Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended March 31, 2001
Whitney Information Network, Inc.
(Exact name of registrant as specified in its charter)
Colorado 0-27403 84-1475486
- ---------------------------- ----------------------- ----------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
4818 Coronado Parkway, Cape Coral, Florida 33904
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (941) 542-8999
(Former name or former address, if changed since last report)
Securities registered under Section 12 (b) of the Exchange Act:
NONE
Securities registered under Section 12 (g) of the Exchange Act:
COMMON STOCK
NO par value per share
(Title of Class)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the Issuer was required to file such reports) and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
The Issuer had 7,528,022 common shares of common stock outstanding as of
March 31, 2001 and December 31, 2000.
PART I
Item 1. Financial Statements
Whitney Information Network, Inc.
Consolidated Financial Statements
As of March 31, 2001 and December 31, 2000
And for the Three Months Ended March 31, 2001 and 2000
Table of Contents
Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, December 31,
2001 2000
------------ ------------
(Unaudited)
Assets
Current assets
Cash and cash equivalents .................................... $ 4,859,794 $ 3,316,905
Accounts receivable (net allowance of $76,758 and
$91,885, respectively) ...................................... 2,136,455 1,793,454
Due from affiliates .......................................... -- 70,490
Prepaid advertising and other ................................ 1,090,237 625,028
Income taxes receivable and prepayments ...................... 1,893,999 1,893,999
Inventory .................................................... 264,256 268,663
Deferred seminar expenses .................................... 2,676,136 2,644,404
------------ ------------
Total current assets ..................................... 12,920,877 10,612,943
------------ ------------
Other assets
Property and equipment, net .................................. 2,886,653 2,920,597
Other assets ................................................. 106,043 121,057
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Total other assets ....................................... 2,992,696 3,041,654
------------ ------------
Total assets ................................................... $ 15,913,573 $ 13,654,597
============ ============
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable ............................................. $ 1,147,812 $ 1,942,804
Accrued seminar expenses ..................................... 145,908 349,341
Due to affiliates ............................................ 50,510 --
Deferred revenues ............................................ 23,961,961 22,640,442
Other accrued liabilities .................................... 385,737 458,982
------------ ------------
Total current liabilities ................................ 25,691,928 25,391,569
Mortgage note payable .......................................... 1,200,000 1,200,000
------------ ------------
Total liabilities ........................................ 26,891,928 26,591,569
------------ ------------
Stockholders' deficit
Preferred stock, no par value, 10,000,000 shares
authorized, no shares issued and outstanding .................. -- --
Common stock, no par value, 25,000,000 shares
authorized, 7,528,022 shares issued and outstanding ........... 67,102 67,102
Paid in capital ................................................ 900 900
Accumulated deficit ............................................ (11,046,357) (13,004,974)
------------ ------------
Total stockholders' deficit .............................. (10,978,355) (12,936,972)
------------ ------------
Total liabilities and stockholders' deficit .................... $ 15,913,573 $ 13,654,597
============ ============
See notes to consolidated financial statements
WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three Months Ended
March 31,
-------------------------
2001 2000
----------- -----------
(Unaudited) (Unaudited)
Sales ......................................... $11,233,678 $ 8,640,017
Cost of sales ................................. 4,444,735 3,485,659
----------- -----------
Gross profit ............................ 6,788,943 5,154,358
----------- -----------
Expenses
Advertising and sales expense ............... 2,847,130 4,506,010
General and administrative expense .......... 1,935,496 1,353,165
----------- -----------
Total expenses .......................... 4,782,626 5,859,175
----------- -----------
Income (loss) from operations ................. 2,006,317 (704,817)
Other income
Interest .................................... 47,700 --
----------- -----------
Income (loss) before income taxes ............. 1,958,617 (704,817)
Income taxes .................................. -- --
----------- -----------
Net income (loss) ............................. $ 1,958,617 $ (704,817)
=========== ===========
Basic and fully diluted income (loss) per share $ .26 $ (.09)
=========== ===========
Weighted average shares outstanding 7,528,022 7,528,022
=========== ===========
See notes to consolidated financial statements
WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Three Months Ended
March 31,
--------------------------
2001 2000
----------- -----------
(Unaudited) (Unaudited)
Cash flows from operating activities
Net income (loss) .................................. $ 1,958,617 $ (704,817)
----------- -----------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities ............. --
Allowance for doubtful accounts ................... (15,127) --
Depreciation and amortization ..................... 59,984 35,000
Changes in assets and liabilities
Accounts receivable ............................. (327,874) (369,174)
Prepaid advertising and other ................... (465,209) (720,840)
Inventory ....................................... 4,407 --
Deferred seminar expenses ....................... (31,732) (529,517)
Other assets .................................... 15,014 --
Accounts payable ................................ (794,992) (61,276)
Accrued seminar expense ......................... (203,433) --
Deferred revenues ............................... 1,321,519 3,468,980
Other liabilities ............................... (73,245) 391,191
----------- -----------
(510,688) 2,214,364
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Net cash provided by operating activities ...... 1,447,929 1,509,547
----------- -----------
Cash flows from investing activities
Purchases of property and equipment ................ (26,040) (132,642)
Loans (to) from affiliates, net .................... 121,000 (87,329)
----------- -----------
Net cash provided (used) by investing activities 94,960 (219,971)
----------- -----------
Net increase in cash and cash equivalents ............ 1,542,889 1,289,576
Cash and cash equivalents, beginning of period ....... 3,316,905 1,274,708
----------- -----------
Cash and cash equivalents, end of period ............. $ 4,859,794 $ 2,564,284
=========== ===========
Supplemental cash flow information:
Cash paid for income taxes was $0 for the three months ended March 31, 2001
and 2000, respectively.
Cash paid for interest was $47,700 and $0 for the three months ended March
31, 2001 and 2000, respectively.
See notes to consolidated financial statements
WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Significant Accounting Policies
The accompanying consolidated financial statements are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments), which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The consolidated
financial statements should be read in conjunction with the financial statements
and notes thereto contained in the Company's Annual Report on Form 10-KSB filed
with the Securities and Exchange Commission April 2, 2001, which includes audited
financial statements for the years ended December 31, 2000 and 1999. The results
of operations for the three months ended March 31, 2001, may not be indicative of
the results of operations for the year ended December 31, 2001.
Recently Issued Accounting Pronouncements
On February 14, 2001, the FASB issued an exposure draft entitled "Business
Combination and Intangible Assets - Accounting for Goodwill." Under this
proposed statement, with its effective date, corporations would no longer
amortize goodwill. Goodwill would be tested for impairment when events occurred
that would reasonably dictate that an impairment of goodwill may have occurred.
The results on the financial statements would not be material to the three months
ended March 31, 2001.
Note 2 - Related Party Transactions
The Company has rented its headquarters location 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 $18,462 and $35,622 for the three months ended
March 31, 2001 and 2000, respectively. The Company leases approximately 8,700
square feet presently.
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 amounts of $37,481 and
$34,960 for the three months ended March 31, 2001 and 2000, respectively. MRS
Equity Corp. provided Whitney Information Network, Inc. with $187,500 and $99,879
for product costs for the three months ended March 31, 2001 and 2000,
respectively. MRS Equity Crop. 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.
Note 2 - Related Party Transactions
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 three months ended March 31, 2001 and 2000,
PSS provided Whitney Information Network, Inc. $102,500 and $90,000 in product
cost, respectively. PSS sells products to Whitney Information Network, Inc. at a
price less than the prices offered to third parties. Whitney Information
Network, Inc. provided payroll services to PSS in the amount of $36,888 and
$7,366 for the three months ended March 31, 2001 and 2000, respectively.
Whitney Information Network, Inc. provided payroll services to Whitney Leadership
Group, Inc. in the amount or $16,954 and $23,359 for the three months ended March
31, 2001 and 2000, respectively. During 2001, Whitney Information Network made
payments of $62,134 for registration fees and commissions. The Chairman of the
Board of Whitney Information Network, Inc. is the President and Chief Operating
Officer of Whitney Leadership Group, Inc.
United States Fiduciary Corp is a company that provides telemarketing services
for Whitney Information Network, Inc. The Chairman of the Board of Directors and
the Chief Financial Officer are also members of the board of directors of United
States Fudiciary Corp. During 2001 and 2000, Whitney Information Network, Inc.
paid $127,991 and $0, respectively, in commission payments to United States
Fiduciary Corp.
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. During 2001,
Whitney Information Network Inc. provided $3,032 in payroll services to RAW, Inc.
Those items above that are reasonably expected to be collected within one year
are shown as current and those that are not expected to be collected during the
next year are shown as non-current.
Related party receivables and payables were as follows:
March 31, December 31,
2001 2000
--------- ---------
(Unaudited)
Receivables
Due from Whitney Leadership Group ....... $ 196,360 $ 160,587
Due from RAW, Inc. ...................... 10,775 15,619
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207,135 176,206
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Payables
Amounts due to RAW, Inc. ................ -- 3,876
Amounts due to MRS Equity Corp .......... 194,828 69,415
Amounts due to PSS ...................... 62,817 32,425
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257,645 105,716
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Net receivable (payable) .................. $ (50,510) $ 70,490
========= =========
Note 3 - Commitments and Contingencies
Litigation
The Company is not involved in any material 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.
Other
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.
Note 4 - Income Taxes
As of March 31, 2001 and December 31, 2000, the Company has net operating loss
(NOL) carryforwards of approximately $14,372,000 and $13,690,000, respectively,
which expire in the years 2001 through 2021.
Deferred tax liabilities and assets are determined based on the difference
between the financial statement assets and liabilities and tax basis assets and
liabilities using the tax rates in effect for the year in which the differences
occur. The measurement of deferred tax assets is reduced, if necessary, by the
amount of any tax benefits that based on available evidence, are not expected to
be realized.
The accompanying balance sheet includes the following:
March 31, December 31,
2001 2000
----------- -----------
(Unaudited)
Deferred tax asset from NOL carryforward ............ $ 4,253,000 $ 5,252,000
Deferred tax liability from deferred expense recognition (998,000) (1,005,000)
----------- -----------
Net deferred tax asset ................................. 3,255,000 4,247,000
Valuation allowance .................................... (3,255,000) (4,247,000)
----------- -----------
$ -- $ --
=========== ===========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto.
None of the Company's business is subject to seasonal fluctuations.
Revenues: Total revenue for the three months ended March 31, 2001 was
$11,233,678, an increase of $2,953,661 or 30% compared to the same period in 2000
of $8,640,017. 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 60% of the expenses for the three months
ended March 31, 2001, was $2,847,130, a decrease of $1,658,880 or 36.8% compared
to the same period in 2000. The decrease in Advertising and Sales expense is due
to discontinuing TV advertising for the Internet division, more effective use of
media buying and more effective marketing programs hitting the market in the
first quarter.
General and Administrative expenses increased to $1,935,496, an increase of
$582,331, or 43% over the comparable period in 2000 of $1,353,496. This increase
is due primarily to increased personnel hired to handle the increase in the
Company's volume.
Cost of Sales increased proportionately in comparison with the increase in sales
for the first quarter of 2001 to $4,444,735 an increase of $959,076 or 27.5% over
the prior comparable period in 2000.
Net Income for the three months ending March 31, 2001 was $1,958,617 as compared
with a net loss of ($704,817) for the three months ending March 31, 2000, an
increase of $2,663,434 or 377.9% or $.26 per share as compared to $(.09) per
share for the prior period. The increase is directly attributable to increased
sales in 2001 over the prior period, higher realization of deferred revenues,
increased production from marketing programs resulting in a larger gross profit
and a disproportionate reduction in advertising expenses.
Earnings (Loss) Before Interest, Taxes, Depreciation and Amortization (EBITDA)
for the three months ended March 31, 2001 and 2000 was $2,018,601 and ($739,817),
respectively. EBITDA is defined as net income (loss) before income taxes,
interest and other income and expense, net, plus depreciation and amortization.
Net income per share was $.26 for the three months ending March 31, 2001 as
compared to a net loss ($.09) per share for the prior year period ending March
31, 2000.
More than 25,000 new students register for one or more of the Company's programs
each month. Management believes the Company's success can also be attributed to
the fact that a large percentage of its gross annual revenue can be attributed
to repeat business, a factor that also indicates students find its training is
effective.
The Internet division, although small as compared to the Company as a whole,
continued to be in a loss position. The Company discontinued its TV and
marketing programs for this division and has embarked on a new method of
marketing the division. The Company expects the Internet division to become a
mainstay division promoting the Company and its products. We will be test
marketing training and product sales on the Internet in the last half of 2001.
Management believes that the division will to be profitable by the end of the
year.
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 $1,542,889 to $4,859,794, an increase of 47% over the previous
comparable period in 2000.
The Company's cash provided by operating activities was $1.45 million and $1.5
million for the three months ended March 31, 2001 and 2000, respectively. In the
first quarter 2001, 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 provided by (used in) investing activities was $94,960 and
$(219,971) for the three months ended March 31, 2001 and 2000, respectively. The
Company's investing activities for the three months ended March 31, 2001 and 2000
were primarily attributable to the purchase of office property and equipment and
related party transactions described in the accompanying 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.
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party defendant in any material pending or threatened
litigation and to its knowledge, no action, suit or proceedings has been
threatened against its officers and its directors.
ITEM 2. 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 3. DEFAULTS UPON SENIOR SECURITIES
There are no senior securities issued by the Company.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matter was submitted during the three months ended March 31, 2001 to a vote of
security holders, through the solicitation of proxies or otherwise.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the last quarter of the period covered
by this report.
Exhibit No. Description
3.1* Articles of Incorporation.
3.2* Bylaws.
3.3* Amended Articles of Incorporation
3.4* Amended Articles of Incorporation
4.1* Specimen Stock Certificate.
99.1* Class A Warrant Agreement
99.2* Class B Warrant Agreement
99.3* Non-Qualified Incentive Stock Option Plan
99.4* Office Lease
* Incorporated by reference to exhibit filed with Form 10SB12G (Sec File No.
000-27403).
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WHITNEY INFORMATION NETWORK, INC.
Dated: May 15, 2001 By:/s/Richard W. Brevoort
----------------------
Richard W. Brevoort
President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated:
Signature Title Date
- --------- ----- ----
/s/Russell A. Whitney Chief Executive Officer Chairman May 15, 2001
Russell A. Whitney
/s/Richard W. Brevoort President and Director May 15, 2001
Richard W. Brevoort
/s/Richard S. Simon Secretary/Treasurer/Chief Financial May 15, 2001
Richard S. Simon Officer/ Principal Accounting Officer and Director
