SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ending December 31, 1999
Whitney Information Network, Inc.
......................................................
(Exact name of registrant as specified in its charter)
Colorado 0-27403 84-1475486
................................................................
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
4818 Coronado Parkway, Cape Coral, Florida 33904
............................................................
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (941) 542-8999
.............................................................
(Former name or former address, if changed since last report)
Securities registered under Section 12 (b) of the Exchange Act:
NONE
Securities registered under Section 12 (g) of the Exchange Act:
COMMON STOCK
$.001 par value per share
(Title of Class)
Check whether the Issuer (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Exchange Act during the past 12
months (or for such shorter period that the Issuer was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of the Issuer's
knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
The Issuer's revenues for the fiscal year ended
December 31, 1999, were $26,775,589.
The aggregate market value of the voting and non-voting common
stock held by non-affiliates of the Issuer, computed by reference to
the closing sale price of such common stock as quoted on the OTCBB
as of March 26, 2000 was about $3,253,207. (Aggregate market value has
been estimated solely for the purpose of this report. For the purpose
of this report it has been assumed that all officers and directors are
affiliates of the Registrant. The statements made herein shall not be
construed as an admission for the purposes of determining the affiliate
status of any person.)
The Issuer had 7,528,022 common shares of common stock outstanding
as of December 31, 1999.
Documents incorporated by reference: See ITEM 13 - EXHIBITS AND REPORTS
ON FORM 8-KSB
PART I
ITEM 1. BUSINESS
History
Whitney Information Network, Inc. (the 'Company') was incorporated
under the laws of the state of Colorado on February 23, 1996 as Gimmel
Enterprises, Inc. On August 18, 1998, the Company acquired all of the
issued and outstanding shares of common stock of Whitney Education
Group, Inc., formerly, Win Systems, Inc., hereinafter 'WSI,' a
corporation incorporated under the laws of the state of Florida, on
November 12, 1992. Thereafter, WSI became a wholly owned subsidiary
corporation of the Company. On August 10, 1998, the Company changed its
name to WIN Systems International, Inc. and on February 11, 1999, the
Company again changed its name to Whitney Information Network, Inc.
General
The Company is engaged in the business of providing educational
and training services through its publications and lectures to create
wealth, achieve financial independence and protect it. The Company
currently concentrates its principal efforts in the area of real estate
training.
The Company is currently holding approximately 120 basic real
estate courses and real estate training academies per month and
approximately 40 advanced programs per month. The Company has 49
instructors and has approximately 15,000 students per month attending
its programs.
The Company trains its students in locations throughout the
United States. The Company utilizes hotels and conference facilities
throughout the United States and Canada to conduct its training
academies. The Company also utilizes its facilities in Cape Coral
Florida and Jackson, Mississippi to conduct its training academies.
Publications
The Company currently produces approximately twenty-four (24)
publications which are promoted by the Company to the general public
and for use at the Company's training and educational classes. The
publications are written by the Company. The Company then retains
independent publishers to produce the publications. The publications
are sold to the public or incorporated in the cost of training courses.
The Company does not rely exclusively on any one publishing firm. In
the event that one publisher ceased operations or refused to continue
to publish the Company's products, the Company could easily retain
another publisher.
Software
The Company sells a line of software primarily for the real estate
and small business industry. The software is developed and licensed by
Precision Software Services, Inc., a corporation controlled by Russell
Whitney, the Company's Chief Executive Officer and Chairman of the
Board of Directors.
Lectures
The Company delivers a series of lectures and training programs
which relate to its publications and software. The Company charges
fees its training programs, however, the Company does not charge for
its free informational lectures. The Company has many instructors that
teach throughout the United States and Canada, while at the same time
promoting the Company's publications, software, and the Company's
programs to succeed in business, successfully invest in real estate,
achieve financial independence and protect assets. The Company
promotes an initial program outlining how to invest in real estate and
how to succeed via small business ownership. Upon completion of the
Company's initial real estate investment training, the Company offers
additional programs that allow a customer to concentrate on a
specialized area. Each lecture topic is supplemented with the
Company's publications.
Real Estate Programs
The Company's base program is a three day seminar on basic real
estate investing. The program is supplemented with its publications
and software. Upon completion of the basic real estate investing
course, the Company promotes an intensified training camp which is
designed to expand the knowledge gained at the basic real estate
investing program. The intensified training camp is held at the
Company's corporate offices in Cape Coral, Florida.
The Company also operates six regional training camps at locations
in the United States and Canada that emphasize specific areas of real
estate investing, small business and asset protection. The camps
consist of lectures and interactive dialogue between the lecturer and
student. The Company promotes its publications and software at the
camps. The specific areas of concentration are: wholesale buying;
foreclosure; landlording; purchase/lease option; asset protection; and
commercial properties.
Mentoring
The Company provides a program whereby trained personnel travel to
a customer's home town and assist the customer in implementing the
knowledge gained at the Company's lectures within the customer's
community.
Financial Management
In addition to the real estate investment programs, the Company
also provides additional ancillary programs relating to enhancing and
the customer's knowledge of managing and protecting his money.
Internet
The Company is currently developing a program to assist business
minded individuals to take advantage of the Internet, including the
creation of a Web-site and marketing thereof. As of the date hereof,
the program has not been fully developed and is currently being test
marketed to the public in selected locations.
The Internet Division is still in the development stage. The
Company is testing various methods of marketing its Internet courses
and products. Currently, the Company has developed an Internet
Training Program to teach basic Internet skills and plans to offer two
additional advanced courses. The Company anticipates the Internet
Division to be fully operational in the second quarter of 2000.
Management has previously reported that the Internet Division was likely
to commence operations in the first quarter of 2000.
Marketing
The Company markets its publications, videos, and lectures through
a number of media, including newspapers, periodic publications, direct
mail, telemarketing, television, radio and word of mouth. The Company
has retained Professional Marketing International, Inc. of Lehigh, Utah
to provide telemarketing services. Further, the Company's wholly owned
subsidiary corporation, Whitney Consulting Services, Inc. also
furnishes telemarketing and mail services to the Company.
Strategic Alliance
The Company has entered into an oral agreement with E-Commerce
Exchange, LLC. ('E-Commerce'). E-Commerce is engaged in the business
of providing credit card services to on-line and conventional
businesses. The Company's oral strategic alliance with E-Commerce
Exchange will allow the Company's students a means of providing secure
credit card transactions on their Web Sites. The Company receives
compensation from E-Commerce Exchange based upon a set schedule which
compensation varies on a case-by-case basis when the student or
customer signs up. The compensation varies depending upon the student
or customer's credit rating and the type of services purchased from E-
Commerce. E-Commerce offers its services directly to the Company's
students on site at the same locations the training takes place.
The Company, through its wholly owned subsidiary corporation,
Whitney Internet Services, Inc., has entered into a written agreement
with Powersites Network, Inc. to provide the Company's students with
on-line store front web-sites to small and medium size businesses. The
fee for one web-site is $19.95 per month. The Company will receive
compensation equal to or greater than 50% of all monthly service fees
charged by Powersites. The agreement with Powersites replaces the
agreement the Company previously had with Internet Development Inc.
Certification
The Company is accredited by the state of Texas as a Certified
Proprietary School. No other state has accredited the Company in any
manner and there is no assurance that the Company will ever be
accredited by any other state for any reason.
Subsidiary Corporations
The Company conducts its business through the following wholly
owned subsidiary corporations: Whitney Education Group, Inc. (formerly,
Win Systems, Inc.); Whitney Internet Services, Inc.; Russ Whitney's
Wealth Education Centers, Inc. and its wholly owned subsidiary
corporation, Russ Whitney's Wealth Education Center of Jackson, MS,
Inc.; Whitney Consulting Services, Inc.; 1311448 Ontario, Inc.;
Whitney Canada, Inc.; and, Wealth Intelligence Network, Inc.
Wealth Centers
The Company intends to create Russ Whitney's Wealth Education
Centers which will be store front schools which will offer all the
Company's current products and services. Future curricula will include
computer training and courses, and continuing and professional
education for professionals. The Company intends to joint venture the
Wealth Centers with local entrepreneurs. As of the date hereof, the
Company has not opened any Wealth Centers and there is no assurance
that any Wealth Centers will be opened in the future. Further, the
Company has not entered into any agreements with any local
entrepreneurs.
Year 2000
The Year 2000 issue is the result of computer programs written
using two digits rather than four to define the applicable year. As a
result, date-sensitive software may recognize a date using '00' as the
year 1900 rather than the year 2000. This could result in system
failures or miscalculations causing disruption of operations,
including among others, temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The Company has reviewed its information and non-information
systems and they are Year 2000 compliant. The Company has consulted
with third party vendors and they have advised it that they are Year
2000 compliant. In the event, however, that any of the vendors are not
Year 2000 compliant, the Company believes that an interruption of the
third party vendor's services may adversely affect the Company until
such time as the vendor's services are restored. The cost to bring the
Company's information and non-information systems into Year 2000
compliance was nominal. The Company has not established any
contingency plans in the event it or its vendors' services are
interrupted by a failure of Year 2000 compliance.
The Company has reviewed its current software and made all
necessary adjustments to bring the software into compliance with the
Year 2000 issue. In the future, the planned acquisitions of software
will most likely involve hardware and software which is relatively new
and therefore management does not anticipate that it will incur
significant operating expenses or be required to invest heavily in
computer systems improvements to be Year 2000 compliant. As the Company
makes arrangements with significant hardware and software suppliers,
the Company intends to determine the extent to which the Company's
systems may be vulnerable should those third parties fail to address
and correct their own Year 2000 issues and take measures to reduce the
Company's exposure, such as, finding alternative suppliers or requiring
the suppliers to correct Year 2000 compliance issues prior to the
Company acquiring the product. The Company anticipates that this will
be an ongoing process as the Company begins to implement its marketing
plan through 1999. There can be no assurances that the systems of
suppliers or other companies on which the Company may rely on will be
converted in a timely manner and will not have a materially adverse
effect on the Company's systems. Additionally there can be no
assurances that the computer systems necessary to maintain the
viability of the Internet will be Year 2000 compliant. The Company
believes that it is taking the steps necessary regarding Year 2000
compliance issues with respect to matters within its control. However,
no assurance can be given that the Company's systems will be made Year
2000 compliant in a timely manner or that the Year 2000 problem will
not have a material adverse effect on the Company's business, financial
condition and results of operations.
As of March 27, 2000, the Company has not experienced any
adverse effects, either financially or operationally, from any of the
Year 2000 compliance issues concerning the Company's products, internal
systems or from any of its suppliers. Further, the Company does
not reasonably anticipate any problems or latent material risks in
the future from Year 2000 compliance issues.
Trademarks and Copyrights
The Company has licenses to sell and distribute all of its
products. It is currently seeking trademark protection on certain
names and marks. The Company entered into confidential agreements with
all technical employees and consultants and with third parties in
connection with the Company's license agreements. Despite these
precautions, it may be possible for a third party to copy or otherwise
obtain proprietary information without authorization. Third parties
may also develop similar technology or methods independent of the Company.
Competition
The Company is involved in highly competitive business. There are
several other entities which manufacture, publish, and conduct training
programs, many of which are much larger companies possessing
substantially greater financial resources and facilities than the
Company. However, said corporations are not using the same marketing
and distribution channels for their products as is the Company. The
Company believes that the principal competitive factors in its
marketing are: (1) brand recognition; (2) a broad selection of products
and services; (3) comprehensive courses and in-depth curricula; (4)
quality and responsiveness of customer service; and, (5) ease of use of
the Company's products.
The Company is currently enhancing its advertising and marketing
to keep its name prominent among those providing similar services. The
Company is developing new courses and new markets for its existing
courses.
The Company believes that its responsiveness to its student's
needs has created customer satisfaction. The foregoing is reflected in
information solicited from the Company's students at the conclusion of
the Company's training sessions.
Company's Office
The Company's headquarters are located 4818 Coronado Parkway, Cape
Coral, Florida 33904 and the telephone number is (941) 542-8999.
Employees
The Company employs eighty-one (81) full time employees and one
(1) part-time employee.
RISK FACTORS
1. DEVELOPMENT AND MARKET ACCEPTANCE OF PRODUCTS. The Company's
success and growth will depend upon the Company's ability to market its
existing products and services, of which there is no assurance. See
'Business - Real Estate Programs.'
2. LIQUIDITY; NEED FOR ADDITIONAL FINANCING. The Company
believes that it has the cash it needs for at least the next twelve
months based upon its internally prepared budget. The Company's cash
requirements, however, are not easily predictable and there is a
possibility that its budget estimates will prove to be inaccurate. If
the Company is unable to generate a positive cash flow before its cash
is depleted, it will be required to curtail operations substantially,
or seek additional capital. There is no assurance that the Company will
be able to obtain additional capital if required, or if capital is
available, to obtain it on terms favorable to the Company. The Company
may suffer from a lack of liquidity in the future which could impair
its short-term marketing and sales efforts and adversely affect its
results of operations. See 'Management's Discussion and Analysis or
Plan of Operation.'
3. COMPETITION. Most of the Company's competitors have
substantially greater financial, technical and marketing resources than
the Company. In addition, the Company's products compete indirectly
with numerous other products. As the market for the Company's products
expand, the Company expects that additional competition will emerge and
that existing competitors may commit more resources to those markets.
See 'Business - Competition.'
4. RELIANCE UPON DIRECTORS AND OFFICERS. The Company is wholly
dependent, at the present, upon the personal efforts and abilities of
its Officers and Directors, Russell A. Whitney, Chief Executive Officer
and Chairman of the Board of Directors; Richard W. Brevoort, President
and a member of the Board of Directors; and Ronald S. Simon,
Secretary/Treasurer and a member of the Board of Directors, who
exercise control over the day to day affairs of the Company. See
'Business' and 'Management.'
5. ISSUANCE OF ADDITIONAL SHARES. 17,472,000 shares of Common
Stock or 70% of the 25,000,000 authorized shares of Common Stock of the
Company are unissued. The Board of Directors has the power to issue
such shares, subject to shareholder approval, in some instances.
Although the Company presently has no commitments, contracts or
intentions to issue any additional shares to other persons, other than
in the exercise of options and warrants, the Company may in the future
attempt to issue shares to acquire products, equipment or properties,
or for other corporate purposes. Any additional issuance by the
Company, from its authorized but unissued shares, would have the effect
of diluting the interest of existing shareholders. See 'Description of
Securities.'
6. INDEMNIFICATION OF OFFICERS AND DIRECTORS FOR SECURITIES
LIABILITIES. The Company's Articles of Incorporation provide that the
Company will indemnify any Director, Officer, agent and/or employee as
to those liabilities and on those terms and conditions as are specified
in The Company Act of the State of Colorado. Further, the Company may
purchase and maintain insurance on behalf of any such persons whether
or not the corporation would have the power to indemnify such person
against the liability insured against. The foregoing could result in
substantial expenditures by the Company and prevent any recovery from
such Officers, Directors, agents and employees for losses incurred by
the Company as a result of their actions. Further, the Company has
been advised that in the opinion of the Securities and Exchange
Commission, indemnification is against public policy as expressed in
the Securities Act of 1933, as amended, and is, therefore,
unenforceable.
7. CUMULATIVE VOTING, PREEMPTIVE RIGHTS AND CONTROL. There are
no preemptive rights in connection with the Company's Common Stock.
Shareholders may be further diluted in their percentage ownership of
the Company in the event additional shares are issued by the Company in
the future. Cumulative voting in the election of Directors is not
provided for. Accordingly, the holders of a majority of the shares of
Common Stock, present in person or by proxy, will be able to elect all
of the Company's Board of Directors. See 'Description of Securities.'
8. NO DIVIDENDS ANTICIPATED. At the present time the Company
does not anticipate paying dividends, cash or otherwise, on its Common
Stock in the foreseeable future. Future dividends will depend on
earnings, if any, of the Company, its financial requirements and other
factors. See 'Dividend Policy.'
ITEM 2. PROPERTIES
The Company leases office space from Russ Whitney, Chief
Executive Officer and Chairman of the Board of Directors, pursuant to
the terms of a three year lease which commenced on September 1, 1999
and terminates on October 31, 2002 with a monthly rental payment of
$5,805.34. Russ Whitney is the President of the Company and a member
of its Board of Directors. The terms of the lease are no less
favorable as can be obtained from independent third parties.
Russ Whitney's Wealth Education Center of Jackson, MS, Inc. a
wholly owned subsidiary corporation of Russ Whitney's Wealth Education
Centers, Inc. leases 3000 square feet of office space from Brown
Lakeland Properties/Charles Brown at 110 Jones Lane, Flowod,
Mississippi pursuant to a written lease agreement. The term of the
lease is November 1, 1999 to October 31, 2002. The monthly rental is
$3,550.00.
Whitney Consulting Services, Inc. leases 3,678 square feet of
office space from Draper Business Park L.C. at Suite 200, Building 5,
12227 South Business Park Drive, Draper, Utah pursuant to a written
lease agreement. The term of the lease is from August 8, 1999 to May
14, 2001. The monthly rental is $3,233.58 per month. Whitney
Consulting Services, Inc. leases an additional 3,475 square feet of
office space from Draper Business Park, L.L.C. at Building #5, Draper
Business Park, 12227 South Business Park Drive, Draper, Utah pursuant
to a written lease agreement. The term of the lease is from September
27, 1999 to September 26, 2001. The monthly rental is $2,968.23 the
first year and $3,113.02 the second year.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party defendant in any pending or threatened
litigation and to its knowledge, no action, suit or proceedings has
been threatened against its officers and its directors.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the
solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's shares are traded on the Bulletin Board operated by
the National Association of Securities Dealers, Inc. (the 'Bulletin
Board') under the trading symbol 'RUSS.' The Company's shares began
trading in August 1998. These quotations reflected inter-dealer prices,
without retail mark-up, mark-down or commissions and may not represent
actual transactions. Summary trading by quarter for the 1999, 1998
and 1997 (partial) fiscal years are as follows:
Fiscal Quarter High Ask Low Bid
1999
Fourth Quarter $ 2.50 $ 1.88
Third Quarter $ 2.00 $ 1.44
Second Quarter $ 2.00 $ 1.87
First Quarter $ 2.00 $ 1.75
1998
Fourth Quarter $ 2.50 $ 2.00
Third Quarter $ 3.50 $ 3.00
Second Quarter $ 0.00 $ 0.00
First Quarter $ 0.00 $ 0.00
1997
Fourth Quarter $ 0.00 $ 0.00
Third Quarter $ 0.00 $ 0.00
The source for the foregoing high and low bid information was
Michael Kirby a registered representative of Spencer Edwards, Inc. a
market maker in the Company's common stock.
As of July 26, 1999, the Company had 195 holders of record of its
Common Stock.
The Company has not paid any dividends since its inception and
does not anticipate paying any dividends on its Common Stock in the
foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
The Company has 7,528,022 shares of Common Stock issued and
outstanding as of March 27, 2000. Of the 7,528,022 shares of the
Company's Common Stock outstanding, 750,022 shares are freely tradeable
and 6,778,000 shares can only be resold in compliance with Reg. 144
adopted under the Securities Act of 1933 (the 'Act').
In general, under Rule 144 as currently in effect, a person (or
persons whose Shares are aggregated) who has beneficially owned Shares
privately acquired directly or indirectly from the Company or from an
affiliate, for at least one year, or who is an affiliate, is entitled
to sell within any three month period a number of such Shares that does
not exceed the greater of 1% of the then outstanding shares of the
Company's Common Stock or the average weekly trading volume in the
Company's Common Stock during the four calendar weeks, immediately
preceding such sale. Sales under Rule 144 are also subject to certain
manner of sale provisions, notice requirements and the availability of
current public information about the Company. A person (or persons
whose Shares are aggregated) who is not deemed to have been an
affiliate at any time during the 90 day preceding a sale, and who has
beneficially owned Restricted Shares for at least two years, is
entitled to sell all such Shares under Rule 144 without regard to the
volume limitations, current public information requirements, manner of
sale provisions or notice requirements.
In 1996, the Company issued 976,200 shares of common stock to its
officers, directors and others pursuant to Reg. 504 of the Securities
Act of 1933.
On or about August 18, 1998, the Company reverse split its shares
of common stock on a 1 for 1.3016 basis.
On or about August 18, 1998, the Company issued 93,750 Class A
Warrants to Earnest Mathis, Jr. in consideration of $100.00 and 93,750
Class A Warrants to Gary Agron in consideration of $100.00. Messrs.
Mathis and Agron are former directors of the Company. The Class A
Warrants were issued pursuant to Section 4(2) of the Securities Act of
1933 (the 'Act') and are deemed 'restricted' securities as that term is
defined in Reg. 144 of the Act. As of the date hereof, Messrs. Mathis
and Agron have not exercised any of the foregoing Class A Warrants.
For a description of the Class A Warrants, see 'Description of
Securities.'
On August 18, 1998, the Company acquired all of the issued and
outstanding shares of common stock of Win Systems, Inc., a corporation
controlled by Russell Whitney, the Company's Chief Executive Officer
and Chairman of the Board of Directors in consideration of 6,750,000
shares of the Company's common stock and 340,000 Class B Warrant
entitling the holders thereof to acquire an addition 340,000 shares of
the Company's common stock at an exercise price of $4.00 per share up
to August 18, 2002. The shares of common stock and warrants were
issued pursuant to Section 4(2) of the Securities Act of 1933. For a
description of the Class B Warrants, see 'Description of Securities.'
On February 1, 1999, the Company issued 20,000 shares of its common
stock in exchange for all 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 shares at $2.00 on May 31, 1999; and 2,000
shares at $1.875 on June 30, 1999; and 2,000 at $1.75 on
july 31, 1999; and 2,000 shares on August 31, 1999 at $1.625 per share).
The issuances of the foregoing shares were exempt from registration under
the Securities Act of 1933 pursuant to Section 4(2) of the Act.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
FORWARD-LOOKING STATEMENTS
This Form 10-KSB contains forward-looking statements within the meaning
of the 'safe harbor' provisions under section 21E of the Securities and
Exchange Act of 1934 and the Private Securities Litigation Act of 1995.
The Company uses forward-looking statements in its description of its
plans and objectives for future operations and assumptions underlying
these plans and objectives. Forward-looking terminology includes the words
'may', 'expects', 'believes','anticipates', 'intends', 'forecasts',
'projects', or similar terms, variations of such terms or the negative of
such terms. These forward-looking statements are based on management's
current expectations and are subject to factors and uncertainties which
could cause actual results to differ materially from those described in
such forward-looking statements. The Company expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to
any forward-looking statements contained in this Form 10-KSB to reflect
any change in its expectations or any changes in events, conditions or
circumstances on which any forward-looking statement is based. Factors
which could cause such results to differ materially from those described
in the forward-looking statements include those set forth under
'Risk Factors,' and elsewhere, in or incorporated by reference into
this Form 10-KSB.
OVERVIEW
On August 18, 1998, Gimmel Enterprises, Inc., a shell company listed
on the NASD OTC Bulletin Board acquired all of the outstanding shares
of Whitney Education Group, Inc. (formerly Win Systems, Inc.). Prior
to this Gimmel Enterprises, Inc. had no operations and its activities
consisted of efforts to establish a new business.
Gimmel Enterprises, Inc. changed its name to Whitney Information
Network, Inc (WIN!). Whitney Education Group, Inc was a privately
held company formed in 1992. For financial and reporting
purposes the acquisition has been treated as a recapitalization of WIN!
with WIN! as the acquirer (a reverse merger). The historical financial
statements prior to August 19, 1998 are those of Whitney Education
Group, Inc.
Whitney Information Network, Inc. (WIN!) is a provider of education
in the areas of real estate, finance, Internet and other post secondary
career related training. Its learning solutions are designed to
deploy and manage knowledge practically and more effectively for use as
a competitive advantage. The Company has accomplished its position in
the market and growth through its innovative distribution channels,
including classroom education, one-on-one mentoring, group instruction,
training centers, and Internet marketing.
During 1999, the Company opened or acquired new subsidiaries and
expanded its existing subsidiaries: Whitney Internet Services, Inc.,
a Company organized to provide Internet marketing and training.
Russ Whitney's Wealth Education Centers, Inc. will provide the same
products and services locally in a brick and mortar facility that
the parent does on a national basis. Whitney Consulting Group, Inc.
provides consulting and telemarketing services to the public and to
the affiliated group. Whitney Canada, Inc. provides the same training
and educational services in Canada that the parent Company provides
in the US. Wealth Intelligence Network, Inc. provides financial
training and financial consulting services. Whitney Mortgage.com, will
provide a means for the Company's students to obtain mortgages at
reasonable rates, and Whitney Education Group, Inc the Company's
mainstay educational and training company.
TWELVE MONTHS AND QUARTER ENDED DECEMBER 31, 1999
REVENUE
Revenue increased $5,860,492 or 140% from $4,179,707 to $10,040,202 for
the three months ended December 31, 1998 as compared to the three months
ended December 31, 1999. The increase in revenue is a direct result of
increased basic and advance real estate courses available to students
along with a successful media campaign.
Revenues for the twelve months ended December 31, 1999 increased to
$26,775,589 as compared with $13,760,208 for the twelve months ended
December 31, 1998 an increase of $13,687,306, or 105%. Total
deferred revenues on the balance sheet were $4,098,642 and
$9,311,574 at December 31, 1998 and 1999, respectively. Cost of
sales increased $3,694,047 in the three months ended
December 31, 1999 from $1,052,310 in the three months ending
December 31, 1998 to $4,746,352 for the three months ending
December 31, 1999.
Total cost of sales increased to $11,529,312 in the twelve months ended
December 31, 1999 from $ 4,682,850 in the twelve months ended
December 31, 1998.
Advertising and Sales Expense
Total Advertising and Sales Expense increased in the 4th quarter of 1999
to $3,381,955 from $1,501,213 and increased proportionately for the
year ended December 31, 1998 as compared with the same twelve month
period in 1998 (being $8,512,287 and $5,351,293 respectively).
This increase in advertising and sales expenses represents management's
decision to increase sales, expand product lines, and offer the Company's
students a greater variety of courses to choose from. As a result there were
a greater number of period costs incurred in the last three months of 1998
where certain marketing strategies were being tested and refined.
The results of these tests and refinements have materialized in the first
three months of the current year. Thus, expenses increased proportionately
with a sales increases due to the higher expenditures in the last quarter
of 1999.
Advertising, sales and marketing expenses consist primarily of TV and
newspaper advertising, direct mailings, travel, public relations, trade
shows, and other marketing literature and overhead allocations.
General and Administrative Expense
General and Administrative Expenses (G & A) increased in the 4th quarter
to $1,154,902 for the quarter ended December 31, 1999 from $980,647 for
the quarter ended December 31, 1998, an increase of $174,255 or 18%. They
increased from $2,542,629 for the twelve months ending December 31, 1998 to
$4,500,268 for the twelve months ended December 31, 1999. The increase
in the current quarter represents start up expenses for several new
divisions and increased administrative hiring to facilitate the increase
in revenues and volume. The overall increase in the twelve months ended
December 31, 1999 of $1,657,639 reflects the initial startup expenses
in adding more courses and crews in the last half of 1999 and development
of additional products in 1999 that were one time expenditures. General
and administrative expenses consist mainly of salaries and other
personnel-related expenses for the Company's administrative, executive,
and finance personnel as well as outside legal and audit costs.
Net income $463,596 (net of taxes of $293,392) in the 4th
quarter of 1999 increased by 65% over the prior 4th quarter of
1998 by $305,463, or $.06 per share as compared with $.04 a share for
the comparable quarter last year. Net income was $768,436
for the year ended December 31, 1998 and $1,371,770 for the year
ended December 31, 1999, an increase of $603,334 or 79%
over the prior year. This resulted in earnings per share of
$.18 per share for the year ending December 31, 1999 as compared
with $.010 for the year ended December 31, 1998.
Liquidity and Working Capital
At December 31, 1999 the company had cash of $1,274,708 as compared
with $370,571 at December 31, 1998. This increase of $904,137 is
attributable primarily to operations. The Company believes at the moment
that (with the exception of any acquisitions, of which none are planned
currently) the Company has sufficient working capital to meet its
growth plans.
The opening expenses of the Wealth Centers are a relatively minor expense of
approximately $50,000 each. The Company's share of the venture is
approximately $25,000. Its joint venture partner will fund the
remaining $25,000 required to open each store.
The internet division functionally will use the same systems,
procedures and operations the real estate training division uses.
All internal personnel are in place and all internal systems are
in place. The only additional capital required for the division
is an advertising budget which should become self-funding after two
to three weeks. Thus; the division will require very little in the way of
start up expenses, and since it is operational now, the initial funds
have already been expended. Future cash flow need for this division is
expected to be provided from its operations.
The Company believes that its cash flow from operations will be
sufficient to meet its working capital needs for the next 12 months.
Receivables and Prepaid Advertising (media)
Accounts receivable increased by $415,296 to $1,395,559 at
December 31, 1999 from $980,263 at December 31, 1998. This increase
reflects the portion of the increased revenue that were credit sales.
Prepaid Advertising (media) was $669,107. Prepaid Advertising at
December 31, 1998 was $141,448. Prepaid Advertising is usually purchased
four to six weeks in advance of each educational conference held.
Deferred Educational Revenues
Deferred educational revenues arise when a student purchases a course
or courses and does not attend those courses until after the balance
sheet date. All courses must be scheduled by the students within 90
days of registration and taken within one year. Deferred revenues at
December 31, 1999 were $9,311,574 as compared with those at
December 31, 1998 of $3,958,244. This substantial increase represents
a natural increase from higher volume and an increase due to a change
in emphasis from basic training to intensified training and educational
camps. Thus, a greater amount of revenue has been deferred as a larger
proportion of educational products sold in the current period will
not be realized until the student attends the courses for which he/she
has been registered. In addition to the deferred revenues, there is
a commensurate amount of expenses associated with those revenues that
is also deferred. As of December 31, 1998 there were $4,098,642 of
expenses that were deferred as compared to $8,865,027 at
December 31, 1999. A breakdown of the amounts deferred appears below:
December 31,
Components of Deferred Expenses 1999 1998
Advertising Expense $ 4,223,395 $ 2,099,998
Instructors and
Trainers Compensation 1,361,326 676,889
Support Services 775,611 385,992
Travel and Facility Costs 1,109,733 551,456
Administrative Expense 542,447 269,344
Production Expense 47,582 -
Total $ 8,865,502 $ 3,983,689
YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
Revenues for the year ended December 31, 1999 increased to
$26,775,589 as compared with $13,760,208 for the year ended
December 31, 1998 an increase of $13,015,381 or 95%. Total deferred
revenues on the balance sheet were $9,311,574 and $3,958,244 at
December 31, 1999 and 1998, respectively. Cost of sales increased
to $11,529,312 for the year ended December 31, 1999 from $4,682,850 in
the year ended December 31, 1998.
Total Advertising, Selling and General and Administrative expenses
increased for the year ended December 31, 1999 to $8,512,287 from
$5,351,293 as compared with 1998. These substantial increases in
revenues and expenses in 1999 over 1998 reflect a general increase in
business activity, and reflect the results of the company's plan to expand
its business into new markets and develop new products.
Sales and marketing expenses consist primarily of TV and newspaper
advertising, direct mailings, travel, public relations, trade shows and
other marketing literature and overhead allocations. General and
administrative expenses consist mainly of salaries and other
personnel-related expenses for the Company's administrative, executive
and finance personnel as well as outside legal and audit costs.
Net income $1,391,770 (net of taxes of $841,952) for the year
ended December 31, 1999 increased dramatically over the net income for
the year ended December 31, 1998 of $768,436 (net of taxes of $415,000)
or $.18 per share as compared with $.10 a share for the prior year.
Liquidity and Working Capital
At December 31, 1998 the company had cash of $370,571 as compared with
$1,274,708 at December 31, 1999. This increase of $904,137 is
attributable primarily to operations. The company anticipates that its
cash flow from operations will be sufficient to meet its needs in the
next 12 months.
In addition, the company from time to time evaluates potential
acquisitions of business products and/or technologies that complement
the company's business. To the extent that resources are insufficient
to fund the company's activities, the company may need to raise
additional funds. There can be no assurance that such additional funding,
if needed, will be available. If adequate funds are not available on
acceptable terms, the company may be unable to expand its business,
develop or enhance its products and services, take advantage of
future opportunities or respond to competitive pressures, any of which
could have a material adverse effect on the Company's business,
operating results and financial condition.
The internet division functionally will use the same systems,
procedures and operations the real estate training division uses.
All internal personnel are in place and all internal systems are in place.
The only additional capital required for the division is an advertising
budget which is self-funding after two to three weeks. Thus; the
division will require very little in the way of start up expenses and
since it operational now, the initial funds have already been expended.
Future cash flow need for this division will be provided for from its
operations.
The Company does not anticipate significant problems in funding its
Wealth Centers Storefront (adult education facilities located in upscale
strip malls), as the up front costs are minimal and its Joint Venture
Partners will pay half of the start-up costs.
Fluctuations in Quarterly Operating Results
The Company's quarterly operating results have varied in the past and
are expected to vary in the future as a result of a variety of factors,
some of which are outside the Company's control. Factors that may
adversely affect the Company's quarterly operating results include
the demand for technology-based training in general, and demand for
online learning solutions in particular: the size and timing of
educational sessions and registrations, the mix of revenue from
products and services, the mix of products sold, market acceptance, etc.
ITEM 7. FINANCIAL STATEMENTS
WHITNEY INFORMATION NETWORK, INC.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITOR'S REPORT
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
LARRY LEGEL, CPA
5100 N. FEDERAL HWY.SUITE 409
FT LAUDERDALE, FL 33308
(954) 493-8900
<PAGE>
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITOR'S REPORT
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT F1
CONSOLIDATED BALANCE SHEET F2
STATEMENT OF CONSOLIDATED OPERATIONS AND RETAINED EARNINGS F3
STATEMENT OF CONSOLIDATED CHANGES IN SHAREHOLDERS' EQUITY F4
STATEMENT OF CONSOLIDATED CASH FLOWS F5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS F6-F16
<PAGE>
LARRY LEGEL, CPA
5100 N. Federal Highway, Suite 409
Ft. Lauderdale, FL 33308
(954) 493-8900 Phone
(954) 493-8300 Fax
E-Mail: [email protected]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
WHITNEY INFORMATION NETWORK, INC.
(Formerly Win Systems International, Inc.)
Cape Coral, FL 33907
I have audited the accompanying consolidated balance sheet of Whitney
Information Network, Inc., (formerly Win Systems International, Inc.)
as of December 31,1999 and 1998, and the related statements of
consolidated operations, changes in consolidated stockholders' equity,
and consolidated cash flows for the years ended December 31,1999 and
1998. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these
consolidated financial statements based on my audits.
I have conducted my audits in accordance with generally accepted
auditing standards. Those standards require that I plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. I believe that my audits provide a reasonable
basis for my opinion.
In my opinion, the consolidated financial statements referred to above
present fairly, the financial position of Whitney Information Network,
Inc., (formerly Win Systems International, Inc.) as of December 31,1999
and 1998, and the results of its consolidated operations and its
consolidated cash flows for the years then ended, are in conformity with
generally accepted accounting principles consistently applied.
Larry Legel
Certified Public Accountant
March 21, 2000
Ft Lauderdale, Florida
-F1-
<PAGE>
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
CONSOLIDATED BALANCE SHEET
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
ASSETS 1999 1998
Current Assets:
Cash $ 1 274 708 $ 370 571
Accounts Receivable 1 395 559 980 263
Due From Affiliates 175 961 117 322
Prepaid Advertising 669 107 141 448
Deferred Expenses 8 865 027 4 098 642
_________ _________
Total Current Assets 12 380 362 5 708 246
Other Assets:
Property and Equipment, net 278 540 -
Other Assets 161 070 40 725
_______ ______
Total Other Assets 439 610 40 725
_______ ______
Total Assets $ 12 819 972 $ 5 748 971
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Accounts Payable $ 596 463 $ 564 708
Accrued Seminar Expenses 247 860 -
Income Taxes Payable 44 500 148 000
Deferred Revenues 9 311 574 3 958 244
Other Liabilities 270 141 140 355
_______ ______
Total Current Liabilities 10 470 538 4 811 307
Other Liabilities:
Deferred Income Taxes 222 500 267 000
Total Other Liabilities 222 500 267 000
_______ _______
Total Liabilities $ 10 693 038 $ 5 078 307
SHAREHOLDERS' EQUITY
Common Stock, no par value,
7,528,022 shares as of 12/31/99 and
7,500,047 shares as of 12/31/98 issued
and outstanding $ 67 102 $ 2 602
Paid in Capital 900 900
Retained Earnings 2 058 932 667 162
_________ _______
Total Shareholders' Equity 2 126 934 670 664
_________ _______
Total Liabilities and Shareholders'
Equity $ 12 819 972 $ 5 748 971
The accompanying notes are an integral part of the
consolidated financial statements.
-F2-
<PAGE>
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
STATEMENT OF CONSOLIDATED OPERATIONS
AND RETAINED EARNINGS
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
Sales $ 26 775 589 $ 13 760 208
Cost of Sales 11 529 312 4 682 850
__________ _________
Gross Profit $ 15 246 277 $ 9 077 358
Expenses
Advertising and Sales Expense 8 512 287 5 351 293
General and Administrative Expense 4 500 268 2 542 629
13 012 555 7 893 922
_________ _________
Income Before Taxes $ 2 233 722 $ 1 183 436
Income Taxes, see note 841 952 415 000
_______ _______
NET INCOME $ 1 391 770 $ 768 436
Retained Earnings (deficit),
beginning of year 667 162 (101 274)
_______ _______
Retained Earnings, end of year 2 058 932 667 162
__________ _______
Basic and Fully Diluted Earnings Per
Share,Adjusted for Reverse Split and
Exchange of Stock Transaction, see note $ .18 $ .10
___ ___
The accompanying notes are an integral part of the
consolidated financial statements.
-F3-
<PAGE>
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
STATEMENT OF CONSOLIDATED CHANGES IN SHAREHOLDERS' EQUITY
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Common Stock Paid Retained Total
Number of in Earnings Shareholders'
Shares Value Capital (Deficit) Equity
<S> <C> <C> <C> <C> <C>
Balance December 31,1997 976 200 $ 2 602 $ (2 564) $ 38
Reverse Split (226 153)
Exchange of Stock 6 750 000 900 (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
Issuance of Stock
During 1999 27 975 64 500 64 500
Net Income for the Year
Ended December 31, 1999 $1 391 770 $1 391 770
Balance December 31, 1999 7 528 022 $67 102 $900 $2 058 932 $2 126 934
_________ ______ ___ _________ _________
Weighted Average Number
of Shares Outstanding
During 1998, Assuming
that the Exchange Took
Place at the
Beginning 1998 7 500 047
_________
Weighted Average Number of
Shares Outstanding
During 1999 7 514 035
_________
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
-F4-
<PAGE>
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTERMS INTERNATIONAL, INC.)
STATEMENT OF CONSOLIDATED CASH FLOWS
AS OF AND FOR THE YEARS ENDED DECEMBER, 31, 1999 AND 1998
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings from Operations $ 1 391 770 $ 768 436
Changes in Operating Assets and Liabilities:
(Increase) in Accounts Receivable (415 296) (902 148)
(Increase) in Due From Affiliates (58,639) -
(Increase) in Deferred
Production Expense (114 953)
Decrease in Notes Receivable 14 979
(Increase) Decrease in Prepaids and
Other Assets (527,659) 110 306
(Increase) in Deferred Expenses (4 766 385) (3 917 689)
(Increase) in Other Assets (120,345) (9 405)
Increase in Accounts Payable 31 755 480 601
Increase in Deferred Revenues 5 353 330 3 709 244
Increase (Decrease) in Income
Taxes Payable (103 500) 415 000
Increase in Accrued Seminar Expense 247 860 -
(Decrease) in Deferred Income Taxes (44 500) -
Increase in Other Liabilities 129 786 55 097
Net Cash Flow from Operations $ 1 118 177 $ 619 468
CASH USED IN INVESTING ACTIVITIES
Purchases of Property and Equipment (278,540) -
Loans Made to Affiliates (51 065) (117 973)
Net Cash used in Investing Activities $ - $ (117 973)
CASH USED IN FINANCING ACTIVITIES
Issuance of Common Stock 64 500 (2 602)
Net Repayments of Loans from Affiliates - -
Net Repayments in loans from Shareholder - -
Net Cash used in Financing Activities $ 64,500 (160 900)
Increase in Cash $ - $ 340 535
Cash at Beginning of year $ 370 571 $ 30 036
Cash at End of Year $ 1 274 708 $ 370 571
The accompanying notes are an integral part of the
consolidated financial statements.
-F5-
<PAGE>
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
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 System, Inc. has been operating in the Educational Seminars Industry since
1992 and expanded its operation 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, effective January 8, 1999, and is presently
seeking national accreditation.
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 subsidiaries.
Whitney Canada, Inc. 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 the corporation, which had been an Ontario corporation, in
order to qualify for the amalgamation with Whitney Canada, Inc., which was
completed January 6, 2000.
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 a variety of internet
services beyond educational training including marketing web sites and
participations in networks of residual internet connection fees.
The accompanying notes are an integral part of the
consolidated financial statements.
-F6-
<PAGE>
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
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. Brokering mortgages represents an expansion from
educational seminars into a different industry.
Russ Whitney's 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
December, 1999.Russ Whitney's Wealth Education Center of Atlanta, GA, Inc.
incorporated in Wyoming on July 22, 1999 and a school is under construction
with plans for an opening in April, 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 mentoring program.
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 affect 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.
The accompanying notes are an integral part of the
consolidated financial statements.
-F7-
<PAGE>
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
FAIR VALUE OF FINANCIAL STATEMENTS
The Company's financial instruments consist principally of cash, accounts
receivable and deferred seminar expense, accounts payable, accrued expenses,
deferred educational revenues, and notes payable. The carrying amounts of
such financial instruments as reflected in the balance sheet approximate
their estimated fair value as of December 31, 1999 and 1998. 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. and its wholly owned subsidiaries,
Whitney Education Group, Inc. (formerly Win Systems, Inc.), Whitney
Canada, Inc.,and 1311448 Ontario Inc., Wealth Intelligence Network, Inc.,
Whitney Consulting Services, Inc., Russ Whitney's Wealth Centers, Inc. and
Whitney Internet Services, Inc. All significant inter-company accounts and
transactions have been eliminated. For more information see note,
'History of the Corporation.'
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 $8.786,597 at December 31, 1999 and $3,958,244 at December 31, 1998.
The accompanying notes are an integral part of the
consolidated financial statements.
-F8-
<PAGE>
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
DEFERRED EXPENSES FOR FUTURE EDUCATIONAL PROGRAMS
When a student signs up to attend a future educational seminar with the Company
the tuition that was collected or accrued is deferred. The expenses related to
the deferred tuition are also deferred. The deferred expenses associated with
future educational programs are shown on the balance sheet as Deferred Seminar
Expense in the amount of $8,817,445 at December 31, 1999 and $3,983,689 at
December 31, 1998.
December 31,
Components of Deferred Expenses 1999 1998
Advertising Expense $ 4,223,395 $ 327,821
Instructors and Trainers Compensation 1,361,326 105,667
Support Services 775,611 60,203
Travel and Facility Costs 1,109,733 86,138
Administrative Expense 542,447 42,105
[unallocated] 804, 934 3,361,755
Total Deferred Seminar Expense $ 8,817,445 $ 3,983,689
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is provided using
accelerated and straight-line methods over the following useful lives:
Office Furniture ---------------------- 7 years
Office Equipment ---------------------- 5 years
Intangibles (Contract Rights) -------- 40 years
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.
The accompanying notes are an integral part of the
consolidated financial statements.
-F9-
<PAGE>
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
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
December 31, 1999 and 1998 and the entire amount of the sales related to
the net receivables are 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 also requires a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation.
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 whereby Whitney Education Group, Inc. exchanged 100% of its shares for
90% of Gimmel's 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. (WIN). The financial statements from
January 1, 1997 through December 31, 1999 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.
Also on August 18, 1998, WIN issued 187,500 Class A stock purchase warrants
and 340,000 Class B stock purchase warrants. Both the Class A and Class B
warrants are exercisable at $4.00 per share.
The accompanying notes are an integral part of the
consolidated financial statements.
-F10-
<PAGE>
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
MERGERS, ACQUISITIONS AND CAPITAL ACCOUNTS (CONTINUED)
The Class A warrants and the Class B warrants are exercisable 2 years and 4
years respectively after the underlying stock is registered. 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 750,000 shares for the stock
option plan of which 415,000 option shares have been granted (at an
exercise price of approximately $2.00 per share)to the balance sheet date.
None have been exercised or expired to date.
On February 1, 1999 the Company purchased all of the Assets of Wealth
Intelligence Network, Inc. for 20,000 shares of stock at $2.50 per share.
In addition the Company (during the period from May to August 1999) issued
8,000 shares to a financial public relations firm in lieu of cash for
services valued at $14,500.
RELATED PARTY TRANSACTIONS
The Company has rented its 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 $35,622 and $26,606 for the twelve months
ended December 31, 1999 and 1998, 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.
The accompanying notes are an integral part of the
consolidated financial statements.
-F11-
<PAGE>
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
RELATED PARTY TRANSACTIONS (CONTINUED)
At December 31,1999 and December 31, 1998 the related party receivables and
payables on the balance sheet were as follows:
Dec 31, 1999 Dec 31,1998
Receivables:
Due from Whitney Leadership Group $175,187 -0-
Due form MRS Equity Corp. $ 747 -0-
Due from RAW, Inc. $ 27 -0-
$175,961 -0-
Payables:
Long-term
Loans Payable to the Chairman
of the Board $ -0- $ 64,979
Short-Term
Amounts due to Whitney
Leadership Group, Inc. $ 18 $ -0-
Amounts Due to RAW, Inc. $ -0- $ 1,220
Amounts Due to MRS Equity
Corp. $ -0- $ 11,208
$ 18 $ 77,407
The Company has receivables from Whitney Leadership Group in the amount of
$175,187; MRS Equity Corp. in the amount of $747 and RAW, Inc. in the amount
of 27 shown on the balance sheet as Due from Affiliates at December 31, 1999.
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. provides payroll services to MRS Equity Corp. in the amount of
$111,724 for the year ended December 31 1999 and $100,272 the year ended
December 31,1998. MRS Equity Corp. provided WHITNEY INFORMATION NETWORK, INC.
with $254,826 and $216,500 for product costs for the year ended
December 31, 1999 nd 1998, respectively. MRS Equity Corp. is a 100 percent
subsidiary of Equity Corp. Holdings, Inc. of which the Chairman of the Board
of WHITNEY INFORMATION NETWORK, INC. owns a controlling interest.
The accompanying notes are an integral part of the
consolidated financial statements.
-F12-
<PAGE>
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
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 Precision Software Services, Inc. During 1999 and 1998
the Company provided WHITNEY INFORMATION NETWORK, INC. $318,089 and $67,925 in
product cost, respectively. PSS sells products to WHITNEY INFORMATION
NETWORK, INC. at a price less than the prices offered to third parties.
WHITNEY INFORMATION NETWORK, INC. provides payroll services to Precision
Software Services, Inc in the amount of $38,605 for the year ended
December 31,1999 and $44,135 for year ended December 31,1998.
WHITNEY INFORMATION NETWORK, INC. provides payroll services to Whitney
Leadership Group, Inc. in the amount of $82,787 for 1999 and $133,928
for 1998. The Chairman of the Board of WHITNEY INFORMATION NETWORK, INC. is
the President and Chief Operating Officer of Whitney Leadership Group, Inc.
RAW, Inc. is a company owned by the Chairman of the Board of WHITNEY
INFORMATION NETWORK, INC., which buys, sells and invests in real property.
It was felt that the Company could enhance its operations if it could also
provide the same services that RAW, Inc. did. RAW, Inc. on January 1, 1997
sold WHITNEY INFORMATION NETWORK, INC., a portion of its inventory of real
estate on hand at that date, Management decided in late 1997 to discontinue
real estate purchases in WHITNEY INFORMATION NETWORK, INC., as this practice
detracted the Company from its primary focus of education and training.
In 1998, the company's outside accountant became the Chief Financial Officer
of the company and a shareholder of the company. During the year ended
December 31, 1998 the company paid $ 19,052 in accounting fees to its now
Chief Financial Officer and $495 during 1999, and $18,487 during 1999
including related companies.
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.
The accompanying notes are an integral part of the
consolidated financial statements.
-F13-
<PAGE>
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
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 $ 496,450
State taxes, net of federal tax benefit 52,150
Income taxes expense per books $ 548,600
Income taxes payable $ 548,600
Deferred Income tax -0-
Income Tax $ 548,600
At December 31, 1997 the Company had Federal net operating loss carry forwards
of approximately $96,000 that were used in 1998. The Company has previously
reported its revenues and expenses for income tax purposes on the 'cash basis'
of accounting. Deferred income taxes of $267,000 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 years ended
December 31, 1999 and 1998. The interest expense was $0 for the years ended
December 31, 1999 and 1998. (See Related Party Transactions). The Company
was indebted to its Chairman for short-term non-interest bearing advances
in the amount of $0 at December 31, 1999, and $64,979 at December 31, 1998.
The accompanying notes are an integral part of the
consolidated financial statements.
-F14-
<PAGE>
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
LITIGATION
The Company is not involved in any asserted or unasserted claims and 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 Company's financial position.
COMMITMENTS AND CONTINGENCIES
The Company carries liability insurance coverage which it considers sufficient
to meet regulatory and consumer requirements and to protect the Company's
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 Company's 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 for and (3) a
Wealth Center facility in Jackson, MS for $42,600 per year. Future
minimum payments by year and in the aggregate under capital and noncancellable
operating 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
Y2K MATTERS
The Securities and Exchange Commission (SEC) had expressed concern in general
over potential Year 2000 problems.
As of December 31, 1999 and 1998 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.
The accompanying notes are an integral part of the
consolidated financial statements.
-F15-
<PAGE>
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
COMMON STOCK OPTIONS
The Company has granted to key employees both, non-statutory and incentive
stock options for 813,150 shares under terms and conditions that at any time
between the grant date and two years of service, the optionee may purchase up
to 25% of the option shares. After two years of continuous service the optionee
may purchase up to 50% of the shares. After three years of continuous service
the optionee may purchase all of the shares. All of the options expire ten
years from the date of the grant. The tables below list the status of the
options at December 31, 1999.
Non-Statutory Stock Options:
Date of Number of Exercise Date of
Grant Shares Price Expiration
September 1, 1998 220,000 $ 2.000 September 1, 2008
August 31, 1999 76,700 1.875 August 31, 2009
Total Non - Statutory 296,700
Incentive Stock Options:
September 1, 1998 121,500 $ 2.000 September 1, 2008
April 1, 1999 20,000 1.875 April 1, 2009
April 26, 1999 10,000 1.875 April 26, 2009
August 31, 1999 309,950 1.875 August 31, 2009
October 20, 1999 55,000 1.875 October 20, 2009
Total Incentive 516,450
Grand Total 813,150
The accompanying notes are an integral part of the
consolidated financial statements.
-F16-
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not Applicable
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The officers and directors of the Company are as follows:
Name Age Position
Russell A. Whitney 43 Chief Executive Officer and
Chairman of the Board of Directors
Richard W. Brevoort 62 President and a member of the Board
of Directors
Ronald S. Simon 56 Secretary/Treasurer, Chief
Financial Officer, and a member of
the Board of Directors
Each director serves for a term of three years and one-third of
the directors are elected at the annual meeting of shareholders. The
Company's officers are appointed by the Board of Directors and hold
office at the discretion of the Board.
Russell A. Whitney - Chief Executive Officer and Chairman of the Board
of Directors
Mr. Whitney was a founder and has been the Chief Executive Officer
and Chairman of the Board of Directors of the Company and its
predecessor, since 1987. Since 1992, Mr. Whitney has been Chief
Executive Officer of Whitney Education Group, Inc. (formerly Win
Systems, Inc.) which is engaged in the business of education and
training. Since October 1998, Mr. Whitney has been the President and
a member of the Board of Directors of 1311448 Ontario, Inc. 1311448
Ontario is in the business of education and training. Since October
1998, Mr. Whitney has been the President and a member of the Board of
Directors of Whitney Canada, Inc. Whitney Canada is in the business of
education and training. Since February 1999, Mr. Whitney has been the
President and a member of the Board of Directors of Wealth Intelligence
Network, Inc. Wealth Intelligence Network is in the business of
education and training. Since June 1999, Mr. Whitney has been the
President and a member of the Board of Directors of Whitney Internet
Services, Inc. Whitney Internet Services is in the business of
providing Internet services, education and training. Since June 1999,
Mr. Whitney has been the President and a member of the Board of
Directors of Whitney Consulting Services, Inc. Whitney Consulting is
in the business of providing telemarketing services. Since June 1999,
Mr. Whitney has been the President and a member of the Board of
Directors of Russ Whitney's Wealth Education Centers, Inc. Russ
Whitney's Wealth Education Centers are in the business of education and
training. Since June 1999, Mr. Whitney has been the President and a
member of the Board of Directors of Russ Whitney's Wealth Education
Centers of Jackson, Mississippi, Inc. Since March 1991, Mr. Whitney
has been Chief Executive Officer of Whitney Leadership Group, Inc., a
Florida corporation located in Cape Coral, Florida engaged in the
business of publishing and marketing. Since February 1995, Mr. Whitney
has been President of RAW, Inc., a Florida corporation engaged in the
business of buying, selling and investing in real estate which is
located in Cape Coral, Florida. Since August 1993, Mr. Whitney has
been Vice President of Precision Software Services, Inc., a Florida
corporation located in Cape Coral, Florida, which is engaged in the
business of developing and licensing software primarily for the real
estate and small business industries. Since March 1992, Mr. Whitney
has been President of MRS Equity Corp., a Florida corporation located
in Cape Coral, Florida, which is engaged in the business of selling
mortgage related products and services. Since November 1996, Mr.
Whitney has been affiliated with Teamwork Communications, Inc., a
company that provides sales and marketing services located in Cape
Coral, Florida.
Richard W. Brevoort - President and a member of the Board of Directors.
Since August 1998, Mr. Brevoort has been a member of the Board of
Directors of the Company and spends substantially full-time on Company
matters. Mr. Brevoort became the President of Whitney Education Group,
Inc. (formerly, Win Systems, Inc.) in February 1997, and President of
the Company in August 1998. From January 1984 to February 1991, Mr.
Brevoort was the President of the Hudson Agency, a marketing company
based in New York City. From September 1970 to October 1975, Mr.
Brevoort was a Deputy Finance Administrator and Commissioner of Tax
Collection. From June 1969 to August 1970, Mr. Brevoort was an
Assistant Administrator of Economic Development. From August 1968 to
March 1969, Mr. Brevoort was a Deputy Commissioner of Commerce. From
March 1966 to November 1966, Mr. Brevoort was a Director of Weights and
Measures for the City of New York. From November 1975 to December
1983, Mr. Brevoort was the Chief of Staff for the Democratic Party in
the New York State Senate. From 1982 to 1987, Mr. Brevoort was a member
of the Board of Directors of the New York City Convention Center. From
1996 to 1997, Mr. Brevoort was an Instructional Supervisor of the
Trace Program at Bronx Community College. From 1968 to 1969, Mr.
Brevoort was a member of an Advisory Committee for the New York City
Superintendent of Schools. Mr. Brevoort has been included in the 1996
Who's Who in America and 1996 Who's Who in the World.
Ronald S. Simon - Secretary/Treasurer, Chief Financial Officer, and a
member of the Board of Directors.
Since August 1998, Mr. Simon has been the Secretary/Treasurer,
Chief Financial Officer, and a member of the Board of Directors of the
Company and spends such time that is necessary on Company matters.
Since August 1998, Mr. Simon has been the Secretary/Treasurer and a
member of the Board of Directors of Whitney Education Group, Inc.
(formerly, Win Systems, Inc.). Whitney Education Group is in the
business of education and training. Since August 1998, Mr. Simon has
been the Secretary/Treasurer and a member of the Board of Directors of
Wealth Intelligence Network, Inc. Wealth Intelligence Network is in the
business of education and training. Since June 1999, Mr. Simon has
been the Secretary/Treasurer and a member of the Board of Directors of
Whitney Consulting Group, Inc. Whitney Consulting Group is in the
business of telemarketing. From October 1995 to January 1999, Mr. Simon
was the President of On Line Services USA, Inc., an Internet service
provider and web site design company. Since 1971, Mr. Simon has been
Certified Public Accountant in the states of Florida and Illinois.
Since 1993, Mr. Simon has had his real estate license in the state of
Florida. Since 1996, Mr. Simon has had his insurance license in the
state of Florida. Mr. Simon graduated from the University of Illinois
with Bachelor of Science degree in accounting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors, and persons who own more than 10% of the
registered class of the Company's equity securities to file reports of
ownership with the Securities and Exchange Commission. Officers, directors
and greater than 10% stockholders are required by the regulations of the
Securities and Exchange Commission to furnish the Company with copies of
all Section 16(a)forms they file.
Based solely on a review of the Forms 3 and 4 furnished to the
Company, the Company believes that all filing requirements applicable to
its officers, directors and greater than 10% beneficial owners were complied
with.
Form 5 is not required to be filed if there are not previously
unreported transactions or holdings to report. Nevertheless, the Company
is required to disclose the name of directors, executive officers and 10%
shareholders who did not file a Form 5, unless the Company has obtained a
written statement that no filing is due. The Company has been advised by
those required to file Form 5 that no filings were due.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation.
The following table sets forth the compensation paid by the
Company during the last three years, for each officer and director of
the Company. This information includes the dollar value of base
salaries, bonus awards and number of stock options granted, and certain
other compensation, if any.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted Securities
Name and Annual Stock Underlying LTIP All
Other
Principal Compen- Options/ Compen-
Position Year Salary Bonus sation Award(s) SARs Payouts sation
($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $67,344 0 0 0 0 0 $67,344
Russell 1998 $52,000 0 0 0 0 0 $52,000
Whitney 1997 $39,365 0 0 0 0 0 $39,365
CEO 1996 -0- 0 0 0 0 0 -0-
1999 $44,093 0 0 0 0 0 $44,093
Richard 1998 $30,281 0 0 0 0 0 $30,281
Brevoort 1997 $32,224 0 0 0 0 0 $32,224
President 1996 $19,480 0 0 0 0 0 $19,480
1999 $42,770 0 0 0 0 0 $42,770
Ronald 1998 $ 5,927 0 0 0 0 0 $ 5,927
Simon 1997 -0- 0 0 0 0 0 -0-
CFO 1996 -0- 0 0 0 0 0 -0-
</TABLE>
There are no retirement, pension, or profit sharing plans for the
benefit of the Company's officers and directors. The Company has
adopted a Non-Qualified Incentive Stock Option Plan and the Company
supplies health insurance to its officers, directors and employees.
The following grants of stock options, whether or not in tandem
with stock appreciation rights ('SARs') and freestanding SARs have been
made to officers and/or directors:
<TABLE>
<CAPTION>
Number of
Securities
Number of Underlying
Securities Options/SARs
Underlying Granted Exercise Number of
Options During Last or Base Options Expiration
Name SARs Granted 12 Months[1] Price ($/Sh) Exercised Date
<S> <C> <C> <C> <C> <C>
Richard Brevoort 100,000 75,000 $1.875 -0- 09/01/2008
Ronald Simon 150,000 125,000 $1.875 -0- 09/01/2008
</TABLE>
[1] 75,000 options were granted to Mr. Brevoort and 125,000 options were
granted to Mr. Simon, all at an exercise price of $1.875, on August 31, 1999.
Mr. Brevoort and Mr. Simon were previously granted 25,000 options each at an
exercise price of $2.00 on September 1, 1998. At the date of this Report no
options have been exercised.
Long-Term Incentive Plan Awards.
The Company does not have any long-term incentive plans that
provide compensation intended to serve as incentive for performance.
Compensation of Directors.
Directors do not receive any compensation for serving as members
of the Board of Directors. The Board has not implemented a plan to
award options to any Directors. There are no contractual arrangements
with any member of the Board of Directors
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the Common Stock ownership of each
person known by the Company to be the beneficial owner of five percent
or more of the Company's Common Stock, each director individually and
all officers and directors of the Company as a group. Each person has
sole voting and investment power with respect to the shares of Common
Stock shown, unless otherwise noted, and all ownership is of record and
beneficial.
Name and Number of Percent of
address of owner Shares Position Class
Russell A. Whitney 6,480,000 Chief Executive Officer 86.40%
4818 Coronado Parkway and Chairman of the
Cape Coral, Florida Board of Directors
33904
Richard W. Brevoort 146,500[1] President 1.95%
4500 S.E. Fifth Place Director
#206
Cape Coral, Florida
33904
Ronald S. Simon 34,000 Secretary/Treasurer 0.45%
1402 Beechwood Trail Chief Financial Officer
Fort Myers, Florida Director
33919
All officers and 6,660,500 88.52%
directors as a
group (3 persons)
[1] Does not include warrant to purchase up to 68,000 shares of common
stock at an exercise price of $4.00 per share which warrant expires
on August 21, 2003.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 18, 1998, the Company acquired all (100 shares) of the
issued and outstanding shares of common stock of Win Systems, Inc. in
exchange for 6,750,000 shares, 187,500 Class A Warrants, and 340,000
Class B Warrants. 97.5% of the shares of Win Systems, Inc. were owned
by Russell Whitney, the current Chief Executive Officer and Chairman of
the Board of Directors of the Company and the remaining shares were
owned by other key personnnel.
The Company has leased office space from Russ Whitney, its Chief
Executive Officer and a member of the Board of Directors pursuant to
the terms of a three year lease which commenced on September 1, 1999
and terminates on October 31, 2002 with a monthly rental payment of
$5,805.34. Russ Whitney is the Chief Executive Officer of the Company
and Chairman of its Board of Directors. The terms of the lease are no
less favorable as can be obtained from independent third parties.
The Company is indebted to Russ Whitney, the Company's Chief
Executive Officer and Chairman of the Board of Directors in the sum of
$19,979 for cash advances.
The Company has advanced to Precision Software Services, Inc. and
MRS Equity Corp., the amount of $528 and $8, respectively. The
aforementioned corporations are owned and controlled by Russ Whitney.
In addition, the Company has receivables from Whitney Leadership
Group, Inc. in the amount of $94,417 for sales of products and from
Teamwork Communication, Inc. in the amount of $20,000 in the form of a
short-term loan. The aforementioned corporations are controlled by
Russ Whitney.
MRS Equity Corp. provides products and services for the Company
and the Company provides MRS Equity Corp. with payroll services.
MRS Equity is a wholly owned subsidiary corporation of Equity Corp.
Holdings which is owned and controlled by Russell Whitney, the
Company's Chief Executive Officer and Chairman of the Board of
Directors.
Precision Software Services, Inc. develops and licenses software
to the Company. Russell Whitney, the Company's Chief Executive Officer
and Chairman of the Board of Directors owns controlling interest in
Precision Software Services, Inc.
The Company provides payroll services to Whitney Leadership Group,
Inc. and in the past, Whitney Leadership Group, Inc. has lent money to
the Company. Russell Whitney, the Company's Chief Executive Officer
and Chairman of the Board of Directors President and Chief Operating
Officer of Whitney Leadership Group.
In January 1997, RAW, Inc. a corporation owned and controlled by
Russell Whitney, the Company's Chief Executive Officer and Chairman of
the Board of Directors, sold to the Company a portion of its inventory
consisting of vacant land.
The amount of purchased products (software books, tapes, and
supplies) from affiliates is as follows:
MRS Equity Corp. $148,350
Precision Software Services, Inc. $180,123
The payroll service amounts are as follows:
MRS Equity Corp. $ 51,747
Precision Software Services, Inc. $ 22,367
Whitney Leadership Group, Inc. $ 46,747
The terms of all of the transactions between related parties were
no less favorable than could be obtained from independent third
parties.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
Exhibit No. Description
3.1* Articles of Incorporation.
3.2* Bylaws.
3.3* Amended Articles of Incorporation
3.4* Amended Articles of Incorporation
4.1* Specimen Stock Certificate.
27.1* Financial Data Schedule
99.1* Class A Warrant Agreement
99.2* Class B Warrant Agreement
99.3* Non-Qualified Incentive Stock Option Plan
99.4* Office Lease
* Incorporated by reference to exhibit filed with Form 10SB12G
(Sec File No. 000-27403).
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WHITNEY INFORMATION NETWORK, INC.
Dated: March 29, 2000 By:/s/Richard W. Brevoort
-----------------
Richard W. Brevoort
President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ----------- ----- -----
<S> <C> <C>
/s/Russell A. Whitney Chief Executive Officer March 29, 2000
- ---------------------- Chairman
Russell A. Whitney
/s/Richard W. Brevoort President March 29, 2000
- ---------------------- Director
Richard W. Brevoort
/s/Richard S. Simon Secretary/Treasuer March 29, 2000
- -------------------- Chief Financial Officer
Richard S. Simon Director
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<S> <C>
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<PERIOD-TYPE> 12-MOS
<CASH> 1,274,708
<SECURITIES> 0
<RECEIVABLES> 1,395,559
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,380,362
<PP&E> 295,193
<DEPRECIATION> 16,653
<TOTAL-ASSETS> 12,819,972
<CURRENT-LIABILITIES> 10,490,538
<BONDS> 0
<COMMON> 67,102
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,819,972
<SALES> 26,775,589
<TOTAL-REVENUES> 26,775,589
<CGS> 11,529,312
<TOTAL-COSTS> 11,529,312
<OTHER-EXPENSES> 13,012,555
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,233,722
<INCOME-TAX> 841,952
<INCOME-CONTINUING> 1,391,770
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,391,772
<EPS-BASIC> (.18)
<EPS-DILUTED> (.18)
</TABLE>
