WHITNEY INFORMATION NETWORK INC
Filing Type: 10QSB/A
Description: Amended Quarterly Report
Filing Date: December 20, 2000
Period End: September 30, 1999
Primary Exchange: Over the Counter Includes OTC and OTCBB
Ticker: RUSS
Table of Contents
To jump to a section, double-click on the section name.
10QSB/A
2
2
3
4
5
6
7
9
11
12
14
15
17
10QSB/A
1
1
------------------------------------------------------------------------
------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q/A-1
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from:
------------------------------
Commission file number 0-27403
------------------------------
WHITNEY INFORMATION NETWORK, INC.
(Exact name of Registrant as specified in its charter.)
COLORADO 84-1475486
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4818 Coronado Parkway
Cape Coral, Florida 33904
(Address of principal executive offices, including zip code.)
(941) 542-8999
Registrant's telephone number, including area code.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of
1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES x NO
The number of shares outstanding of the Registrant's Common Stock, no
par value per share, at September 30, 1999 was 7,500,047 shares.
------------------------------------------------------------------------
------------------------------------------------------------------------
2
PART I
ITEM 1. FINANCIAL STATEMENTS.
WHITNEY INFORMATION NETWORK, INC.
Consolidated Financial Statements
For the Nine Months Ended September 30, 1999 and 1998
Index
Consolidated Balance Sheet 1
Consolidated Statement of Operations 2
Consolidated Statement of Cash Flows 3
Consolidated Statement of Changes in Shareholders'
Equity 4
Comparative Consolidated Statement of Operations 5
Notes to the Consolidated Financial Statements 6-12
3
WHITNEY INFORMATION NETWORK, INC.
Consolidated Balance Sheet
At September 30, 1999 and 1998
ASSETS
1999 1998
CURRENT ASSETS:
Cash $ 1,205,523 $ 465,010
Accounts Receivable $ 1,436,997 $ 1,067,572
Notes Receivable $ 6,364 $ 19,083
Prepaid Advertising, Taxes and Other $ 1,076,705 $ 262,523
Due From Affiliates $ 99,211 $ 11,210
Land for Resale $ 9,686 $ 12,336
Deferred Seminar Costs $ 1,260,990 $ 105,667
Miscellaneous Receivable and
Other Current Assets $ 95,226 $ 24,098
----------- -----------
Total Current Assets $ 5,190,702 $ 1,967,499
------------ -----------
PROPERTY AND EQUIPMENT
(net of depreciation of $16,653) $ 181,481 $ -
------------ -----------
OTHER ASSETS
Contract Rights
(net of amortization of $1,634) $ 48,683 $ -
------------ -----------
TOTAL ASSETS $ 5,420,866 $ 1,967,499
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts Payable $ 874,294 $ 363,273
Loans From Affiliates $ 89,755
Deferred Educational Revenues $ 8,801,815 $ 1,445,792
Other Accrued Liabilities $ 172,395 $ 29,750
------------ -----------
TOTAL CURRENT LIABILITIES $ 9,848,504 $ 1,928,539
------------ -----------
OTHER LIABILITIES
Loans from Shareholder $ 64,979
------------ -----------
TOTAL OTHER LIABILITIES $ $ 64,979
------------ -----------
TOTAL LIABILITIES $ 9,848,504 $ 1,993,518
------------ -----------
SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock (no par value stock, 7,500,047
shares issued and outstanding) $ 67,102 $ 2,602
Paid In Capital $ 900 $ 900
Retained Earnings (Deficit) $ (4,495,640) $ (29,521)
------------ -----------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) $ (4,427,638) $ (26,019)
------------ -----------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 5,420,866 $ 1,967,499
============ ===========
The accompanying notes are an integral part of the consolidated
financial statements.
1
4
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Operations
For the Nine Months Ended September 30, 1999 and 1998
1999 1998
Sales $ 16,715,387 $ 13,058,283
COST OF SALES $ 7,082,955 $ 4,626,462
------------ ------------
Gross Profit $ 9,632,432 $ 8,431,821
------------ ------------
EXPENSES
Advertising and Sales Expense $ 8,393,125 $ 5,584,704
General and Administrative Expense $ 3,395,366 $ 2,775,364
------------ ------------
$ 11,788,491 $ 8,360,068
------------ ------------
Income (Loss) Before Taxes $ (2,156,059) $ 71,753
Income Taxes (see note) $ $
------------ ------------
NET INCOME (LOSS) $ (2,156,059) $ 71,753
Retained Earnings (deficit),
beginning of year $ (2,339,581) $ (101,274)
------------ ------------
Retained Earnings (deficit),
end of year $ (4,495,640) $ (29,521)
============ ============
Basic and Fully Diluted
Earnings (loss) Per Share** $ -0.29 $ 0.06
============ ============
Weighted average number of shares outstanding
during the period 7,513,859 7,500,047
============ ============
** Prior periods have been restated to reflect
the merger as if it took place at the beginning
of the year
The accompanying notes are an integral part of the consolidated
financial statements.
2
5
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Cash Flows
For the Nine Months Ended September 30, 1999 and 1998
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) from operations $(2,156,059) $ 71,753
Add back Depreciation and Amortization $ 18,287
----------- -----------
$(2,137,772) $ 71,753
Changes in operating assets and liabilities
Increase in Accounts Receivable $ (456,734) $ (989,456)
Decrease in Notes Receivable $ 4,194 $ 6,454
(Increase) Decrease in
Prepaids and other assets $ (935,257) $ (82,835)
Increase in Other Receivables $ (74,745) $ (16,772)
Increase in Deferred Expenses $ (594,091) $ (39,699)
Increase in Accounts Payable $ 309,586 $ 279,166
Increase in Deferred Income $ 4,843,571 $ 1,206,793
Increase in Income Tax Payable $ 380,538 $ 240,000
Increase in Other Liabilities $ 109,447 $ 22,937
------------ -----------
Net cash flow from operations $ 1,078,199 $ 458,341
------------ -----------
CASH USED IN INVESTING ACTIVITIES
Purchase of Property and Equipment $ (198,134)
Acquisition of Contract Rights $ (50,317)
Real Estate Sold $ 67,625
Loans made to Affiliates $ (77,407)
----------- -----------
Net cash used in investing activities $ (325,858) $ 67,625
----------- -----------
CASH USED IN FINANCING ACTIVITIES
Issuance of Common Stock $ 64,500
Loans from affiliates $ 18,111 $ (90,992)
----------- -----------
Net cash used in financing activities $ 82,611 $ (90,992)
----------- -----------
Increase in cash $ 834,952 $ 434,974
Cash at beginning of year $ 370,571 $ 30,036
----------- -----------
Cash at end of year $ 1,205,523 $ 465,010
=========== ===========
The accompanying notes are an integral part of the consolidated
financial statements.
3
6
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Changes in Stockholders' Equity
For the Nine Months Ended September 30, 1999 and 1998
Common Stock Paid Retained Total
Number of In Earnings Shareholders'
Shares Value Capital (Deficit) Equity
Balance
December 31, 1996 976,200 $ 2,602 $ (2,500) $ 102
Net loss for 1997 $ (64) $ (64)
--------- -------- ----- ----------- ----------
Balance
December 31, 1997 976,200 $ 2,602 $ (2,564) $ 38
Reverse Split (226,153)
Merger with Win
Systems, Inc. 6,750,000 $ 900 $ (98,710) $ (97,810)
Net income (loss) for
the period ended
December 31, 1998 $(2,238,307) $(2,238,307)
--------- ------- ----- ----------- -----------
Balance
December 31, 1998 7,500,047 $ 2,602 $ 900 $(2,339,581) $(2,336,079)
Issuance of Shares
for Acquisitions 20,000 $50,000 $ 50,000
Issuance of Shares
for Services 8,000 $14,500 $ 14,500
Net income (loss) for the
Nine months ended
September 30, 1999 $(2,156,059) $(2,156,059)
--------- -------- ---- ----------- -----------
Balance
September 30, 1999 7,528,047 67,102 900 $(4,495,640) $(4,427,638)
========= ====== === =========== ============
The accompanying notes are an integral part of the consolidated
financial statements.
4
7
WHITNEY INFORMATION NETWORK, INC.
Comparative Consolidated Statement of Operations
For the Nine Months and Three Months Ended September 30, 1999 and 1998
Quarter Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Sales $ 6,429,067 $4,879,288 $16,715,387 $13,058,283
Cost of Sales $ 2,742,865 $1,760,533 $ 7,082,955 $ 4,626,462
----------- ---------- ----------- -----------
Gross Profit $ 3,686,202 $3,118,755 $ 9,632,432 $ 8,431,821
----------- ---------- ----------- -----------
Expenses
Advertising and
Sales Expense $ 2,830,101 $2,328,347 $ 8,393,125 $ 5,584,704
General and
Administrative
Expense $ 1,393,324 $1,097,771 $ 3,395,366 $ 2,775,364
----------- ---------- ----------- -----------
$ 4,223,425 $3,426,118 $11,788,491 $ 8,360,068
----------- ---------- ----------- -----------
Income (loss) Before
Taxes $ (537,223) $ (307,363) $(2,156,059) $ 71,753
Income Taxes
(see note) $ $ $ $
----------- ---------- ----------- -----------
NET INCOME (LOSS) $ (537,223) $ (307,363) $(2,156,059) $ 71,753
Retained Earnings,
beginning of period $(3,958,417) $ 277,842 $(2,339,581) $ (101,274)
----------- ---------- ----------- -----------
Retained Earnings (deficit)
end of period $(4,495,640) $ (29,521) $(4,495,640) $ (29,521)
=========== =========== =========== ===========
Basic and Fully Diluted
Earnings (Loss)
Per Share** $ -0.07 $ 0.03 $ -0.29 $ 0.06
=========== =========== =========== ===========
Weighted average number
of shares outstanding
during the period. 7,526,025 7,500,047 7,519,945 7,500,047
========= ========== =========== ===========
** Prior periods have been restated to reflect the merger as
if it took place at the beginning of the period.
The accompanying notes are an integral part of the consolidated
financial statements.
5
8
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
SIGNIFICANT ACCOUNTING POLICIES
General
WHITNEY INFORMATION NETWORK, INC. (formerly Win Systems International,
Inc.) was incorporated under the laws of the State of Colorado and
began operations in the Educational Seminar industry on August 18, 1998
when it merged with Win Systems, Inc.
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.
Fair Value of Financial Statements
The Company's financial instruments consist principally of cash,
accounts receivable and notes receivable, deferred seminar costs,
accounts payable, accrued expenses, deferred educational revenues,
and notes payable. The carrying amounts of such financial instruments
as reflected in the balance sheets approximate their estimated fair
value as of Septembr 30, 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. and its wholly owned subsidiaries,
Whitney Education Group, Inc. (formerly Win Systems, Inc,) Whitney
Canada, Ltd. and 1311448 Ontario Corp and 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.
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 $8,801,815
at September 30, 1999 and $1,445,792 at September 30, 1998.
6
9
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Deferred Expenses for Future Educational Programs
The Company incurs a liability when a student signs up to attend a
future educational seminar with the Company and the tuition that was
collected or accrued is deferred. The direct 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 Costs in the amount of $1,260,990 at
September 30, 1999 and $105,667 at September 30,1998.
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) 15 years
Also; the Company owned land for resale at September 30, 1999, which
it plans to sell to an affiliate in the second half of 1999 (at the
same price it purchased the land from the affiliate at the beginning
of 1997).See related party transactions.
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 and Notes Receivable
Notes Receivable represent one-year notes at various interest rates
received on sales of real estate. 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 September 30, 1998.
7
10
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Land for Resale
The land held for resale on the balance sheet is recorded at cost and is
reasonably expected to be sold or exchanged during the succeeding year.
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 September 30,
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 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 stock of Wealth
Intelligence Network, Inc. for 20,000 shares of its 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.
8
11
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
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 nine months ended September 30, 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.
At September 30,1999 and September 30, 1998 the related party
receivables and payables on the balance sheet were as follows:
Sept 30, 1998 Sept 30, 1999
Payables:
Long-term
Loans Payable to the Chairman
of the Board $ 64,979 $ -0-
Short-Term
Amounts due to Whitney
Leadership Group, Inc. $ 225 $ -0-
Amounts Due to RAW, Inc. $ 1,747 $ -0-
Amounts Due to MRS Equity Corp, $ 87,783 $ -0-
-------- -------
$ 89,755 $ -0-
======== =======
Receivables:
Due from Whitney Leadership Group $ 98,269
Due form MRS Equity Corp $ 888
Due from RAW, Inc. $ 54
--------
$ 99,211
========
The Company has receivables from Whitney Leadership Group in the amount
of $98,269; Precision Software Services, Inc. in the amount of $0; MRS
Equity Corp. in the amount of $888 and RAW, Inc. in the amount of $54
shown on the balance sheet as Due from Affiliates at September 30, 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 $78,844 for the six months ended
September 30 1999 and $51,795 for the six months ended September 30,
1998. MRS Equity Corp.provided WHITNEY INFORMATION NETWORK, INC. with
$214,800 and $159,515 for product costs for the nine months ending 1999
and 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.
9
12
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 the first nine months of 1999 and 1998 the
Company provided WHITNEY INFORMATION NETWORK, INC. $247,623 and $139,389
in product cost, respectively. PSS sells products to WIN 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 $31,608 for the nine months ended September 30,1999
and $21,900 for nine months ended September 30,1998.
WHITNEY INFORMATION NETWORK, INC. provides payroll services to Whitney
Leadership Group, Inc. in the amount of $54,948 for 1999 and $75,071 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. In the year
ended December 31, 1998 the Company paid $19,052 in accounting fees to
its now Chief Financial Officer and $-0- in 1999.
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 twelve months, are shown as long-term.
Income Taxes
Income Taxes (continued)
At September 3, 1999 the company had Federal net operating loss carry
forwards of approximately $4,300,000 that are available to carry
forward to future periods to offset future income.
10
13
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Indebtedness
There were no short or long-term borrowings from unrelated third parties
for the nine months ended September 30, 1998 and 1999. The interest
expense was $-0- for the nine months ended September 30, 1998 and 1999
to date. (See Related Party Transactions). The Company was indebted to
its Chairman for short-term non-interest bearing advances in the amount
of $64,979 at September 30, 1998 and $0 at September 30, 1999.
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 is currently working to resolve the potential impact of the
Year 2000 on the processing of date-sensitive information by the
Company's computerized information systems. The year 2000 problem is
the result of computer programs being written using two digits (rather
than four) to define the applicable year. Any of the Company's
programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000, which could result in
miscalculations or system failures. Costs of addressing potential
problems are expensed as incurred and are not expected to have a
material adverse impact on the Company's financial position, results
of operations or cash flows in future periods. However, if the Company
or its vendors are unable to resolve such issues in a timely manner,
it could result in a financial risk. Accordingly, the Company plans
to devote the necessary resources to resolve all significant Year 2000
issues in a timely manner. While the Company does not at this time
anticipate significant problems with suppliers, it will develop
contingency plans, if required, with these third parties due to
the possibility of compliance issues.
As of the date of this filing 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 and/or from any of its suppliers. Further, the Company does not
anticipate any problem or latent material risks in the future.
11
14
WHITNEY INFORMATION NETWORK, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Commitments and Contingencies (Continued)
The Company leases the following properties: (1) its headquarters
building in Cape Coral, Florida at an annual rental of $73,844 for
approximately 8,700 square feet, (2) its telemarketing facility in
Draper, Utah at an annual rental of $46,563 for 3,678 square feet
beginning August 8, 1999 and (3) a Wealth Center facility in
Jackson, MS for $42,600 per year for 3,000 square feet beginning
September 1, 1999. 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 as follows:
First year $ 133,795
Second Year $ 158,820
Third Year $ 120,020
Fourth Year $ 39,675
SUBSEQUENT EVENTS
At a meeting with the Company and the SEC in late November 2000, the
Company agreed to change its method of accounting to recognize
advertising and substantially all other related expenses that gave rise
to the deferred revenues as period costs. Therefore, the Company has
restated its financial statements to reflect this change.
12
15
ITEM 2. MANAGEMENT'S 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.
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.
NINE MONTHS AND QUARTER ENDED SEPTEMBER 30, 1999
REVENUE
Revenue increased by 34.2% from $4,789,288 to $6,429,067 for the
three months ended September 30, 1999 as compared to the three months
ended September 30, 1998. 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
Revenues for the nine months ended September 30, 1999 increased to
$16,715,387 as compared with $13,058,283 for the nine months ended
September 30, 1998 an increase of $3,657,149,or 28%. Total deferred
revenues on the balance sheet were $8,357,501 and $842,304 at September
30, 1999 and 1998, respectively. Cost of sales increased to $2,139,434
in the three months ended September 30, 1999 from $1,886,438 in the
three months ended September 30, 1998. Total cost of sales increased to
$4,340,090 in the six months ended September 30, 1998 from $2,865,029 in
the six months ended September 30, 1998.
Advertising and Sales Expense
Total Advertising and Sales Expense increased in the 3rd quarter of
1999 to $2,830,101 from $2,328,347 over the third quarter of 1998 and
increased from $5,584,704 to $8,393,125 for the nine months ended
September 30, 1999 as compared with the same nine month period in 1998.
This change in advertising and sales expenses represents a greater
number of period costs incurred in the first nine months of 1999 where
certain marketing strategies were being tested and refined. The results
of these tests and refinements have materialized in the first nine
months of the current year. Thus, expenses did not increase
proportionately with sales due to the increased expenditures in the
first nine months of 1999.
16
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 3rd
quarter to $1,393,324 at September 30, 1999 from $1,097,771 at September
30, 1998 an increase of $299,453 or 27% and increased from $2,775,364
for the nine months ended September 30, 1998 to $3,395,366 for the nine
months ended September 30, 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 nine months ended September 30, 1999 of
$620,002 reflects the initial startup expenses in adding more crews in
1999 and development of additional products in 1999 that produced 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 loss of $537,223 in the 3rd quarter of 1999 increased by 75%
over the prior 3rd quarter loss of 1998 of $307,363 or $-.07 a share
as compared with $-.04 a share for the comparable quarter last year.
Nine months net loss was $2,156,059 for the period ended September 30,
1999 as compared with $71,753 of net income for the period ended
September 30, 1998, a decrease of $2,227,812 from the prior period.
This resulted in earnings (Loss) per share of $-.029 per share for
the nine months ended September 30, 1999 as compared with $.06 for
the nine months ended September 30, 1998.
Liquidity and Working Capital
At September 30, 1999 the company had cash of $1,205,523 as
compared with $465,010 at September 30, 1998. This increase of
$740,513 is attributable solely to operations. The company anticipates
that its cash flow from operations will be sufficient to meet its
working capital needs for the next 12 months.
Receivables and Prepaid Advertising
Accounts receivable increased by $369,425 to $1,436,997 at
September 30, 1999 over $1,067,572 at September 30, 1998. This increase
reflects the portion of the increased revenues that were credit sales.
Prepaid Advertising, Taxes and other consisted of prepaid Federal
income taxes of $448,000 and prepaid state income taxes of $72,000 for
a total of $520,000 and prepaid media was $490,825. There were no
prepaid taxes at September 30, 1998 and prepaid media at September
30, 1998 was approximately $250,000. The prepaid media is usually
purchased four to six weeks in advance of each educational conference
held. The prepaid taxes are for 1999 taxes and a portion of the taxes
payable due to the change in the accounting method for tax purposes at
December 31, 1998.
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 the September 30, 1999 were $8,801,815 as compared with
those at September 30, 1998 of $1,445,792. This substantial increase
represents a natural increase from increased 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 nine months will not be realized until the student attends the
courses that he/she has been registered. In addition to the deferred
revenues, there is a certain amount of expenses associated with those
revenues that is also deferred. At September 30, 1999 there were
$1,260,990 of expenses that were deferred as compared to $105,667
for the period ended September 30, 1998.
Years Ended December 31, 1997 and December 31, 1998
Revenues for the year ended December 31, 1998 increased to
$13,760,208 as compared with $5,558,280 for the year ended December 31,
1997 an increase of $8,201,928 or 147%. Total deferred revenues on the
balance sheet were $3,958,244 and $239,000 at December 31, 1998 and
1997, respectively. Cost of sales increased to $4,682,850 in the year
ended December 31, 1998 from $1,910,300 in the year ended December 31,
1997.
Total Advertising, Selling and General and Administrative expenses
increased in the year ended December 31, 1998 to $11,315,665 form
$3,637,716 as compared with 1997. These substantial increases in
revenues and expenses in 1998 over 1997 reflect a general increase in
business 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 person
personnel-related expenses for the Company's administrative, executive
and finance personnel as well as outside legal and audit costs.
17
The net loss $2,238,307 for the year ended December 31, 1998 (or
$-.30 per share) was caused mainly by incurring advertising and other
marketing expenses in the current year relating to revenues that were
deferred to future periods. Net income for the year ended December 31,
1997 was $10,264 or $.01 a share
At December 31, 1998 the company had cash of $370,571 as compared
with $30,036 at December 31, 1997. This increase of $340,535 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 Company does not anticipate a problem 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 star-up costs.
The Internet division functionally will use the same systems, procedures
and operations that the real estate training division currently uses.
All internal personnel and systems are in place. The only additional
capital required will be for advertising. The funds for advertising
will be derived from working capital. After approximately two to
three weeks, the funds for advertising will be derived from revenues
generated from the Internet operations.
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.
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated this 20th day of December, 2000.
WHITNEY INFORMATION NETWORK, INC.
(the "Registrant")
BY: /s/ Ronald S. Simon
Ronald S. Simon
Secretary/Treasurer, Chief Financial Officer
and a member of the Board of Directors
Chief Financial Officer and a member of
the Board of Directors.
