
Seller in writing as soon as both contingencies have been removed and both
parties shall proceed to close on or before March 31, 1998
Agreed to this 26th day of February, 1998, in Memphis, Shelby County,
Tennessee.
PURCHASER SELLER
X/s/ Tracy A. Childers X/s/ Kenneth B. Lenoir
- ------------------------------- -----------------------------
Tracy A. Childers, President Kenneth B. Lenoir
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 974832 0
<SECURITIES> 4448047 0
<RECEIVABLES> 1725453 0
<ALLOWANCES> 0 0
<INVENTORY> 2303193 0
<CURRENT-ASSETS> 12753504 0
<PP&E> 12053768 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 43489836 0
<CURRENT-LIABILITIES> 23603808 0
<BONDS> 778042 0
0 0
0 0
<COMMON> 695792 0
<OTHER-SE> 17342646 0
<TOTAL-LIABILITY-AND-EQUITY> 43489836 0
<SALES> 0 0
<TOTAL-REVENUES> 55009168 40472440
<CGS> 22407381 15255346
<TOTAL-COSTS> 22407381 15255346
<OTHER-EXPENSES> 31326400 16962046
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 301317 148762
<INCOME-PRETAX> 1903911 8781720
<INCOME-TAX> 666369 3073251
<INCOME-CONTINUING> 1237542 5708469
<DISCONTINUED> 599,788 582786
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1837330 6291255
<EPS-PRIMARY> .028 .104
<EPS-DILUTED> .028 .104
</TABLE>
