On Friday, CLCK filed its 10-Q for the quarter ended Sept. 30, 1998. Several excerpts relate to the Best Bank contract and are relevant to the discussion about the impact that loss of that business might have on CLCK. Two aspects may be of particular interest:
1. Of the 678,845 active credit card accounts serviced by CLCK as of Sept. 30, 1998, 643,768 or about 94.8% are derived from the agreement with Best Bank.
2. 84% of the revenue for the nine month period ending Sept. 30, 1997 was from the Best Bank agreement. If the 84% figure also applied to the three months ending on Sept. 30, 1998 (the actual percentage may be more or less than this) then the non Best Bank revenues during that period would be about $589,000. This is less than the corresponding revenues ($629,749) for the three month period ending Sept. 30, 1997. (Since the Best Bank master agreement began on Oct. 1, 1997, there presumably were no Best Bank revenues in that earlier period.)
Here are the excerpts on which the above figures were based. The entire 10-Q may be viewed at:
freeedgar.com
NOTE 10: MARKET RISK AND CONCENTRATIONS
On June 30, 1997 the Subsidiary had a significant credit card
portfolio processing contract expire. This contract was not renewed.
The contract represented approximately one hundred thousand dollars
($100,000) or thirty percent (30%) of the Subsidiary's monthly
operating revenue, and its loss substantially affected the
Subsidiary's profitability in 1997. As a result, substantial
operating losses were recognized in the months July through October
1997.
On October 1, 1997 the Subsidiary entered into a five year contract to
process credit card activity and produce account statements for Best
Bank. This contract represented approximately $500,000 per month in
additional operating revenue in November and December of 1997.
F-13<PAGE>
NOTE 10: MARKET RISK AND CONCENTRATIONS - CONTINUED
In December, 1997, the Subsidiary earned approximately five hundred
thirty-five thousand ($535,000) on the bank contract which represents
seventy-two percent (72%) of total revenue for the month.
For the year ending December 31, 1997, revenue from Security State
Bank (25%), Best Bank (43%) and Pride (14%) accounted for
approximately 82% of the Company's total revenues. No other customers
accounted for 10% or more of the Company's total revenues.
For the nine months ended September 30, 1998, revenue from the Best
Bank portfolio (the "Portfolio") accounted for approximately 84% of
the Company's total revenues. No other customers accounted for 10% or
more of the Company's total revenues. Since the Best Bank failure in
July 1998 the Company has continued its role as processor for the
Portfolio accounts and is receiving payment from the Federal Deposit
Insurance Corporation ("the FDIC") for its processing costs. As of
September 30, 1998, the Company's accounts receivable from the FDIC
relating to the Portfolio was $457,994, all current. The Company can
not speculate on the extent to which it will continue to process the
Portfolio. The loss of processing revenue associated with the
Portfolio could have a material effect on the Company's financial
statements.
...
RECENT CHANGES IN THE BUSINESS OF THE COMPANY
CLOSURE OF BESTBANK AND RELATED MATTERS. On July 23, 1998, the
Colorado State Banking Board ordered the closure of BestBank and the Federal
Deposit Insurance Corporation ("FDIC") assumed the role of receiver of
BestBank. The single largest asset of BestBank was a portfolio (the
"Portfolio") of credit card accounts receivable serviced by FICI. As of
September 30, 1998, the number of active credit card accounts serviced by the
Company was 678,845, of which 643,768 were derived by the Company pursuant to
a master agreement (the "Master Agreement") with BestBank.
On October 1, 1997, the Company entered into the Master Agreement with
BestBank for processing and services for its customers with which BestBank
has entered into contractual agreements. Since the Best Bank closure in July,
1998, the Company has continued to process the Portfolio's accounts, pursuant
to the terms of the Master Agreement, which remains in effect, and has been
receiving payment from the FDIC for its processing services pursuant to the
Master Agreement. Although the Company continues to generate revenues from
the Master Agreement with BestBank, the closure of BestBank may have a
material adverse effect on the Company's future operations due to the
Company's current dependence on the revenues derived pursuant to the Master
Agreement. The FDIC has placed the Portfolio up for public sale and expects
to close the sale of these assets prior to December 31, 1998. No assurance
can be given that the Portfolio will be sold, or if sold, that the buyer will
continue to utilize the services of the Company for processing the Portfolio.
However, the Master Agreement has provisions which call for significant
liquidated damages which may have to be paid by the FDIC to the Company
should the Master Agreement be terminated, without the Company's consent,
prior to the end of its term.
The Company has been contacted by the FDIC for the purpose of
renegotiating the terms of the Master Agreement with the FDIC for the
continued processing of the Portfolio accounts. The Company does not believe
that the terms of a renegotiated agreement would be as favorable to the
Company as those of the Master Agreement, particularly with regard to the
terms of the liquidated damages provision. As of the date of this Report,
the Company and the FDIC have not reached an accord in connection with the
request of the FDIC to renegotiate the terms of the Master Agreement. The
FDIC may attempt to terminate the Master Agreement if the FDIC and the
Company are unable to reach an agreement as to the renegotiated terms of the
Master Agreement. No assurance can be given that the Company will be able to
renegotiate the terms of the Master Agreement or that the Master Agreement
will not be terminated by the FDIC. ...
|
