UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15
(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15
(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from:
----------------------------------
Commission file number 0-27403
----------------------------------
WHITNEY INFORMATION NETWORK, INC.
(Exact name of Registrant as specified in its
charter.)
COLORADO 84-1475486
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification
No.)
4818 Coronado Parkway
Cape Coral, Florida 33904
(Address of principal executive offices, including zip code.)
(941) 542-8999
Registrant's telephone number, including area code.
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 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
The number of shares outstanding of the registrant's Common Stock,
no par value per share, at June 30, 2000 was 7,528,047 shares.
WHITNEY INFORMATION NETWORK, INC.
FORM 10Q
AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1998
TABLE OF CONTENTS
ITEM 1. FINANCIAL STATEMENTS
WHITNEY INFORMATION NETWORK, INC.
Consolidated Financial Statements
As of and for the Six Months Ended June 30, 2000 and 1999
Consolidated Balance Sheet.......................1-2
Consolidated Statement of Operations
And Retained Earnings.......................... 3
Consolidated Statement of Cash Flows.............4-5
Consolidated Statement of Changes in
Shareholders' Equity........................... 6
Comparative Consolidated Statement of
Operations and Retained Earnings............... 7
Notes to the Consolidated Financial
Statements................................... 8-21
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS AND
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS........................22-24
ITEM 3. CHANGES IN SECURITIES AND USE OF
PROCEEDS
ITEM 4. DEFAULTS UPON SENIOR SECURITIES
ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS................... 25
ITEM 6. NONE
ITEM 7. EXHIBITS AND REPORTS ON FORM 8-K....26-27
SIGNATURE PAGE ............................... 28
WHITNEY INFORMATION NETWORK, INC.
Consolidated Balance Sheet
As of June 30, 2000 and 1999
<TABLE>
ASSETS
<S> <C> <C>
June 30
2000 1999
----- -----
CURRENT ASSETS:
Cash $ 2,827,553 $ 1,512,455
Accounts Receivable 2,615,931 1,730,688
Prepaid Advertising,
Taxes and Other 2,285,247 531,949
Due From Affiliates 183,297 114,015
Deferred Seminar
Expense 14,874,632 6,946,342
Other Current Assets 355,996 70,344
------- ------
Total Current Assets 23,142,656 10,905,793
PROPERTY AND EQUIPMENT, net 451,816 127,444
OTHER ASSETS:
Contract Rights, net 48,683 49,500
------ ------
TOTAL ASSETS $ 23,643,155 $11,082,737
========== ==========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
1
WHITNEY INFORMATION NETWORK, INC.
Consolidated Balance Sheet
As of June 30, 2000 and 1999
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S>
<C> <C>
June 30
2000 1999
---- ----
LIABILITIES
CURRENT LIABILITIES:
Accounts Payable $ 479,326 $ 666,667
Income Taxes Payable 1,478,225 342,868
Deferred Revenues 17,752,891 8,357,501
Other Accrued Liabilities 761,910 74,199
------- ------
TOTAL CURRENT LIABILITIES 20,472,352 9,441,235
---------- ---------
OTHER LIABILITIES AND
DEFERRED CREDITS:
Deferred Income Taxes 200,000 267,000
Loans from Shareholder - 19,979
------- ------
TOTAL OTHER LIABILITIES 200,000 286,979
------- -------
TOTAL LIABILITIES $ 20,672,352 $ 9,728,214
---------- ---------
SHAREHOLDERS' EQUITY
Common Shares, no par value,
25,000,000 shares authorized,
7,528,047 shares at 6/30/00
and 7,513,859 shares at
6/30/99 issued and outstanding $ 67,102 $ 60,352
Paid In Capital 900 900
Retained Earnings 2,902,801 1,293,271
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 2,970,803 1,354,523
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 23,643,155 $ 11,082,737
========== ==========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
2
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Operations and Retained Earnings
As of and For the Six Months Ended June 30, 2000 and 1999
<TABLE>
<S> <C> <C>
June
----
2000 1999
---- ----
SALES $ 17,418,022 $10,286,320
COST OF SALES 7,024,545 4,340,090
--------- ---------
GROSS PROFIT 10,393,477 5,946,230
--------- ---------
EXPENSES
Advertising and Sales Expense 5,866,171 2,974,198
General and Administrative
Expense 3,069,914 2,002,042
--------- ---------
Total Expenses 8,936,085 4,976,240
--------- ---------
Income Before Taxes 1,457,392 969,990
Less: Income Taxes(see note) 613,522 343,881
------- -------
NET INCOME $ 843,870 $ 626,109
======= =======
Retained Earnings,
Beginning of Period 2,058,932 667,162
--------- -------
Retained Earnings,
End of Period $ 2,902,802 $ 1,293,271
========= =========
Basic and Fully Diluted
Earnings Per Share $ 0.11 $ 0.08
==== ====
Weighted average number of
Shares outstanding during
the period 7,520,953 7,513,859
========= =========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Cash Flows
As of and For the Six Months Ended June 30, 2000 and 1999
<TABLE>
<S> <C> <C>
June
----
2000 1999
---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Earnings From Operations $ 843,870 $ 626,109
Add Back Depreciation and
Amortization 62,000 8,476
------ -----
$ 905,870 $ 634,585
------- -------
Changes in Operating Assets
and Liabilities
(Increase) in Accounts Receivable (1,220,372) (750,425)
Decrease in Notes Receivable - 10,558
(Increase) in Prepaid and
Other Assets (1,616,140) (390,501)
(Increase) in Other Receivables (256,261) (40,137)
(Increase) in Deferred Expenses (6,009,605) (2,847,700)
Increase (Decrease) in Accounts
Payable (364,997) 101,959
Increase in Deferred Revenues 8,441,317 4,399,257
Increase in Income Taxes Payable 1,433,725 194,868
Increase in Other Liabilities 469,268 11,211
------- ------
Net Cash Flow From Operations $ 1,782,805 $1,323,675
--------- ---------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
4
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Cash Flows (continued)
As of and For the Six Months Ended June 30, 2000 and 1999
<TABLE>
<S> <C> <C>
June
----
2000 1999
---- ----
CASH USED IN INVESTING ACTIVITIES
Purchase of Property and
Equipment $ (235,277)$ (135,103)
Acquisition of Contract Rights 317 (50,317)
Loans Made to Affiliates (7,336) 3,307
Real Estate Sold 12,336 -
------ -----
Net Cash Used in Investing
Activities $ (229,960)$ (182,113)
------- -------
CASH FROM FINANCING ACTIVITIES
Issuance of Common Stock - 57,750
Loans From Affiliates (57,428)
------- ------
Net Cash From Financing
Activities - $ 322
------- ---
Increase in Cash $1,552,845 $1,141,884
Cash at Beginning of Period 1,274,708 370,571
--------- ---------
Cash at End of Period $ 2,827,553 $1,512,455
========= =========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
5
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statements of Changes in Shareholders' Equity
As of and For the Six Months Ended June 30, 2000 and 1999
<TABLE>
<S> <C> <C> <C> <C> <C>
Common Stock Paid Retained Total
Number of In Earnings Shareholders'
Shares Value Capital (Deficit) Equity
(Deficit)
Balance
December 31,
1997 976,200 $2,602 $ 0 $ (2,564) $ 38
Reverse Split (226,153)
Merger with Win
Systems, Inc./
Exchange Stock6,750,000 $ 900 $ (98,710) $ (97,810)
Net Income for the
Year Ended
December 31, 1998 768,436 768,436
------- -------
Balance
December 31,
1998 7,500,047 $2,602 $ 900 $ 667,162 $ 670,664
Net Income for the
Year Ended
December 31, 1999 1,391,770 1,391,770
Issuance of Shares
for Acquisitions 20,000 50,000
Issuance of Shares
for Services 8,000 14,500
----- ------ --------- ---------
Balance
December,
1999 7,528,047$67,102 $ 900 $2,058,932 $2,062,434
Net Income for the
Six Months Ended
June 30, 2 843,870 843,870
------- -------
Balance
June 30,
2000 7,528,047$67,102 $ 900 $2,902,802 $2,906,304
========= ====== === ========= =========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
6
WHITNEY INFORMATION NETWORK, INC.
Comparative Consolidated Statement of Operations
And Retained Earnings For the Three Months and
Six Months Ended June 30, 2000 and 1999
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30 June 30
2000 1999 2000 1999
---- ---- ---- ----
Sales $8,778,005 $5,631,788 $17,418,022 $10,286,320
Cost of Sales3,538,886 2,439,434 7,024,545 4,340,090
--------- --------- --------- ---------
Gross
Profit 5,239,119 3,192,354 10,393,477 5,946,230
--------- --------- ---------- ---------
Expenses
Advertising
and Sales
Expense 2,661,604 1,752,607 5,866,171 2,974,198
General and
Administrative
Expense 1,716,749 1,014,452 3,069,914 2,002,042
--------- --------- --------- ---------
Total
Expenses 4,378,353 2,767,059 8,936,085 4,976,240
--------- --------- --------- ---------
Income Before
Taxes $ 860,766 $ 425,295 $ 1,457,392 $ 969,990
Income Taxes
(see note) 322,787 150,881 613,522 343,881
------- ------- ------- -------
NET INCOME 537,979 $ 274,414 $ 843,870 $ 626,109
Retained Earnings,
Beginning
Of period $2,325,542 1,018,857 2,019,651 667,162
--------- --------- --------- -------
Retained
Earnings,
End of
period $2,863,521 $1,293,271 $ 2,863,521 $1,293,271
========= ========= ========= =========
Basic and
Fully Diluted
Earnings
Per Share $ 0.07 $ 0.03 $ 0.11 $ 0.08
==== ==== ==== ====
Weighted average
Number of shares
Outstanding
During the
Period 7,528,047 7,513,859 7,520,953 7,513,859
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statement
7
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
HISTORY OF THE CORPORATION
Whitney Information Network, Inc., formerly known as Win
Systems International, Inc., incorporated in Colorado on
February 23, 1996 under the name of Gimmel Enterprises,
Inc.
Whitney Education Group, Inc., formerly known as Win
Systems, Inc., incorporated in Florida on November 12,
1992. An exchange of shares was completed between the
shareholders of Win Systems, Inc. and Gimmel Enterprises,
Inc. on August 18, 1998. Subsequently, the name of Gimmel Enterprises, Inc.
was changed to Win Systems International, Inc. on August 25, 1998 and that
name was changed to Whitney Information Network, Inc. on February 11, 1999.
The name of Win Systems, Inc. was changed to Whitney Education Group,
Inc. on September 10, 1999.
Win Systems Inc. has been operating in the Educational
Seminars Industry since 1992 and expanded its operations
in the industry subsequent to the aforesaid exchange of
shares and name change to Whitney Education Group, Inc.
Whitney Education Group, Inc. is accredited by the State
of Texas as a Certified Proprietary School.
During 1998 Win Systems International, Inc. expanded its educational
seminars business into Canada through the
opening of a wholly owned subsidiary, 1311448 Ontario,
Inc. The Canadian operations continued to expand and at
the end of 1999 the operations were transferred to
Whitney Canada, Inc. through an amalgamation of two
wholly owned Canadian subsidiaries.
Whitney Canada, Inc. was incorporated in Canada on
October 5, 1998 and is the surviving corporation of an amalgamation with
3667057 Canada, Inc. 3667057 Canada, Inc. was incorporated in Ontario,
Canada on August 21, 1998 under the name of 1311448 Ontario, Inc. The name
was changed to 3667057 Canada, Inc. on October 5, 1999 as a preliminary
requirement of federalization of that corporation, which had been an Ontario
corporation, but in order to qualify for the amalgamation with Whitney
Canada, Inc., had to be reregistered as a Canadian corporation. The
amalgamation with 1311448 Ontario, Inc. was completed January 6, 2000.
8
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
Whitney Internet Services, Inc. incorporated in Wyoming on
June 8, 1999, is located in Cape Coral, Florida, and is an operating
subsidiary, marketing internet training seminars throughout the United
States. Whitney Internet Services, Inc. is expanding its operations into
marketing web sites and participations in networks of residual internet
connections fees.
Wealth Intelligence Network, Inc. incorporated in Florida
on May 26, 1996 under the name of Real Estate Link, Inc.
The name was changed to Wealth Intelligence Network, Inc. on September 20,
1998. Win Systems International, Inc. acquired
the shares of Wealth Intelligence Network, Inc. on November
18, 1998. Wealth Intelligence Network, Inc. is an operating subsidiary
marketing financial training seminars, which represents an expansion from
the real estate investment training seminar business.
Whitney Mortgage.com, Inc. incorporated in Florida on
September 30, 1999 and operates as a full service
internet mortgage broker affiliated with a national
internet mortgage provider. Whitney Mortgage.com, Inc.
represents an expansion from educational seminars into
the mortgage brokerage industry.
Russ Whitneys Wealth Education Centers, Inc. incorporated
in Wyoming on June 8, 1999 as a wholly owned subsidiary of
Whitney Information Network, Inc. and the subsidiary is
itself the parent corporation of two wholly owned
subsidiaries formed to operate permanent learning centers
in Jackson, MS. and Atlanta, GA. Russ Whitney's Wealth
Education Center of Jackson, MS, Inc. incorporated in
Wyoming on June 8, 1999 and a school was opened in November,
1999. Russ Whitneys Wealth Education Center of Atlanta,
GA, Inc. incorporated in Wyoming on July 22, 1999 and
a school was opened in July, 2000. The Wealth Education
Centers are the first two of many regional centers being
planned throughout the United States and represents an
expansion from the educational seminars industry into
regional permanent schools for teaching classes in
how to build and maintain wealth.
Whitney Consulting Services, Inc. incorporated in Wyoming
on July 28, 1998 under the name of Financial Consulting
Services, Inc. and the name was changed to Whitney
Consulting Group, Inc. on April 28, 1999 when that
corporation was acquired by Win Systems International, Inc.
The name was again changed to Whitney Consulting Services,
Inc. on March 21, 2000. Whitney Consulting Services, Inc.
is located in Salt Lake City, Utah and is an operating
subsidiary telemarketing real estate investments and
financial training seminars and an individual one-on-one
coaching program.
9
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity
with generally accepted accounting principals requires
management to make estimates and assumptions that effect
the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results
could differ from those estimates.
FAIR VALUE OF FINANCIAL STATEMENTS
The Companys financial instruments consist principally of
cash, accounts receivable and deferred seminar expense,
accounts payable, accrued expenses and deferred revenues.
The carrying amounts of such financial instruments as
reflected in the balance sheet approximate the estimated
fair value of the accounts as of June 30, 2000 and 1999.
The estimated fair value is not necessarily indicative
of the amounts the Company could realize in a current
market exchange or of future earnings or cash flows.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements
include the accounts of WHITNEY INFORMATION NETWORK,
INC. (formerly Win Systems International, Inc.); and
its wholly owned subsidiaries; Whitney Education Group,
Inc. (formerly Win Systems, Inc.); Whitney Canada, Inc.;
1311448 Ontario, Inc.; Wealth Intelligence Network, Inc.;
Whitney Consulting Services, Inc.; Russ Whitney's Wealth
Centers, Inc.; Whitney Mortgage.com, Inc.; and Whitney
Internet Services, Inc. Russ Whitneys Wealth Centers, Inc.
is the parent corporation of Russ Whitneys Wealth Center
of Jackson, MS, Inc. and Russ Whitneys Wealth Center of
Atlanta, GA, Inc. All significant inter-company accounts
and transactions have been eliminated. For more
information see note, History of the Corporation.
10
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
REVENUE RECOGNITION
Revenue from product sales is recognized at the time the
sale is made. Revenue from educational seminars is
recorded (1) when the non refundable deposit is received
for the seminars and the seminar has taken place; (2)
when it is reasonably certain that the balance of the
option to purchase additional educational programs will
be exercised and paid and the seminar has taken place
and (3) revenues are deferred when the seminar proceeds
are received in full in the current period and the
seminar takes place in a subsequent period. See
liability for Deferred Revenues on the balance sheet
in the amount of $17,752,891 at June 30, 2000 and
$8,357,501 at June 30, 1999.
DEFERRED EDUCATIONAL EXPENSE
When a student signs up to attend a future educational
seminar with the Company, the tuition that was
collected or recorded a receivable is deferred.
The expenses directly related to the deferred tuition
are also deferred. The deferred expenses associated
with future educational programs are shown on the
balance sheet as Deferred Educational Expenses in
the amount of $14,874,632 at June 30, 2000 and
$5,395,724 at June 30, 1999.
June 30
--------
Components of Deferred Educational
Expenses 2000 1999
---- ----
Advertising Expense $ 7,922,867 $ 2,873,994
Instructors and Trainers
Compensation 2,579,813 935,819
Support Services 1,470,261 533,332
Travel and Facility Expense 2,102,633 762,723
Administrative Expense 799,058 289,856
--------- ---------
Total Deferred Expenses $14,874,632 $ 5,395,724
========== =========
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation
and amortization are provided using accelerated and
straight-line methods over the following useful lives:
Office Furniture.............................7 years
Office Equipment.............................5 years
Intangibles(Contract Rights)................15 years
Leasehold Improvements...................... 5 years
11
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
INCOME TAXES
The Company adopted Statement of Financial Accounting
Standards No. 109 (SFAS No. 109), "Accounting for Income
Taxes" in 1993. SFAS No. 109 requires the liability method
of accounting for income taxes. Deferred income taxes
result in temporary differences in the recognition of
revenue and expenses for income tax and financial
reporting purposes. These differences are primarily
due to the differences in accrual basis reporting for
statement purposes and cash basis reporting for tax
purposes.
ACCOUNTS RECEIVABLE
The accounts receivable are trade receivables arising
from the sale of educational products and seminars. The
Company believes the allowance for doubtful accounts is
sufficient to cover any uncollectible amounts as of June
30, 2000 and 1999. The entire amount of the sales
related to the net receivables is deferred.
NET INCOME PER COMMON SHARE
In 1997 the Company adopted SFAS No. 128 "Earnings Per
Share." SFAS No. 128 (the "Statement") establishes
standards for computing and presenting earnings per
share ("EPS"). This Statement replaces the presentation
of primary EPS with a presentation of basic EPS and
requires dual presentation of basic and diluted EPS on
the face of the statement of operations for all entities
with complex capital structures. This Statement replaces
the presentation of primary EPS with a presentation of
basic EPS and requires dual presentation of basic and
diluted EPS on the face of the statement of operations
for all entities with complex capital structures. This
Statement also requires a reconciliation of the numerator
and denominator of the basic EPS computation to the
numerator and denominator of the diluted EPS computation.
12
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
MERGERS, ACQUISITIONS AND CAPITAL ACCOUNTS
On August 18, 1998, Whitney Education Group, Inc.
(formerly Win Systems, Inc.) was acquired by WHITNEY
INFORMATION NETWORK, INC. (formerly Win Systems
International, Inc. and prior to that Gimmel Enterprises,
Inc.) in a reverse merger where by Whitney Education Group,
Inc. exchanged 100% of its shares for 90% of Gimmels shares bringing the
total shares of WHITNEY INFORMATION NETWORK,
INC., issued and outstanding at August 18, 1998, to
7,500,047. Whitney Education Group, Inc. became a wholly
owned subsidiary of Whitney Information Network, Inc. The financial
statements from January 1, 1998 through June 30,
2000 are based upon the assumption that the companies
were combined for the entire period and all stock splits
have been reflected in the statements as of the beginning
of the period.
On August 18, 1998, WHITNEY INFORMATION NETWORK, INC.
issued 187,500 Class A stock purchase warrants and
340,000 Class B stock purchase warrants. The Class
A warrants are exercisable at $4.00 per share two years
after the underlying stock is registered. The Class B
warrants were exchanged for employee stock options on
May 1, 2000.
The Company also instituted a stock option plan for key
personnel. Under the plan options are to be granted at
the fair market value at the date of the grant and
exercisable for a 10 year period after the grant with a
three year vesting schedule. The Company has reserved
2,000,000 shares for the stock option plan of which 901,650
option shares have been granted, at an exercise price of approximately
$2.00 per share, as of June 30, 2000 none
have been exercised or expired to date.
On February 1, 1999 the Company exchanged all of the
assets of Wealth Intelligence Network, Inc. for 20,000
shares of the Companys stock valued at $2.50 per share.
In addition, the Company, during the period from May to
August 1999, issued 8,000 shares of the Companys stock,
valued at $1.8125 per share, to a financial public
relations firm in lieu of cash for services valued at
$14,500.
13
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
RELATED PARTY TRANSACTIONS
The Company has rented its international headquarters
premises in Cape Coral, Florida since 1992 from the
Chairman of the Board and pays rent on annual leases.
Rentals under the related party lease were $36,922 and
$22,100 for six months ended June 30, 2000 and 1999,
respectively. The Company leases approximately 8,700
square feet presently. Future minimum payments, by
year and in the aggregate under capital and
noncancellable operating leases with initial or
remaining terms of one year or more are shown in the
Commitments footnote.
At June 30, 2000 and June 30, 1999 the related
party receivables and payables on the balance sheet
were as follows:
June 30, 2000 June 30, 1999
------------- -------------
Receivables:
Due from Whitney Leadership
Group $ 175,315
Due from MRS Equity Corp. 16,336
Due from RAW, Inc. 964
Due from PSS, Inc. 3,852
-------
Total $ 196,467
=======
Payables:
Short-term: $ 18,821
Long-term:
Loans Payable to the Chairman
of the Board $ 19,979
Those items above that are reasonably expected to be
collected within one year are shown as short-term and
those which are not expected to be collected during the
next year are shown as long-term.
MRS Equity Corp. provides certain products and services
for WHITNEY INFORMATION NETWORK, INC. and WHITNEY
INFORMATION NETWORK, INC. provides MRS Equity Corp.
with payroll services including leased employees. WHITNEY INFORMATION
NETWORK, INC. provided payroll services to
MRS Equity Corp. in the amount of $45,283 for the six
months ended June 30, 2000 and $51,747 for the six months
ended June 30, 1999. MRS Equity Corp. provided WHITNEY
INFORMATION NETWORK, INC. with $201,800 and $148,350
for products for the six months ended June 30, 2000 and
1999, respectively. MRS Equity Corp. is a wholly owned
subsidiary of Equity Corp. Holdings, Inc. of which the
Chairman of the Board of WHITNEY INFORMATION NETWORK,
INC. owns a controlling interest.
14
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
RELATED PARTY TRANSACTIONS (Continued)
Precision Software Services, Inc. (PSS) is a company that
develops and licenses software primarily for the real
estate and small business industries. The Chairman of the
Board of Directors of WHITNEY INFORMATION NETWORK, INC.
owns a majority interest in PSS. During the six months
ended June 30, 2000 and 1999 PSS provided WHITNEY
INFORMATION NETWORK, INC. $137,400 and $180,123 in
products, respectively. PSS sells products to WHITNEY
INFORMATION NETWORK, INC. at a price less than the
prices offered to third parties. WHITNEY INFORMATION
NETWORK, INC. provided payroll services to Precision
Software Services, Inc. in the amount of $18,334 and
$22,367 for the six months ended June 30, 2000 and
1999, respectively.
WHITNEY INFORMATION NETWORK, INC. provided payroll
services to Whitney Leadership Group, Inc. in the
amount of $45,283 for the six months ended June 30,
2000 and $46,767 for the six months ended June 30,
1999. The Chairman of the board of WHITNEY INFORMATION
NETWORK, INC. is the President and Chief Operating
Officer of Whitney Leadership Group, Inc.
15
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
INCOME TAXES
The reconciliation between the provision for income taxes
and the amount which results from applying the federal
statutory rate of 34% to the income before income taxes
is as follows:
Federal Income tax expense at the statutory
rate $ 562,513
State tax, net of federal tax
benefit 51,009
-------
Income tax expense per books $ 613,522
Deferred Income tax 0
Income tax currently payable $ 613,522
=======
At December 31, 1997 the Company had Federal net operating
loss carry forwards of approximately $96,000 that were
used in 1998. The Company had previously reported its
revenues and expenses for income tax purposes on the
cash basis of accounting. Deferred income taxes of
$200,000 at June 30, 2000 and $267,000 at June 30, 1999
reflect primarily the taxes owing on the change of
accounting method at the end of 1998 to be paid over the
next six years and the net tax effects of differences
between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used
for income tax purposes.
INDEBTEDNESS
There were no borrowings from unrelated third parties
for the six months ended June 30, 2000 and 1999. The
interest expense was $0 for both the six months ended
June 30, 2000 and 1999.(See Related Party Transactions).
The Company was indebted to its Chairman for short-term
non-interest bearing advances in the amount of $0 at
June 30, 2000, and $19,979 at June 30 1999.
LITIGATION
The Company is not involved in any asserted or unasserted
claims or actions arising out of the normal course of its
business that in the opinion of the Company, based upon
knowledge of facts and advice of counsel, will result
in a material adverse effect on the Companys financial
position.
16
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
COMMITMENTS AND CONTINGENCIES
The Company carries liability insurance coverage which
it considers sufficient to meet regulatory and consumer
requirements and to protect the Companys employees,
assets and operations.
The Company, in the ordinary course of conducting its
business, is subject to various state and federal
requirements. In the opinion of management, the
Company is in compliance with these requirements.
The Companys main office is located in Cape Coral,
Florida. The Company has three other offices open.
The Company leases the following properties: (1) Its
headquarters building in Cape Coral, Florida at an annual
rental of $73,844; (2) Its telemarketing facility in Draper,
Utah at an annual rental of $46,563; (3) a Wealth Center
facility in Jackson, MS for $42,600 per year; and (4) a
Wealth Center in Marietta, GA at an annual rental of
$48,000. Future minimum payments by year and in the
aggregate under capital and noncancellable operation
leases with terms of one year or more are as follows:
2000 $ 133,795
2001 158,820
2002 120,020
2003 39,675
------
Total $ 452,310
=======
The Company is currently having a disagreement with the
Securities and Exchange Commission (SEC) over an accounting
issue. The Company is currently treating certain direct
response advertising and related seminars costs which have
been incurred to produce its deferred revenues as deferred expenses in
order to have a proper matching of income
and expenses. When the deferred revenues are recognized
as current revenue in subsequent periods, the related
costs giving rise to such deferred revenues are then
expensed. The SECs position is that all costs incurred to
produce the deferred revenues, with the exception of
commissions, should be expenses of the current period
and not matched against the revenues that were created
by such costs. The Company believes that the SECs
position is incorrect and is a departure from Generally
Accepted Accounting Principles. If the SEC were to prevail,
the Company would have to restate its financial statements
to reflect a change in accounting method, as follows:
17
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
COMMITMENTS AND CONTINGENCIES(Continued)
Potentially
Restatable
Stated Net(Loss) Which
Net Income Would Be Necessary
Per Companys Per SECs
Position Position
-------- --------
Year Ended December 31, 1998 $ 768,436 $ ( 2,238,307)
Year Ended December 31, 1999 $ 1,391,770 $ ( 1,680,290)
Six Months Ended June 30, 2000 $ 843,870 $ ( 3,292,071)
The Company is confident that the present deferred
revenues and expenses accounting method reflects the
companys financial position more accurately than does
that of the SECs suggested method. At June 30, 2000,
the Company had cash of almost $3,000,000; no long or
short term borrowings; no unpaid bills; no unpaid taxes;
and approximately $3,000,000 in working capital. A company generating over
$7,000,000 in losses, as would be the case
per the SECs position, would not likely be able to show
such a strong current position as the Company now enjoys
and not likely would be increasing cash balances each
period as the Company has accomplished and as is the case
without borrowing or obtaining equity investors.
The Company has relied upon the guidance of S.O.P. 93-7
in determining that the deferring of direct response
advertising is the most authoritative and correct
Generally Accepted Accounting Principle to follow in
the proper reporting of its financial position and results
of operations.
The Company is supported in this position by expert
opinions including the Companys auditors, by CPA
auditing consultants, by financial consultants, and by
legal consultants.
The Company will defend this position vigorously.
Management believes that to change the current accounting
method away from matching deferred seminars expenses against
the related revenues which have been deferred until the
seminars are held, would result in a material misstatement
of the Companys financial position and results of
operations. While it is the Companys intent to adhere
to all SEC rules, guidelines and suggestions, it is not
the Companys wishes to follow the SECs staff suggestions
if by doing so the company would be required to issue
financial statements which would follow an incorrect
accounting method, which would be a material departure
from Generally Accepted Accounting Principles.
18
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
COMMITMENTS AND CONTINGENCIES(Continued)
Management further believes that upon the proper
presentation of the Companys position on this complex
accounting method issue, the SEC will agree with the
Companys position and that there will be no need to
restate any financial statements.
Forward-looking Statements
Certain information included in this report contains
forward-looking statements made pursuant to the Private
Securities Litigation Reform Act of 1995 (Reform Act).
Such statements are based on current expectations and
involve a number of known and unknown risks and uncertainties
that could cause the actual results and performance of the
Company to differ materially from any expected future
results or performance, expressed or implied by the forward-looking
statements. In connection with the safe harbor
provisions of the Reform act, the Company has identified
important factors that could cause actual results to differ materially
from such expectations, including operating uncertainty, acquisition
uncertainty, uncertainties relating to economic and political
conditions and uncertainties regarding the impact of regulations,
changes in government policy and competition. Reference
is made to all to the Companys SEC filings, including
the Companys Report on Form 10SB, incorporated herein by reference, for a
description of certain risk factors.
The Company assumes no responsibility to update
forward-looking information contained herein.
19
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
Y2K MATTERS
During 1998 and 1999 the Securities and Exchange Commission
(SEC) had expressed concern in general over potential Year
2000 problems. As of June 30, 2000 management is of the
opinion that the Company did not and will not suffer any
problems of a material nature as a result of any Y2K
problems.
COMMON STOCK OPTIONS
The Company instituted a stock option plan for key personnel
on or about August 18, 1998. Under the plan the options are
to be granted at the fair market value at the date of the
grant with a three year vesting schedule. The Company had previously
reserved 1,200,000 shares for the plan. During
the quarter the Company authorized and additional 800,000
shares for the plan and authorized the conversion of the
Class B warrants to options at an exercise price of $2.00
per share. The result is as follows:
At 3/31/00 At 6/30/00 Total
Shares Authorized for
Plan 1,200,000 1,200,000
Additional Shares
Authorized 800,000 800,000
Conversion of Class B
Warrants to Options 340,000 340,000
Grants (881,650) (20,000) (901,650)
Terminations 43,500 37,250 80,750
------ ------ ------
Available for future
Grants 361,850 1,157,250 1,519,100
======= ========= =========
20
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
CAPITAL CHANGES
On February 1, 1999 the Company issued 20,000 shares of
its common stock in exchange for all of the outstanding
stock of Wealth Intelligence Network, Inc. The shares were
valued at $2.50 each for a total purchase price of $50,000.
Wealth Intelligence Network, Inc. publishes a monthly
financial newsletter and provides and promotes financial
education and training. In addition, the Company issued
8,000 shares to a financial public relations firm for
financial public relations services in the amount of
$14,500 (2,000 on May 31, 1999 valued at $2.00 per share,
2,000 on June 30, 1999 valued at $1.875 per share, 2,000
on July 31, 1999 valued at $1.750 per share, and 2,000
on August 31, 1999 valued at $1.625 per share).
21
Part II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
The Company knows of no litigation, present, threatened
or contemplated, or unsatisfied judgment against the
Company, its officers or directors, or any proceedings
in which the Company, its officers or directors are a
party.
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction
with the consolidated financial statements and notes
thereto.
None of the Companys business is subject to seasonal
fluctuations.
Revenues: Total revenue for the six months ended June
30, 2000 was $17,418,022, an increase of $7,131,702
or 60% compared to the same period in 1999. The
combination of the increase in advance training courses
held and the higher registrations contributed to the
increase above.
Advertising and Sales Expense: Advertising and sales
expense, of which Advertising represents approximately
50% of the expenses for the six months ended June 30,
2000, was $5,866,171, an increase of $2,891,973 or 90%,
compared to the same period in 1999. The increase in
Advertising and Sales expense is due to higher volume
resulting from increased sales and increased advertising
expense related to Whitney Internet Services Inc. new
products and services
General and Administrative expenses increased to
$3,069,914, an increase of $1,067,872, or 53% over
the comparable period in 1999.
Cost of Sales increased proportionately in comparison
with the increase in sales for the six months ended
June 30, 2000 to $7,024,545, an increase of $2,684,455
or 62% over the prior comparable period in 1999.
Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) for the six months ended June
30, 2000 and 1999 was $1,519,392 and $978,466,
respectively. EBITDA is defined as net income before
income taxes, interest and other income and expense,
net, plus depreciation and amortization including
amortization of pending real estate sales contracts.
22
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources
The Companys capital requirements consist primarily
of working capital, capital expenditures and
acquisitions. Historically, the Company has funded
its working capital and capital expenditures using
cash and cash equivalents on hand. Cash increased by
$1,522,848 to $2,827,553, an increase of 80% over
the previous comparable period in 1999.
The Companys cash provided by operating activities was
$1,782,805 and $1,323,675 for the six months ended June
30, 2000 and 1999, respectively. In the second quarter
2000, cash flows from advanced training programs were
positively impacted by the increased collection efforts
by the sales associates accompanying the instructors
and trainers at the training locations.
The Companys cash used in investing activities was
$229,960 and $182,113 for the six months ended June 30,
2000 and 1999, respectively. The Companys cash used in
investing activities for the six month ended June 30,
2000 and 1999 were primarily attributable to the
purchase of office property and equipment of $235,277
and $135,103, respectively.
The Company is currently having a disagreement with the
Securities and Exchange Commission (SEC) over an accounting
issue. The Company is currently treating certain direct
response advertising and related seminars costs which
have been incurred to produce its deferred revenues
as deferred expenses in order to have a proper matching
of income and expenses. When the deferred revenues are
recognized as current revenue in subsequent periods,
the related costs giving rise to such deferred revenues
are then expensed. The SECs position is that all costs
incurred to produce the deferred revenues, with the
exception of commissions, should be costs of the
current period and not matched against the revenues
that were created by such costs. The Company believes
that the SECs position is incorrect and is a departure
from Generally Accepted Accounting Principles. If the
SEC were to prevail, the Company would have to restate
its financial statements to reflect a change in
accounting method, as follows:
Potential Restated
Stated Net(Loss)Which
Net Income Would Be Necessary
Per Companys Per SECs
Position Position
Year Ended December
31, 1998 $ 768,436 $ ( 2,238,307)
Year Ended December
31, 1999 $1,391,770 $ ( 1,680,290)
Six Months Ended June
30, 2000 $ 843,870 $ ( 3,292,071)
23
The Company is confident that the present accounting
method reflects the Companys financial position more
accurately than does the SECs suggested method. At
June 30, 2000, the Company had cash of almost $3,000,000;
no long or short term borrowings; no unpaid bills; no
unpaid taxes; and approximately $3,000,000 in working
capital. A company generating over $7,000,000 in losses,
as would be the case per the SECs position, would not
likely be able to show such a strong current position,
as the Company now enjoys and would not likely be
increasing cash balances each period, as the Company
has accomplished as is the case without borrowing or
obtaining equity investors.
The Company has relied upon the guidance of S.O.P.
93-7 in determining that the deferring of direct
response advertising is the most authoritative and
correct generally accepted accounting principle to
follow in the proper reporting of its financial
position and results of operations.
The Company is supported in this position by the
Companys auditor, by CPA auditing consultants, by
financial consultants, and by legal consultants.
The Company will defend this position vigorously.
Management believes that to change the current
accounting method away from matching deferred seminars
expenses against the related revenues which have been
deferred until the seminars are held, would result in
a material misstatement of the Companys financial
position and results of operations.
Management further believes that upon the proper
presentation of the Companys position on this complex
accounting method issue, the SEC will agree with the
Companys position and that there will be no need to
restate any financial statements.
Forward-looking Statements
Certain information included in this report contains
forward-looking statements made pursuant to the Private
Securities Litigation Reform Act of 1995 (Reform Act).
Such statements are based on current expectations and
involve a number of known and unknown risks and
uncertainties that could cause the actual results
and performance of the Company to differ materially
from any expected future results or performance,
expressed or implied, by the forward-looking statements.
In connection with the safe harbor provisions of the
Reform Act, the Company has identified important
factors that could cause actual results to differ
materially from such expectations, including operating uncertainty,
acquisition uncertainty, uncertainties
relating to economic and political conditions and
uncertainties regarding the impact of regulations,
changes in government policy and competition. Reference
is made to all of the Companys SEC filings, including
the Companys report on form 10SB, incorporated herein by reference, for a
description of certain risk factors.
The Company assumes no responsibility to update
forward-looking information contained herein.
24
ITEM 3. CHANGES IN SECURITIES AND USE OF PROCEEDS.
The rights of the holders of the companys securities have
not been modified nor have the rights evidenced by the
securities been limited or qualified by the issuance or modification of any
other class of securities.
ITEM 4. DEFAULTS UPON SENIOR SECURITIES.
There are no senior securities issued by the Company.
ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters presented to the shareholders
for vote during the six months ended June 30, 2000.
ITEM 6. OTHER INFORMATION.
None.
25
ITEM 7. EXHIBITS AND REPORTS ON FORM 8-K.
The Company filed a Form 8-K on August 1, 2000
providing notification of a change in auditors. A
copy of that Form 8-K is attached hereto.
REPORTS ON FORM 8-K
One report was filed on Form 8-K during the six months
ended June 30, 2000.
August 1, 2000
Securities & Exchange Commission
450 Fifth Street N.W.
Washington, DC 20549
re: Whitney Information Network, Inc. SEC No. 000-27403
Form 8-K required letter.
Replacement of auditor.
Securities and Exchange Commission:
In accordance with Item 304 of Regulation S-B,
Whitney Information Network, Inc., a corporation
incorporated within the State of Colorado, has made,
pursuant to approval by the Board of Directors of the
Company, the following statements that I agree with:
A: The independent certified public accounting
firm for the Company, Larry Legel, CPA, has been dismissed
due to the Companys desire to engage a larger certified
public accounting firm. Accordingly, the dismissal was
necessary in order for the Company to retain BDO Seidman,
Miami, Florida, as the Companys independent certified
public accountants.
The dismissal was made July 28, 2000, effective August
17, 2000.
B: (i) Larry Legel was dismissed solely because
of the Companys desire to have a larger
independent Certified public accounting
firm.
(ii) The reports on the financial statements of
the Company by Larry Legel over the past
two year contain no adverse opinion or
disclaimer of opinion and were not qualified
or modified as to uncertainty, audit scope,
or accounting principles.
(iii) The decision to change accountants was
approved by the Board of Directors of the
Company on July 28, 2000, effective
August 17, 2000.
(iv) During the Companys two most recent
fiscal years and any subsequent interim
period preceding dismissal of Larry Legel,
there were no disagreements with Larry
Legel on any matter of accounting principles
or practices, financial statements,
disclosure, or auditing scope, or procedure.
26
EXHIBITS AND REPORTS ON FORM 8-K (Continued)
(v) No reportable events referred to in
Item 304(a)of regulation S-K occurred
during the two years prior to the
dismissal of Larry Legel.
(1) BDO Seidman has been engaged
effective August 17, 2000.
The Company did not consult with
BDO Seidman on any matter during
the two most recent fiscal years or
any subsequent interim period prior
to engaging BDO Seidman.
(2) The Company has requested that
Larry Legel issue this letter and
Larry Legel has furnished the Company
with this letter addressed to the
Commission stating that he agrees with
the foregoing statements made by the
Company.
/s/ Larry Legel, CPA
Larry Legel, CPA
Date: August 1, 2000
c: Whitney Information Network, Inc.
BDO Seidman
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly changed this report
to be signed on its behalf by the undersigned,
there unto duly authorized.
Dated this 14th day of August, 2000.
WHITNEY INFORMATION NETWORK, INC.
(The Registrant)
BY: /s/Ronald S. Simon
Ronald S. Simon
Secretary/Treasurer, Chief Financial Officer
And a member of the Board of Directors
28
