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                                                  SECURITIES AND EXCHANGE COMMISSION
                                                        Washington, D.C. 20549

                                                               FORM 10-Q

                                           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                                                OF THE SECURITIES EXCHANGE ACT OF 1934
                                           For the quarterly period ended September 30, 2001
                                                     Commission File No. 000-24769

                                                          CLARK/BARDES, INC.
                                        (Exact name of Registrant as specified in its charter)

                           Delaware                           52-2103926
                  (State of Incorporation)          (I.R.S. Employer Identification No.)

                  102 South Wynstone Park Drive
                      North Barrington, Illinois                   60010
                  (Address of principal executive offices)      (Zip code)

                                             Registrant's telephone number: (847) 304-5800
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file suchreports), and (2) has been subject to such filing requirements for the past 90 days.  Yes[X]   No [  ]

As of November 12, 2001 there were 12,824,320 shares of common stock outstanding.

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                                                                                                 PAGE
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.....................................................................   4
     Condensed Consolidated Balance Sheets at September 30, 2001.................................   4
           and December 31, 2000
     Condensed Consolidated Statements of Income for the three...................................   5
          months and nine months ended September 30, 2001 and 2000
     Condensed Consolidated Statements of Cash Flows for the.....................................   6
           nine months ended September 30, 2001 and 2000
     Notes to Condensed Consolidated Financial Statements........................................   7

Item 2. Management's Discussion and Analysis of Financial........................................  15
             Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk...............................  36

PART II.  OTHER INFORMATION

Item 1. Legal Proceedings........................................................................   36

Item 4. Submission of Matters to a Vote of Security Holders......................................   36

Item 6. Exhibits and Reports on Form 8-K.........................................................   36

SIGNATURES.......................................................................................   37

EXHIBITS
     Index to Exhibits...........................................................................
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FORWARD-LOOKING STATEMENTS

     This Form 10-Q and the documents included or incorporated by reference in this Form 10-Q may contain forward-lookingstatements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.Such statements include statements as to expected renewal revenues, projected future results of operations, decreases in amounts ofamortization expense and other statements of a forward looking nature.  These statements are identified by words such as"anticipate", "believe", "estimate", "expect", "intend", "predict", or "project", and similar expressions, as they relate to us or ourmanagement.  When we make forward-looking statements, we are basing them on our management's beliefs and assumptions, usinginformation currently available to us.  These forward-looking statements are subject to risks, uncertainties and assumptions,including but not limited to the following:

- changes in tax legislation; federal and state regulations;our dependence on a select group of insurance companies;
- our dependence on key consultants and services of key personnel; our dependence on information processing systems and risk of errors or omissions;our dependence on persistency of existing business;
- risks associated with acquisitions; significant intangible assets;competitive factors and pricing pressures;
- our ability to achieve our earnings projections; and general economic conditions.
     If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect,actual results may vary materially from what we may have projected.  Any forward-looking statement you read in this Form 10-Qreflects our current views with respect to future events and are subject to these and other risks, uncertainties and assumptionsrelating to our business, results of operations, growth strategy and liquidity (including the risk and uncertainties described underthe caption "Risk Factors" in our Registration Statement filed on Form S-3 (333-72232) on October 26, 2001, as amended by AmendmentNo. 1 on November 2, 2001).  All subsequent written and oral forward-looking statements attributable to us or individuals acting onour behalf are expressly qualified in their entirety by this paragraph.  We disclaim any intent or obligation  to update or reviseany of the forward looking statements, whether in response to new information, unforeseen events, changed circumstances or otherwise.
PART 1. FINANCIAL INFORMATION-----------------------------------------------------------------------------------------------------------------------------                                            CLARK/BARDES, INC. AND SUBSIDIARIES                                           CONDENSED CONSOLIDATED BALANCE SHEETS                                                                               September 30,               December 31,                                                                                    2001                       2000                                                                                 Unaudited                   Audited                                                                                          (dollars in thousands                                                                                          except share amounts)                                                           ASSETSCurrent Assets   Cash and cash equivalents                                                  $          6,655         $        7,598   Accounts and notes receivable - net                                                  25,209                 31,134    Income tax refund receivable                                                         1,650                      -    Other current assets                                                                 3,664                  2,809   Deferred tax asset                                                                    1,530                  1,861                                                                             -------------------      -----------------------      Total Current Assets                                                              38,708                  43,402Intangible Assets - Net                                                                183,388                 165,373Equipment and Leasehold Improvements - Net                                              11,173                   8,376Other Assets                                                                             4,658                   2,704                                                                             -------------------      -----------------------      Total Assets                                                            $        237,927           $     219,855                                                                             ===================      =======================                                            LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities   Accounts payable                                                           $          2,572         $        10,786   Accrued liabilities                                                                  23,753                  17,664   Income taxes                                                                            351                   4,121   Deferred income                                                                         936                   1,180   Debt maturing within one year                                                        12,123                  11,968                                                                             -------------------      -----------------------      Total Current Liabilities                                                         39,735                   45,719Deferred Tax Liability                                                                   8,234                    7,228Deferred Compensation                                                                    2,595                    1,745Interest Rate Swap                                                                       1,205                        -Long Term Debt                                                                          64,013                   52,605Stockholders' Equity   Preferred stock          Authorized - 1,000,000 shares; $.01 par value, none issued                         -                        -   Common stock          Authorized - 20,000,000 shares; $.01 par value          Issued and outstanding - 12,824,320 in 2001 and 12,675,309 in 2000               128                      127    Paid in capital                                                                     90,724                   88,810    Retained earnings                                                                   32,498                   23,621    Other comprehensive loss (interest rate swap)                                       (1,205)                       -                                                                             -------------------      -----------------------Total Stockholders' Equity                                                             122,145                  112,558                                                                             -------------------      -----------------------Total Liabilities and Stockholders' Equity                                    $        237,927          $       219,855                                                                             ===================      =======================                           see accompanying notes to condensed consolidated financial statements                                                     Unaudited                                    CONDENSED CONSOLIDATED STATEMENTS OF INCOME                                                            Three Months Ended              Nine Months Ended                                                              September 30,                   September 30,                                                           2001            2000             2001          2000                                                               (dollars in thousands except share amounts)Total Revenue                                          $  43,922       $   34,645      $  153,427      $  90,156  Commission and fee expense                              13,972           11,757          53,998         30,669                                                      --------------- --------------  --------------  -------------Gross Profit                                              29,950           22,888          99,429         59,487                                                      --------------- --------------  --------------- -------------Operating Expenses   General and administrative                             24,053           17,357          73,320         46,484   Amortization                                            2,887            1,933           8,626          4,597   Acquisition integration                                     -              518               -            518                                                      --------------  -------------  --------------- --------------                                                          26,940           19,808          81,946         51,599                                                      --------------  -------------  --------------- --------------Operating Income                                           3,010            3,080          17,483          7,888Non-operating Income                                           -                -             119              -Interest   Income                                                    355               78             557            205   Expense                                                (1,561)          (1,485)         (4,501)        (3,310)                                                      --------------  -------------  --------------- --------------                                                          (1,206)          (1,407)         (3,944)        (3,105)                                                      --------------  -------------  --------------- --------------Income before taxes                                        1,804            1,673          13,658          4,783Income taxes                                                  39              514           4,779          1,674                                                      --------------  -------------  --------------- --------------Net Income                                             $   1,765       $    1,159     $     8,879      $   3,109                                                      ==============  =============  =============== ==============Basic Net Income per Common ShareNet income                                             $    0.14       $     0.11     $      0.70      $    0.31                                                      --------------  -------------  --------------- --------------Weighted average shares                                 12,781,935     10,697,924        12,739,727    10,099,451                                                      --------------  -------------  --------------- --------------Diluted Net Income per Common ShareNet income                                             $    0.13       $     0.11     $      0.68      $     0.30                                                      --------------  -------------  --------------- --------------Weighted average shares                                13,326,488      10,875,931        13,069,817    10,358,231                                                      --------------  -------------  --------------- --------------                         see accompanying notes to condensed consolidated financial statements                                                          Unaudited                                       CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                                            Nine Months Ended                                                                                              September 30,                                                                                        2001                    2000                                                                                          (dollars in thousands)Cash From Operating Activities - Net                                          $         18,225       $        10,475Investing Activities   Purchases of businesses                                                             (27,414)              (52,673)   Purchases of equipment - net                                                         (3,881)               (2,805)   Other                                                                                   300                (1,217)                                                                             -------------------------------------------------                                                                                       (30,995)              (56,695)                                                                             -------------------------------------------------Financing Activities   Proceeds from borrowings                                                             33,500                57,100   Repayment of borrowings                                                             (21,937)              (35,229)   Issuance of common stock - net                                                          264                25,915   Other                                                                                     -                  (221)                                                                             -------------------------------------------------                                                                                        11,827                47,565                                                                             -------------------------------------------------Increase (Decrease) in Cash                                                               (943)                1,345   Cash and Cash Equivalents at  Beginning of Period                                     7,598                 4,832                                                                             -------------------------------------------------   Cash and Cash Equivalents at  End of Period                                $          6,655       $         6,177                                                                             =================================================                            see accompanying notes to condensed consolidated financial statements                                                 CLARK/BARDES, INC. AND SUBSIDIARIES                                                               Unaudited                                         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                                          September 30, 2001                                   (Tables shown in thousands of dollars, except per share amounts)1.  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     The condensed consolidated financial statements include the accounts of Clark/Bardes, Inc. and our wholly ownedsubsidiaries.  Through our five operating segments, Compensation Resource Group, Banking Practice, Healthcare Group, CompensationConsulting, and Corporate Practice, we design, market and administer life insurance products, compensation, and benefit programs toU.S. corporations, banks and healthcare organizations.  We assist our clients in using customized life insurance products to financelong-term benefit liabilities and supplement and secure benefits for key employees, and provide compensation consulting services.

     The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generallyaccepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of RegulationS-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles forcomplete financial statements.  In our opinion, all adjustments, including normal recurring accruals, considered necessary for a fairpresentation have been included.  Operating results for the three month and nine month periods ended September 30, 2001 are notnecessarily indicative of the results that may be expected for the year ended December 31, 2001.

     The balance sheet at December 31, 2000 has been derived from the audited financial statements at that date but does notinclude all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

     For further information, refer to the consolidated financial statements and footnotes thereto included in our annual reporton Form 10-K for the year ended December 31, 2000.
2.  ACQUISITION OF LYONS COMPENSATION AND BENEFITS
     On August 31, 2001, we acquired the business and certain assets and assumed certain liabilities of Lyons Compensation &Benefits, LLC. ("Lyons").  Based in Waltham, Massachusetts, Lyons is an established regional firm in the insured benefits business inthe New England and Northeast markets.

     Lyons results have been combined with ours as of September 1, 2001 and will be reflected in the results of our CompensationResource Group.

     The purchase price paid at closing, not including expenses, was $6.0 million consisting of a cash payment of $5.0 million,borrowed under our line of credit, and 39,558 shares of our common stock having a market value of $1.0 million.  An additional $6.0million of contingent consideration shall be paid ratably during the years ended December 31, 2002 through 2005 if certain revenuetargets are met.  The payments shall be 75% in cash and 25% in our common stock.  These payments, when earned, will be accounted foras additional purchase price to be included in goodwill.

     At the time of the acquisition, Lyons had a net tangible asset value of $317,000 giving rise to an excess purchase price of$5.7 million.  The purchase price has not been finally determined pending the expiration of the escrow period and payment oftransaction expenses.  The entire excess purchase price has been allocated to the present value of future renewal revenues and willbe amortized over a period of thirty years.
3. ACQUISITION OF MANAGEMENT SCIENCE ASSOCIATES
     On July 24, 2001 we acquired the business and certain assets and assumed certain liabilities of Management ScienceAssociates, Inc. ("MSA").  Based in St. Louis, Missouri, MSA is a consultant to the health care industry and is expected to be animportant factor in the development of a larger client base for our Healthcare Group.

     MSA's results have been combined with ours since July 1, 2001 and will be reflected in the results of our Healthcare Group.The purchase price paid at closing, not including expenses was $4.6 million in cash, borrowed under our line of credit.  Additionalconsideration of $750,000 is payable if certain revenue objectives are met during the years ended December 31, 2001 through 2003.These payments, when earned, will be accounted for as additional purchase price to be included in goodwill.

     At the time of the acquisition, MSA had a net liability balance of $400,000 giving rise to an excess purchase price of $5.0million.  The purchase price has not been finally determined pending the expiration of the escrow period and the payment oftransaction expenses.  The entire excess purchase price has been allocated to goodwill.
4.  ACQUISITION OF COMPENSATION RESOURCE GROUP, INC.
     On September 6, 2000, we acquired all the issued and outstanding capital stock of Compensation Resource Group ("CRG") for atotal purchase price of $30.5 million, not including acquisition expenses, consisting of the following:
- a cash payment to the CRG selling shareholders of $11.4 million; the issuance of 596,463 shares of our common stock, having an aggregate value of $6.1 million based on the closing price onSeptember 5, 2000; andthe repayment of approximately $13.0 million of CRG's long-term debt.
     Acquisition expenses were $735,000.   The cash portion of the purchase price was borrowed under our acquisition and workingcapital credit facility.
     The acquisition of CRG has been accounted for as a purchase with $26.7 million of the purchase price allocated to thepresent value of inforce revenue and amortized over a period of thirty years and $11.6 million allocated to goodwill that has beenamortized over twenty years.  Goodwill amortization will cease on December 31, 2001 under new accounting rules (see Note 8).
     CRG is an executive compensation and benefits organization providing the design, marketing and administration ofnon-qualified benefit plans.  It is headquartered in Los Angeles, California and has affiliated offices in seven other cities.  Priorto the acquisition, we had no material relationship with CRG.
     Coincident with this acquisition, we entered into a bonus arrangement for certain key executives and employees of CRG.This arrangement will provide for the payment of bonuses of up to $20 million if certain stipulated financial objectives are achievedduring the years ended December 31, 2003 to 2005.
     The unaudited financial information below presents our results and CRG as if the acquisition had occurred on January 1, 2000.
                                                    September 30, 2000            September 30, 2000Pro Forma             Revenue...............................          $ 36,628                 $  111,340             Net income (loss).....................              (594)                       435             Diluted earnings (loss) per share.....              (0.05)                     0.04
5.  ACQUISITION OF PEARL MEYER & PARTNERS, INC.
     On June 21, 2000, we acquired all of the outstanding capital stock of Pearl Meyer & Partners, Inc. for a total purchase price of$25.9 million, not including expenses.  The purchase price consisted of a cash payment of $21.9 million and the issuance of 250,000shares of our common stock with a value of $4.0 million. Acquisition expenses were $720,000.  The cash portion of the purchase pricewas borrowed under our line of credit.
     The acquisition has been accounted for as a purchase and goodwill of $23.5 million has been amortized over twenty years.Amortization will cease on December 31, 2001 under new accounting rules (see Note 8).
     In addition to the initial purchase price, $2.0 million of additional cash consideration will be paid in the first quarter of2002 upon the achievement of a defined performance objective during the eighteen months subsequent to the purchase.  If made, thispayment will be accounted for as additional goodwill.
     Pearl Meyer is a New York City based consulting firm specializing in executive compensation and retention programs.  The PearlMeyer organization became our fourth operating division.  Prior to the acquisition, we had no material relationship with Pearl Meyer.
     The unaudited pro forma information below presents our results and Pearl Meyer & Partners as if the acquisition had occurred onJanuary 1, 2000.
                                                                                  September 30, 2000Pro Forma             Revenue....................................................................$ 96,453             Net income..............................................................      3,955             Diluted earnings per share...........................................          0.38
6.  INCOME TAXES
     As a result of a recent Circuit Court case allowing the deductibility of such expenses, we filed an amended Federal incometax return for the year ended December 31, 1998 for an additional deduction of $4.8 million expended in 1998 for the repurchase ofcertain put warrants.
     During an audit of our Federal income tax return for the years 1998 and 1999, the Internal Revenue Service approved ouramended return and approved a refund of approximately $1.7 million, before interest, for the years under audit of which $1.0 millionhad been collected as of November 7, 2001.  No other audit adjustments were made.
     The effect of this adjustment will be calculated in our tax accruals for the remainder of the year and will have the effectof reducing our effective tax rate to 35.0%.  Without the benefit of this refund, our normal tax rate would have been 40.7%.
7.  ASSET DISPOSITION
     We acquired Insurance Alliances Group in May 2000 with the intent of establishing it as our estate planning division.  Wewere unable to develop this business to the size and scope we contemplated at the time of its acquisition and on September 21, 2001,we sold substantially all of the assets of this business for $300,000.   However, we have retained and will continue to service theformer company's inforce revenue stream and maintain a production arrangement with the former business owner.
8.  RECENT ACCOUNTING PRONOUNCEMENTS
     FASB Accounting Standard - Derivatives and Hedging Activities
     As of January 1, 2001, we adopted Financial Accounting Standards Board Statement No. 133, (Accounting for DerivativeInstruments and Hedging Activities) issued in June 1998 together with its amendments, Statement 137, Accounting for DerivativeInstruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133 and Statement 138, Accounting forCertain Derivative Instruments and Certain Hedging Activities.  Collectively, these Statements require companies to recognize allderivatives as either assets or liabilities in the balance sheet and measure such instruments at fair value.
     If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are eitheroffset against the change in fair value of assets, liabilities, or firm commitments through earnings or recognized in othercomprehensive income until the hedged item is recognized in earnings.  The ineffective portion of a derivative's change in fair valueis immediately recognized in earnings.
     We entered into interest rate swaps to match floating rate with fixed rate interest payments periodically over the life ofour term loan agreement.  The interest rate swaps have been designated as cash-flow hedges and have been highly effective as ofSeptember 30, 2001.  At September 30, 2001, we had interest rate swap agreements outstanding with a notional principal amount of$39.0 million.  Changes in the fair value of derivatives that are highly effective and are designated and qualify as cash flow hedgesare recorded in other comprehensive income until earnings are affected by the variability of cash flows.
     Hedge ineffectiveness, determined in accordance with SFAS 133, had no impact on earnings for the nine months ended September30, 2001.  No cash flow hedges were derecognized or discontinued for the nine months ended September 30, 2001.  The adoption of theStandards had no significant impact on our financial position or results of operation for the three and nine months ended September30, 2001.
FASB Accounting Standard - Business Combinations
FASB Accounting Standard - Goodwill and Other Intangible Assets
     On June 27, 2001 the Financial Accounting Standards Board (FASB)  issued Statements of Financial Accounting Standards No.141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December15, 2001.  The new rules outlined in FAS 141 affect the allocations between goodwill and other intangible assets.
     With the adoption of FAS 142, goodwill will no longer be amortized but will be subject to annual impairment tests inaccordance with the Statements.  Other intangible assets will continue to be amortized over their useful lives.  Additionally,acquisitions consummated after June 30, 2001, will no longer be subject to amortization.
     We will apply the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of 2002.As a result of the application of the nonamortization provision of the FAS 142, our amortization expense is expected to be $4.0million less in 2002.  During 2002, we will perform the first of the required impairment tests of goodwill as of January 1, 2002 andhave not yet determined what the effect of these tests will be on our earnings and financial position.
9.  EARNINGS PER SHARE
     The following table sets forth the computation of historical basic and diluted earnings per share:
                                                    September 30,                    September 30,                                                 2001           2000            2001              2000                                                                 (dollars in thousands)Numerator:Net income for basic earnings per share      $  1,765       $  1,159        $  8,879          $   3,109                                            --------------- -------------- ----------------  ----------------Numerator for diluted earnings per share     $  1,765       $  1,159        $  8,879          $   3,109                                            =============== ============== ================  ================DenominatorDenominator for basic earnings per share -   weighted average shares                  12,781,935      10,697,924     12,739,727        10,099,451Effect of dilutive securities:   Stock options                               544,553         178,007        330,090           258,780                                           --------------- -------------- ----------------  ----------------Denominator for diluted earnings per share -   weighted average shares - diluted        13,326,488      10,875,931     13,069,817        10,358,231                                            =============== ============== ================  ================Per ShareBasic earnings                               $    0.14      $     0.11      $    0.70         $    0.31                                            =============== ============== ================  ================Diluted earnings                             $    0.13      $     0.11      $    0.68         $    0.30                                            =============== ============== ================  ================
10.  RISKS AND UNCERTAINTIES
     Federal tax laws create certain advantages for the purchase of life insurance products by individuals and corporations,therefore the life insurance products underlying the benefit programs we market are vulnerable to adverse changes in tax legislationand policy.
     During the past two years, a number of U.S. corporations have been faced with a significant income tax liability as a resultof Internal Revenue Service challenges and court rulings disallowing interest deductions related to a program known as a leveragedCOLI.  Although we stopped selling leveraged COLI programs in June 1997, this development may cause some existing holders ofleveraged COLI policies to surrender their policies, which could reduce the amount of renewal commissions or fees that we wouldrealize in the future.
     In addition, the Internal Revenue Service has begun an initiative with respect to certain aspects of split-dollar insuranceprograms known as "equity split-dollar."  Under this initiative, the individual insured could suffer adverse income tax consequencesover the term of the policy.  This policy could result in a reduction of revenue derived from the sale of such policies.
     For a discussion of additional risks and uncertainties affecting our business, financial condition and results ofoperations, see the disclosure under the caption "Risk Factors" in our Registration Statement filed on Form S-3 (333-72232) onOctober 26, 2001, as amended by Amendment No. 1 on November 2, 2001.
11.  SEGMENTS AND RELATED INFORMATION
     We have five reportable segments:
Compensation Resource Group
- Banking Practice Healthcare GroupCompensation Consulting
- Corporate Practice       On March 12, 2001, we acquired the assets and business of Rich, Florin/Solutions, Inc. and it became the fifth operatingsegment - Corporate Practice, specializing in technical and middle management compensation consulting.       On September 6, 2000, we acquired all of the outstanding common stock of Compensation Resource Group, Inc. (CRG) anindependent company specializing in the design, marketing and administration of non-qualified executive compensation plans usingcompany owned life insurance  products.  In acquiring CRG, we reorganized as follows:  The division formerly known as Clark/Bardes was renamed Compensation Resource Group and consists of a Los Angeles, California headquarterswith service centers in Dallas, Texas and Bethesda, Maryland.
- The bank owned life insurance product sold by the former Clark/Bardes division was transferred to the Banking Practice thus placing all of our bank ownedlife insurance business in one division, commencing January, 2001.       The Healthcare Group became a segment with the acquisition of Phynque, Inc. (doing business as MCG HealthCare) on April 5,1999.  Compensation Consulting became a segment with the acquisition of Pearl Meyer & Partners, Inc. on June 21, 2000.       The five reportable segments operate as independent and autonomous business units with a central corporate staff responsiblefor finance, strategic planning, and human resources.   Each segment  has its own client base as well as its own marketing,administration, and management.       We evaluate performance and allocate resources based on income from operations before income taxes, interest, or corporateadministrative expenses.  The accounting policies of the reporting segments are the same as those described in the summary ofsignificant policies.  There are no inter-segment revenues or expenses.                                                 September 30,               September 30,                                         -------------------------------------------------------                                             2001          2000         2001          2000                                         -------------------------------------------------------Revenues from External Customers     Compensation Resource Group          $15,013       $ 14,338     $ 66,354       $ 29,027     Banking Practice                      17,297         11,229       53,613         40,917     Healthcare                             7,293         5,996        18,709         16,844     Compensation Consulting                2,180         2,860         8,144          3,066     Corporate Practice                     2,139         -             6,607              -                                         -------------------------------------------------------      Total segments - reported            43,922        34,423       153,427         89,854     Reconciling items                          -           222             -            302                                         -------------------------------------------------------       Total consolidated - reported      $43,922        34,645       153,427       $ 90,156                                         =======================================================Operating Income     Compensation Resource Group          $   291         2,800         8,270        $ 4,431     Banking Practice                       4,386         1,698        14,787          8,137     Healthcare                               (34)          517          (431)           781     Compensation Consulting                 (426)          426           902            533     Corporate Practice                       675           -           2,431              -                                         -------------------------------------------------------       Total segments - reported            4,892         5,441        25,959          13,882     Corporate overhead                    (1,882)       (2,361)       (8,476)          (5,994)     Non-operating income                       -             -           119                -     Interest - net                        (1,206)       (1,407)       (3,944)          (3,105)                                         -------------------------------------------------------      Income before taxes                 $ 1,804       $ 1,673      $ 13,658         $  4,783                                         =======================================================Depreciation and Amortization     Compensation Resource Group          $ 1,750           947         4,692         $  2,203     Banking Practice                         383           377         1,749            1,119     Healthcare                               818           622         2,363            1,863     Compensation Consulting                  440           389         1,201              424     Corporate Practice                       140           -             325                -                                         -------------------------------------------------------      Total segments - reported             3,531         2,335        10,330            5,609     Reconciling items                         50            78           169              154                                         -------------------------------------------------------      Total consolidated - reported       $ 3,581       $ 2,413      $ 10,499         $  5,763                                         =======================================================                                                                    September 30    December 31,Identifiable Assets                                                     2001             2000     Compensation Resource Group                                      $   84,224      $  83,964     Banking Practice                                                     61,815         65,156     Healthcare                                                           40,386         33,768     Compensation Consulting                                              27,850         29,627     Corporate Practice                                                   12,798              -                                                                    ----------------------------      Total segments - reported                                          227,073        212,515     Deferred tax asset                                                    1,530          1,861     Holding company assets - non-operating                                9,324          5,479                                                                    ----------------------------      Total consolidated - reported                                   $  237,927      $ 219,855                                                                    ============================Capital Expenditures     Compensation Resource Group                                      $    1,452       $   1091     Banking Practice                                                        482           1161     Healthcare                                                              972            663     Compensation Consulting                                                 849            550     Corporate Practice                                                      123             32                                                                    ----------------------------      Total segments - reported                                            3,878          3,497     Reconciling items                                                         3              -                                                                    ----------------------------       Total consolidated - reported                                  $    3,881      $   3,497                                                                    ============================  12.  SUBSEQUENT EVENT       On October 26, 2001 (amended by Amendment No. 1 on November 2, 2001), we filed a registration statement with the Securitiesand Exchange Commission ("SEC") for the sale of 3,625,000 shares of common stock.  Of these shares, 3.0 million will be sold by usand 625,000 by existing shareholders.  In addition, we have granted the underwriters an option to purchase up to 543,750 additionalshares.  We expect our share of the net proceeds from this offering (excluding the underwriters' option) to be approximately $62.7million based on our closing price of $22.22 per share on November 1, 2001.  The entire amount of the proceeds that we will receivefrom the offering will be used to repay bank debt.  ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  (Tables shown in thousands of dollars, except per share amounts)       The following discussion and analysis of our financial condition and results of operations should be read in conjunctionwith our financial statements, the notes thereto and other information appearing elsewhere in this Form 10-Q.  Overview       Net income for the quarter ended September 30, 2001 was $1.8 million or $0.13 per diluted share representing a 52.3%increase over net income of $1.2 million or $0.11 per diluted share in the comparable quarter of 2000.  For the three months endedSeptember 30, 2001, net income was positively affected by an income tax refund that reduced our effective tax rate to 35.0% for theyear and contributed $0.05 to third quarter earnings per share.  For the first nine months of 2001, our net income was $8.9 millionor $0.68 per diluted share, an increase of 185.6% over the reported net income of $3.1 million or $0.30 per diluted share for thenine months ended September 30, 2000.  Acquisitions  **Lyons Compensation and Benefits**       On August 31, 2001, we acquired the business and certain assets and assumed certain liabilities of Lyons Compensation &Benefits, LLC. ("Lyons").  Based in Waltham, Massachusetts, Lyons is an established regional firm in the insured benefits business inthe New England and Northeast markets.       Lyons results have been combined with ours as of September 1, 2001 and will be reflected in the results of our CompensationResources Group.       The purchase price paid at closing, not including expenses, was $6.0 million consisting of a cash payment of $5.0 million,borrowed under our line of credit, and 39,558 shares of our common stock having a market value of $1.0 million.  An additional $6.0million of contingent consideration shall be paid ratably during the years ended December 31, 2002 through 2005 if certain revenuetargets are met.  The payments shall be 75% in cash and 25% in our common stock.  These payments, when earned, will be accounted foras additional purchase price to be included in goodwill.       At the time of the acquisition, Lyons had a net tangible asset value of $317,000 giving rise to an excess purchase price of$5.7 million.  The purchase price has not been finally determined pending the expiration of the escrow period and payment oftransaction expenses.  The entire excess purchase price has been allocated to the present value of future renewal revenues and willbe amortized over a period of thirty years.  **Management Science Associates**       On July 24, 2001 we acquired the business and certain assets and assumed certain liabilities of Management ScienceAssociates, Inc. ("MSA").  Based in St. Louis, Missouri, MSA is a consultant to the health care industry and is expected to be animportant factor in the development of a larger client base for our Healthcare Group.       MSA's results have been combined with ours since July 1, 2001 and will be reflected in the results of our Healthcare Group.The purchase price paid at closing, not including expenses was $4.6 million in cash, borrowed under our line of credit.  Additionalconsideration of $750,000 is payable if certain revenue objectives are met during the years ended December 31, 2001 through 2003.These payments, when earned, will be accounted for as additional purchase price to be included in goodwill.       At the time of the acquisition, MSA had a net liability balance of $400,000 giving rise to an excess purchase price of $5.0million.  The purchase price has not been finally determined pending the expiration of the escrow period and the payment oftransaction expenses.  The entire excess purchase price has been allocated to goodwill.  **Compensation Resource Group, Inc.**       On September 6, 2000, we acquired all the issued and outstanding capital stock of Compensation Resource Group ("CRG") for atotal purchase price of $30.5 million, not including acquisition expenses, consisting of the following:  a cash payment to the CRG selling shareholders of $11.4 million;
- the issuance of 596,463 shares of our common stock, having an aggregate value of $6.1 million based on the closing price on September 5, 2000; and the repayment of approximately $13.0 million of CRG's long term debt.
     Acquisition expenses were $735,000. The cash portion of the purchase price was borrowed under our acquisition and workingcapital credit facility.

     The acquisition of CRG has been accounted for as a purchase with $26.7 million of the purchase price allocated to thepresent value of inforce revenue and amortized over a period of thirty years and $11.6 million allocated to goodwill, which will beamortized over twenty years.  The allocation includes $7.1 million of net deferred tax liabilities arising from the portion of thepurchase price that will not be deductible for federal income tax purposes.

     CRG is an executive compensation and benefits organization that provides the design, marketing and administration ofnon-qualified benefit plans.  It is headquartered in Los Angeles, California and has affiliated offices in seven other cities.  Priorto the acquisition, we had no material relationship with CRG.

     Coincident with this acquisition, we entered into a bonus arrangement for certain key executives and employees of CRG.  Thisarrangement will provide for the payment of bonuses of up to $20 million if certain stipulated financial objectives are achievedduring the years ended December 31, 2003 to 2005.

     The unaudited financial information below presents the results of CRG and ourselves as if the acquisition had occurred onJanuary 1, 2000.
                                                        September 30, 2000             September 30, 2000Pro Forma             Revenue...............................         $ 36,628                   $ 111,340             Net income (loss).....................             (594)                        435             Diluted earnings (loss) per share.....             (0.05)                      0.04
**Pearl Meyer & Partners, Inc.**

     On June 21, 2000, we acquired all of the issued and outstanding capital stock of Pearl Meyer & Partners, Inc. for a totalpurchase price of $25.9 million, not including expenses.  The purchase price consisted of a cash payment of $21.9 million and theissuance of 250,000 shares of our common stock with a value of $4.0 million.  Acquisition expenses were $720,000.  The cash portionof the purchase price was borrowed under our line of credit.

     The acquisition has been accounted for as a purchase and goodwill of $23.5 million has been  amortized over a twenty-yearperiod.  Amortization will cease on December 31, 2001.

     In addition to the initial purchase price, $2.0 million of additional cash consideration will be paid in the first quarterof 2002 upon the achievement of a defined performance objective during the eighteen months subsequent to the purchase.  If made, thispayment will be accounted for as additional goodwill.

     Pearl Meyer is a New York City based consulting firm specializing in executive compensation and retention programs.  ThePearl Meyer organization became our fourth operating division.  Prior to the acquisition, we had no material relationship with PearlMeyer.

     The unaudited pro forma information below presents the results of Pearl Meyer & Partners and ourselves as if the acquisitionhad occurred on January 1, 2000.
                                                                                     September 30, 2000Pro Forma             Revenue...............................                                     $ 96,453             Net income............................                                        3,955             Diluted earnings per share............                                         0.38
**Earnings Guidance**

     Set forth below is a comparison of our actual results for the three months ended September 30, 2001 compared to the guidancepreviously provided.
                                                                  September 30, 2001                                                              -------------------------------------                                                                   Actual           Guidance                Revenue                     First year                                 $   25,784       $     29,300                     Renewal and fees                               18,138             17,900                                                                ------------     -------------                         Total                                      43,922             47,200                                                                ------------     -------------                Gross profit                                        29,950              33,000                                                                ------------     -------------                Earnings before interest, taxes and                     amortization                                    5,897              6,500                                                                ------------     -------------                Net income                                       $   1,765        $     1,600                                                              =====================================                Diluted shares outstanding                      13,326,488         13,500,000                Diluted earnings per share                      $     0.13        $      0.12
     Set forth below is an update of our previously published forecasts of our expected results of operations for the quarterending and the years ending December 31, 2001 and 2002.  All of the data in the following table constitute forward-lookinginformation within the meaning of Section 27A of the Securities Acts of 1933 and Section 21E of the Securities Exchange Act of 1934.These forward looking statements are subject to the risks, uncertainties and assumptions described on page 11 hereof and under thecaption "Risk Factors" in our Registration Statement filed on Form S-3 (333-72232) on October 26, 2001 as amended by Amendment No. 1on November 2, 2001.
                                  --------------------------------------------------------------------                                  March 31, (A)   June 30 (A)      September 30(A)      December 31       2001         2002 *Revenue     First year                        $  40,132      $   26,790            $   25,784     $   41,200   $ 133,906     $ 161,700     Renewal and fees                     25,905          16,678                18,138         23,900      84,621        94,000                                       ---------      ----------            ----------     ----------   ---------     ---------         Total                            66,037          43,468                43,922         65,100     218,527       255,700                                        ---------      ----------            ----------     ----------   ---------     ---------Gross profit                              39,081          30,398                 29,950        44,700     144,129       169,800                                        ---------      ----------            ----------     ----------   ---------     ---------Earnings before interest, taxesand amortization                          14,431           5,781                  5,897        18,600      44,709        52,000                                        ---------      ----------            ----------     ----------   ---------     ---------Net income                             $    6,124       $    900              $   1,765    $    9,600    $ 18,479        21,600                                        ---------      ----------            ----------     ----------   ---------     ---------Diluted shares outstanding             12,783,715     13,021,962             13,326,488     13,600,000  13,400,000    13,700,000Diluted earnings per share             $     0.49       $   0.07              $    0.13     $     0.71   $    1.38       $  1.58Contributions by Group     Revenue         Corporate Benefits                                                                                     38%           38%         Banking Practice                                                                                       41%           39%         HealthCare Compensation                                                                                12%           12%         Compensation Consulting                                                                                 9%           11%     Earnings before interest,taxes and         Amortization         Corporate Benefits                                                                                     32%           35%         Banking Practice                                                                                       75%           57%         HealthCare Compensation                                                                                 4%           10%         Compensation Consulting                                                                                12%           19%         Holding Company                                                                                       -23%          -21%(A)  Represents the actual operating results for the quarter.
     *We expect a positive impact to net income and earnings per share in 2002 from the recently issued FASB Statement No. 142, which willaffect reported amortization expense.  The impact of the adoption of this Statement is not reflected in our current earnings guidance.

     The above forward looking statements are based on the beliefs of management and the information currently available and arenot an assurance of future performance.  These forward looking statements are based on a number of assumptions by management,including, without limitation; there will be no change in tax laws, regulations or enforcement policies of the Internal RevenueService, that our acquisitions will be successful, that general economic conditions will not decline from current levels and that ouroverall persistency rates will remain at levels consistent with historic levels.  The foregoing assumptions are inherently subject tosignificant business, economic, competitive, regulatory and other risks and uncertainties, many of which are beyond our control, andupon assumptions with respect to future business decisions that are subject to change.  Forecasts are necessarily speculative innature, and it can be expected that some or all of the assumptions underlying the forecasts will not materialize.  We cannot assureyou that the forecasts will be realized, and actual result may be materially higher or lower than the forecasts.  Consequently, theinclusion of the forecasts in this 10-Q should not be regarded as a representation by us or any other person that the forecastedresults will be achieved.  Because of such risks and uncertainties and the possibility that one or more of our assumptions may beincorrect, you should not rely on the above forward looking statements in making any investment decision whether to buy, hold or sellany of our securities.

**Revenue Sources and Recognition**

     Our operating units derive their revenue primarily from:
- commissions paid by the insurance companies issuing the policies underlying our benefit programs; program design and administrative service fees paid by our clients; andexecutive compensation and benefit consulting fees.
     Our commission revenue is normally long term and recurring, is typically paid annually and usually extends for a period often years or more after the sale.  Commissions paid by insurance companies vary by policy and by program and represent a percentageof the premium or the cash surrender value of the insurance policies underlying the program.
First Year Revenue.  First year revenue is derived from two principal sources; (a) the commission we earn when the clientfirst purchases the policies.  It is the financial result of our sales efforts and revenue is recognized at the time theapplication is substantially completed, the client is contractually committed to purchase the insurance policies and thepremiums are paid, by the client, to the insurance company; and (b) fees for the services we perform in advising ourclients on their executive compensation programs.  These fees are based on a rate per hour arrangement and are earnedwhen the service is rendered and billed to the client.
- Renewal Commission Revenue.  Renewal revenue is the commission we earn based on the premiums on the policies underlying thebenefit programs we have sold in prior years.  Renewal revenue is recognized on the date that the renewal premium is dueor paid to the insurance company depending on the type of policy. Other Revenue.  Other revenue consists mostly of fees we charge our clients for the administration of their benefit program.
     All fees are recorded as revenue as they are earned in accordance with the governing agreement.
                                                   Three Months Ended                          Nine Months Ended                                                      September 30,                              September 30,                                             2001            2000       % Change        2001             2000      % ChangeTotal revenue                            $  43,922        $  34,645       26.8     $   153,427      $   90,156       70.2Commission and fee expense                  13,972           11,757       18.8          53,998          30,669       76.1                                       ----------------------------------         ----------------------------------Gross profit                                29,950           22,888       30.9          99,429          59,487       67.1                                       ----------------------------------         ----------------------------------General and administrative expenses         24,053           17,357       38.6          73,320          46,484       57.7Amortization                                 2,887            1,933       49.4           8,626           4,597       87.6Acquisition expenses                             -              518     (100.0)              -             518      (100.0)                                       ----------------------------------         ----------------------------------Operating income                             3,010            3,080       (2.3)         17,483           7,888       121.6Non-operating income                             -                -          -             119               -       100.0Interest income                                355               78      355.1             557             205       171.7Interest expense                            (1,561)          (1,485)       5.1          (4,501)         (3,310)       36.0                                       ----------------------------------         ----------------------------------Income before taxes                          1,804            1,673        7.8          13,658           4,783       185.6Income taxes                                    39              514      (92.4)          4,779           1,674       185.5                                       ----------------------------------         ----------------------------------Net income                                $  1,765         $  1,159       52.3      $    8,879       $   3,109       185.6                                       ==================================         ==================================Per diluted common share:     Net income                           $   0.13         $   0.11       18.2      $     0.68       $    0.30        126.7     Weighted average shares               13,326,488       10,875,931    22.5        13,069,817      10,358,231      26.2
     The tables that follow present the operating results of our four major operating groups for the quarter and nine months endedSeptember 30, 2001 and 2000.
                                          Three Months Ended                         Nine Months Ended                                             September 30,                             September 30,                                         2001           2000                      2001            2000Revenue     First year                      $   3,323       $    6,020              $   29,369       $     11,324     Renewal                            11,690            8,318                  36,985             17,703                                    --------------------------------         ----------------------------------       Total                            15,013           14,338                  66,354             29,027Commission expense                       6,916            7,326                  33,469             13,905                                    --------------------------------         ----------------------------------Gross profit                             8,097            7,012                  32,885             15,122         % of revenue                     53.9%            48.9%                   49.6%              52.1%                                    --------------------------------         ----------------------------------Expenses    General and administrative           6,237            3,757                  20,532              9,855         % of revenue                     41.5%            26.2%                   30.9%              34.0%    Amortization of intangibles          1,569              455                   4,083                836         % of revenue                     10.5%             3.2%                    6.2%               2.9%                                    --------------------------------         ----------------------------------Operating income/(loss)                 $  291      $     2,800               $   8,270        $      4,431         % of revenue                      1.9%            19.5%                   12.5%               15.3%                                    ================================         ==================================
     Our Compensation Resource Group now consists of the original non-banking business as well as the non-banking revenues fromthe Schoenke, Wiedemann & Johnson, Wamberg Organization, and CRG acquisitions.  The CRG acquisition was included in the three monthsended September 30, 2001 results compared to one month for the three months ended September 30, 2000 results.

     In order to streamline the focus of this group on non-bank corporate benefits, the banking business was transferred to theBanking Practice Group, effective January 1, 2001, and the Compensation Resource Group now concentrates on non-qualified executivecompensation and benefit plans for large corporations.

     The Compensation Resource Group revenue increased 4.7% over the third quarter of 2000 and 129.6% over the nine month periodended September 30, 2000.  Gross profit increased 15.5% over the third quarter of 2000 and 117.3% over the nine month period endedSeptember 30, 2000.

     Operating expenses and amortization for the first nine months of 2001 have increased substantially over the nine monthsended September 30, 2000 as a result of the September 2000 acquisition of CRG.

     The current levels of gross profit and operating expense are reflective of a shift from outside sales consultants to insidesales consultants.  We expect gross profit and operating expenses to continue at these levels.
                                          Three Months Ended                         Nine Months Ended                                             September 30,                             September 30,                                         2001             2000                      2001             2000Revenue     First year                      $   12,251      $    6,365                $    34,037      $   21,381     Renewal                              5,046           4,864                     19,576          19,536                                   ----------------------------------        -----------------------------------       Total                             17,297          11,229                     53,613          40,917Commission expense                        6,330           3,727                     18,403          14,843                                   ----------------------------------        -----------------------------------Gross profit                             10,967           7,502                     35,210          26,074        % of revenue                       63.4%           66.8%                     65.7%            63.7%                                   ----------------------------------        -----------------------------------Expenses    General and administrative            6,320           5,159                     18,971          16,005        % of revenue                       36.5%           45.9%                     35.4%            39.1%    Amortization of intangibles             261             645                      1,452           1,932        % of revenue                        1.5%            5.7%                      2.7%             4.7%                                   ----------------------------------        -----------------------------------Operating income                     $    4,386      $    1,698                $    14,787      $    8,137         % of revenue                      25.4%           15.1%                     27.6%            19.9%                                   ==================================        ===================================
     The Banking Practice enjoyed favorable growth with revenue increasing 54.0% over the third quarter of 2000 and 31.0% overthe nine month period ended September 30, 2000.

     For the quarter ended September 30, 2001, operating income was 25.4% of revenue compared with 15.1% in the comparable 2000quarter, reflecting the benefit of the 54.0% increase in revenue.

     For the nine months ended September 30, 2001, operating income increased to $14.8 million, or 81.7% from $8.1 million forthe comparable period in 2000 as revenue increases were more than increases in operating expenses.  We expect business to continueshifting from outside sales consultants to inside sales consultants.
                                             Three Months Ended                        Nine Months Ended                                               September 30,                             September 30,                                            2001           2000                      2001            2000Revenue     First year                        $   5,891        $  4,506                $   14,445       $  12,611     Renewal                               1,402           1,490                     4,264           4,233                                       -------------------------------          --------------------------------       Total                               7,293           5,996                    18,709          16,844Commission expense                           726             704                     2,126           1,921                                       -------------------------------          --------------------------------Gross profit                               6,567           5,292                    16,583          14,923                 % of revenue               90.0%           88.3%                     88.6%           88.6%                                       -------------------------------          --------------------------------Expenses     General and administrative            6,004           4,327                    15,229          12,793                 % of revenue               82.3%           72.2%                     81.4%           75.9%     Amortization of intangibles             597             448                     1,785           1,349                 % of revenue                8.2%            7.5%                      9.5%            8.0%                                       -------------------------------          --------------------------------Operating income/(loss)                $     (34)        $   517                $     (431)        $   781                 % of revenue               -0.5%            8.6%                     -2.3%            4.6%                                       ===============================          ================================
     The Healthcare Group continues to experience the difficult conditions prevailing in the healthcare industry, in general.Until the outlook for the industry stabilizes, we do not foresee an appreciable improvement in this group's performance.  Revenue forthe September 30, 2001 quarter increased 21.6% over the comparable quarter of 2000 while operating expenses grew 38.8% reflecting thefirst quarter acquisition of Partners First.

     MSA was acquired in July 2001.  It contributed 28.4% and 31.5% to the revenue and gross profit, respectively, for the threemonths ended September 30, 2001.
                                            Three Months Ended                        Nine Months Ended                                              September 30,                             September 30,                                          2001            2000                       2001            2000Revenue     First year                           $   4,319       $     2,860                $   14,751       $   3,066     Renewal                                      -                 -                         -               -                                     ---------------------------------         ---------------------------------                Total                         4,319             2,860                    14,751           3,066Commission expense                                -                 -                         -               -                                     ---------------------------------         ---------------------------------Gross profit                                  4,319             2,860                    14,751           3,066                % of revenue                  100.0%            100.0%                    100.0%          100.0%                                     ---------------------------------         ---------------------------------Expenses     General and administrative               3,657             2,142                    10,275           2,206                % of revenue                   84.7%             74.9%                     69.7%           72.0%     Amortization of intangibles                413               292                     1,143             327                % of revenue                    9.6%             10.2%                      7.7%           10.7%                                     ---------------------------------         ---------------------------------Operating income                            $   249         $     426                 $   3,333         $   533                % of revenue                    5.8%             14.9%                      22.6%           17.4%                                     =================================         =================================
     The Compensation Consulting Group consists of Pearl Meyer & Partners, acquired in June 2000 and Rich, Florin/Solutions,Inc., purchased in March 2001.  Rich, Florin/Solutions, Inc. is not included in the 2000 results.

     Pearl Meyer & Partners experienced some mild business interruption at the end of the current quarter and lost approximatelytwo weeks of billings.  The operating loss for the current quarter was $426,000.

     Rich, Florin/Solutions, Inc. revenue for the current quarter was $2.1 million with operating income of $675,000.  Revenueand operating income for the nine months ended September 30, 2001 were $6.6 million and $2.4 million, respectively.

**Results Attributable to Acquisitions**

     As an active acquirer, our operating results are significantly influenced by the contributions of our acquired businesses.By definition, we consider any business not appearing in four full quarters of operating results as being from acquisitions.  Nonmaterial acquisitions are not included in the acquisition column.  After that, they become part of existing business.  An analysis ofour operating results, separating acquisitions from existing businesses for the periods indicated is as follows:
                                              September 30, 2001                        September 30, 2000                                 Existing     Acquisitions(1)    Combined      Existing   Acquisitions(1)    CombinedRevenue                                 $                      $     First year                      23,248         2,536       $ 25,784   $  14,528     $       5,223      $  19,751     Renewal                         15,130         3,008         18,138      13,648             1,246         14,894                                --------------------------------------------------------------------------------------     Total                           38,378         5,544         43,922      28,176             6,469         34,645Commission expense                   11,469         2,503         13,972      10,253             1,504         11,757                                --------------------------------------------------------------------------------------Gross profit                         26,909         3,041         29,950                                                                              17,923             4,965         22,888General and administrativeexpense                              20,523         3,530         24,053      14,374             3,501         17,875                                --------------------------------------------------------------------------------------Operating income before               6,386         (489)          5,897amortization                                                                   3,549             1,464          5,013Amortization of intangibles           1,968           919          2,887       1,245               688          1,933                                --------------------------------------------------------------------------------------Operating income                 $                      $       $  3,010   $   2,304       $       776       $  3,080                                      4,418       (1,408)                                ======================================================================================                                          September 30, 2001                          September 30, 2000                                 Existing     Acquisitions(2)    Combined        Existing    Acquisitions(3)  CombinedRevenue     First year                  $   62,843     $  29,759       $ 92,602       $  42,953      $  5,429      $  48,382     Renewal                         41,148        19,677         60,825          40,528         1,246         41,774                                -----------------------------------------      ---------------------------------------     Total                          103,991        49,436        153,427          83,481         6,675         90,156Commission expense                   30,233        23,765         53,998          37,408        (6,739)        30,669                                --------------------------------------------------------------------------------------Gross profit                         73,758        25,671         99,429          46,073        13,414         59,487General and administrative expense   57,134        16,186         73,320          41,266         5,736         47,002                                --------------------------------------------------------------------------------------Operating income before amoritzation 16,624         9,485         26,109           4,807         7,678         12,485Amortization of intangibles           5,292         3,334          8,626           2,127         2,470          4,597                                --------------------------------------------------------------------------------------Operating income                 $   11,332      $  6,151       $ 17,483       $   2,680      $  5,208      $   7,888                                ======================================================================================(1)      includes operations of Compensation Resource Group and Pearl Meyer & Partners.(2)      includes operations of Compensation Resource Group.(3)      includes operations of The Wamberg Organization, Compensation Resource Group and Pearl Meyer & Partners.
     Caution should be used in analyzing and evaluating the foregoing.  Acquisitions have made, and are expected to make, asubstantial contribution to our operating performance and growth, however, the resources dedicated to our acquisition program wouldhave been available to make an impact on the performance of the existing business.

     For the nine months ended September 30, 2001, approximately 32.2% of gross revenue and 35.2% of operating income came fromacquisitions while 7.4% of gross revenue and 66.0% of operating income were from acquisitions during the same period in 2000.  We donot attribute a great deal of significance to the above statistics for the following reasons:
- an acquisition's contribution to operating performance in any given period is considerably dependent on the timing of the transaction; an acquisition, by our definition for this purpose, is one that has not yet appeared in four quarters' operating results.  As the value of these acquisitions addto our existing business base, the relative contribution of any subsequent acquisition may diminish; andacquisitions have made, and are expected to make, a substantial contribution to our operating performance and growth, however, the resources dedicated to our acquisitionprogram would have been available to make an impact on the performance of the existing business.
**Corporate General and Administrative Expenses**
     The corporate administrative office in North Barrington, Illinois contains our executive staff and provides direction andcoordination of our financial, strategic planning and acquisition activities.  For the September 30, 2001 quarter, the cost of ourCorporate Headquarters amounted to $1.9 million compared with $2.3 million for the comparable quarter of last year.  For the ninemonths, expenses were $8.5 million in 2001 compared with $6.0 million last year.  The year-to-date increase reflects the naturalincrease in expense required to support increased revenue and operations and the increase in salaries and bonuses as a result ofadditional personnel at the North Barrington corporate office.
**Interest Expense - Net**
     Net interest expense was $1.2 million in the September 30, 2001 quarter, a 14.3% decrease from the $1.4 million net expensein first quarter 2000.  Year-to-date interest of $3.9 million is $839,000 or 27.0% more than last year's first nine months.  Althoughcash flow from operations was $18.2 million, our average borrowings increased $12.3 million over the same quarter of 2000.  Borrowingincreased to support our acquisition program.  During the first nine months, our cash outlays for acquisitions were $27.4 million.
**Income Taxes**
     Income taxes for the first nine months of 2001 were $4.8 million at an effective rate of 35.0% compared with $1.7 million atan effective rate of 35.0% in the first nine months of 2000.  We received approval for a refund of prior year's taxes ofapproximately $1.7 million during the third quarter.  The refund reduced the tax rate to 35.0% for the 2001 tax year.  Without thebenefit of this refund, our normal tax rate would have been 40.7%.
**Quarterly Results**
     The following table presents a summary of key revenue and expense statistics for the most recent eight calendar quarters.This information is not necessarily indicative of results for any full year or for any subsequent period.
     Our operating results can fluctuate considerably, especially when compared on a consecutive quarterly basis.  We haveexperienced and may continue to experience large increases in revenue in the first and fourth quarters and our operating results maybe affected by a number of other factors, including:
a significant portion of the financing for our bank-owned life insurance products occurs in the fourth calendar quarter; and
- a significant portion of the deferred compensation plans, marketed by our Compensation Resource Group division, are financed in the first quarter.                             -------------------------------------------------------------------------------------                              Dec       Mar        Jun        Sep       Dec       Mar        Jun        Sep                              1999      2000      2000       2000       2000      2001      2001       2001                                                                                                     $Revenue                      $ 41,335  $ 31,147   $ 24,364   $ 34,645  $ 57,457  $ 66,037   $ 43,468     43,922   % of annual                  34.2%     24.4%      19.9%      26.3%     38.9%     36.2%      21.6%      20.8%Gross profit                   25,898    20,263     16,336     22,888    37,322    39,081     30,398     29,950   Ratio                        62.7%     65.1%      67.0%      66.1%     65.0%     59.2%      69.9%      68.2%Operating expenses             15,364    15,013     14,114     17,875    21,705    24,650     24,617     24,053Amortization                    1,361     1,335      1,329      1,933     2,540     2,799      2,940      2,887Operating income                9,173     3,915        893      3,080    13,076    11,632      2,841      3,010   % of revenue                 22.2%     12.6%       3.7%       8.9%     22.8%     17.6%       6.5%       6.9%   % of gross profit            35.4%     19.3%       5.5%      13.5%     35.0%     29.8%       9.3%      10.1%Non-operating income           -         -          -          -          1,001       191       (72)          -Interest expense - net          1,015       851        847      1,407     1,587     1,291      1,447      1,206Income taxes                    3,270     1,273      (113)        514     4,151     4,318        422         39                                                                                                     $Net income                    $ 4,888  $  1,791    $   159   $  1,159  $  8,339  $  6,214    $   900      1,765                                                                                                     $Per diluted common share      $  0.50   $  0.18    $  0.02    $  0.11   $  0.65   $  0.49    $  0.07       0.13       We expect that future quarterly fluctuations in our total revenue will be mitigated , to some extent, by the addition of ourCompensation Consulting Group whose revenue tends to be more stable throughout the year.    Our revenue is difficult to forecast, andwe believe that comparing our consecutive quarterly results of operations is not necessarily meaningful, nor does it indicate whatresults we will achieve for any subsequent period.  In our business, past operating results are not reliable indicators of futureperformance.  **Liquidity and Capital Resources**  Selected Measures of Liquidity and Capital Resources                                                                       2001               2000             2000Cash and cash equivalents                                      $    6,655        $     7,598       $     6,177Working capital                                                $   (1,027)       $    (2,317)      $    (3,441)Current ratio - to one                                                .97                .95               .88Shareholders' equity per common share (1)                      $     9.52        $      8.88       $      8.25Debt to total capitalization (2)                                     38.4%              36.5%            38.2%-----------(1)  total shareholders' equity divided by actual shares outstanding(2)  current debt plus long term debt divided by current debt plus long term debt plus stockholders' equity       In addition to our recognized balance sheet assets and liabilities, we have an on going renewal revenue stream, estimated tobe $632.3 million over the next ten years.       As a financial company with strong operating cash flow, we believe we have little need to retain substantial cash balances.We use the net cash from operating activities to fund capital expenditures and small acquisitions and pay down our credit facility.We expect that large future acquisitions will be financed primarily through externally available funds.  However, we can offer noassurance that such funds will be available and, if so, on terms acceptable to us.       Summarizing our cash flow, comparatively, for the year-to-date:                                                                                       September 30,                                                                                 2001             2000Cash flows from (used in):   Operations................................................................$18,225           $10,475    Investing................................................................(30,995)          (56,695)    Financing................................................................ 11,827            47,565  **Cash Flows from Operating Activities**       Our cash flow from operations for the nine months ended September 30, 2001, compared with the same nine month period in2000, was as follows:                                                                  September 30,                                                                                     Increase/(Decrease)                                                      2001              2000              In CashNet income plus non-cash expenses                    $19,715           $ 8,873            $  10,842Changes in operating assets and liabilities           (1,490)            1,602               (3,092)Cash flow from operating activities                  $18,225          $ 10,475            $   7,750       Our continued strong cash flow from operations allows us to pay down acquisition debt and still continue our acquisitionprogram.  We make significant use of borrowings to finance our acquisitions.  Because of this and the strong cash generated byoperations, management has decided to dedicate all excess cash to the reduction of bank borrowings and, as a result, only cash forreasonably foreseeable needs and expenses is retained.       The following table represents the estimated gross renewal revenue associated with our inforce business owned life insurancepolicies as of September 30, 2001.  The projected gross revenue is not adjusted for mortality, lapse or other factors that may impairrealization.  These projected gross revenues are based on the beliefs and assumptions of management and are not necessarilyindicative of the revenue that may actually be achieved in the future and we cannot assure you that commissions under these policieswill be received.                                 Compensation          Banking            Healthcare                              Resource Group         Practice             Group              Total        2002                      $  56,498          $  34,178             $6,167            $ 96,843        2003                         46,524             29,442              5,994              81,960        2004                         39,116             25,348              5,530              69,994        2005                         31,993             25,835              5,090              62,918        2006                         27,828             26,255              4,737              58,820        2007                         26,127             25,008              4,343              55,478        2008                         24,067             24,494              3,675              52,236        2009                         24,032             24,860              2,917              51,809        2010                         23,512             25,414              2,084              51,010        2011                         23,650             26,082              1,510              51,242                            ----------------     --------------      -------------       -------------                     Total        $ 323,347          $ 266,916            $42,047                                                                                             $632,310       At September 30, 2000, our ten year renewal projection amounted to $527.2 million.  The September 30, 2001 balancerepresents a 19.9% increase in our residual book of business - a reflection of our revenue growth.       As a fee based business, our Compensation Consulting division does not have renewal revenues. Cash Used in Investing Activities      Acquisitions accounted for $27.4 million used in investing activities and $3.9 million was used for the purchase ofequipment.       We expect acquisitions to continue and be financed primarily from available credit lines and possible additional equity.However, we can offer no assurances such will be the case.  **Cash Flows from Financing Activities**       We have a credit facility with a group of banks which as of January 1, 2001 was $114.3 million.  Loans bear interest at arate based on the London InterBank Offered Rate at the time of borrowing or floating prime rate.  The credit agreement contains anumber of restrictive covenants with which we were in compliance at September 30, 2001.       In an effort to reduce interest costs, management has directed that all cash beyond reasonably foreseeable needs be used topay down debt.  Depending upon adherence to the criteria in our loan agreements at the time of draw down, we had $45.7 millionavailable under our credit line at September 30, 2001.       We believe that our net cash flow from operations will continue to provide sufficient funds to service our debtobligations.  We estimate renewal revenue in future periods, which is not reflected on our balance sheet, to be approximately $371million over the next five years.  However, renewal revenue can be adversely affected by policy surrenders or exchanges, materialcontract changes, asset growth and case mortality rates.       As our business grows, our working capital and capital expenditure requirements will also continue to increase.  We believethat net cash flows from operations will be sufficient to finance our debt payments, working capital and capital expenditures for thenext twelve months.  There can be no assurance, however, that the net cash flows from operations will be sufficient to meet ouranticipated requirements or that we will not require additional debt or equity financing within this time frame.  We may continue toissue stock to finance future acquisitions.  **Intangible Assets and Renewal Revenue**       We believe it helpful to understand the inter-relationship between our renewal revenue and our intangible assets.  Becausethe renewal premiums underlying the book of business that come with many of our acquisitions are not contractually enforceable,generally accepted accounting principles do not recognize them as assets.  In most of our acquisitions, we acquire very little in theway of tangible assets, therefore virtually the entire purchase price is allocated to intangible assets.  Two important elements ofour intangible assets affect our cash flow:  the present value of inforce revenue is the net discounted cash flow from the book of business of those companies havingfuture renewal revenue at the time we acquired them; and
- a potential future tax benefit over the next fifteen years.  Approximately $153.0 million of our gross intangible assets are expected to be tax deductible.  Net intangible assets arising from our purchased businesses consist of the following:                                                                             2001             2000               Present value of inforce revenue                           $83,653         $85,962               Goodwill                                                   $98,949         $78,419               Non-competition agreements.                                    786             992                                                                         $183,388        $165,373               Total assets                                                 77.1%           75.2%               Stockholders' equity                                        150.1%          146.9%       The amounts allocated to inforce revenue are determined using the discounted cash flow of future commission adjusted forexpected persistency, mortality and associated costs.  The balance of the excess purchased price over the net tangible assets isallocated to goodwill.  The inforce revenue is amortized over its period of duration, which is normally twenty to thirty years.  Manyfactors outside our control determine the persistency of our inforce business and we cannot be sure that the value we allocated willultimately be realized.       Goodwill is being amortized over periods of twenty to forty years.  Non-competitive agreements are amortized over five toten years, according to the terms of the agreements.       On June 27, 2001 the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards No.141, Business Combinations,  The new rules outlined in this new standard affects the allocations between goodwill and otherintangible assets.       On June 27, 2001, the Financial Accounting Standards Board issued Standard No. 142 - Goodwill and Other Intangible Assets.Under this new rule, effective with the year beginning January 1, 2002, goodwill will no longer be amortized but will be subject toperiodic tests for impairment.  Application of this new standard is expected to reduce our annual amortization expense by $4.0million.  **Market Risk**       Our primary market risk exposure is to changes in interest rates on borrowings under our credit agreement.  We have a creditfacility with a group of banks which as of January 1, 2001 was $114.3 million.  The credit facility provides for a revolving creditand a term loan.  Interest on borrowings under our line of credit is based on:  the U.S. prime rate, published in the Wall Street Journal, which will float for as long as the borrowed segment is outstanding; or,
- the London InterBank offered rate (LIBOR), based on the published rate at the time of the borrowing plus a spread based on the ratio of consolidated indebtednessto income before interest, taxes, depreciation and amortization for the most recent four quarters on a rolling quarterly basis. This rate remains fixed for as long as the borrowed segment isoutstanding, at our option, at the time the funds are borrowed.       At December 31, 2000, we had total outstanding indebtedness of $64.6 million, or approximately 36.5% of total marketcapitalization.  At September 30, 2001, we had total outstanding indebtedness of  $76.1 million or 21.6% of total marketcapitalization.  Our interest rate risk objective is to limit the impact of rate fluctuations on earnings and cash flows.  To achievethis objective, we use fixed rate debt instruments to the extent that reasonably favorable rates are obtainable, and interest rateswaps to mitigate interest rate risk and to effectively fix the interest rate on a portion of our variable rate term debt.       Coincident with the credit facility, we entered into three interest rate swap agreements with a bank affiliated with thelending group.  The first agreement went into effect on July 6, 1999, and sets the underlying LIBOR-based interest rate at 5.76% on$10.5 million of the debt.  The second agreement went into effect on January 18, 2000 and sets the underlying LIBOR-based rate at5.29% on $10.5 million of the debt.  The third agreement went into effect on June 29, 2000 and sets the underlying LIBOR rate at7.24% on $18.0 million of the debt.       As LIBOR interest rates declined during the September 30, 2001 quarter, these swaps produced a net cost of $256,000 over thefixed amounts we received.  This was offset by reduced interest costs on the LIBOR based borrowings.       We do not enter into derivative or interest rate transactions for speculative purposes.  Approximately 8.7% of ouroutstanding debt was at the prime rate of 6.5% plus the applicable spread at September 30, 2001.  56.8% of our outstanding debt atSeptember 30, 2001, was effectively locked at an interest rate of 6.32% plus the applicable spread through an interest rate swapagreement for a notional amount of $39.0 million.  While these hedges effectively reduce our overall cost of borrowings, it shouldnot be inferred that we can borrow at these reduced rates.  Our ability to control interest rates through swap agreements is limitedto the notional amounts under those agreements with such notional amounts declining on a quarterly basis.       The following table incorporates only those exposures that existed as of  September 30, 2001, and does not consider exposuresor positions that could arise after that date.  In addition, because firm commitments are not represented in the table above, theinformation presented therein has limited predictive value.  As a result, our ultimate realized gain or loss with respect to interestrate fluctuations would depend on the exposures that arise during future periods and prevailing interest rates. There is inherentrollover risk for borrowings as they mature and are renewed at current market rates.  The extent of this risk is not quantifiable orpredictable because of the variability of future interest rates and our financing requirements.                                     -----------------------------------------------------------------------------------------------                                      2001        2002        2003        2004       2005    Thereafter     Total     Fair ValueLiabilitiesLong term debt      Fixed rate                    $     948  $  1,046    $   1,154   $   1,274   $ 1,407   $  1,672     $   7,501   $   7,501      Average interest rate              10.0%     10.0%        10.0%       10.0%     10.0%     10.0%      Variable rate:      U. S. Prime                   $    600   $    600    $     600   $     600   $    600  $  3,000     $   6,000   $   6,000      London Interbank Offered      $ 10,420   $ 10,420    $  10,420   $  10,420   $ 10,420  $ 10,535     $  62,635   $  62,635      Average interest rate              5.2%       5.2%         5.2%        5.2%       5.2%      5.2%Interest Rate DerivativesInterest rate swaps      Variable to fixed      Notional amount               $ 40,250   $ 30,250    $  20,250   $  10,250   $  2,500  $     -      Average pay rate                  6.29%      6.33%        6.38%       6.51%      6.91%       -      Average receive rate         Variable - floating three month LIBOR  **Recent Accounting Pronouncements**       FASB Accounting Standard - Derivatives and Hedging Activities       As of January 1, 2001, we adopted Financial Accounting Standards Board Statement no. 133, (Accounting for DerivativeInstruments and Hedging Activities) issued in June 1998, together with its amendments, Statements 137, Accounting for DerivativeInstruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133 and 138, Accounting for CertainDerivative Instruments and Certain Hedging Activities.  Collectively, these Statements require that companies recognize allderivatives as either assets or liabilities in the balance sheet and measure such instruments at fair value.       If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are eitheroffset against the change in fair value of assets, liabilities, or firm commitments through earnings or recognized in othercomprehensive income until the hedged item is recognized in earnings.  The ineffective portion of a derivative's change in fair valueis immediately recognized in earnings.       As explained in the preceding section on Market Risk, we have entered into interest rate swaps to exchange floating rate forfixed rate interest payments periodically over the life of our loan agreement.  The interest rate swaps have been designated ascash-flow hedges and have been highly effective as of September 30, 2001.  At September 30, 2001, we had interest rate swapagreements outstanding with a notional principal amount of $39.0 million.  Changes in the fair value of a derivative that is highlyeffective as and that is designated and qualifies as a cash flow hedge are recorded in other comprehensive income, until earnings areaffected by the variability of cash flows, that is, when periodic settlements on a variable-rate asset or liability are recorded inearnings.       We formally document all relationships between hedging instruments and hedged items, as well as our risk-managementobjective and strategy for undertaking various hedge transactions.  We also formally assess, both at the hedge's inception and on anongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fairvalues or cash flows of hedged items.  When it is determined that a derivative is not highly effective, as a hedge or that it hasceased to be a highly effective hedge, we discontinue hedge accounting prospectively.  We do not hold derivative or financialinstruments for trading purposes.       FASB Accounting Standard - Business Combinations       FASB Accounting Standard - Goodwill and Other Intangible Assets       On June 27, 2001 the Financial Accounting Standards Board (FASB)  issued Statements of Financial Accounting Standards No.141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December15, 2001.  The new rules outlined in FAS 141 affect the allocations between goodwill and other intangible assets.       Goodwill acquired in business combinations before June 30, 2001 will continue to be amortized until December 31, 2001.  Anygoodwill acquired in business combinations after June 30, 2001 will not be amortized.  With the adoption of FAS 142, goodwill will nolonger be amortized but will be subject to annual impairment tests in accordance with the Statements.  Other intangible assets willcontinue to be amortized over their useful lives.  Additionally, acquisitions consummated after June 30, 2000, will no longer besubject to amortization.       We will apply the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of 2002.As a result of the application of the nonamortization provision of the FAS 142, our amortization expense is expected to be $4.0million less in 2002.  During 2002, we will perform the first of the required impairment tests of goodwill as of January 1, 2002 andhave not yet determined what the effect of these tests will be on our earnings and financial position.  ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK       Information required by this item is incorporated by reference from the Liquidity and Capital Resources section of "Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations" in pages 14 through 35 of this Form 10-Q.  PART II OTHER INFORMATION  ITEM 1.  LEGAL PROCEEDINGS  None  ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  None  ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K  The list of exhibits required by this Item 6(a) appears on the Exhibit Index attached hereto.
- Reports in Form 8-K. None  SIGNATURES       Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.                                                                CLARK/BARDES, INC.Date              November 12, 2001                           /s/ W.T. WAMBERG                                                                  W.T. Wamberg                                                              President and Chief Executive OfficerDate              November 12, 2001                           /s/  THOMAS M. PYRA                                                                   Thomas M. Pyra                                                              Vice President and Chief Financial Officer                                                              (Principal Financial Officer)  Exhibit Index  3.1  Certificate of Incorporation of Clark/Bardes, Inc. (Incorporated herein by reference to Exhibit 3.1 to Clark/Bardes' Registration Statement     on Form S-1 (No. 333-56799) filed with the SEC on July 12, 1998.)3.2  Bylaws of the Company (Incoroprated by reference to Exhibit 3.2 to Clark/Bardes' Registration Statement on Form S-1 (No. 333-567999) filed     with the SEC on July 12, 1998.)4.1  Specimen Certificate for shares of Common Stock, par value $.01 per share, of Clark/Bardes, Inc. (Incorporated by reference to Exhibit 4.1 of     Clark/Bardes' Amendment No. 1 to the Registration Statement on Form S-1, File No. 333-567999, field with the SEC on July 27, 1998.4.2  Rights Agreement, dated as of July 10, 1998, by and between Clark/Bardes Holdings, Inc. and The Bank of New York (Incoroprated herein by reference     to Exhibit 4.4 of Clark/Bardes' Quarterly Report on Form 10-Q, File No. 000-24769, field with the SEC on November 16, 1998.