WHITNEY INFORMATION NETWORK, INC.
Filing Type: 10QSB/A
Description: Amended Quarterly Report
Filing Date: December 28, 2000
Period End: September 30, 2000
Primary Exchange: Over the Counter includes OTC and OTCBB
Ticker: RUSS
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:
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Commission file number 0-27403
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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/A
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 8-18
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 19
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 19-21
ITEM 3. CHANGES IN SECURITIES AND USE OF
PROCEEDS 21
ITEM 4. DEFAULTS UPON SENIOR SECURITIES 21
ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 21
ITEM 6. OTHER INFORMATION 21
ITEM 7. EXHIBITS AND REPORTS ON FORM 8-K 21
Summary Financial Information 22
SIGNATURE PAGE 22
WHITNEY INFORMATION NETWORK, INC.
Consolidated Balance Sheet
As of September 30, 2000 and 1999
ASSETS
Restated
September 30
2000 1999
----- -----
CURRENT ASSETS:
Cash $ 3,824,846 $ 1,205,523
Accounts Receivable 3,639,499 1,436,997
Prepaid Assets 745,517 1,076,705
Income Taxes Receivable 1,831,632 658,132
Due From Affiliates 150,831 99,211
Deferred Expense 3,167,588 1,260,990
Other Current Assets 904,549 111,276
------- ------
Total Current Assets 14,264,462 5,848,834
PROPERTY AND EQUIPMENT, net 594,044 181,481
OTHER ASSETS:
Other Assets 48,683 48,683
------ ------
TOTAL ASSETS $14,907,189 $ 6,078,898
========== ==========
The accompanying notes are an integral part of the
consolidated financial statements
F1
WHITNEY INFORMATION NETWORK, INC.
Consolidated Balance Sheet
As of September 30, 2000 and 1999
LIABILITIES AND SHAREHOLDERS EQUITY
Restated
September 30
2000 1999
---- ----
LIABILITIES
CURRENT LIABILITIES:
Accounts Payable $ 944,294 $ 874,294
Deferred Revenue 22,659,677 8,801,815
Other Accrued Liabilities 1,036,431 439,395
---------- ----------
TOTAL CURRENT LIABILITIES 24,640,402 10,115,504
---------- ----------
TOTAL LIABILITIES $24,640,402 $ 10,115,504
---------- ----------
SHAREHOLDERS EQUITY
Common Shares, no par value,
25,000,000 shares authorized,
7,528,047 shares issued and
and outstanding $ 67,102 $ 67,102
Paid In Capital - 900
Retained Earnings (Deficit) (9,800,315) (4,104,508)
--------- ---------
TOTAL SHAREHOLDERS EQUITY
(DEFICIT) (9,733,213) (4,036,506)
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY $14,907,189 $ 6,078,898
========== ==========
The accompanying notes are an integral part of the
consolidated financial statements
F2
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Operations and Retained Earnings
As of and For the Nine Months Ended September 30, 2000 and 1999
Restated
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 17,180,634 8,001,993
General and Administrative
Expense 7,871,574 3,395,366
--------- ---------
Total Expenses 25,052,208 11,397,359
---------- ---------
(Loss) Before Taxes (5,498,468) (1,764,927)
Less: Income Taxes(see note)
--------- ---------
NET (LOSS) $ (5,498,468) $ (1,764,927)
Retained Earnings (Deficit),
Beginning of Period (4,301,847) (2,339,581)
--------- -------
Retained Earnings (Deficit),
End of Period $ (9,800,315) $(4,104,508)
========= =========
Basic and Fully Diluted
Earnings (Loss) Per Share * $ -0.73 $ -0.23
==== ====
Weighted average number of
Shares outstanding during
the period 7,528,047 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.
F3
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Cash Flows
As of and For the Nine Months Ended September 30, 2000 and 1999
Restated
September 30
2000 1999
---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Loss From Operations $(5,498,468)$(1,764,927)
Add Back Depreciation and
Amortization 154,000 18,287
--------- -------
$(5,344,468)$(1,746,640)
--------- -------
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 ( 809,638) (1,326,389)
(Increase) in Other Receivables (735,630)
(Increase) in Deferred Expense (1,806,262) (584,091)
Increase (Decrease) in Accounts
Payable 347,830 309,586
Increase in Deferred Revenue 13,348,103 4,843,571
Increase (Decrease) in Other
Liabilities (492,641) 109,447
Increase in Accrued Instructional
Programs Expense 788,571
--------- ---------
Net Cash Flow From Operations $ 2,995,076 $1,078,199
--------- ---------
The accompanying notes are an integral part of the
consolidated financial statements
F4
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Cash Flows (continued)
As of and For the Nine Months Ended September 30, 2000 and 1999
Restated
September 30
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 $ 834,952
========= =======
Cash at Beginning of Period 1,274,708 370,571
--------- -------
Cash at End of Period $3,824,846 $1,205,523
========= =========
The accompanying notes are an integral part of the
consolidated financial statements
F5
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)
Restated
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 (Loss) for the
Year 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)
Net (Loss) for the
Year Ended
December 31, 1999 (1,962,266) $(1,962,266)
Issuance of Shares
for Acquisitions 20,000 $50,000 $50,000
Issuance of Shares
for Services 8,000 14,500 14,500
----- ------ --- --------- ---------
Balance
December 31, 1999 7,528,047 $67,102 $ 900 $(4,301,847) $(4,233,845)
Adjustment (900)
Net (Loss) for the
Nine Months Ended
September 30, 2000 $(5,498,468) $(5,498,468)
--- --------- ---------
Balance
September 30, 2000 7,528,047 $67,102 $ 0 $(9,800,315) $(9,732,213)
========= ====== === ========= =========
The accompanying notes are an integral part of the
consolidated financial statements
F6
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
Restated Restated
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 6,637,613 2,560,968 17,180,634 8,001,993
General and
Administrative
Expense 4,801,660 1,393,324 7,871,574 3,395,366
--------- --------- --------- ---------
Total Expenses 11,169,273 3,954,292 25,052,208 11,397,359
--------- --------- ---------- ---------
Income (Loss)
Before Taxes $(2,009,010) $ (268,090) $(5,498,468)$(1,764,924)
Income Taxes
(see note) - - - -
------- ------- ---------- ---------
NET INCOME(LOSS)(2,009,010) $ (268,090) $(5,498,468)$(1,764,924)
Retained Earnings
(Deficit),
Beginning
Of period $(7,791,305) (3,836,418) (4,301,847) (2,339,581)
--------- --------- --------- -------
Retained Earnings
(Deficit),
End of period $(9,800,315) $(4,104,508) $(9,800,315)$(4,104,508)
========= ========= ========= =========
Basic and Fully
Diluted Earnings
(Loss)
Per Share $ (0.27) $ (0.04) $ (0.73) $ (0.23)
==== ==== ==== ====
Weighted average
Number of shares
Outstanding
During the
Period 7,528,047 7,528,047 7,528,047 7,519,945
========= ========= ========= =========
The accompanying notes are an integral part of the
consolidated financial statement
F7
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.
F8
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 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 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.
F9
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 Company's 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
Whitney's Wealth Centers, Inc.; Whitney Mortgage.com, Inc.; and Whitney
Internet Services, Inc. Russ Whitney's Wealth Centers, Inc. is the parent
corporation of Russ Whitney's Wealth Center of Jackson, MS, Inc. and Russ
Whitney's 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.
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.
F10
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
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 $3,167,588 at September 30, 2000 and $1,260,990 at September 30, 1999.
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
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.
F11
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
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.
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.
F12
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 (continued)
On February 1, 1999 the Company exchanged all of the assets of Wealth
Intelligence Network, Inc. for 20,000 shares of the Company's 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 Company's stock, valued at
$1.8125 per share, to a financial public relations firm in lieu of cash for
services valued at $14,500.
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.
F13
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 Company's outside accountant became the Chief Financial Officer
of the Company and a shareholder of the Company.
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.
F14
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 (continued)
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
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
=======
F15
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 (continued)
As of December 30, 2000 the Company had Federal net operating loss carry
forwards of approximately $9,000,000 that are Available to offset future
revenues.
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 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; (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:
2000 $ 81,043
2001 158,820
2002 120,020
2003 39,675
------
Total $ 399,558
=======
F16
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)
Restatement
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.
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 Company's SEC filings,
including the Company's 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).
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.
F17
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
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
======= ========= ========= =========
F18
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 Company's 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 Company's
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.
Net Loss for the nine months ending September 30, 2000 was $(5,498,468) as
compared with a net loss of ($1,1,764,927) for the nine months ending
September 30, 1999, an increase of $3,733,541 (212%)or $(.73) per share as
compared to $(.23) per share for the prior period. The net Loss for the
quarter ending September 30, 2000 was $(2,009,010) as compared with a net
loss of ($268,090) for the quarter ending September 30, 1999, an increase
of $1,740,920 (649%)or $(.27) per share as compared to $(.04) per share for
the prior period. The increase in the loss is directly attributable to
increased deferred revenues in 2000 over the prior period and increased
period costs.
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
The Internet division, although small as compared to the Company as a whole,
contributed to 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 Company's 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 Company's upward growth trend.
Earnings (Loss) Before Interest, Taxes, Depreciation and Amortization
(EBITDA) for the nine months ended September 30, 2000 and 1999 was
$(5,344,468) and $(1,746,640), respectively. For the three months ended
September 30, 2000 and 1999, EBITDA was $(1,917,010) and $(258,279)
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.
Liquidity and Capital Resources
The Company's 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 $1,205,523 to $3,824,846, an increase of
$2,619,323 or 217% over the previous comparable period in 1999.
The Company's cash provided by operating activities was $2,995,096 and
$1,078,199 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 Company's cash used in investing activities was $444,058 and $325,858
for the nine months ended September 30, 2000 and 1999, respectively. The
Company's 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.
Restatement
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..
Management further believes that upon the proper presentation to the SEC of
the Company's position on this complex accounting method issue, the SEC will
agree with the Company's position and that there will be no need to restate
any financial statements.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (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 of the Company's SEC filings, including the Company's 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.
ITEM 3. CHANGES IN SECURITIES AND USE OF PROCEEDS.
The rights of the holders of the Company's securities have not been modified
nor have the rights evidenced by the securities been limited or qualified by
the issuance or modification of any other class of securities.
ITEM 4. DEFAULTS UPON SENIOR SECURITIES.
There are no senior securities issued by the Company.
ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters presented to the shareholders for vote during the nine
months ended September 30, 2000.
ITEM 6. OTHER INFORMATION.
None.
ITEM 7. EXHIBITS AND REPORTS ON FORM 8-K.
The Company filed a Form 8-K on August 1, 2000 providing notification of a
change in auditors. A copy of that Form 8-K was attached to the Form 10-Q
filed for the quarter ended June 30, 2000.
No reports were filed on Form 8-K during the three months ended
September 30, 2000.
On November 14, 2000, the Board of Directors terminated the services of
BDO Seidman who had been named as auditors for the Company on August 1, 2000.
The termination was over a fee dispute and is effective November 14, 2000.
This event gives rise to a requirement during the quarter ended December
31, 2000 to file a Form 8-K to provide a notification of a change in auditors.
Summary Financial Information
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of September 30, 2000 and the Consolidated
Statement of Operations and Retained Earnings as of and for the nine months
ended September 30, 2000 and is qualified in its entirety by reference to
such financial statements.
Period Type 9 months
Fiscal Year End December 31, 2000
Period End September 30, 2000
Cash 3,824,846
Securities 0
Receivables 3,639,499
Allowances 0
Inventory 0
Current Assets 14,264,462
PP&E 594,044
Depreciation 154,000
Total Assets 14,907,189
Current Liabilities 24,640,402
Bonds 0
Preferred Mandatory 0
Preferred 0
Common 67,102
Other-SE (9,800,315)
Total Liabilities and Equity 14,907,189
Sales 28,989,982
Total Revenues 28,989,982
CGS 9,436,242
Total costs 9,436,242
Other Expenses 25,052,208
Loss Prevention 0
Interest Expense 0
Income Pretax (5,498,468)
Income Tax 0
Income Continuing (5,498,468)
Discontinued 0
Extraordinary 0
Changes 0
Net Income (5,498,468)
EPS Basic (0.73)
EPS Diluted (0.73)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly changed this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated this 28th 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
