WHITNEY INFORMATION NETWORK INC, 10QSB, 2000-11-15

WHITNEY INFORMATION NETWORK INC
10QSB, 2000-11-15
BUSINESS SERVICES, NEC

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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 September 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

Registrants 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 registrants Common Stock, no par value

per share, at September 30, 2000 was 7,528,047 shares.

WHITNEY INFORMATION NETWORK, INC.

FORM 10QSB

AS OF AND FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2000 AND 1999

TABLE OF CONTENTS

PART I FINANCIAL STATEMENTS

WHITNEY INFORMATION NETWORK, INC.

Consolidated Financial Statements

As of and for the Nine Months Ended September 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 8-23

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS 24

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS 24-29

ITEM 3. CHANGES IN SECURITIES AND USE OF

PROCEEDS 30

ITEM 4. DEFAULTS UPON SENIOR SECURITIES 30

ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF

SECURITY HOLDERS 30

ITEM 6. OTHER INFORMATION 30

ITEM 7. EXHIBITS AND REPORTS ON FORM 8-K 30

Summary Financial Information 31

SIGNATURE PAGE 32

WHITNEY INFORMATION NETWORK, INC.

Consolidated Balance Sheet

As of September 30, 2000 and 1999

ASSETS

September 30

2000 1999

----- -----

CURRENT ASSETS:

Cash $ 3,824,846 $ 1,205,523

Accounts Receivable 3,639,499 1,436,997

Prepaid Assets 2,577,149 1,076,705

Due From Affiliates 150,831 99,211

Deferred Expense 18,263,437 8,127,464

Other Current Assets 904,549 111,276

------- ------

Total Current Assets 29,360,311 12,057,176

PROPERTY AND EQUIPMENT, net 594,044 181,481

OTHER ASSETS:

Other Assets 48,683 48,683

------ ------

TOTAL ASSETS $30,003,038 $12,287,340

========== ==========

The accompanying notes are an integral part of the

consolidated financial statements

WHITNEY INFORMATION NETWORK, INC.

Consolidated Balance Sheet

As of September 30, 2000 and 1999

LIABILITIES AND SHAREHOLDERS EQUITY

September 30

2000 1999

---- ----

LIABILITIES

CURRENT LIABILITIES:

Accounts Payable $ 944,294 $ 874,294

Income Taxes Payable 1,946,164 528,538

Deferred Revenue 22,659,677 8,801,815

Other Accrued Liabilities 1,036,431 172,395

---------- ----------

TOTAL CURRENT LIABILITIES 26,586,566 10,377,042

---------- ----------

OTHER LIABILITIES:

Deferred Income Taxes - 267,000

------- -------

TOTAL OTHER LIABILITIES - 267,000

------- -------

TOTAL LIABILITIES $ 26,586,566 $ 10,644,042

---------- ----------

SHAREHOLDERS EQUITY

Common Shares, no par value,

25,000,000 shares authorized,

7,528,047 shares at 9/30/00 and

7,513,859 shares at 9/30/99

issued and outstanding $ 67,102 $ 67,102

Paid In Capital - 900

Retained Earnings 3,349,370 1,575,296

--------- ---------

TOTAL SHAREHOLDERS EQUITY 3,416,472 1,643,298

--------- ---------

TOTAL LIABILITIES AND

SHAREHOLDERS EQUITY $ 30,003,038 $ 12,287,340

========== ==========

The accompanying notes are an integral part of the

consolidated financial statements

WHITNEY INFORMATION NETWORK, INC.

Consolidated Statement of Operations and Retained Earnings

As of and For the Nine Months Ended September 30, 2000 and 1999

September 30

2000 1999

---- ----

SALES $ 28,989,982 $16,715,387

COST OF SALES 9,436,242 7,082,955

--------- ---------

GROSS PROFIT 19,553,740 9,632,432

---------- ---------

EXPENSES

Advertising and Sales Expense 9,510,267 4,780,332

General and Administrative

Expense 7,871,574 3,395,366

--------- ---------

Total Expenses 17,381,841 8,175,698

---------- ---------

Income Before Taxes 2,171,899 1,456,734

Less: Income Taxes(see note) 881,461 548,600

--------- ---------

NET INCOME $ 1,290,438 $ 908,134

========= =======

Retained Earnings,

Beginning of Period 2,058,932 667,162

--------- -------

Retained Earnings,

End of Period $ 3,349,370 $ 1,575,296

========= =========

Basic and Fully Diluted

Earnings Per Share * $ 0.17 $ 0.12

==== ====

Weighted average number of

Shares outstanding during

the period 7,520,953 7,519,945

========= =========

* Prior periods have been restated to reflect a merger as

if it had taken place at the beginning of the period.

The accompanying notes are an integral part of the

consolidated financial statements.

WHITNEY INFORMATION NETWORK, INC.

Consolidated Statement of Cash Flows

As of and For the Nine Months Ended September 30, 2000 and 1999

September

---------

2000 1999

---- ----

CASH FLOWS FROM OPERATING

ACTIVITIES

Net Earnings From Operations $ 1,290,438 $ 908,134

Add Back Depreciation and

Amortization 154,000 18,287

--------- -------

$ 1,444,438 $ 926,421

--------- -------

Changes in Operating Assets

and Liabilities:

(Increase) in Accounts Receivable (2,243,940) (456,734)

(Increase) Decrease in Notes

Receivable (56,849) 4,194

(Increase) in Prepaid and

Other Assets (1,908,042) (935,257)

(Increase) in Other Receivables (735,630)

(Increase) in Deferred Expense (9,398,408) (4,028,822)

Increase (Decrease) in Accounts

Payable 347,830 309,586

Increase in Deferred Revenue 13,348,103 4,843,571

Increase in Income Taxes Payable 1,901,664 380,538

Increase (Decrease) in Other

Liabilities (492,641) 109,447

Increase in Accrued Instructional

Programs Expense 788,571

--------- ---------

Net Cash Flow From Operations $ 2,995,096 $1,152,944

--------- ---------

The accompanying notes are an integral part of the

consolidated financial statements

WHITNEY INFORMATION NETWORK, INC.

Consolidated Statement of Cash Flows (continued)

As of and For the Nine Months Ended September 30, 2000 and 1999

September

---------

2000 1999

---- ----

CASH USED IN INVESTING ACTIVITIES

Purchase of Property and

Equipment $ (469,505) $ (198,134)

Acquisition of Contract Rights 317 (50,317)

Loans Made to Affiliates 25,130 (77,407)

------ ------Net Cash Used in Investing

Activities $ (444,058) $ (325,858)

------- -------

CASH USED IN FINANCING ACTIVITIES

Issuance of Common Stock - 64,500

Adjustment to Paid In Capital (900) -

Loans From Affiliates - 18,111

--- ------

Net Cash Used in Financing

Activities (900) 82,611

--- ------

Increase in Cash $2,550,138 $ 909,697

========= =======

Cash at Beginning of Period 1,274,708 370,571

--------- -------

Cash at End of Period $3,824,846 $1,280,268

========= =========

The accompanying notes are an integral part of the

consolidated financial statements

WHITNEY INFORMATION NETWORK, INC.

Consolidated Statements of Changes in Shareholders Equity

As of and For the Nine Months Ended September 30, 2000 and 1999

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 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

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 31, 1999 7,528,047 $67,102 $ 900 $2,058,932 $2,062,434

Adjustment (900)

Net Income for the

Nine Months Ended

September 30, 2000 1,290,438 1,290,438

--- --------- ---------

Balance

September 30, 2000 7,528,047 $67,102 $ 0 $3,349,370 $3,352,872

========= ====== = ========= =========

The accompanying notes are an integral part of the

consolidated financial statements

WHITNEY INFORMATION NETWORK, INC.

Comparative Consolidated Statement of Operations

And Retained Earnings For the Three Months and

Nine Months Ended September 30, 2000 and 1999

Three Months Ended Nine Months Ended

September 30 September 30

2000 1999 2000 1999

Sales $11,571,960 $6,429,067 $28,989,982 $16,715,387

Cost of Sales 2,411,697 2,742,865 9,436,242 7,082,955

--------- --------- --------- ---------

Gross Profit 9,160,263 3,686,202 19,553,740 9,632,432

--------- --------- ---------- ---------

Expenses

Advertising and

Sales Expense 3,644,096 1,806,134 9,510,267 4,780,332

General and

Administrative

Expense 4,801,660 1,393,324 7,871,574 3,395,366

--------- --------- --------- ---------

Total Expenses 8,445,756 3,199,458 17,381,841 8,175,698

--------- --------- ---------- ---------

Income Before

Taxes $ 714,507 $ 486,744 $ 2,171,899 $1,456,734

Income Taxes

(see note) 267,939 204,719 881,461 548,600

------- ------- ------- -------

NET INCOME $ 446,568 $ 282,025 $ 1,290,438 $ 908,134

Retained Earnings,

Beginning

Of period $2,902,802 1,293,271 2,058,932 667,162

--------- --------- --------- -------

Retained

Earnings,

End of period $3,349,370 $1,575,296 $ 3,349,370 $1,575,296

========= ========= ========= =========

Basic and

Fully Diluted

Earnings

Per Share $ 0.06 $ 0.04 $ 0.17 $ 0.12

==== ==== ==== ====

Weighted average

Number of shares

Outstanding

During the

Period 7,528,047 7,526,025 7,520,953 7,519,945

========= ========= ========= =========

The accompanying notes are an integral part of the

consolidated financial statement

WHITNEY INFORMATION NETWORK, INC.

(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED

SEPTEMBER 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 Instructional Programs 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 instructional programs

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 provincial 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.

WHITNEY INFORMATION NETWORK, INC.

(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2000 AND 1999

HISTORY OF THE CORPORATION (continued)

Whitney Internet Services, Inc. incorporated in Wyoming on June 8, 1999, is

located in Cape Coral, Florida, and is an operating subsidiary, marketing

internet instructional programs 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

instructional programs, which represents an expansion from the real estate

investment instructional programs 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 instructional programs 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 Whitneys Wealth Education

Center of Jackson, MS, Inc. incorporated in Wyoming on June 8, 1999 and a school

was opened in December, 1999. Russ Whitneys Wealth Education Center of Atlanta,

GA, Inc. incorporated in Wyoming on July 22, 1999 and

a school will be opened in June, 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 instructional programs 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

providing telemarketing services to Whitney Education Group, Inc. and other

subsidiaries of the Company.

WHITNEY INFORMATION NETWORK, INC.

(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED

SEPTEMBER 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 expense 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 instructional programs expense, accounts payable,

accrued expense and deferred revenue. The carrying amounts of such financial

instruments as reflected in the balance sheet approximate the estimated fair

value of the accounts as of September 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 Whitneys 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.

WHITNEY INFORMATION NETWORK, INC.

(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2000 AND 1999

REVENUE RECOGNITION AND DEFERRED REVENUE

Revenue from product sales is recognized at the time the sale is made. Revenue

from instructional programs is recorded (1) when the non refundable deposit is

received for the instructional programs and the instructional programs have

taken place; (2) when it is reasonably certain that the balance of the option to

purchase additional instructional programs will be exercised and paid and the

instructional programs have taken place and (3) revenues are deferred when the

instructional programs proceeds

are received in full in the current period and the instructional programs take

place in a subsequent period. See liability for Deferred Revenues on the balance

sheet in the amount of $22,659,677 at September 30, 2000 and $8,801,815 at

September 30, 1999.

DEFERRED EXPENSE

When a student signs up to attend future instructional programs with the

Company, the tuition that was collected or recorded

as a receivable is deferred. The expenses directly related to

the deferred tuition are also deferred. The deferred expense associated with

future instructional programs are shown on the balance sheet as Deferred Expense

in the amount of $18,263,437 at September 30, 2000 and $8,127,464 at September

30, 1999.

Components of Deferred September 30

Expense 2000 1999

---- ----

Advertising Expense $ 9,727,890 $ 4,338,347

Instructors and Trainers

Compensation 3,167,558 1,361,326

Support Services 1,805,222 775,611

Travel and Facility Expense 2,581,664 1,109,733

Administrative Expense 981,103 542,447

--------- ---------

Total Deferred Expense $18,263,437 $ 8,127,464

========== =========

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

WHITNEY INFORMATION NETWORK, INC.

(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED

SEPTEMBER 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 instructional programs. The Company believes the

allowance for doubtful accounts is sufficient to cover any uncollectible amounts

as of September 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.

WHITNEY INFORMATION NETWORK, INC.

(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED

SEPTEMBER 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

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 September 30, 2000 none

of the options 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.

WHITNEY INFORMATION NETWORK, INC.

(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED

SEPTEMBER 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 $55,383 and $35,622

for nine months ended September 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.

As of September 30, 2000 and September 30, 1999 the related party

receivables on the balance sheet were as follows:

Sept 30, 2000 Sept 30, 1999

------------- -------------

Short-Term Receivables:

Due from Whitney Leadership

Group $ 150,819 $ 98,269

Due from MRS Equity Corp. 13,234 888

Due from RAW, Inc. 2,438 54

Due from PSS, Inc. 8,015 -

------- ------

Total $ 174,506 $ 99,211

======= ======

Those items above that are reasonably expected to be collected within one year

are shown as short-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 $58,510 for

the nine months ended Sept. 30, 2000 and $78,844 for the nine months ended Sept.

30, 1999. MRS Equity Corp. provided WHITNEY INFORMATION NETWORK, INC. with

$322,400 and $214,800 for products for the nine months ended September 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.

WHITNEY INFORMATION NETWORK, INC.

(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED

SEPTEMBER 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 nine months ended September 30, 2000 and

1999 PSS provided WHITNEY INFORMATION NETWORK, INC. $199,775 and $247,623 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 $42,022 and $31,608 for the nine months ended September 30, 2000

and 1999, respectively.

WHITNEY INFORMATION NETWORK, INC. provided payroll services to Whitney

Leadership Group, Inc. in the amount of $58,570 for the nine months ended

September 30, 2000 and $54,948 for the nine months ended September 30, 1999. 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. WHITNEY

INFORMATION NETWORK, INC. provides payroll services to RAW, Inc. in the amount

of $4,024 for the nine months ended September 30, 2000.

In 1998, the Companys outside accountant became the Chief Financial Officer of

the Company and a shareholder of the Company.

WHITNEY INFORMATION NETWORK, INC.

(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2000 AND 1999

SUBSEQUENT EVENTS: Office Building Purchased

WHITNEY INFORMATION NETWORK, INC. entered into a purchase agreement on August

11, 2000 to purchase real property in Cape Coral, Florida known as the SunBank

Building at 1612 E. Cape Coral Parkway at a purchase price of $2,200,000. The

closing of this commercial office building took place on November 9, 2000. A

deposit of $500,000 was made on August 11, 2000 and an additional down payment

of $500,000 was paid at closing.

The Seller took back a $1,200,000 purchase money balloon payment mortgage due

November 9, 2004, interest payable monthly at an initial rate of 9% per annum

due on the first of each month. The interest rate of 9% is adjustable on a

semi-annual basis by the amount of change, if any, in the prime rate charged by

the Chase Manhattan Bank, New York, using the rate in effect each June 1st

and each December 1st as the basis for the change. During the first three years

of this mortgage, the interest rate shall not exceed 10% or fall below 8%.

During the fourth year the interest shall not be less than 8.5%. Principal

payments may be paid in whole or in part at any time without penalty.

The SunBank Building is approximately 30,000 square feet, 12,000 square feet of

which will be used by the Company as executive and sales offices.

The balance of the 18,000 square feet is leased to tenants under noncancellable

operating leases or unallocated for use at this time.

The second floor of the main building consisting of 11,000 square feet is leased

for $88,000 annually for a term of two years ending October 31, 2002 and for an

additional three years thereafter at 5% annual rental increases.

An additional 1,635 square feet is leased to another tenant for $20,040 annually

through September 30, 2001, plus annual CAM payments of $7,620. Thereafter, the

tenant has an option to extend the lease for five years at annual rental

increases of 5%. The mortgage interest payment will be $9,000 monthly.

The annual rental income under noncancellable leases for future years is as

follows:

2000 $ 11,704

2001 108,040

2002 108,938

2003 114,394

2004 120,116

-------

$463,192

WHITNEY INFORMATION NETWORK, INC.

(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED

SEPTEMBER 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 taxable income

before income taxes is as follows:

Federal Income Tax expense at the statutory rate $ 805,445

State Tax, net of Federal Tax benefit 76,016

-------

Income Tax expense per books $ 881,461

Deferred Income Tax 0

-------

Income Tax currently payable $ 881,461

=======

As of 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 $-0- at September 30, 2000

and $267,000 at September 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

nine months ended September 30, 2000 and 1999. The interest expense was $0 for

both the nine months ended September 30, 2000 and 1999. (See Related Party

Transactions).

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.

WHITNEY INFORMATION NETWORK, INC.

(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED

SEPTEMBER 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 Facility 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:

$ 81,043

158,820

120,020

39,675

------

Total $ 399,558

=======

The Company is currently having a disagreement with the Securities and Exchange

Commission (SEC) over an accounting method issue. The Company is currently

treating certain direct response advertising and related instructional programs

expenses 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 completely recognized as current revenue in subsequent

periods over the subsequent eighteen months and on average over six to nine

months, the related expenses giving rise to such deferred revenues are then

currently expensed.

WHITNEY INFORMATION NETWORK, INC.

(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2000 AND 1999

COMMITMENTS AND CONTINGENCIES (continued)

The SECs position is that all costs incurred to produce the deferred revenues,

with the exception of instructors fees, should be expensed in the current period

and not matched against the revenues that were created by such expenses. The

Company believes

that the SECs position is incorrect and is a departure from Generally Accepted

Accounting Principles.

The Companys financial statements are presented and have consistently been

presented based on a percentage of completion cost accounting method. The

Company believes that this current, more sophisticated accounting method

presents more fairly the results of its operations because this more detailed

method provides for the proper matching of income with related expenses.

Therefore, based on the GAAP principle of materiality, it is more important to

follow the matching principle than to adhere to a strict interpretation of SOP

93-7, which under the SECs interpretation could eliminate all deferral of direct

response advertising. Management believes that this would result in an unfair

presentation of the financial statements.

Upon full consideration of the issue, it is the Companys position that GAAP

requires a proper matching of income and expense. This could only be

accomplished by using a sophisticated percentage of completion cost accounting

method which requires deferred expense accounting, despite SEC suggesting that

it is not allowed under SOP 93-7.

Since this issue is overwhelmingly material, the financial statements could only

be presented fairly with the proper matching of income and expense method.

The Companys business is unique. SOP 93-7 does not take into consideration such

a unique marketing operation that is in fact the Company experience. SOP 93-7 is

non applicable as the Company does not rely on the use of estimates in matching

its advertising expenses to specific instructional programs income. Each dollar

of advertising is specifically identified as incurred and matched exactly to

each instructional program for which it was intended. This is a more

sophisticated method of accounting for advertising and related costs than is

assumed in SOP 93-7.

To further support the Companys position, two accounting models have been

developed by the Company which compare the present accounting method of the

Company and the SEC suggested method. Both models report a summary of the

Companys operations for the three years 1997 to 1999; and for the year 2000

based on actual results for the nine months ended September 30, 2000, combined

with a financial projection of the last quarter of 2000; and a projection of the

Companys business from 2001 through 2006.

WHITNEY INFORMATION NETWORK, INC.

(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2000 AND 1999

COMMITMENTS AND CONTINGENCIES (continued)

These 10-year models report the results of operations using both the current

Company method and the SEC suggested method. Using the Company method, the model

results in a series of profitable years, substantial annual income tax

provisions, and a financially healthy company based on historic steady sales

growth and projected steady future sales growth.

Using the SEC method, despite steady sales growth over a nine year period, four

years of which are actual, there are losses for all of the first nine years and

no income taxes. Assuming a major hypothetical downturn in the 10th year, based

on a huge downturn in sales, such as might be experienced in a winding up of the

Companys business, or if the Company discontinued current operations or went

into another line of business, or hypothetically went out of business, the SEC

method model shows a large profit in that 10th year, totally distorting the

results of operations.

Based on the SEC method model, it appears that good years for sales growth and

cash accumulation result in losses and no taxes, and a disaster year in sales

results in a large profit.

Based on the Company method, the model reflects a normal business cycle without

distortion of the results of operations. The Company intends to present these

models with supporting statements to the SEC as soon as possible and believes

that the SEC will agree with the Company upon proper consideration and review of

the issue.

However, if the SEC were to prevail, the Company would have to restate its

financial statements to reflect a change in accounting method, as follows:

Potentially

Restatable

Stated Net(Loss) Which

Net Income Would Be Necessary

Per Companys Per SECs

Position Position

-------- --------

Year Ended December 31, 1998 $ 768,436 $ ( 2,800,000)

Year Ended December 31, 1999 $ 1,391,770 $ ( 2,600,000)

Nine Months Ended September 30, 2000 $ 1,290,438 $ ( 4,100,000)

WHITNEY INFORMATION NETWORK, INC.

(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2000 AND 1999

COMMITMENTS AND CONTINGENCIES (continued)

The Company is confident that the present deferred revenues and expenses and

percentage of completion cost accounting method reflects the Companys financial

position more accurately than does that of the SECs suggested SOP 93-7 method.

As of September 30, 2000, the Company had cash in excess of $3,800,000; no long

or short-term borrowings; no unpaid bills; no unpaid taxes; and approximately

$3,800,000 in working capital. A company generating approximately $10,000,000 in

losses over four years, 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 liquidating assets or

obtaining equity investors.

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 instructional

programs expenses against the related revenues which have been deferred until

the instructional programs 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 and guidelines, 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.

Management further believes that upon the proper presentation to the SEC 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.

WHITNEY INFORMATION NETWORK, INC.

(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED

SEPTEMBER 30, 2000 AND 1999

COMMITMENTS AND CONTINGENCIES (continued)

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.

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.

At that time the shares were valued at $2.50 for a total purchase price of

$50,000. Wealth Intelligence Network, Inc. publishes a monthly financial

newsletter and provides and promotes financial education and instructional

programs.

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).

WHITNEY INFORMATION NETWORK, INC.

(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE NINE MONTHS ENDED

SEPTEMBER 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 September 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 August 18, 1998.

Under the plan the options were 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 had initially reserved 1,200,000 shares for the plan. During the

quarter ended June 30, 2000, the Company authorized an 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. There were no changes during the quarter

ended September 30, 2000. The plan schedule is as follows:

At 3/31/00 At 6/30/00 At 9/30/00 Total

Initial Shares

Authorized for Plan 1,200,000 1,200,000

Additional Shares

Authorized 800,000 800,000 800,000

Conversion of Class B

Warrants to Options 340,000 340,000 340,000

Grants (881,650) (20,000) (20,000) (901,650)

Terminations 43,500 37,250 37,250 80,750

------ ------ ------ -------

Available for Future

Grants 361,850 1,157,250 1,157,250 1,519,100

======= ========= ========= =========

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 nine months ended September 30, 2000 was

$28,989,982, an increase of $12,274,595 or 73% compared to the same period in

1999. The combination of the increase in advanced instructional programs held

and the higher registrations contributed to the increase. Revenues for the three

months ended September 30, 2000 were $11,571,960 as compared to $6,429,067 for

the three months ended September 30, 1999, an increase of $5,142,893 or 80%.

Advertising and Sales Expense: Advertising and sales expense,

of which Advertising represents over 60% of the expenses for the nine months

ended September 30, 2000, was $9,510,267, an increase of $4,729,935 or 98%

compared to the same period in 1999. For the three months ended September 30,

2000, advertising and sales expenses were $3,664,096 as compared with $1,806,134

for the three months ended September 30, 1999, an increase of 103%. The increase

in Advertising and Sales expense is due to higher volume resulting from

increased sales and increased advertising expenses related to Whitney Internet

Services, Inc.s new product and services and the continued growth in the real

estate division.

General and Administrative expenses increased to $7,871,574, an increase of

$4,476,208, or 100% over the comparable period in 1999. This increase is due to

the hiring of new management personnel to support the Companys growth and

increased personnel in the internet division. The Company believes that its

current management and employee base is sufficient to support its current

operations and near term projected future growth.

Cost of Sales increased proportionately in comparison with the increase in sales

for the nine months ended September 30, 2000 to $9,436,242, an increase of

$2,353,287 or 33% over the prior comparable period in 1999. Cost of sales for

the three months ended September 30, 1999 decreased by $331,167, a decrease of

12%. This decrease was primarily due to an increase in efficiency in operations

and higher gross margins on product and instructional program costs. The

telemarketing division and the financial division both contributed heavily to

producing these efficiencies.

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (continued)

Total Consolidated net income was $1,290,438 for the nine months ended September

30, 2000 and $446,566 for the quarter ended September 30, 1999, primarily due to

increases in the real estate division.

The Internet division, although small as compared to the Company as a whole, had

a loss for the nine months of approximately $1,600,000 and $700,000 for the

quarter. This loss was caused primarily by ineffective marketing programs and

poor management. The cost per person of TV advertising for this division has

exceeded the Companys threshold of acceptability and has contributed greatly to

the loss. All TV advertising for this division has stopped as of November 1,

2000. The company has, in the 4th quarter of the year taken additional steps to

eliminate losses in this division. The Company is currently testing various

marketing programs to enhance the Internet division, which are designed to

produce sales at a cost in which the Company can realize its normal profit

margin. The real estate division profits have increased proportionately this

year and especially in the third quarter so there are no visible signs that

would contribute to any reduction the Companys upward growth trend.

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) for the

nine months ended September 30, 2000 and 1999 was $2,325,897 and $1,475,021,

respectively. For the three months ended September 30, 2000 and 1999, EBITDA was

$771,505 and $503,397 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.

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 from $1,274,708 to $3,824,846, an

increase of

$2,619,323 or 217% over the previous comparable period in 1999.

The Companys cash provided by operating activities was

$2,995,096 and $1,152,944 for the nine months ended September 30, 2000 and 1999,

respectively. In the third quarter 2000, cash flows from advanced instructional

programs were positively impacted by the increased collection efforts by the

sales associates accompanying the instructors at the instructional program

locations.

The Companys cash used in investing activities was $444,058

and $325,858 for the nine months ended September 30, 2000 and 1999,

respectively. The Companys cash used in investing activities for the nine months

ended September 30, 2000 and 1999 were primarily attributable to the purchase of

office property and equipment of $469,505 and $198,134, respectively, and a

$500,000 deposit in the third quarter for a new office building closed on

November 9, 2000. See Subsequent Events Note.