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 March 31, 2000.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from:
------------------------------
Commission file number 0-27403
------------------------------
WHITNEY INFORMATION NETWORK, INC.
(Exact name of Registrant as specified in its charter.)
COLORADO 84-1475486
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4818 Coronado Parkway
Cape Coral, Florida 33904
(Address of principal executive offices, including zip code.)
(941) 542-8999
Registrant's telephone number, including area code.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Act of 1934
during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES x NO
The number of shares outstanding of the Registrant's Common Stock, no par
value per share, at March 31, 2000 was 7,528,022 shares.
------------------------------------------------------------------------
------------------------------------------------------------------------
<PAGE>2
PART I
ITEM 1. FINANCIAL STATEMENTS.
WHITNEY INFORMATION NETWORK, INC.
Consolidated Financial Statements
As of and For the Three Months Ended March 31, 2000 and 1999
TABLE OF CONTENTS
Consolidated Balance Sheet . . . . . . . . . . . .1-2
Consolidated Statement of Operations . . . . . . . . . . 3
Consolidated Statement of Cash Flows . . . . . . . . . . 4
Consolidated Statement of Changes in Shareholders' Equity. . 5
Notes to the Consolidated Financial Statements . . . . . .6-19
<PAGE> 3
WHITNEY INFORMATION NETWORK, INC.
Consolidated Balance Sheet
For the Three Months Ended March 3, 2000 and 1999
<TABLE>
<CAPTION>
March 31
2000 1999
<S> <C> <C>
CURRENT ASSETS:
Cash $ 2,564,284 $ 1,339,155
Accounts Receivable 1,764,733 1,260,129
Prepaid Advertising, Taxes and Other 1,188,279 570,197
Due From Affiliates 163,849 76,203
Deferred Seminar Expense 10,902,174 5,395,724
Other Current Assets 115,327 47,032
------- ------
Total Current Assets 16,698,646 8,688,440
PROPERTY AND EQUIPMENT,net 411,182 87,855
------- ------
OTHER ASSETS
Contract Rights,net 48,683 49,000
------ ------
TOTAL ASSETS $ 17,158,511 $ 8,825,295
========== =========
</TABLE>
The accompanying notes are an integral part of the cosolidated
financial statements
1
<PAGE> 4
WHITNEY INFORMATION NETWORK, INC.
Consolidated Balance Sheet
March 31, 2000 and 1999
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31
2000 1999
<S> <C> <C>
LIABILITIES
CURRENT LIABILITIES
Accounts Payable $ 678,237 $ 758,631
Income Taxes Payable 357,735 148,000
Loans from Affiliates - 16,399
Deferred Revenues 12,780,554 6,269,357
Other Accrued Liabilities 709,160 68,958
------- ---------
TOTAL CURRENT LIABILITIES 14,525,686 7,261,345
---------- ---------
OTHER LIABILITIES AND DEFERRED CREDITS
Deferred Income Taxes 200,000 460,000
Loans from Shareholder - 64,979
------- ------
TOTAL OTHER LIABILITIES 200,000 524,979
------- -------
TOTAL LIABILITIES $ 14,725,686 $ 7,786,324
---------- ---------
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
<S> <C> <C>
Common Stock, no par value,
7,528,022 shares issued and outstanding $ 67,102 $ 53,253
Paid In Capital 900 900
Retained Earnings 2,364,823 984,764
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 2,432,825 1,038,917
--------- ---------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 17,158,511 $ 8,825,241
========== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
2
<PAGE> 5
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Operations
For the Three Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
March 31
2000 1999
<S> <C> <C>
SALES $ 8,640,017 $ 4,654,532
COST OF SALES 3,485,659 1,900,656
--------- ---------
GROSS PROFIT $ 5,154,358 $ 2,753,876
--------- ---------
EXPENSES
Advertising and Sales Expense $ 3,204,567 $ 1,221,591
General and Administrative Expense 1,353,165 987,590
---------- -------
4,557,732 2,209,181
--------- ---------
Income Before Taxes $ 596,626 $ 544,695
Less:Income Taxes (see note) 290,735 193,000
------- --------
NET INCOME $ 305,891 $ 351,695
Retained Earnings, Beginning of Period 2,058,932 633,370
--------- -------
Retained Earnings, End of Period $ 2,364,823 $ 985,065
========= =======
Basic and Fully Diluted
Earnings Per Share $ 0.04 $ 0.05
==== ====
Weighted average number of shares
outstanding during the period 7,513,859 7,500,047
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 6
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Cash Flows
For the Three Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
March 31
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings From Operations $ 305,891 $ 351,395
Add Back Depreciation and Amortization 35,000 -
------ -------
340,891 351,395
Changes in Operating Assets and Liabilities
(Increase)in Accounts Receivable (369,174) (279,866)
(Increase)in Prepaid and Other Assets (514,643) (435,001)
(Increase)in Deferred Expenses (2,037,147) (1,297,082)
Increase(Decrease)in Accounts Payabe (61,276) 193,923
Increase in Deferred Revenues 3,468,980 2,311,113
Increase in Income Taxes Payable 290,725 -
Increase in Other Liabilities 391,191 6,009
------- -----
Net Cash Flow From Operations 1,509,547 850,491
--------- -------
CASH USED IN INVESTING ACTIVITIES
Purchase of Property and Equipment (132,642) (87,855)
Acquisition of Contract Rights 317 (49,000)
Loans made to Affiliates (87,646) 3,971
--------- -----
Net Cash Used in Investing Activities (219,971) (132,884)
--------- -------
CASH USED IN FINANCING ACTIVITIES
Issuance of Common Stock - 50,561
Increase in Deferred Taxes 193,000
Loans From Affiliates (41,119)
--------- ------
Net Cash Used in Financing Activities - 202,442
--------- -------
Increase in Cash $ 1,289,576 $ 920,049
Cash at Beginning of Period 1,274,708 30,036
--------- ------
Cash at End of Period $ 2,564,284 $ 950,085
========= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
4
<PAGE> 7
WHITNEY INFORMATION NETWORK, INC.
Consolidated Statement of Changes in Stockholders' Equity
As of and For the Three Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
Common Stock Paid Retained Total
Number of In Earnings Shareholders'
Shares Value Capital (Deficit) Equity(Deficit)
<S> <C> <C> <C> <C> <C>
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 50,000
Issuance of Shares
for Services 8,000 14,500 14,500
----- ------ ------ ------
Balance
December, 1999 7,528,047 $67,102 $900 $2,058,932 $2,126,934
Net Income for the
Three Months Ended
March 31, 2000 305,891 305,891
------- -------
Balance
March 31, 2000 7,528,047 $67,102 $900 $2,364,823 $2,432,825
========= ====== === ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
5
<PAGE> 8
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
HISTORY OF THE CORPORATION
Whitney Information Network, Inc., formerly known as Win Systems International,
Inc., incorporated in Colorado on February 23, 1996 under the name of Gimmel
Enterprises, Inc.
Whitney Education Group, Inc., formerly known as Win Systems, Inc.,
incorporated in Florida on November 12, 1992. An exchange of shares was
completed between the shareholders of Win Systems, Inc. and Gimmel
Enterprises, Inc. on August 18, 1998.
Subsequently, the name of Gimmel Enterprises, Inc. was changed to Win Systems
International, Inc. on August 25, 1998, and that name was changed to Whitney
Information Network, Inc. on February 11, 1999. The name of Win Systems, Inc.
was changed to Whitney Education Group, Inc. on September 10, 1999.
Win Systems, Inc. has been operating in the Educational Seminars Industry
since 1992 and expanded its operations in the industry subsequent to the
aforesaid exchange of shares and name change to Whitney Education Group, Inc.
Whitney Education Group, Inc. is accredited by the State of Texas as a
Certified Proprietary School, effective January 8, 1999, and will be seeking
national accreditation.
During 1998 Win Systems International, Inc. expanded its educational seminars
business into Canada through the opening of a wholly owned subsidiary,
1311448 Ontario, Inc. The Canadian operations continued to expand and at the
end of 1999 the operations were transferred to Whitney Canada, Inc. through
an amalgamation of two wholly owned Canadian subsidiaries.
Whitney Canada, Inc. incorporated in Canada on October 5, 1998 and is the
surviving corporation of an amalgamation with 3667057 Canada, Inc. 3667057
Canada, Inc. was incorporated in Ontario, Canada on August 21, 1998 under
the name of 1311448 Ontario, Inc. The name was changed to 3667057 Canada,
Inc. on October 5, 1999 as a preliminary requirement of federalization of
the corporation, which had been an Ontario corporation, in order to qualify
for the amalgamation with Whitney Canada, Inc., which was completed
January 6, 2000.
6
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSYTEMS INTERNATIONA, INC.)
NOTES TO THE CONSOLIDATED FNANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Whitney Internet Services, Inc. incorporated in Wyoming on June 8, 1999,
is located in Cape Coral, Florida and is an operating subsidiary marketing
internet training seminars throughout the United States. Whitney internet
Services, Inc. is expanding its operations into a 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. on November 18, 1998. Wealth Intelligence Network,
Inc. is an operating subsidiary marketing financial training seminars,
which represents an expansion from the real estate investment training
seminar business.
Whitney Mortgage.com, Inc. incorporated in Florida on September 30, 1999 and
operates as a full service internet mortgage broker affiliated with a
national internet mortgage provider. Whitney Mortgage.com, Inc. represents
an expansion from educational seminars into the mortgage brokerage
industry.
Russ 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 educational seminars industry into
regional permanent schools for teaching classes in how to build and maintain
wealth.
Whitney Consulting Services, Inc. incorporated in Wyoming on July 28, 1998
under the name of Financial Consulting Services, Inc. and the name was
changed to Whitney Consulting Group, Inc. on April 28, 1999 when that
corporation was acquired by Win Systems International, Inc. The name was
again changed to Whitney Consulting Services, Inc. on March 21, 2000.
Whitney Consulting Services, Inc. is located in Salt Lake City, Utah and
is an operating subsidiary telemarketing real estate investments and
financial training seminars and an individual one-on-one mentoring program.
7
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
REVENUE RECOGNITION
Revenue from product sales is recognized at the time the sale is made.
Revenue from educational seminars is recorded (1) when the non refundable
deposit is received for the seminar 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 lliability for deferred revenues on the balance sheet
in the amount of $12,780,554 at March 31, 2000 and $6,269,357 at
March 31, 1999.
DEFERRED EXPENSE FOR FUTURE EDUCATIONAL PROGRAMS
When a student signs up to attend a future educational seminar with the
Company, the tuition that was collected or recorded as a receivable is
deferred. The expenses related to the deferred tuition are also deferred.
The deferred expenses associated with future educational programs are shown
on the balance sheet as Deferred Expenses in the amount of $10,902,174 at
March 31, 2000 and $5,395,724 at March 31, 1999.
<TABLE>
<CAPTION>
March 31
Components of Deferred Expenses 2000 1999
<S> <C> <C>
Advertising Expense $ 5,806,966 $ 2,873,994
Instructors and Trainers Compensation 1,890,842 935,819
Support Service 1,077,609 533,322
Travel and Facility Costs 1,541,098 762,723
Administrative Expense 585,660 289,856
Total Deferred Expenses $10,902,175 $ 5,395,714
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is provided using
accelerated and straight-line methods over the following useful lives:
Office Furniture........................................7 years
Office Equipment........................................5 years
Intangibles(Contract Rights)...........................40 years
9
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109
(SFAS No. 109), "Accounting for Income Taxes" in 1993. SFAS No. 109
requires the liability method of accounting for income taxes. Deferred
income taxes result in temporary differences in the recognition of revenue
and expenses for income tax and financial reporting purposes. These
differences are primarily due to the differences in accrual basis reporting
for statement purposes and cash basis reporting for tax purposes.
ACCOUNTS RECEIVABLE
The accounts receivable are trade receivables arising from the sale of
educational products and seminars. The Company believes the allowance for
doubtful accounts is sufficient to cover any uncollectible amounts as of March
31, 2000 and 1999 and the entire amount of the sales related to the net
receivables are deferred.
In 1997 the Companyadopted 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 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 EPA computation.
WHITNEY INFORMATION NETWORK,INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 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 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.. The financial statements from January 1, 1998
through March 31, 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. Also on
August 18, 1998, WHITNEY INFORMATION NETWORK, INC. 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 registerd. The Company
also institured 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. None have been exercised or expired to date.
On February 1, 1999 the Company purchased all of the assets of Wealth
Intelligence Network, Inc. for 20,000 shares of stock at $2.50 per share.
In addition, the Company purchased all of the assets of Wealth Intelligence
Network, Inc. for 20,000 shares of stock at $2.50 per share. In additon,
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.
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
RELATED PARTY TRANSACTIONS
The Company has rented its international headquarters 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 years
ended December 31, 1999 and 1998, respectively. The Company leases approximately
8,700 square feet presently. Future minimum payments, by year and in
aggregate under capital and noncancellabel operating leases with initial or
remaining terms of one year or more are shown in the Commitments footnotes.
At March 31, 2000 and March 31, 1999 the related party receivables and payables
on the balance sheet were as follows:
<TABLE>
<CAPTION>
March 31, 2000 March 31,1999
<S> <C> <C>
Receivables:
Due from Whitney Leadership Group $ 160,298 $ -0-
Due from MRS Equity Corp. 3,488
Due from RAW, Inc. 63
$ 163,849 -0-
Payables: $ 175,961 $ -0-
Long-term:
Loans Payable to the Chairman of
the Board $ -0- $ 64,979
</TABLE>
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 $34,960 for the three months ended March 31, 2000 and $25,700 for
the three months ended March 31, 1999. MRS Equity Corp. provided WHITNEY
INFORMATION NETWORK, INC. with $99,879 and $80,400 for product cost for the
three months ended March 31, 1999. MRS Equity Corp. provided
WHITNEY INFORMATION NETWORK, INC. with $99,879 and $80,400 for product costs
for the three months ended March 31, 2000 and 1999, 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.
12
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 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 Precision Software Services, Inc.
During the three months ended March 31, 2000 and 1999 the Company provided
WHITNEY INFORMATION NETWORK, INC. $90,000 and $61,107 in products,
respectively. PSS sells products to WHITNEY INFORMATION NETWORK, INC. at a
price offered to third parties. WHITNEY INFORMATION NETWORK, INC. provided
payroll services to Precision Software Services, Inc. in the amount of
$7,366 for the three months ended March 31, 2000.
WHITNEY INFORMATION NETWORK, INC. provided payroll services to Whintey
Leadership Group, Inc. in the amount of $23,359 for the three months ended
March 31, 2000 and $33,500 for the three months ended March 31, 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 and sels and invests in real property.
In 1998, the Company's outside accountant became the Chief Financial Officer
of the Company and a shareholder of the Company. During 1998 the Company
paid $19,052 in accounting fees to its now Chief Financial Officer, $495 during
1999, and $18,487 during 1999, and $0 during the three onths ended
March 31, 2000; including realted companies.
Those irems abouve that are reasonably expected to be collected within one
year are shown as short term and those which are not expected to be collected
during the next year are shown as long-term.
13
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 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 35% to the income
before income taxes is as follows:
Federal Income tax expense at the statutory rate $ 275,835
State taxes, net of federal tax benefit 14,900
Income taxes expense per books $ 290,735
Deferred Income tax -0-
Income tax $ 290,735
At December 3, 1997 the Company had Federal net operating loss carry
Forwards of approximately $96,000 that were used in 1998. The Company has
previously reported its revenues and expenses for income tax purposes on the
'cash basis' of accounting. Deferred income taxes of $267,000 reflect
primarily the taxes owing on the change of accounting method at the end
of 1998 to be paid over the next six years and the net tax effects of
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
INDEBTEDNESS
There were no borrowings from unrelated third parties for the three months
ended March 31, 2000 and 1999. The interest expense was $0 for the three
months ended March 31, 2000 and 1999. (See Related Party Transactions).
The Company was indebted to its Chairman for short-term non-interest
bearing advances in the amount of $0 at March 31, 2000, and $64,979 at
March 31, 1999.
0
LITIGATION
The Company is not involved in any asserted or unasserted claims and actions
arising out of the normal course of its business that in the opinion of the
Company, based upon knowledge of facts and advice of counsel, will result in
a material adverse effect on the Company's financial position.
14
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 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 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; and (3) a Wealth Center facility in Jackson, MS for $42,600 per
year. Future minimum payments by year and in the aggregate under capital
and noncancellable operating leases with terms of one year or more are as
follows:
2000 $ 100,346
2001 158,820
2002 120,020
2003 39,675
------
Total $ 418,861
======
The Company is currently having a disagreement with the Securities and
Exchange Commission (SEC) over an accounting issue. The Company is currently
treating certain direct response advertising and related seminars costs
which have been incurred to produce its deferred revenues as deferred
expenses in order to have a proper matching of income and expenses. When the
deferred revenues are recognized as current revenue in subsequent periods,
the related costs giving rise to such deferred revenues are then expensed.
The SEC's position is that all costs incurred to produce the deferred
revenues, with the exception of commissions should be costs of the current
period and not matched against the revenues tath were created by such costs.
The departure from Generally Accepted Accounting Principles. If the SEC
were to prevail, the Company would have to restate its financial statements
to reflect a change in accounting method, as follows:
15
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
COMMITMENTS AND CONTINGENCIES(Continued)
Restated
Stated Net(Loss)Which
Net Income Would Be Necessary
Per Company's Per SEC's
Position Position
Year Ended December 31, 1998 $ 768,436 $ ( 2,238,307)
Year Ended December 31, 1999 $ 1,391,770 $ ( 1,680,290)
Three Months Ended March 31, 2000 $ 305,891 $ ( 1,078,951)
The Company is confident that the present accounting method reflects the
Company's financial position more accurately than does the SEC's suggested
method. At March 31, 2000, the Company had cash in excess of $2,500,000; no
long or short term borrowings; no unpaid bills; no unpaid taxes; and
approximately $2,500,000 in working capital. A company generating
approximately $5,000,000 in losses, as would be the case per the SEC's
position, would not likely be able to show such a strong current position
as the as the Company now enjoys and not likely would be increasing cash
balances each period as the Company has accomplished as is the case without
borrowing or obtaining equity investors.
The Company has relied upon the guidance of S.O.P. 93-7 in determining that
the deferring of direct response advertising is the most authoritative and
correct generally accepted accounting principle to follow in the proper
reporting of its financial position and results of operations.
The Company is supported in this position by the Company's auditor, by CPA
auditing consultants, by financial consultants, and by legal consultants.
The Company will defend this position vigorously. Management believes that
to change the current accounting method away from matching deferred seminars
expenses against the related revenues which have been deferred until the
seminars are held, would result in a material misstatement of the Company's
financial position and results of operations.
16
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
COMMITMENTS AND CONTINGENCIES(Continued)
Management further believes that upon the proper presentation 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.
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 provision
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.
17
WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 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
March 31, 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 has granted to key employees both non-statutory and incentive
stock options for 813,150 shares under terms and conditions that at any
time between the grant date and two years of service, the optionee may
purchase up to 25% of the option shares. After two years of continuous
service the optionee may purchase up to 50% of the shares. After three years
of continuous service the optionee may purchase all of the shares. All of
the options expire ten years from the date of the grant. The tables below
list the status of the opitions at March 31, 2000.
Non-Statutory Stock Options:
Date of Number of Exercise Date of
Grant Shares Price Expiration
September 1, 1998 220,000 $ 2.000 September 1, 2008
August 31, 1999 76,700 1.875 August 31, 2009
Total Non-Statutory 296,700
Incentive Stock Options:
September 1, 1998 121,500 $ 2.000 September 1, 2008
April 1, 1999 20,000 1.875 April 1, 2009
April 26, 1999 10,000 1.875 April 26, 2009
August 31, 1999 309,950 1.875 August 31, 2009
October 20, 1999 55,000 1.875 October 20, 2009
Total Incentive 516,450
Grand Total 1,032,900
18
0 WHITNEY INFORMATION NETWORK, INC.
(FORMERLY WIN SYSTEMS INTERNATIONAL, INC.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
CAPITAL CHANGES
On February 1, 1999 the Company issued 20,000 shares of its common stock
in exchange for all of the outstanding stock of Wealth Intelligence Network,
Inc. The shares were valued at $2.50 each for a total purchase price of
$50,000. Wealth Intelligence Network, Inc. publishes a monthly financial
newsletter and provides and promotes financial education and training.
In addition, the Company issued 8,000 shares to a financial public relations
firm for financial public relations services in the amount of $14,500 (2,000
on May 31, 1999 valued at $2.00 per share, 2,000 on June 30, 1999 valued
at $1.875 per share, 2,000 on July 31, 1999 valued at $1.750 per share,
and 2,000 on August 31, 1999 valued at $1.625 per share).
19
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. 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.
None of the Company's business is subject to seasonal fluctuations.
Revenues: Total revenue for the three months ended March 31, 2000 was
$8,640,017, an increase of $3,985,485 or 85.6% compared to the same period
in 1999. The combination of the increase in advance training courses held
and the higher registrations and revenue contributed to the increase above.
Advertising and Sales Expense: Advertising and sales expense, of which
Advertising represents approximately 50% of the expenses for the three
months ended March 31, 2000, was $3,204,657, an increase of $1,983,066
or 162.3% compared to the same period in 1999. The increase in Advertising
and Sales expense is due to higher volume resulting from increased sales
and new products introduced late in the fourth quarter of 1999.
0
General and Administrative expenses increased to $1,353,165, an increase of
$365,575, or 37% over the comparable period in 1999.
Cost of Sales increased proportionately in comparison with the increase in
sales for the first quarter of 2000 to $3,485,659, an increase of $1,585,003
or 83.3% over the prior comparable period in 1999.
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) for
the three months ended March 31, 2000 and 1999 was $0.6 million and $0.5
million, 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.
20
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 by $1,289,576 to $2,564,284, an increase
of 94.4% over the previous comparable period in 1999.
The Company's cash provided by operating activities was $1.5 million
and $0.9 million for the three months ended March 31, 2000 and 1999,
respectively. In the first quarter 2000, cash flows from advanced training
programs were positively impacted by the increased collection efforts by
the sales associates accompanying the instructors and trainers at the
training locations.
The Company's cash used in investing activities was $0.0 and $0.1
0million for the three months ended March 31, 2000 and 1999, respectively.
The Company's cash used in investing activities for the three months ended
March 31, 2000 and 1999 were primarily attributable to the purchase of
office property and equipment of $.2 million and $.1 million, respectively.
The Company is currently having a disagreement with the Securities and
Exchange Commission (SEC) over an accounting issue. The Company is currently
treating certain direct response advertising and related seminars costs
which have been incurred to produce its deferred revenues as deferred
expenses in order to have a proper matching of income and expenses. When
the deferred revenues are recognized as current revenue in subsequent
periods, the related costs giving rise to such deferred revenues are then
expensed. The SEC's position is that all costs incurred to produce
the deferred revenues, with the exception of commissions, should be costs
of the current period and not matched against the revenues that were
created by such costs. The Company believes that the SEC's position is
incorrect and is a departure from Generally Accepted Accounting Principles.
If the SEC were to prevail, the Company would have to restate its financial
statements to reflect a change in accounting method, as follows:
Potential Restated
Stated Net(Loss)Which
Net Income Would Be Necessary
Per Company's Per SEC's
Position Position
Year Ended December 31, 1998 $ 768,436 $ ( 2,238,307)
Year Ended December 31, 1999 $ 1,391,770 $ ( 1,680,290)
Three Months Ended March 31, 2000 $ 305,891 $ ( 1,078,951)
21
The Company is confident that the present accounting method reflects the
Company's financial position more accurately than does the SEC's suggested
method. At March 31, 2000, the Company had cash in excess of $2,500,000; no
long or short term borrowings; no unpaid bills; no unpaid taxes; and
approximately $2,500,000 in working capital. A company generating
approximately $5,000,000 in losses, as would be the case per the SEC's
position, would not likely be able to show such a strong current position,
as the Company now enjoys and would not likely be increasing cash balances
each period, as the Company has accomplished as is the case without borrowing
or obtaining equity investors.
The Company has relied upon the guidance of S.O.P. 93-7 in determining that
the deferring of direct response advertising is the most authoritative and
correct generally accepted accounting principle to follow in the proper
reporting of its financial position and results of operations.
The Company is supported in this position by the Company's auditor, by CPA
auditing consultants, by financial consultants, and by legal consultants.
The Company will defend this position vigorously. Management believes that
to change the current accounting method away from matching deferred seminars
expenses against the related revenues which have been deferred until the
seminars are held, would result in a material misstatement of the Company's
financial position and results of operations.
Management further believes that upon the proper presentation 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
a00ny financial statements.
Forward-looking Statements
Certain information included in this report contains forward-looking
statements made pursuant to the Private Securities Litigation Reform Act
of 1995 ("Reform Act"). Such statements are based on current expectations
and involve a number of known and unknown risks and uncertainties that
could cause the actual results and performance of the Company to differ
materially from any expected future results or performance, expressed or
implied, by the forward-looking statements. In connection with the safe
harbor provisions of the reform Act,the Company has identified important
factors that could cause actual results to differ materially from such
expectations, including operating uncertainty, acquisition uncertainty,
uncertainties relating to economic and political conditions and
uncertainties regarding the impact of regulations, changes in government
policy and competition. Reference is made to all of the 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.
0
22
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
three months ended March 31, 2000.
ITEM 6. OTHER INFORMATION.
None.
ITEM 7. EXHIBITS AND REPORTS ON FORM 8-K.
None.
REPORTS ON FORM 8-K
No reports on Form 8-K were filed for the quarter ended
March 31,2000.
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 19th day of May, 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
23
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,564,284
<SECURITIES> 0
<RECEIVABLES> 1,764,733
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,698,646
<PP&E> 411,182
<DEPRECIATION> 35,000
<TOTAL-ASSETS> 17,158,511
<CURRENT-LIABILITIES> 14,525,686
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<COMMON> 67,102
<OTHER-SE> 2,365,723
<TOTAL-LIABILITY-AND-EQUITY> 17,158,511
<SALES> 8,640,017
<TOTAL-REVENUES> 8,640,017
<CGS> 3,485,659
<TOTAL-COSTS> 3,485,659
<OTHER-EXPENSES> 4,557,732
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 596,626
<INCOME-TAX> 290,735
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