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, 2000
                            Commission File No. 24769

                           Clark/Bardes Holdings, 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, #200
         North Barrington, Illinois                                60010
  (Address of principal executive offices)                       (Zip code)

                  Registrant's telephone number: (847) 304-5800

           Securities Registered Pursuant to Section 12(g) of the Act:

Title of Securities                              Exchanges on which Registered
       None                                           Not applicable

           Securities Registered Pursuant to Section 12(b) of the Act:

                     Common Stock, Par Value $.01 per share
                                (Title of class)

         Junior Participating Preferred Stock, Series A, Purchase Rights
                            Par value, $.01 per share
                                (Title of class)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     As of  November  9, 2000,  there  were  12,646,606  shares of common  stock
outstanding.

<PAGE>

                                TABLE OF CONTENTS

                                                                           PAGE

PART I-FINANCIAL INFORMATION
     Item 1.   Financial Statements
     Condensed Consolidated Balance Sheets at September 30, 2000              4
      and December 31, 1999
     Condensed Consolidated Statements of Income for the three                5
      months and nine months ended September 30, 2000 and September 30, 1999
     Condensed Consolidated Statements of Cash Flows for the                  6
      nine months ended September 30, 2000 and September 30, 1999
     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      30

Part Ii.  Other Information

     Item 1.   Legal Proceedings                                              30

     Item 2.   Changes in Securities and Use of Proceeds                      31

     Item 6.  Exhibits and Reports on Form 8-K                                31

SIGNATURES                                                                    32

EXHIBITS
      Index to Exhibits                                                       33


<PAGE>

                           FORWARD-LOOKING STATEMENTS

     This Form 10-Q may contain certain  forward-looking  statements  within the
meaning of Section  27A of the  Securities  Act of 1933,  and Section 21E of the
Securities Exchange Act of 1934. Words such as "estimate," "believe," "project,"
"expect,"  "intend,"  "predict,"  and  similar  expressions,  as they  relate to
Clark/Bardes Holdings, Inc. and its subsidiaries (collectively, "Clark/Bardes"),
or  Clark/Bardes'   management,   identify  forward-looking   statements.   Such
forward-looking  statements are based on the beliefs of Clark/Bardes' management
as  well  as  assumptions  made  by  and  information   currently  available  to
Clark/Bardes.  These  forward-looking  statements  are subject to certain risks,
uncertainties   and   assumptions,   including   but  not  limited  to,   risks,
uncertainties and assumptions related to changes in tax legislation,  dependence
on key producers, dependence on persistency of existing business, realization of
renewal revenue,  acquisition risks,  competitive factors and pricing pressures,
dependence  on certain  insurance  companies,  changes  in legal and  regulatory
requirements,  litigation and general economic  conditions and other factors. If
one or more of these risks or uncertainties  materialize,  or should  underlying
assumptions  prove  incorrect,  actual  results may vary  materially  from those
anticipated,  expected or projected.  Such  forward-looking  statements  reflect
Clark/Bardes'  current  views with  respect to future  events and are subject to
these and other risks, uncertainties and assumptions,  relating to Clark/Bardes'
operations,  growth  strategy and  liquidity.  All  subsequent  written and oral
forward-looking statements attributable to Clark/Bardes or individuals acting on
Clark/Bardes'   behalf  are  expressly  qualified  in  their  entirety  by  this
paragraph.  Clark/Bardes  disclaims  any intent or obligation to update or alter
any of the forward-looking  statements,  whether in response to new information,
unforeseen events, changed circumstances or otherwise.

<PAGE>

Part 1. Financial Information

ITEM 1. FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                  Clark/bardes Holdings, Inc. and Subsidiaries
                      Condensed Consolidated Balance Sheets

<S>                                                                                     <C>               <C>

                                                                                    September 30,   December 31,
                                                                                       2000            1999
                                                                                     Unaudited        Audited
                                                                                    (dollars in thousands
                                                                                    except share amounts)

                                                   ASSETS
Current Assets
   Cash and cash equivalents                                                            $ 6,177         $ 4,832
   Accounts and notes receivable - net                                                   16,863          18,295
   Other current assets                                                                   2,309           1,123
                                                                                    ------------    ------------
      Total Current Assets                                                               25,349          24,250
Intangible Assets - Net                                                                 155,541          94,991
Equipment and Leasehold Improvements - Net                                                8,108           4,505
Deferred Tax Asset                                                                            -             282
Other Assets                                                                              4,402             831
                                                                                    ------------    ------------
      Total Assets                                                                    $ 193,400       $ 124,859
                                                                                    ============    ============

                               LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
   Accounts payable                                                                     $ 7,813         $ 4,100
   Commissions and fees                                                                   3,208           3,475
   Income taxes                                                                             618           4,350
   Accrued liabilities                                                                   10,627           7,841
   Debt maturing within one year                                                          6,524           7,252
                                                                                    ------------    ------------
      Total Current Liabilities                                                          28,790          27,018
Long Term Debt                                                                           58,071          35,473
Deferred Tax Liability                                                                      272               -
Deferred Compensation                                                                     1,944               -
Stockholders' 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 - 12,646,606 in 2000 and 9,629,999 in 1999                 126              96
    Paid in capital                                                                      88,947          50,099
    Retained earnings                                                                    15,283          12,173
    Treasury stock - 2,077 shares at cost                                                   (33)              -
                                                                                    ------------    ------------
                                                                                    ------------    ------------
Total Stockholders' Equity                                                              104,323          62,368
                                                                                    ------------    ------------
                                                                                    ------------    ------------
Total Liabilities and Stockholders' Equity                                            $ 193,400       $ 124,859
                                                                                    ============    ============
</TABLE>


      see accompanying notes to condensed consolidated financial statements



<PAGE>

<TABLE>
<CAPTION>

                  CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARIES
                                    Unaudited
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME

<S>                                                           <C>          <C>          <C>           <C>

                                                        Three Months Ended          Nine Months Ended
                                                        September 30,               September 30,
                                                           2000          1999          2000          1999
                                                        (dollars in thousands except share amounts)



Total Revenue                                             $ 34,645      $ 25,655      $ 90,156      $ 79,431
Commission and fee expense                                  11,757        10,456        30,669        37,672
                                                                      -----------   -----------   ----------------------
                                                        -----------   -----------   -----------   ----------------------
Gross Profit                                                22,888        15,199        59,487        41,759
                                                        -----------   -----------   -----------   ----------------------

Operating Expenses
   General and administrative                               17,357        11,332        46,484        29,789
   Amortization                                              1,933         1,237         4,597         3,009
   Acquisition integration and reorganization expenses         518             -           518             -
                                                        -----------   -----------   -----------   ----------------------
                                                            19,808        12,569        51,599        32,798
                                                        -----------   -----------   -----------   ----------------------
Operating Income                                             3,080         2,630         7,888         8,961
Interest
   Income                                                       78           133           205           291
   Expense                                                  (1,485)         (923)       (3,310)       (2,500)
                                                        -----------   -----------   -----------   ----------------------
                                                            (1,407)         (790)       (3,105)       (2,209)
                                                        -----------   -----------   -----------   ----------------------
Income before taxes                                          1,673         1,840         4,783         6,752
Income taxes                                                   514           804         1,674         2,809
                                                        -----------   -----------   -----------   ----------------------
Net Income                                                 $ 1,159       $ 1,036       $ 3,109       $ 3,943
                                                        ===========   ===========   ===========   ======================


Basic Net Income per Common Share
Net income                                                  $ 0.11        $ 0.11        $ 0.31        $ 0.44
                                                        -----------   -----------   -----------   -----------

Weighted average shares                                 10,697,924     9,629,157    10,099,451     8,891,628
                                                        -----------   -----------   -----------   -----------

Diluted Net Income per Common Share
Net income                                                  $ 0.11        $ 0.11        $ 0.30        $ 0.43
                                                        -----------   -----------   -----------   -----------

Weighted average shares                                 10,875,931     9,865,535    10,358,231     9,118,669
                                                        -----------   -----------   -----------   -----------
</TABLE>


      see accompanying notes to condensed consolidated financial statements


<PAGE>

<TABLE>
<CAPTION>

                  CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARIES
                                    Unaudited
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<S>                                                                                                     <C>            <C>
                                                                                                        Nine Months Ended
                                                                                                 September 30,
                                                                                                    2000             1999


Cash From Operating Activities - Net                                                                $ 10,475         $ 10,609

Investing Activities
   Purchases of businesses                                                                           (52,673)         (53,289)
   Purchases of equipment - net                                                                       (2,805)          (5,880)
   Other                                                                                              (1,217)            (622)
                                                                                                 ------------     ------------
                                                                                                 ------------     ------------
                                                                                                     (56,695)         (59,791)
                                                                                                 ------------     ------------

Financing Activities                                                                                       -                -
   Proceeds from borrowings                                                                           57,100           68,216
   Repayment of borrowings                                                                           (35,229)         (51,497)
   Sale and issuance of common stock                                                                  25,915           23,766
   Other                                                                                                (221)               -
                                                                                                 ------------     ------------
                                                                                                 ------------     ------------
                                                                                                      47,565           40,485
                                                                                                 ------------     ------------
Increase (Decrease) in Cash                                                                            1,345           (8,697)
   Cash and Cash Equivalents at  Beginning of Period                                                   4,832           12,102
                                                                                                 ------------     ------------
   Cash and Cash Equivalents at  End of Period                                                       $ 6,177          $ 3,405
                                                                                                 ============     ============



                     see accompanying notes to condensed consolidated financial statements

</TABLE>


<PAGE>


                  CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000
                                    Unaudited

1. NATURE OF  OPERATIONS,  SUMMARY OF SIGNIFICANT  ACCOUNTING  POLICIES AND
   BASIS OF PRESENTATION

     The unaudited  consolidated  financial  statements  include the accounts of
Clark/Bardes  Holdings,  Inc. and its wholly owned  subsidiaries  (collectively,
CBH).  Through  its  four  operating   divisions,   Clark/Bardes   Consulting  -
Compensation   Resource  Group,   Bank   Compensation   Strategies,   HealthCare
Compensation  Strategies  and Pearl Meyer & Partners,  CBH designs,  markets and
administers life insurance products, compensation, and benefit programs to U. S.
corporations,  banks, and healthcare  organizations.  CBH assists its clients in
using  customized  life  insurance  products  to  generate  capital  to  finance
long-term  benefit  liabilities  and to supplement  and secure  benefits for key
employees.  In addition,  CBH  provides  long-term  administrative  services for
executive benefits and insurance and provides compensation consulting services.

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally  accepted  accounting  principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation  S-X.  Accordingly,  they do not include all of the information
and notes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments,  including
normal recurring  accruals,  considered  necessary for a fair  presentation have
been included. Operating results for the three month and nine month period ended
September 30, 2000,  are not  necessarily  indicative of the results that may be
expected for the year ended December 31, 2000.

     The balance  sheet at December  31, 1999 has been  derived from the audited
financial  statements  at that date but does not include all of the  information
and notes  required by generally  accepted  accounting  principles  for complete
financial statements.

     For further information, refer to the consolidated financial statements and
footnotes  thereto included in the Registrant  Company and  Subsidiaries  annual
report on Form 10-K for the year ended December 31, 1999.

2.   ACQUISITION OF COMPENSATION RESOURCE GROUP, INC.

     On September 6, 2000, CBH acquired all the issued and  outstanding  capital
stock of Compensation Resource Group ("CRG") for a total purchase price of $30.5
million, not including acquisition expenses, estimated to be $652,000 consisting
of the following:

     (i) a cash payment to the CRG selling shareholders of $11.5 million,

     (ii)the issuance by CBH of 596,463  shares of its common  stock,  having an
         aggregate  value of $6.0 million based on the average  closing price of
         the common stock on September 5, 2000; and,

    (iii)the assumption and repayment of approximately $13.0 million of
         long-term debt.

     CRG is an executive  compensation and benefits  organization  that provides
the  design,  marketing  and  administration  of  non-qualified  plans.  CRG  is
headquartered  in Los Angeles,  California and has  affiliated  offices in seven
other  cities.  Prior to the  acquisition,  there was no  material  relationship
between CRG and Clark/Bardes

     The $24.5  million cash portion of the  purchase  price was borrowed  under
CBH's existing credit facility with Bank One.

<PAGE>

     Coincident  with the  foregoing  transaction,  CBH will  enter 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 achieved during the years ended December 31,
2003 to 2005.

     The  acquisition  of CRG has been  accounted for as a purchase with most of
the  purchase  price  allocated  to the present  value of  in-force  revenue and
amortized  over a period of thirty years.  The  remainder has been  allocated to
goodwill and  amortized  over twenty  years.  The purchase  price  allocation is
preliminary.

     The unaudited  financial  information below presents the results of CBH and
CRG as if the acquisition had occurred on January 1, 1999.



                             Three Months Ended              Nine Months Ended
                               September 30,                   September 30,
                              -------------                   -------------
                            2000          1999              2000          1999
                            ----          ----              ----          ----
Pro forma
     Revenue             $  40,237     $  29,698         $114,949      $104,139
     Net income (loss)        (340)         (850)          (1,431)        3,174
     Diluted earnings
        (loss) per share      (.03)         (.08)            (.13)          .33


3.    ACQUISITION OF PEARL MEYER & PARTNERS, INC.

     On June 21, 2000,  CBH acquired all of the issued and  outstanding  capital
stock  of Pearl  Meyer &  Partners,  Inc.  for a total  purchase  price of $26.6
million.  The purchase price consisted of a cash payment,  at closing,  of $21.9
million and the  issuance of 250,000  shares of CBH common stock with a value of
$4.0 million. Acquisition expenses were $720,000. The $22.6 million cash portion
of the purchase price was borrowed under CBH's line of credit.

     The  acquisition  will be accounted for as a purchase and the goodwill will
be amortized  over a  twenty-year  period.  The  purchase  price  allocation  is
preliminary.

     In addition to the initial purchase price,  $2.0 million of additional cash
consideration  will be paid in the first quarter of 2002 upon the achievement of
a defined  performance  objective  during the eighteen months  subsequent to the
purchase.  This  payment,  when  earned,  will be  accounted  for as  additional
purchase  price to be amortized  over the remainder of the original  twenty-year
period.

     Pearl  Meyer is a New York  City  based  consulting  firm  specializing  in
executive  compensation  and retention  programs.  The Pearl Meyer  organization
became Clark/Bardes' fourth operating division. Prior to the acquisition,  there
was no material relationship between CBH and Pearl Meyer.

     The unaudited pro forma  information  below presents the results of CBH and
Pearl Meyer & Partners as if the acquisition had occurred on January 1, 1999.


                            Three Months Ended               Nine Months Ended
                              September 30,                    September 30,
                               -------------                   -------------
                            2000          1999              2000          1999
                            ----          ----              ----          ----
Pro forma
     Revenue             $ 34,645      $  28,362         $  96,425    $  88,029
     Net income             1,159          4,923             1,136        5,782
     Diluted earnings
       per share              .11           .11               .55           .53


4.   ACQUISITION OF W. M. SHEEHAN & COMPANY, INC.

     On June 13, 2000, CBH acquired certain assets,  principally working capital
and equipment,  and assumed certain liabilities of W. M. Sheehan & Company, Inc.
("Sheehan").  The  purchase  price  was  $367,000  cash  paid  at  closing.  The
acquisition  has been  accounted  for as a  purchase  and the  goodwill  will be
amortized   over  twenty  years.   The  allocation  of  the  purchase  price  is
preliminary.

<PAGE>

     In addition to the purchase price paid at closing,  an additional  $650,000
will be paid upon the  achievement  of certain  revenue and earnings  objectives
during the years ended June 30, 2001 through 2004. The payments will be made 23%
in cash and 77% in CBH common  stock  based on values at time of  issuance.  The
additional  payments will be accounted  for as goodwill and  amortized  over the
remaining twenty-year period.


5.    ACQUISITION OF INSURANCE ALLIANCES GROUP, INC.

     On May 5, 2000,  CBH acquired the  business of Insurance  Alliances  Group,
Inc. ("IAG").  There were no assets or liabilities acquired or assumed. IAG is a
Stamford, Connecticut insurance firm specializing in executive estate planning.

     The purchase  price for the business  was $3.5 million  consisting  of $2.8
million cash at closing and 49,143  shares of CBH common stock having a value of
$700,000.  The cash portion of the purchase  price was borrowed under CBH's line
of credit.  The  acquisition  will be accounted for as a purchase and the entire
purchase  price has been  allocated to the net present value of renewal  revenue
from  insurance  in force at the time of the  acquisition  and will be amortized
over a  period  of  thirty  years.  The  allocation  of the  purchase  price  is
preliminary.


6.   ACQUISITION OF THE WAMBERG ORGANIZATION AND WAMBERG FINANCIAL
     CORPORATION

     On September 1, 1999,  CBH  purchased  certain  assets and assumed  certain
liabilities  of The Wamberg  Organization  and purchased all of the  outstanding
stock of Wamberg Financial Corporation for a purchase price of $17.9 million and
expenses of $266,000.

     The asset  purchase  agreement  provides  for the payment of an  additional
$11.9  million  upon the  attainment  of  certain  stipulated  annual  financial
objectives  starting with the periods ended  December 31, 1999 through  December
31, 2002. As of December 31, 1999,  the financial  objectives  for 1999 had been
met and a $1.5  million  cash  payment  was made to W. T.  Wamberg  in the first
quarter of 2000. This payment was recorded as additional purchase price and will
be amortized as goodwill over the remaining  twenty-year  period commencing with
the effective date of the acquisition.

     On January 4, 1999, CBI purchased the right to receive  approximately 27.5%
of the  commissions  and fees  related  to renewal  revenue  of certain  inforce
policies  existing  on June  30,  1998,  due to W. T.  Wamberg  and The  Wamberg
Organization,  for a cash payment of $7.5 million. Concurrent with the September
1, 1999  acquisition  of The  Wamberg  Organization,  CBI  purchased  all of the
renewal revenue not acquired on January 4, 1999. All renewal revenue acquired in
these transactions will revert to Mr. Wamberg on August 31, 2018.

     The  acquisition  of  The  Wamberg   Organization  and  Wamberg   Financial
Corporation  has been  accounted  for as a  purchase.  The  unaudited  pro forma
information  below  presents our results of operations  and those of The Wamberg
Organization and Wamberg Financial Corporation as if the acquisition occurred on
January 1, 1999.

                             Three Months Ended              Nine Months Ended
                                September 30,                   September 30,
                               -------------                   -------------
                             2000          1999              2000          1999
                             ----          ----              ----          ----
Pro forma
     Revenue             $  34,645   $  27,246           $ 90,156      $ 87,058
     Net income              1,059       4,514              1,159         3,109
     Diluted earnings
      per share                .11         .11                .30           .49


7.   Acquisition of Mcg/healthcare

     On April 5, 1999, CBH purchased the assets and business and assumed certain
liabilities of Phynque, Inc., d/b/a Management Compensation Group/HealthCare,  a
Minnesota  corporation,  for a purchase  price of $35.6  million and $372,000 of
closing costs.

<PAGE>

     MCG/HealthCare is a 170 employee executive benefit consulting  organization
servicing  the  health  care  industry  and  is  headquartered  in  Minneapolis,
Minnesota. Prior to the acquisition,  there was no material relationship between
CBH and MCG/HealthCare. Subsequent to the acquisition, MCG/HealthCare became the
HealthCare Compensation Strategies division.

     The acquisition of MCG/HealthCare has been accounted for as a purchase. The
unaudited  pro  forma   information  below  presents  the  results  of  CBH  and
MCG/HealthCare as if the acquisition had occurred on January 1, 1999:


                             Three Months Ended              Nine Months Ended
                                September 30,                   September 30,
                               -------------                   -------------
                             2000          1999              2000          1999
                             ----          ----              ----          ----
Pro forma
     Revenue               $ 34,645    $  25,655           $ 90,156    $ 85,188
     Net income               1,159        1,036              3,109       4,328
     Diluted earnings
      per share                 .11           .11               .30         .47


8.   Private Placement

     On September 11, 2000, CBH sold 1,888,887 shares of common stock to a group
of  investors  for  $25.1  million,  net of  expenses,  in a  private  placement
transaction.  The  proceeds  from this sale  were  used for debt  reduction  and
acquisitions.

     The  1,888,887  shares were sold to the  investors for $13.50 per share and
have been  registered for resale by the investors if they deem it appropriate to
resell them.

9.   Credit Facility

     On August 23, 2000, CBH and its subsidiary,  CBI, expanded its December 28,
1999 credit  facility  from $100.0  million to $114.3  million and added another
bank to the  existing  group  of bank  lenders.  The  principal  changes  in the
structure of the facility  are the  increase of the working  capital  limit from
$5.0 million to $10.0 million and the expansion of the borrowing base.

     The  credit  facility  contains  restrictive  covenants  requiring  certain
conditions,  financial  reporting and  compliance  certificates,  maintenance of
financial  ratios,  restrictions  on  guarantees  and  additional  indebtedness,
limitations  on  mergers  and  acquisitions,   prohibition  of  cash  dividends,
limitation on investments, loans, and advances and changes in control.

     On June 29, 2000, a third interest rate swap went into effect,  setting the
underlying London Interbank offered Rate-based rate at 7.24% on $20.0 million of
debt.


10.  Recent Accounting Pronouncements

     FASB Accounting Standard - Derivatives and Hedging Activities

     In June 1998,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement of Financial  Accounting  Standards  (SFAS) No. 133,  "Accounting  for
Derivative Instruments and Hedging Activities." This statement requires that all
derivatives  be  measured  at fair  value and  recognized  as  either  assets or
liabilities  on the  balance  sheet.  Changes in the fair  values of  derivative
instruments  will be  recognized  in either  earnings or  comprehensive  income,
depending on the designated use and  effectiveness of the instruments.  The FASB
amended this  pronouncement in June 1999 to defer the effective date of SFAS No.
133 for one year. CBH must adopt SFAS No. 133 no later than January 1, 2001.

     Because of CBH's minimal use of derivatives, management does not anticipate
the adoption of the new Statement will have a significant  effect on earnings or
the financial position of CBH.

<PAGE>

FASB Interpretation - Stock Compensation

     In March  2000,  the FASB issued  Interpretation  No. 44,  "Accounting  for
Certain Transactions  Involving Stock  Compensation".  Interpretation No. 44 was
issued in order to clarify issues arising from Accounting Principles Board (APB)
Opinion No. 25 "Accounting for Stock Issued to Employees,"  which was previously
issued in October 1972.  Interpretation  No. 44 is effective  July 1, 2000,  but
certain  conclusions  cover specific events that occur either after December 15,
1998 or January 12, 2000.

     The main issues addressed by Interpretation  No. 44 are; (a) the definition
of an employee for purposes of applying APB Opinion No. 25, (b) the criteria for
determining  whether  a plan  qualifies  as a  non-compensatory  plan,  (c)  the
accounting  consequences  of  modifications  to the terms of a previously  fixed
stock  option  award,   and,  (d)  the  accounting  for  an  exchange  of  stock
compensation awards in a business combination.

     The  adoption of  Interpretation  No. 44 did not have a material  impact on
CBH's results of operations or financial position.


SEC Staff Accounting Bulletin - Revenue Recognition

     In December 1999, the SEC issued Staff  Accounting  Bulletin (SAB) No. 101,
"Revenue  Recognition in Financial  Statements," which must be adopted for years
beginning  after  December  15, 2000.  SAB No. 101 provides  guidance on revenue
recognition, as well as criteria for when revenue is realized and earned.

     CBH does not expect that SAB No. 101 will have a material impact on results
of operations or financial position.

11. Earnings Per Share

     The following  table sets forth the  computation  of  historical  basic and
diluted earnings per share:

<TABLE>
<CAPTION>


                               EARNINGS PER SHARE

The following table sets forth the computation of historical basic and diluted earnings per share:

<S>                                                     <C>             <C>             <C>             <C>
                                                   Three Months Ended                   Nine Months Ended
                                                                 September 30,                   September 30,
                                                       2000            1999            2000             1999
                                                                    (dollars in thousands)
Numerator
Net income for basic earnings per share                 $ 1,159         $ 1,036         $ 3,109          $ 3,943
                                                   -------------    ------------    ------------    -------------

Numerator for diluted earnings per share                $ 1,159         $ 1,036         $ 3,109          $ 3,943

Denominator
Denominator for basic earnings per share -
   weighted average shares                           10,697,924       9,629,157      10,099,451        8,891,628
Effect of dilutive securities:
   Stock options                                        178,007         236,378         259,080          227,041
                                                   -------------    ------------    ------------    -------------

Denominator for diluted earnings per share -
   weighted average shares - diluted                 10,875,931       9,865,535      10,358,531        9,118,669
                                                   =============    ============    ============    =============

Per Share
Basic earnings                                           $ 0.11          $ 0.11          $ 0.31           $ 0.44
                                                   =============    ============    ============    =============

Diluted earnings                                         $ 0.11          $ 0.11          $ 0.30           $ 0.43
                                                   =============    ============    ============    =============
</TABLE>

<PAGE>

12.  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 marketed by the Company are
vulnerable to changes in federal tax laws. In recent federal  budget  proposals,
provisions  have been  offered  to amend  existing  rules  related  to  policies
covering employees,  officers and directors. If such proposals are enacted, they
could  significantly  reduce the attractiveness of business-owned life insurance
to companies that traditionally have high debt to equity ratios,  such as banks.
While CBH  believes  there is  insufficient  support in Congress to enact such a
change,  at this  time,  CBH is  unable  to  predict  the  outcome  of any  such
legislative proposal by the current or any future Congress.

     As  CBH's  business  grows,   working   capital  and  capital   expenditure
requirements  will also  continue to increase.  CBH believes that net cash flows
from operations will be sufficient to finance debt  repayments,  working capital
requirement and capital expenditures for the next twelve months.  However, there
can be no assurance that the net cash flows from  operations  will be sufficient
to meet anticipated requirements or that CBH will not require additional debt or
equity  financing  within  this time frame.  CBH may  continue to issue stock to
finance future acquisitions.

13.  Segments and Related Information

     CBH has four reportable segments:

     Clark/Bardes Consulting - Compensation Resource Group
     Bank Compensation Strategies
     HealthCare Compensation Strategies
     Pearl Meyer & Partners

     On  September  6,  CBH  acquired  all of the  outstanding  common  stock of
Compensation  Resource Group, Inc. (CRG), an independent company specializing in
the design, marketing and administration of non-qualified executive compensation
plans using company owned life insurance (COLI) products.  In acquiring CRG, CBH
reorganized its divisions as follows:

o             The  division   formerly   known  as   Clark/Bardes   was  renamed
              Clark/Bardes  Consulting -  Compensation  Resource  Group and will
              consist of a Los  Angeles,  California  headquarters  with service
              centers in Dallas, Texas and Bethesda, Maryland.

              In 1999, CBH reported  Clark/Bardes of Washington,  D.C. (formerly
              Schoenke & Associates) as a segment. During 1999, this segment was
              combined with the operations of what was the Clark/Bardes division
              and was no longer a separately reportable segment.

o             The  bank  owned  life  insurance   (BOLI)  product  sold  by  the
              Clark/Bardes  division is in the process of being  transferred  to
              Bank Compensation  Strategies thus placing all of CBH's bank owned
              life  insurance  business  in one  division.  The  effect  of this
              transfer is not yet  reflected in the revenues of this segment nor
              in the results of Bank Compensation Strategies. For the year ended
              December 31, 1999,  BOLI accounted for 56.6 % of the  Clark/Bardes
              Consulting - Compensation Resource Group total revenue.

     HealthCare Compensation Strategies became a segment with the acquisition of
MCG  HealthCare on April 5, 1999.  Pearl Meyer & Partners  became a segment with
the acquisition of Pearl Meyer & Partners, Inc. on June 21, 2000.

     The  four  reportable   segments  operate  as  independent  and  autonomous
divisions with a central  corporate  staff  responsible  for finance,  strategic
planning and human  resources.  CBH's segments are in the business of designing,
marketing and  administering  employee benefit programs for large  corporations;
community,  regional  and  money  center  banks;  healthcare  organizations  and
executive  compensation  consulting.  The distinction  between these segments is
each has its own client base as well as its own marketing, administrative staffs
and management.

<PAGE>

<TABLE>

<S>                                                                     <C>             <C>             <C>             <C>
                                                                         Three Months Ended             Nine Months Ended
                                                                                 September 30,                  September 30,
                                                                        2000            1999           2000           1999
Revenues from External Customers
     Clark/Bardes Consulting - Compensation Resource Group              $ 17,655       $ 12,557        $ 47,133      $ 47,167
     Bank Compensation Strategies                                          7,911          7,002          22,811        20,266
     HealthCare Compensation Strategies                                    5,996          6,096          16,843        11,998
     Pearl Meyer & Partners                                                2,860              -           3,066             -
                                                                     ------------    -----------    ------------    ----------
           Total segments - reported                                      34,422         25,655          89,853        79,431
     Reconciling items                                                       223              -             303             -
                                                                     ------------
                                                                     ------------    -----------    ------------    ----------
           Total consolidated - reported                                $ 34,645       $ 25,655        $ 90,156      $ 79,431
                                                                     ============    ===========    ============    ==========

Operating Income
     Clark/Bardes Consulting - Compensation Resource Group               $ 3,100        $ 1,924        $ 11,764       $ 8,630
     Bank Compensation Strategies                                          1,398            522           1,322         1,538
     HealthCare Compensation Strategies                                      516            877             780         1,504
     Pearl Meyer & Partners                                                  426              -             533             -
                                                                     ------------    -----------    ------------    ----------
           Total segments - reported                                       5,440          3,323          14,399        11,672
     Corporate overhead                                                   (2,360)          (694)         (6,511)       (2,712)
     Interest - net                                                       (1,407)          (791)         (3,105)       (2,209)
                                                                     ------------    -----------    ------------    ----------
           Income before taxes                                           $ 1,673        $ 1,838         $ 4,783       $ 6,751
                                                                     ============    ===========    ============    ==========

Depreciation and Amortization
     Clark/Bardes Consulting - Compensation Resource Group                 $ 947          $ 580         $ 2,203       $ 1,562
     Bank Compensation Strategies                                            377            297           1,119           831
     HealthCare Compensation Strategies                                      622            569           1,863         1,163
     Pearl Meyer & Partners                                                  389              -             424             -
                                                                     ------------    -----------    ------------    ----------
           Total segments - reported                                       2,335          1,446           5,609         3,556
     Reconciling items                                                        78              -             154             -
                                                                     ------------    -----------    ------------    ----------
           Total consolidated - reported                                 $ 2,413        $ 1,446         $ 5,763       $ 3,556
                                                                     ============    ===========    ============    ==========

Identifiable Assets
     Clark/Bardes Consulting - Compensation Resource Group                                             $ 90,560      $ 54,760
     Bank Compensation Strategies                                                                        32,733        27,849
     HealthCare Compensation Strategies                                                                  34,437        34,688
     Pearl Meyer & Partners                                                                              29,697             -
                                                                                                    ------------    ----------
           Total segments - reported                                                                    187,427       117,297
     Deferred tax asset                                                                                       -            55
     Holding company assets - non operating                                                               5,973             -
                                                                                                    ------------    ----------
           Total consolidated - reported                                                              $ 193,400     $ 117,352
                                                                                                    ============    ==========



Capital Expenditures
     Clark/Bardes Consulting - Compensation Resource Group                                                $ 675       $ 3,440
     Bank Compensation Strategies                                                                           502           279
     HealthCare Compensation Strategies                                                                     907         2,161
     Pearl Meyer & Partners                                                                                 255             -
                                                                                                    ------------    ----------
           Total segments - reported                                                                      2,339         5,880
     Reconciling items                                                                                      466             -
                                                                                                    ------------    ----------
           Total consolidated - reported                                                                $ 2,805       $ 5,880
                                                                                                    ============    ==========
</TABLE>


<PAGE>

     CBH evaluates  performance and allocates resources based on profit and loss
from  operations  before  income  taxes,  interest or  corporate  administrative
expenses.  The  accounting  policies of the  reporting  segments are the same as
those described in the summary of significant policies. There are no significant
inter-segment revenues or expenses.

14.  Income Taxes

     Income  taxes for the quarter  ended  September  30,  2000,  reflect  CBH's
overall  effective tax rate for the year of 35% less the net of tax benefit of a
refund of state income taxes incurred in prior years.

15.  Litigation

     On July 25, 2000, Constellation Energy Group, Inc.  ("Constellation") filed
a civil action against Clark/Bardes, Inc., ("CBI"), a wholly owned subsidiary of
CBH, in the United States District Court for the District of Maryland.  The suit
asserts a claim of $7.5 million with  pre-judgment and  post-judgment  interest,
costs and expenses  and such other relief as the court deems proper  against CBI
under ERISA for breach of fiduciary duty in connection  with the  administration
of benefit  plans for  Baltimore  Gas and Electric  Company and state common law
claims for breach of contract,  professional  negligence and breach of fiduciary
duty.

     CBI denies each and all of the allegations in the Constellation  action and
intends to vigorously  defend itself. As previously  disclosed,  CBI has entered
into an  agreement  by which the  parties  agreed to attempt  to  resolve  their
differences by negotiation.

     Constellation  has been a CBI client  since  January  1993 and CBI believes
this  action is without  merit.  However,  there can be no  assurance  that this
matter will be resolved in CBI's favor.  In this event, we believe our exposure,
if any, is fully insured.


16.  ACQUISITION OF FORREST, WAGNER & ASSOCIATES, INC.

     On October 23, 2000, CBH acquired all of the outstanding  stock of Forrest,
Wagner &  Associates,  Inc.  ("FWA")  for a purchase  price of  $4,235,000,  not
including  expenses,  of which  $3,485,000 was paid in cash at the closing.  The
remaining $750,000 is payable upon the achievement of certain financial criteria
by December 31, 2004.

     FWA  is a  Phoenix,  Arizona  based  firm  specializing  in  marketing  and
administering  non-qualified executive benefit plans funded primarily by Company
owned life insurance. FWA is affiliated with Compensation Resource Group, Inc.

     The  acquisition  will be  accounted  for as a  purchase  with  most of the
purchase  price  amortized  based on the net  present  value of  future  renewal
revenue over twenty years. Additional payments, when made, will be accounted for
as goodwill and amortized over the remainder of the initial twenty-year period.


<PAGE>


ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS (Tables in thousands of dollars except per
           share amounts)

Overview

     Our net income was $1.2  million or $.11 per diluted  share,  for the third
quarter and $3.1 million,  or $.30 per diluted share, for the nine-month  period
ended  September  30, 2000.  In 1999,  we reported net income of $1.0 million or
$.11 per diluted share, for the third quarter and net income of $3.9 million, or
$.43 per diluted share, for the nine-month period ended September 30.

     Results for both the third quarter and year to date September 30, 2000 were
adversely  affected  by  $518,000  of  non-recurring  expenses  related  to  the
elimination  of several  executive  positions and the costs of  integrating  our
newest acquisition,  Compensation  Resource Group. The effect of this change was
to reduce diluted earnings per share for the current quarter by $.03 and year to
date by $.03.

Acquisitions

Since January 1, 2000, we have made seven acquisitions:

o        Compensation Resource Group, a company specializing in non-qualified
         deferred compensation plans,

o        Pearl Meyer & Partners,  an  independent  executive  compensation  firm
         which became our fourth operating segment - executive  compensation and
         benefits consulting;

o        Insurance Alliances Group, an estate planning firm, which has been
         renamed Clark/Bardes Partners; and,

o        The Christiansen Group, the Watson Company and W. M. Sheehan & Company;
         three add-on acquisitions for our Bank Compensation Strategies
         division.

     We may have several  acquisitions under consideration at any point in time.
Our evaluation  focus is on the quality of the  management,  future earnings and
growth  potential and the financial asset values in the book of renewal business
that will be realized for many years after the acquisition takes place.

Compensation Resources Group, Inc.

     On September 6, 2000,  we acquired all the issued and  outstanding  capital
stock of Compensation Resource Group ("CRG") for a total purchase price of $30.5
million,  not  including  acquisition   expenses,   estimated  to  be  $652,000,
consisting of:

o        a cash payment to the CRG shareholders Sellers of $11.5 million,

o        the issuance by CBH of 596,463  shares of its common  stock,  par value
         $.01 per share (the "Common Stock"),  having an aggregate value of $6.0
         million  based on the closing price of the Common Stock on September 5,
         2000; and,

o        the assumption and repayment of approximately $13.0 million of
         long-term debt.

<PAGE>

     For the periods prior to the acquisition; CRG had revenue and net income as
follows:

                            Nine Months Ended               Fiscal Years Ended
                               September 30,                     June 30,
                                    1999                     2000          1999
                                    ----                     ----          ----
                                 (Unaudited)                      (Audited)

     Revenue                         $ 24,708          $  26,286     $  27,126
     Net income (loss)                  1,735             (3,268)           45


     CRG is an executive  compensation and benefits  organization  that provides
the  design,  marketing  and  administration  of  non-qualified  plans.  CRG  is
headquartered  in Los Angeles,  California and has  affiliated  offices in seven
other  cities.  Prior to the  acquisition,  there was no  material  relationship
between CRG and Clark/Bardes.

    The $24.5 million cash portion of the purchase prices was borrowed under our
existing credit facility with Bank One.

    In connection with the 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 achieved during the years ended December 31, 2003 to 2005.

    The  acquisition of CRG will be accounted for as a purchase with most of the
purchase price allocated to the present value of in-force  revenue and amortized
over a period of thirty years.  The remainder  will be allocated to goodwill and
amortized over twenty years. The purchase price allocation is preliminary.

    The unaudited  financial  information below presents our results with CRG as
if the acquisition occurred on January 1, 1999.

                            Three Months Ended               Nine Months Ended
                              September 30,                    September 30,
                              -------------                    -------------
                            2000           1999              2000          1999
                            ----           ----              ----          ----
Pro forma
     Revenue           $  40,237        $ 29,698        $ 114,949      $104,139
     Net income (loss)      (340)         (1,044)          (1,431)        3,174
     Diluted earnings
      (loss) per share      (.03)           (.11)            (.13)          .33


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 total  purchase  price of $26.6
million including acquisition expenses of $720,000. The purchase price consisted
of a cash payment at closing of $21.9 million and the issuance of 250,000 shares
of our common  stock with a value based on the closing  NASDAQ price on June 21,
2000 of $4.0 million.  The cash portion of the purchase price was borrowed under
our line of credit.

     The  acquisition has been accounted for as a purchase and the goodwill will
be amortized  over a  twenty-year  period.  The  purchase  price  allocation  is
preliminary.

     In addition to the purchase price, $2.0 million of additional consideration
will be paid in the  first  quarter  of 2002 upon the  achievement  of a defined
performance  objective  during  the  first  eighteen  months  subsequent  to the
purchase.  These  payments,  when earned,  will be accounted  for as  additional
purchase  price to be amortized  over the remainder of the original  twenty-year
period.

<PAGE>

     For the  periods  prior to the  acquisition,  Pearl  Meyer &  Partners  had
revenue and net income as follows:

                            Nine Months Ended               Fiscal Years Ended
                               September 30,                   December 31,
                                  1999                     1999          1998
                                  ----                     ----          ----
                               (Unaudited)                      (Audited)

     Revenue                    $  8,598                $  12,579     $  11,230
     Net income                    3,746                      757           232

     Pearl Meyer & Partners was an S corporation and,  accordingly,  did not pay
federal income taxes.

     Pearl  Meyer  &  Partners  is  a  New  York  City  based   consulting  firm
specializing in executive  compensation and retention programs.  The Pearl Meyer
organization  became  Clark/Bardes'  fourth  operating  division.  Prior  to the
acquisition,  there  was  no  material  relationship  between  Pearl  Meyer  and
ourselves.

     The unaudited pro forma information below presents our results and those of
Pearl Meyer & Partners as if the acquisition had occurred on January 1, 1999.


                             Three Months Ended              Nine Months Ended
                                September 30,                   September 30,
                               -------------                   -------------
                            2000          1999              2000          1999
                            ----          ----              ----          ----
Pro forma
     Revenue            $  34,645      $  28,362         $ 96,425      $ 88,029
     Net income             1,159          1,136            5,782         4,923
     Diluted earnings
      per share               .11           .12               .55           .53


W. M. Sheehan & Company, Inc.

     On June 13, 2000, we acquired certain assets,  principally  working capital
and equipment and assumed certain  liabilities of W. M. Sheehan & Company,  Inc.
("Sheehan").  The  purchase  price  was  $367,000  cash  paid  at  closing.  The
acquisition will be accounted for as a purchase and the goodwill  amortized over
twenty years. The allocation of the purchase price is preliminary.

     In addition to the purchase  price paid at closing,  $650,000  will be paid
upon the achievement of certain revenue and earnings objectives during the years
ended June 30, 2001 through 2004.  The payments will be divided 23% cash and 77%
CBH common stock based on value at time of  issuance.  The  additional  payments
will be accounted for as goodwill and amortized  over the remaining  twenty-year
period.  Sheehan's  financial  results  are  included  with  those  of our  Bank
Compensation Strategies division.

Insurance Alliances Group, Inc.

     On May 5, 2000, we acquired the business of Insurance Alliances Group, Inc.
("IAG"). There were no other assets or liabilities acquired or assumed. IAG is a
Stamford,  Connecticut insurance firm specializing in executive estate planning.
Subsequent to the acquisition, IAG became Clark/Bardes Partners.

     The purchase  price for the business  was $3.5 million  consisting  of $2.8
million cash at closing and 49,143  shares of our common stock having a value of
$700,000.  The cash portion of the purchase price was borrowed under our line of
credit.  This  acquisition  has been  accounted for as a purchase and the entire
purchase  price was allocated to the net present  value of renewal  revenue from
insurance in force at the time of the  acquisition  and will be amortized over a
period of thirty years.  The financial  performance of IAG since its acquisition
has been insignificant.

The Wamberg Organization and Wamberg Financial Corporation

     On  September  1, 1999,  we purchased  certain  assets and assumed  certain
liabilities  of The Wamberg  Organization  and purchased all of the  outstanding
stock of Wamberg  Financial  Corporation,  for a purchase price of $17.9 million
and expenses of approximately $266,000.

<PAGE>

     The asset  purchase  agreement  provides  for the payment of an  additional
$11.9  million  upon the  attainment  of  certain  stipulated  annual  financial
objectives starting with the period ended December 31, 1999 through December 31,
2002. As of December 31, 1999, the financial objectives for 1999 were met, and a
$1.5  million  cash  payment was made to W. T.  Wamberg in the first  quarter of
2000.  This  payment was recorded as goodwill and will be amortized on an annual
basis until August 31, 2018.

     On January 4, 1999, we purchased the right to receive  approximately  27.5%
of the commissions  and fees on renewal  revenue from certain  inforce  policies
existing on June 30, 1998,  due to W. T.  Wamberg and The Wamberg  Organization,
for a cash  payment of $7.5  million.  Concurrent  with the  acquisition  of The
Wamberg  Organization,  we purchased all of the renewal  revenue not acquired on
January 4, 1999. All renewal revenue acquired in these  transactions will revert
to Mr. Wamberg on August 31, 2018.

     The  acquisition  of  The  Wamberg   Organization  and  Wamberg   Financial
Corporation  has been  accounted  for as a  purchase.  The  unaudited  pro forma
information  below  presents our results of operations  and those of The Wamberg
Organization and Wamberg Financial Corporation as if the acquisition occurred on
January 1, 1999.

                             Three Months Ended              Nine Months Ended
                               September 30,                   September 30,
                              -------------                   -------------
                            2000          1999              2000          1999
                            ----          ----              ----          ----
Pro forma
     Revenue            $  34,645     $  27,246           $ 90,156    $  87,058
     Net income             1,159         1,059              3,109        4,514
     Diluted earnings
      per share               .11           .11               .30           .49


MCG/HealthCare

     On April 5, 1999, we purchased the assets and business and assumed  certain
liabilities of Phynque, Inc., d/b/a Management Compensation Group/HealthCare,  a
Minnesota  corporation,  for a purchase  price of $35.6  million and $372,000 of
closing costs.

     MCG/HealthCare is a 170 employee executive benefit consulting  organization
servicing  the  healthcare   industry  and  is   headquartered  in  Minneapolis,
Minnesota. Prior to the acquisition,  there was no material relationship between
MCG/HealthCare and us. Subsequent to the acquisition,  MCG/HealthCare became the
HealthCare Compensation Strategies Division.

     The acquisition of MCG/HealthCare has been accounted for as a purchase. The
unaudited  pro  forma  information  below  presents  our  results  and  those of
MCG/HealthCare as if the acquisition had occurred on January 1, 1999:


                             Three Months Ended              Nine Months Ended
                                September 30,                   September 30,
                                -------------                   -------------
                            2000          1999              2000          1999
                            ----          ----              ----          ----
Pro forma
     Revenue             $  34,645     $  25,655          $  90,256   $  85,188
     Net income              1,159         1,036              3,109       4,328
     Diluted earnings
      per share                .11           .11                .30         .47

Additional Acquisition

     On October 23, 2000, we acquired all of the  outstanding  stock of Forrest,
Wagner &  Associates,  Inc.  ("FWA")  for a purchase  price of  $4,235,000,  not
including  expenses of which  $3,485,000  was paid in cash at the  closing.  The
remaining $750,000 is payable upon the achievement of certain financial criteria
by December 31, 2004.

     FWA  is a  Phoenix,  Arizona  based  firm  specializing  in  marketing  and
administering  non-qualified executive benefit plans funded primarily by Company
owned life insurance. FWA is affiliated with Compensation Resource Group, Inc.

<PAGE>

     The  acquisition  will be  accounted  for as a  purchase  with  most of the
purchase  price  amortized  based on the net  present  value of  future  renewal
revenue over the next twenty  years.  Additional  payments,  when made,  will be
accounted  for as  goodwill  and  amortized  over the  remainder  of the initial
twenty-year period.


Revenue Sources and Recognition

     Our operating units derive their revenue primarily from:

o       Commissions paid by the insurance companies that underwrite the policies
        underlying the various insurance programs;
o       Executive  compensation program and benefit consulting fees; and,
o       Fees paid by clients in connection with program design and
        administrative services.

     Our commission  revenue is typically paid annually and extends for a period
of ten years or more after the sale.  Commissions  paid by  insurance  companies
vary by policy and by program and usually  represent a percentage of the premium
or the cash surrender value of the insurance policies underlying the program.
Included in total revenue are:

o        First  Year  Commissions  and Fees.  First year  commission  revenue is
         recognized  at the  time  the  client  is  contractually  committed  to
         purchase the insurance policies and the premiums are paid by the client
         to the insurance company. Fee revenue is recognized when earned.

o        Renewal Commissions. Renewal commission revenue is recognized on the
         date that the renewal premium is due or paid to the insurance company.

Consolidated Results of Operations

<TABLE>

<S>                                             <C>           <C>           <C>         <C>       <C>

                                                        Nine Months Ended September        %0Change
                                         -------------------------------------------
                                              2000          1999          1998        00/99     99/98
Total revenue                               $ 90,156         $ 79,431      $ 46,626      13.5      70.4
Gross profit                                     59,487        41,759        17,371      42.5     140.4
           % of total revenue                66.0%          52.6%         37.3%
General and administrative expenses              47,002        29,789        13,022      57.8     128.8
           % of total revenue                52.1%          37.5%         27.9%
Operating income, excluding amortization         12,485        11,970         4,349       4.3     175.2
           % of total revenue                13.8%          15.1%         9.3%
Interest - net                                    3,105         2,209         2,180      40.6       1.3
           % of total revenue                 3.4%          2.8%          4.7%
Income taxes                                      3,283         4,061             -     (19.1)
           Effective tax rate                35.0%          41.6%         0.0%
Income before amortization                        6,097         5,700         2,169       7.0     162.8
           % of total revenue                 6.8%          7.2%          4.7%
Amortization - net of tax                         2,988                    1,757798      70.1     120.2
           % of total revenue                 3.3%          2.2%          1.7%
Net income                                      $ 3,109       $ 3,943      $ (5,011)    (21.2)   (178.7)
           % of total revenue                 3.4%          5.0%         -10.7%

Per diluted common share:

           Income before amortization            $ 0.59        $ 0.63        $ 0.55     -5.8%     14.1%
           Amortization - net of tax             $ 0.29        $ 0.19        $ 0.20     49.7%     -4.4%
           Net income                            $ 0.30        $ 0.43       $ (1.27)   -30.6%   -134.2%
           Weighted average shares           10,358,231     9,118,669     3,958,602     13.6%    130.4%
</TABLE>

<PAGE>

Clark/Bardes Consulting - Compensation Resource Group

     First year revenue for the third quarter  increased  over the third quarter
of 1999 by $3.2  million or 78.7%.  Renewal  revenue was also  favorable by $1.9
million or 22.6% ahead of the same quarter in 1999.  General and  administrative
expenses also reflect the previously  mentioned $518,000 provision for severance
benefits and reorganization expenses incurred in connection with the integration
of the Compensation Resources Group acquisition.

     With its strong third quarter, the Division has pulled ahead of last year's
year to date  results.  While  sales are  essentially  even with last year,  the
reduction in  commission  expense of $7.2 million as the result of acquiring key
producers  more than  offset a $4.1  million or 36.7%  increase  in general  and
administrative  expense.  The  acquisition  of key producers  results in a lower
commission  cost, as we are able to pay a lower level of compensation  since the
producer no longer bears the overhead burden of an independent office.


<TABLE>

                <S>                                             <C>         <C>                       <C>       <C>

                                                                      Three Months Ended September 30,
                                                                      -------------------------------------
                                                             2000        1999                    2000         1999
                                                         Operating Results                   Variances  - +/(-)
             Revenue
                  First year                                  $ 7,212     $ 4,036                  $ 3,176       78.7%
                  Renewal                                      10,443       8,521                    1,922        22.6
                                                                                             --------------------------
                                                         -------------------------
                        Total                                  17,655      12,557                    5,098        40.6
             Commission expense                                 8,251       6,382                    1,869        29.3
                                                         -------------------------           --------------------------
             Gross profit                                       9,404       6,175                    3,229        52.3
                        % of revenue                        53.3%        49.2%                         -          -
                                                         -------------------------           --------------------------
             Expenses
                  General and administrative                    5,501       3,740                    1,761        47.1
                        % of revenue                        31.2%        29.8%                         -          -
                  Amortization of intangibles                     803         511                      292        57.1
                        % of revenue                         4.5%        4.1%                           -          -
                                                         -------------------------           --------------------------
                                                         -------------------------           --------------
                        Total                                   6,304       4,251                    2,053        48.3

             Operating income                                 $ 3,100     $ 1,924                  $ 1,176       61.1%
                        % of revenue                        17.6%        15.3%                                  -          -
                                                         =========================           ==========================

                                                                      Nine Months Ended September 30,
                                                                      -------------------------------------
                                                             2000        1999                    2000         1999
                                                         Operating Results                   Variances  - +/(-)
             Revenue
                  First year                                 $ 17,646    $ 21,271                 $ (3,625)     -17.0%
                  Renewal                                      29,487      25,896                    3,591        13.9
                                                                                             --------------------------
                                                         -------------------------
                        Total                                  47,133      47,167                      (34)       (0.1)
             Commission expense                                18,919      26,122                   (7,203)      (27.6)
                                                         -------------------------           --------------------------
             Gross profit                                      28,214      21,045                    7,169        34.1
                        % of revenue                        59.9%        44.6%                         -          -
                                                         -------------------------           --------------------------
             Expenses
                  General and administrative                   15,086      11,034                    4,052        36.7
                        % of revenue                        32.0%        23.4%                         -          -
                  Amortization of intangibles                   1,881       1,381                      500        36.2
                        % of revenue                         4.0%        2.9%                           -          -
                                                         -------------------------           --------------------------
                                                         -------------------------           --------------
                        Total                                  16,967      12,415                    4,552        36.7

             Operating income                                $ 11,247     $ 8,630                  $ 2,617       30.3%
                        % of revenue                        23.9%        18.3%                         -          -

                                                         =========================           ==========================
</TABLE>

<PAGE>

Bank Compensation Strategies

     For the quarter, Bank Compensation Strategies revenues were 13% better than
the comparable  quarter of 1999. First year revenue was up $520,000 or 11.2% and
renewals  increased  $390,000 or 16.6%.  Gross  profits  improved  from 51.7% of
revenue last year to 64.6% in the 2000 quarter.

     For the nine months to date,  revenues were up 12.6% or $2.5 million as BCS
continued to benefit from its recent  acquisitions.  Of equal  importance  was a
27.8% improvement in gross profit margins also as a result of acquiring in-house
producers. Operating expenses were $2.8 million or 35.1% higher than the year to
date 1999 results as BCS absorbs its recent acquisitions.


<TABLE>
                <S>                                           <C>          <C>                        <C>         <C>
                                                                          Three Months Ended September 30,
                                                                      -------------------------------------
                                                             2000        1999                       2000         1999
                                                         Operating Results                        Variances  - +/(-)
             Revenue
                  First year                                  $ 5,173     $ 4,653                    $ 520       11.2%
                  Renewal                                       2,739       2,349                      390        16.6
                                                                                             --------------------------
                                                         -------------------------
                        Total                                   7,912       7,002                      910        13.0
             Commission expense                                 2,802       3,384                     (582)      (17.2)
                                                         -------------------------           --------------------------
             Gross profit                                       5,110       3,618                    1,492        41.2
                        % of revenue                        64.6%        51.7%                          -          -
                                                         -------------------------           --------------------------
             Expenses
                  General and administrative                    3,415       2,884                      531        18.4
                        % of revenue                        43.2%        41.2%                          -          -
                  Amortization of intangibles                     297         212                       85        40.1
                        % of revenue                         3.8%        3.0%                           -          -
                                                         -------------------------           --------------------------
                                                         -------------------------           --------------
                        Total                                   3,712       3,096                      616        19.9

             Operating income                                 $ 1,398       $ 522                    $ 876      167.8%
                        % of revenue                        17.7%        7.5%                           -          -
                                                         =========================           ==========================

                                                                      Nine Months Ended September 30,
                                                                      -------------------------------------
                                                             2000        1999                    2000         1999
                                                         Operating Results                   Variances  - +/(-)
             Revenue
                  First year                                 $ 15,182    $ 14,119                  $ 1,063        7.5%
                  Renewal                                       7,629       6,147                    1,482        24.1
                                                                                             --------------------------
                                                         -------------------------
                        Total                                  22,811      20,266                    2,545        12.6
             Commission expense                                 9,828      10,111                     (283)       (2.8)
                                                         -------------------------           --------------------------
             Gross profit                                      12,983      10,155                    2,828        27.8
                        % of revenue                        56.9%        50.1%                         -          -
                                                         -------------------------           --------------------------
             Expenses
                  General and administrative                   10,775       7,976                    2,799        35.1
                        % of revenue                        47.2%        39.4%                         -          -
                  Amortization of intangibles                     886         641                      245        38.2
                        % of revenue                         3.9%        3.2%                          -          -
                                                         -------------------------           --------------------------
                                                         -------------------------           --------------
                        Total                                  11,661       8,617                    3,044        35.3

             Operating income                                 $ 1,322     $ 1,538                   $ (216)     -14.0%
                        % of revenue                         5.8%        7.6%                                   -          -
                                                         =========================           ==========================
</TABLE>

<PAGE>

HealthCare Compensation Strategies

     HealthCare  Compensation  Strategies  revenues  for the third  quarter were
comparable  to the third  quarter of 1999.  First  year  revenue  declined  $1.2
million  while  renewals  were up by $1.1 million as HCS continued to experience
the effects of the financially  depressed health care industry.  Gross profit of
88.3% for the first  quarter  of 2000 was almost  identical  to the 88.6% of the
comparable 1999-quarter.

     We did not own HCS until  the  second  quarter  of 1999 so the year to date
results are not comparable.

<TABLE>
                <S>                                           <C>            <C>                    <C>           <C>

                                                                      Three Months Ended September 30,
                                                                      -------------------------------------
                                                             2000        1999                      2000         1999
                                                         Operating Results                       Variances  - +/(-)
             Revenue
                  First year                                  $ 4,506     $ 5,694                 $ (1,188)     -20.9%
                  Renewal                                       1,490         402                    1,088       270.6
                                                          --------------------------         ---------------------------

                       Total                                   5,996       6,096                     (100)       (1.6)
             Commission expense                                   704         692                       12         1.7
                                                         -------------------------           --------------------------
             Gross profit                                       5,292       5,404                     (112)       (2.1)
                        % of revenue                        88.3%        88.6%                          -          -
                                                         -------------------------           --------------------------
             Expenses
                  General and administrative                    4,327       4,014                      313         7.8
                        % of revenue                        72.2%        65.8%                          -          -
                  Amortization of intangibles                     448         514                      (66)      (12.8)
                        % of revenue                         7.5%        8.4%                           -          -
                                                         -------------------------           --------------------------
                                                         -------------------------           --------------
                        Total                                   4,775       4,528                      247         5.5
             Operating income                                   $ 517       $ 876                   $ (359)     -41.0%
                        % of revenue                         8.6%        14.4%                          -          -
                                                         =========================           ==========================

                                                                      Nine Months Ended September 30,
                                                                      -------------------------------------
                                                             2000        1999                    2000             1999
                                                         Operating Results                       Variances  - +/(-)
             Revenue
                  First year                                 $ 12,611     $ 9,501                  $ 3,110       32.7%
                  Renewal                                       4,233       2,497                    1,736        69.5
                                                       -----------------------------           --------------------------

                        Total                                  16,844      11,998                    4,846        40.4
             Commission expense                                 1,921       1,438                      483        33.6
                                                         -------------------------           --------------------------
             Gross profit                                      14,923      10,560                    4,363        41.3
                        % of revenue                        88.6%        88.0%                         -          -
                                                         -------------------------           --------------------------
             Expenses
                  General and administrative                   12,793       8,069                    4,724        58.5
                        % of revenue                        75.9%        67.3%                          -          -
                  Amortization of intangibles                   1,349         987                      362        36.7
                        % of revenue                         8.0%        8.2%                           -          -
                                                         -------------------------           --------------------------
                                                         -------------------------           --------------
                        Total                                  14,142       9,056                    5,086        56.2
             Operating income                                   $ 781     $ 1,504                   $ (723)     -48.1%
                        % of revenue                         4.6%        12.5%                          -          -
                                                         =========================           ==========================
</TABLE>

<PAGE>

Pearl Meyer & Partners

     Pearl Meyer & Partners is our executive  compensation  consulting division.
It was  acquired on June 21, 2000 and the results  reflect the  operations  from
that date to  September  30.  Despite  producing  only 8.3% of  revenue  for the
quarter,  this new division  contributed  14.3%,  our  operating  income  before
amortization.

<TABLE>
                <S>                                            <C>         <C>                    <C>           <C>

                                                                      Three Months Ended September 30,
                                                                      -------------------------------------
                                                             2000        1999                    2000         1999
                                                         Operating Results                   Variances  - +/(-)
             Revenue
                  First year                             $ 2,860         $ -                  $ 2,860           -
                  Renewal                                      -           -                        -           -
                                                       --------------------------            ------------------------
                        Total                              2,860           -                    2,860           -
             Commission expense                                -           -                        -           -
                                                         -------------------------           --------------------------
             Gross profit                                  2,860           -                    2,860           -
                        % of revenue                      100.0%           -                        -           -
                                                         -------------------------           --------------------------
             Expenses                                                                                           -
                  General and administrative               2,141           -                    2,141           -
                        % of revenue                        74.9%          -                         -
                  Amortization of intangibles                293           -                      293           -
                        % of revenue                        10.2%          -                         -          -
                                                         -------------------------           --------------------------
                                                         -------------------------           --------------
                        Total                               2,434           -                    2,434          -
                  Operating income                          $ 426         $ -                    $ 426          -
                        % of revenue                        14.9%           -                         -         -
                                                         =========================           ==========================

                                                                      Nine Months Ended September 30,
                                                                      -------------------------------------
                                                             2000        1999                    2000           1999
                                                         Operating Results                   Variances  - +/(-)
             Revenue
                  First year                             $ 3,066         $ -                  $ 3,066            0.0%
                  Renewal                                      -           -                        -              -
                                                       -------------------------          --------------------------
                        Total                              3,066           -                    3,066             -
             Commission expense                                -           -                        -             -
                                                         -------------------------           --------------------------
             Gross profit                                  3,066           -                    3,066             -
                        % of revenue                        100.0%         _                        _             -          -
                                                         -------------------------           --------------------------
             Expenses
            General and administrative                     2,206           -                    2,206             -
                        % of revenue                        72.0%          -                        -             -
                  Amortization of intangibles                327           -                      327             -
                        % of revenue                        10.7%          -                        -             -
                                                         -------------------------           -------------------------
                    Total                                   2,533          -                    2,533             -

             Operating income                               $ 533           -                   $ 533             -
                        % of revenue                        17.4%           -                       -             -
                                                         =========================           ==========================
</TABLE>

<PAGE>

Results Attributable to Acquisitions

     As an acquirer,  our operating results are significantly  influenced by the
contribution of our acquired businesses. For reporting purposes, we consider any
business not appearing in four complete  quarters of operating  results as being
from  acquisitions.  After  that,  they become  part of  existing  business.  An
analysis  of  our  operating  results,  separating  acquisitions  from  existing
businesses is as follows:

<TABLE>

<S>                                                    <C>           <C>       <C>              <C>           <C>         <C>

                                                Three Months Ended                        Three Months Ended
                                                September  30,  2000                      September  30,  1999
                                                  Existing   Acquisitions    Combined       Existing   Acquisitions   Combined

Revenue
     First year                                     $ 14,622       $ 5,223     $ 19,845        $ 8,689      $ 5,694     $ 14,383
     Renewal                                          13,555         1,246       14,801         10,869          402       11,271
                                                ----------------------------------------  ---------------------------------------
     Total                                            28,177         6,469       34,646         19,558        6,096       25,654
Commission expense                                    16,445        (4,688)      11,757         10,792         (335)      10,457
                                                ----------------------------------------  ---------------------------------------
Gross profit                                          11,732        11,157       22,889          8,766        6,431       15,197
General and administrative expense                    12,872         5,002       17,874          7,132        4,199       11,331
                                                ----------------------------------------  ---------------------------------------
Operating income before amortization                  (1,140)        6,155        5,015          1,634        2,232        3,866
Amortization of intangibles                            1,018           915        1,933            595          642        1,237
                                                ----------------------------------------  ---------------------------------------
Operating income                                    $ (2,158)      $ 5,240      $ 3,082        $ 1,039      $ 1,590      $ 2,629
                                                ========================================  =======================================



                                                Nine Months Ended                         Nine Months Ended
                                                September  30,  2000                      September  30,  1999
                                                  Existing   Acquisitions    Combined       Existing   Acquisitions   Combined

Revenue
     First year                                     $ 43,179       $ 5,429     $ 48,608       $ 29,961     $ 14,929     $ 44,890
     Renewal                                          40,302         1,246       41,548         30,797        3,743       34,540
                                                ----------------------------------------  ---------------------------------------
     Total                                            83,481         6,675       90,156         60,758       18,672       79,430
Commission expense                                    37,408        (6,739)      30,669         35,758        1,914       37,672
                                                ----------------------------------------  ---------------------------------------
Gross profit                                          46,073        13,414       59,487         25,000       16,758       41,758
General and administrative expense                    41,265         5,736       47,001         17,968       11,821       29,789
                                                ----------------------------------------  ---------------------------------------
Operating income before amortization                   4,808         7,678       12,486          7,032        4,937       11,969
Amortization of intangibles                            2,127         2,470        4,597          1,305        1,704        3,009
                                                ----------------------------------------  ---------------------------------------
Operating income                                     $ 2,681       $ 5,208      $ 7,889        $ 5,727      $ 3,233      $ 8,960
                                                ========================================  =======================================

</TABLE>


     Caution should be observed in analyzing and evaluating the foregoing. While
acquisitions have made, and will continue to make, a substantial contribution to
our operating performance and growth, the resources dedicated to our acquisition
program could have had an impact on the performance of the existing business had
the acquisitions not been made.

Corporate General and Administrative Expenses

     In 1999, we established a corporate executive and administrative  office in
North  Barrington,  Illinois  to  provide  direction  and  coordination  for our
financial,  strategic planning and human resources activities.  During the third
quarter,  expenses  were $2.9 million up $2.2 million over the third  quarter of
last year.  For the nine months ended  September  30, 2000,  expenses  were $6.5
million compared with $2.7 million last year.

     The year to date expenses is not  comparable  because the Corporate  office
was not formally  established  until the third  quarter of 1999 and staffing and
other expenses did occur until after September 1, 1999.

Interest Expense - Net

     Interest  expense of $1.4 million for the three months ended  September 30,
2000 was $616,000 or 77.9% more than the same quarter last year. For the year to
date,  interest expense of $3.1 million exceeded last year's to date by $896,000
or 40.5%.

<PAGE>

     The year to date increase results from increased borrowing for acquisitions
- notably  Compensation  Resource  Group,  Pearl Meyer & Partners and  Insurance
Alliances  Group - and an increase in interest rates of over 25% during the last
eighteen months.

Income Taxes

     Income taxes for the quarter were $514,000, reflecting an effective rate of
30.7% and $1.7  million for the year to date on an  effective  rate of 35%,  our
anticipated rate for the full year 2000. For the same periods last year,  income
taxes were  $804,000  for the  quarter  and $2.8  million  year to date  showing
effective rates of 43.7% and 41.6%, respectively.

     The decrease in the effective tax rate results  primarily from the recovery
of prior years state taxes of  approximately  $480,000.  This is a non-recurring
benefit. For succeeding years, we expect our income tax rate to be 37.5%.

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.

<TABLE>
<S>                            <C>      <C>         <C>       <C>       <C>       <C>         <C>       <C>

                             Dec        Mar       Jun        Sep       Dec        Mar       Jun        Sep
                             1998      1999       1999      1999       1999      2000       2000      2000
Revenue                     $ 28,141   $24,057    $29,714  $ 25,655    $41,335  $ 31,147   $ 24,364   $34,646
   % of last twelve months     37.6%     28.3%      29.8%     23.9%      34.2%     24.4%      19.9%     26.3%
Gross profit                  11,285     9,874     16,681    15,199     25,899    20,263     16,336    22,888
   Ratio                       40.1%     41.0%      56.1%     59.2%      62.7%     65.1%      67.0%     66.1%

Operating expenses             6,594     6,255     12,202    11,332     15,364    15,013     14,114    17,875
Amortization                     434       620      1,152     1,237      1,361     1,335      1,329     1,933

Operating income               4,257     2,999      3,327     2,630      9,174     3,915        893     3,080
   % of revenue                15.1%     12.5%      11.2%     10.3%      22.2%     12.6%       3.7%      8.9%
   % of gross profit           37.7%     30.4%      19.9%     17.3%      35.4%     19.3%       5.5%     13.5%

</TABLE>

     Our  operating  results  can  fluctuate  considerably  when  compared  on a
consecutive  quarterly basis.  Because many of our programs are implemented late
in the year, we can  experience  large  increases in both first year and renewal
revenue in the fourth calendar  quarter.  Operating results may be affected by a
number of other factors, including:

o        introduction of new or enhanced programs and services by us or our
         competitors;
o        client acceptance or rejection of new programs and services;
o        program development expenses; and,
o        timing of major sales.

     Many of these  factors are beyond our  control  and sales  cycles can often
take between twelve and eighteen months. In our industry, past operating results
is not a reliable indicator of future  performance,  particularly on a quarterly
basis.

<PAGE>

Liquidity and Capital Resources

Selected Measures
                                                          As of September 30,
                                                         2000            1999
                                                         ----            ----
Cash and cash equivalents                             $   6,177       $  4,832
Working Capital                                          (3,441)        (2,768)
Current ratio (to one)                                      .88            .90
Shareholders' equity per common share (1)           $      8.25      $    6.48
Debt to total capitalization (2)                           38.2%         40.7%


(1) total  stockholders'  equity divided by actual shares outstanding  excluding
stock  options

(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 to be $527.2  million,  over the
next ten years.  The following  table  represents  the  projected  gross revenue
associated  with  our  inforce  business-owned  life  insurance  policies  as of
September 30, 2000.  They have not been adjusted for mortality,  lapse, or other
factors that may reduce their value. We cannot assure you that commissions under
any of these policies will be received. These projected gross revenues are based
on the beliefs and assumptions of management and are not necessarily  indicative
of the revenue that may actually be achieved in the future.  Renewal revenue can
be affected by policy surrenders or exchanges,  contract  changes,  asset growth
and mortality rates.

     Over the  last  five  years,  we have  experienced  a  persistency  rate of
approximately  95% of the  inforce  insurance  underlying  our  programs.  As we
continue to diversify and acquire  companies  specializing  in different  market
segments,  our persistency rates can vary  significantly.  While we intend to do
all we can to retain  our  clients,  service  their  accounts  and  sustain  our
persistency, there can be no assurance our persistency rates will remain at this
level.
                         Projected Gross Renewal Revenue
                               September 30, 2000

       Clark/Bardes
       Consulting --          Bank              Healthcare
       Compensation        Compensation         Compensation
      Resource Group        Strategies          Strategies               Total

2001  $  54,574         $    9,594          $      6,423          $      70,591
2002     52,473              6,505                 7,361                 66,339
2003     46,790              4,292                 7,271                 58,353
2004     40,880              4,318                 7,170                 52,368
2005     39,292              4,318                 6,964                 50,574
2006     37,918              4,336                 6,705                 48,959
2007     35,224              4,358                 6,451                 46,033
2008     34,280              4,374                 6,230                 44,884
2009     34,436              4,388                 5,777                 44,601
2010     34,898              4,392                 5,245                 44,535
      -----------------  -----------------   ----------------    ---------------

Total $ 410,765        $    50,875          $     65,597            $   527,237
      ===============      ========          =================       ===========

<PAGE>

     As a financial  company with strong  operating  cash flow and an accessible
working  capital  line of credit,  we believe  we have  little  reason to retain
substantial cash balances. We use the net cash flow from operating activities to
fund capital  expenditures and small  acquisitions.  We expect that large future
acquisitions  will be financed  primarily  through  externally  available funds.
However, we can offer no assurance that such funds will be available and, if so,
on terms acceptable to us. Summarizing our cash flow:

                                                            Nine Months Ended
                                                               September 30,
                                                           2000            1999
                                                           ----            ----
Cash flows from (used in):
         Operations                                   $  10,475       $  10,609
         Investing                                      (56,695)        (59,791)
         Financing                                       47,565          40,485

Cash Flows from Operating Activities

     Our cash flow from operations for the nine months ended September 30, 2000,
compared with the same nine-month period in 1999, was as follows:

                                            Nine Months Ended          Increase
                                              September 30,           (Decrease)
                                              -------------
                                             2000          1999          In Cash
                                             ----          ----          -------

Net income plus non-cash expenses           $ 8,873       $ 7,511       $ 1,362
Changes in operating assets and liabilities   1,602         3,098        (1,496)
                                          ----------    ----------   -----------
Cash flow from operating activities        $ 10,475      $ 10,609       $  (134)
                                           ===========  ============= ==========

     Our  continued  strong  cash  flow  from  operations  allows us to pay down
acquisition debt and continue our acquisition  program.  We make significant use
of borrowings to finance our acquisitions.  Because of these factors, management
has  determined to dedicate all excess cash to the reduction of bank  borrowings
and,  as a result only cash for  reasonably  foreseeable  needs and  expenses is
retained.

Cash Used in Investing Activities

     For the nine months to date,  acquisitions  accounted  for $52.7 million of
the $56.7 million cash used in investing  activities.  The balance was comprised
of $2.8 million for purchase of  equipment  and various  assets such as deferred
debt expenses.

Cash Flows from Financing Activities

     We presently have a $114.3  million credit  facility with a group of banks.
Loans bear  interest at a floating  rate based on the London  InterBank  Offered
Rate at the time of  borrowing  or prime rate at due dates.  On August 29, 2000,
CBH's group of lending  banks  expanded the line of credit from $100.0 to $114.3
million and added another lending bank to the group. The most significant change
in the agreement  was the increase in the working  capital limit from $5 million
to $10 million and the  expansion  of the  borrowing  base.  The loan matures on
December 31, 2004, with interest and principal payable quarterly  starting March
31, 2000. The credit  agreement  contains  restrictive  covenants  including the
requirement  that  all  acquisitions  in  excess  of $25  million  per  year  be
pre-approved by the lenders.

     On September  11, 2000,  we sold 1.9 million  shares of  registered  common
stock to a group of investors, in a private placement, for $13.50 per share. The
net  proceeds  were  $25.1  million  and were  used for debt  reduction  and the
acquisition of Compensation Resource Group.

     We believe that our net cash flow from  operations will continue to provide
sufficient funds to service our debt obligations. We estimate renewal revenue in
future periods, which is not reflected on our balance sheet, to be approximately
$298.2  million  over the next  five  years.  However,  renewal  revenue  can be
adversely affected by policy surrenders or exchanges, material contract changes,
asset growth and case mortality rates.

<PAGE>

     As our  business  grows,  our  working  capital  and  capital  expenditures
requirements will also continue to increase. There can be no assurance, however,
that  the net  cash  flows  from  operations  will  be  sufficient  to meet  our
anticipated requirements,  or that we will not require additional debt or equity
financing. We may continue to issue stock to finance future acquisitions.

Intangible Assets

     When we  acquire  a  company,  we  normally  acquire  little  in the way of
tangible  assets  such  as  receivables,  furniture  and  the  like.  Therefore,
virtually  the  entire  purchase  price  is  allocated  to  intangible   assets.
Intangible  assets  arising from  purchased  businesses are our largest and most
important  financial  assets.  Two important  elements of our intangible  assets
affect our cash flow:

1)       the present value of inforce  revenue is the net  discounted  cash flow
         from the book of  business of those  companies  having  future  renewal
         revenue at the time we acquired them; and,

2)       a potential future tax benefit over the next fifteen years.
         Approximately $141.1 million of our gross intangible assets are
         expected to be tax deductible.

     Intangible  assets  arising from our  purchased  businesses  consist of the
following:

                                                 September 30,     December 31,
                                                      2000             1999
                                                      ----             ----
Present value of future cash flows from inforce
   revenue......................................   $ 92,932        $     62,132
Goodwill..........................................   71,355              36,427
Non-competition agreements........................    1,750               1,750
                                                 -----------      --------------
                                                    166,037             100,309
Accumulated amortization..........................  (10,496)             (5,318)
                                                 ------------    ---------------
Net..............................................  $155,541         $     94,991
                                                 ============     ==============
As a percent of:
Total assets.......................................    80.5%             76.1%
Stockholders' equity...............................   149.2%            152.3%

     The  amounts   allocated  to  inforce  revenue  are  determined  using  the
discounted cash flow of future  commissions  adjusted for expected  persistency,
mortality and associated  costs.  The balance of the excess  purchase price over
the net  tangible  assets is  allocated  to  goodwill.  The  inforce  revenue is
amortized over its period of duration, which is normally twenty to thirty years.
Many  factors  outside  our control  determine  the  persistency  of our inforce
business and we cannot be sure that the values we allocated  will  ultimately be
realized.

     Goodwill  had been  amortized  over  periods of twenty to forty  years.  In
anticipation of new rules governing  amortization  expected to be promulgated by
the Financial Accounting Standards Board, goodwill arising from new acquisitions
is  amortized  over  a  period  not  to  exceed  twenty  years.  Non-competition
agreements are amortized  over five to ten years,  according to the terms of the
agreements.

     We  have  adopted  Statement  of  Financial  Accounting  Standard  No.  121
"Accounting  for  Impairment  of Long Lived  Assets and Long Lived  Assets To Be
Disposed Of." On an annual  basis,  we review the  components of our  intangible
assets  and  make  appropriate  adjustments  if it  becomes  apparent  that  the
undiscounted  cash flow is less than its unamortized  carrying amount. No growth
rates are used in the  projection  of renewal  revenue  and,  in the  opinion of
management,  projections are consistent in all respects. If any component of the
inforce  revenue  base  should  become  unrealizable  or  accounting  regulatory
agencies impose shorter amortization periods, this could have a material adverse
effect on our business,  financial  condition and operating  results.  We cannot
assure  you that a  component  of the  inforce  revenue  base  will  not  become
unrealizable  or that  accounting  regulatory  bodies  will not  impose  shorter
amortization periods.

<PAGE>

Market Risk

     Our  primary  market  risk  exposure  is to  changes in  interest  rates on
borrowings  under our  credit  agreement.  We have a credit  facility  of $114.3
million  with a group  of bank  lenders.  The  credit  facility  provides  for a
revolving  credit  and a term loan.  Interest  on  borrowings  under our line of
credit is based on one of two factors,  at our option, at the time the funds are
borrowed:

o        U. S. prime rate, published in the Wall Street Journal, which will
         float for as long as this segment of borrowing is outstanding; or,

o        London InterBank  offered rate, which is based on the published rate at
         the time of the  borrowing  and will  remain  fixed at that rate for as
         long as this segment of the borrowing is outstanding.

     At  December  31,  1999,  we had total  outstanding  indebtedness  of $42.7
million, or approximately 30.9% of total market capitalization. At September 30,
2000, we had total  outstanding  indebtedness of $64.6 million or 33.3% of total
market  capitalization.  Our interest rate risk objective is to limit the impact
of rate  fluctuations on earnings and cash flows. To achieve this objective,  we
manage our exposure to  fluctuations  in interest rates through the use of fixed
rate  debt  instruments  to the  extent  that  reasonably  favorable  rates  are
obtainable,  and use the interest rate swaps to mitigate  interest rate risk and
to effectively lock the interest rate on a portion of our variable debt.

     Coincident  with the credit  facility,  we entered into three interest rate
swap  agreements  with a bank  affiliated  with  the  lending  group  to set the
interest rates. The first  agreement,  accounted for as interest  expense,  went
into effect on July 6, 1999, and sets the underlying  LIBOR-based  interest rate
at 5.76% on $12.8 million of the debt. The second  agreement went into effect on
January 18, 2000,  and sets the  underlying  LIBOR-based  rate at 5.29% on $13.5
million of the debt. The third  agreement went into effect on June 29, 2000, and
sets the  underlying  LIBOR rate at 7.24% on $20.0  million of our debt.  In the
third quarter and year-to-date, these agreements provided savings of $59,000 and
$150,000 respectively.

     We  do  not  enter  into  derivative  or  interest  rate  transactions  for
speculative  purposes.  Approximately  7.7% of our  outstanding  debt was at the
prime  rate of 9.5%  plus the  applicable  spread  at  September  30,  2000.  An
additional  71.6% of our outstanding debt at September 30, 2000, was effectively
locked at an interest rate of 6.2% through an interest rate swap agreement for a
notional  amount of $46.3  million.  While these hedges  effectively  reduce our
overall  cost of  borrowings,  it should not be  inferred  that we can borrow at
these  reduced  rates.  Our  ability  to control  interest  rates  through  swap
agreements is limited to the notional  amounts under those  agreements with such
notional amounts declining on a quarterly basis.

Inflation

     Inflation  has not had a  material  effect on our  results  of  operations.
Certain of our expenses,  such as compensation,  benefits and capital  equipment
costs, are subject to normal inflationary  pressures.  However,  the majority of
our service and  administrative  agreements  with  clients,  which  generate fee
income,  have a cost of living  adjustment  tied to the  consumer  price  index.
Management  believes  that future  inflationary  pressures  will  continue to be
offset,  because as inflation increases,  investment returns will also increase,
resulting in higher cash values and higher commission rates.

Recent Accounting Pronouncements

FASB Accounting Standard - Derivatives and Hedging Activities

     In June 1998,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement of Financial  Accounting  Standards  (SFAS) No. 133,  "Accounting  for
Derivative Instruments and Hedging Activities." This statement requires that all
derivatives  be  measured  at fair  value and  recognized  as  either  assets or
liabilities  on our  balance  sheet.  Changes in the fair  values of  derivative
instruments  will be  recognized  in either  earnings or  comprehensive  income,
depending on the designated use and  effectiveness of the instruments.  The FASB
amended this  pronouncement in June 1999 to defer the effective date of SFAS No.
133 for one year. We must adopt SFAS No. 133 no later than January 1, 2001.

<PAGE>

     Because of CBH's minimal use of derivatives, management does not anticipate
that the  adoption  of the new  Statement  will  have a  significant  effect  on
earnings or the financial position of CBH.

FASB Interpretation - Stock Compensation

     In March  2000,  the FASB issued  Interpretation  No. 44,  "Accounting  for
Certain Transactions  Involving Stock  Compensation".  Interpretation No. 44 was
issued in order to clarify issues arising from Accounting Principles Board (APB)
Opinion No. 25 "Accounting for Stock Issued to Employees,"  which was previously
issued in October 1972.  Interpretation  No. 44 is effective  July 1, 2000,  but
certain  conclusions  cover specific events that occur either after December 15,
1998 or January 12, 2000.

     The main issues addressed by Interpretation  No. 44 are: (a) the definition
of an employee for purposes of applying APB Opinion No. 25, (b) the criteria for
determining  whether  a plan  qualifies  as a  non-compensatory  plan,  (c)  the
accounting  consequences  of  modifications  to the terms of a previously  fixed
stock option award, and (d) the accounting for an exchange of stock compensation
awards in a business combination.

     The  adoption of  Interpretation  No. 44 did not have a material  impact on
CBH's results of operations or financial position.

SEC Staff Accounting Bulletin - Revenue Recognition

     In December 1999, the SEC issued Staff  Accounting  Bulletin (SAB) No. 101,
"Revenue  Recognition in Financial  Statements," which currently must be adopted
for years ending  after  December  15,  2000.  SAB No. 101  provides  additional
guidance  on  revenue  recognition,  as well as  criteria  for when  revenue  is
realized and earned.

     We do not expect  that SAB No. 101 to have a material  impact on results of
operations or financial position.

ITEM 3A.  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 27 through
28 of this Form 10-Q.

                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

     On July 25, 2000, Constellation Energy Group, Inc.  ("Constellation") filed
a civil action against Clark/Bardes, Inc., ("CBI"), a wholly owned subsidiary of
CBH, in the United States District Court for the District of Maryland.  The suit
asserts a claim of $7.5 million with  pre-judgment and  post-judgment  interest,
costs and expenses  and such other relief as the court deems proper  against CBI
under ERISA for breach of fiduciary duty in connection  with the  administration
of benefit  plans for  Baltimore  Gas and Electric  Company and state common law
claims for breach of contract,  professional  negligence and breach of fiduciary
duty.

     CBI denies each and all of the allegations in the Constellation  action and
intends to vigorously  defend itself. As previously  disclosed,  CBI has entered
into an  agreement  by which the  parties  agreed to attempt  to  resolve  their
differences in a non-litigious manner and we are still hopeful of doing that.

     Constellation  has been a CBI client  since  January  1993 and CBI believes
this  action is without  merit.  However,  there can be no  assurance  that this
matter will be resolved in CBI's favor.  In this event, we believe our exposure,
if any, is fully insured.

<PAGE>

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

     On September  11,  2000,  CBH sold  1,888,887  shares of its $.01 par value
common stock to a group of private  investors  for $13.50 per share.  The shares
were registered for sale in a prospectus  filed with the Securities and Exchange
Commission  that  became  effective  on  September  26, 2000 thus  allowing  the
investor group to sell the shares at any time.

     The net proceeds from the sale were $25.1 and was used partially to acquire
CRG and to pay bank debt.

Item 6.  Exhibits and Reports On Form 8-K

(a)      The list of exhibits required by this Item 6 (a) appears on the Exhibit
         Index Attached hereto.
(b)      Reports in Form 8-K.

     On August 29,  2000,  CBH filed with the SEC a Current  Report on Form 8-K,
dated August 24, 2000. The Current Report on Form 8-K relates to the resignation
of Melvin G. Todd from his position of President of Clark/Bardes division.

     On September 20, 2000, CBH filed with the SEC a Current Report on Form 8-K,
dated  September  6,  2000.  The  Current  Report  on Form  8-K  relates  to the
consummation of the merger between CBH and Compensation Resource Group, Inc.

     On September 22, 2000, CBH filed with the SEC a Current Report on Form 8-K,
dated July 25, 2000.  The Current  Report on Form 8-K relates to the filing of a
civil action by Compensation  Resource Group,  Inc. against CBH arising from the
merger between the two.

     On November 6, 2000,  CBH filed with the SEC a Current  Report on Form 8-K,
dated  September  6,  2000.  The  Current  Report  on Form  8-K  relates  to the
consummation of the merger between CBH and Compensation Resource Group, Inc.

<PAGE>

Signatures

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



Date     November 14, 2000                    CLARK/BARDES HOLDINGS, INC.



Date    November 14, 2000                 /s/ W. T. Wamberg
                                           -----------------------------------
                                           W. T. Wamberg
                                           President and Chief Executive Officer



Date    November 14, 2000                 /s/ Thomas M. Pyra
                                          --------------------------------------
                                          Thomas M. Pyra
                                          Vice President and Chief Financial
                                          Officer (Principal Financial Officer)