form_10qsb-063001.htm
SECURITIES AND EXCHANGE COMMISSION
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 June 30, 2001
Whitney Information Network, Inc.
(Exact name of registrant as specified in its charter)
Colorado 0-27403 84-1475486
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
4818 Coronado Parkway, Cape Coral, Florida 33904
(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 June 30, 2001 and
December 31, 2000.
PART I
Item 1. Financial Statements
Whitney Information Network, Inc.
Consolidated Financial Statements
As of June 30, 2001 and December 31, 2000
And for the Six Months Ended June 30, 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
June 30, December 31,
2001 2000
------------ -----------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 5,958,104 $ 3,316,905
Accounts receivable (net of allowance of $124,545 and
$91,885, respectively) 2,991,026 1,793,454
Due from affiliates 159,075 70,490
Prepaid advertising and other 1,057,866 625,028
Income taxes receivable and prepayments 1,893,999 1,893,999
Inventory 164,606 268,663
Deferred seminar expenses 3,230,604 2,644,404
------------ -----------
Total current assets 15,455,280 10,612,943
------------ -----------
Other assets
Property and equipment (net accumulated depreciation
of $298,017 and $193,714, respectively) 2,845,361 2,920,597
Other assets 59,178 121,057
------------ -----------
Total other assets 2,904,539 3,041,654
------------ -----------
Total assets $ 18,359,819 $13,654,597
============ ===========
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable $ 536,229 $ 1,942,804
Accrued seminar expenses 408,489 349,341
Deferred revenues 25,160,520 22,640,442
Other accrued liabilities 1,112,009 458,982
------------ -----------
Total current liabilities 27,217,247 25,391,569
Mortgage note payable 1,200,000 1,200,000
------------ -----------
Total liabilities 28,417,247 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 (10,125,430) (13,004,974)
------------ -----------
Total stockholders' deficit (10,057,428) (12,936,972)
------------ -----------
Total liabilities and stockholders' deficit $ 18,359,819 $13,654,597
============ ===========
See notes to consolidated financial statements.
WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- -------------------------
2001 2000 2001 2000
---------- ---------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Sales $11,950,654 $8,778,005 $23,184,332 $17,418,022
Cost of sales 5,517,334 3,538,886 9,962,069 7,024,545
---------- ---------- ----------- -----------
Gross profit 6,433,320 5,239,119 13,222,263 10,393,477
---------- ---------- ----------- -----------
Expenses
Advertising and sales expense 3,638,757 6,307,011 6,485,887 10,813,021
General and administrative
expense 1,959,442 1,716,749 3,894,938 3,069,914
---------- ---------- ----------- -----------
Total expenses 5,598,199 8,023,760 10,380,825 13,882,935
---------- ---------- ----------- -----------
Income (loss) from operations 835,121 (2,784,641) 2,841,438 (3,489,458)
Other income
Interest 85,806 - 38,106 -
---------- ---------- ----------- -----------
Income (loss) before income
taxes 920,927 (2,784,641) 2,879,544 (3,489,458)
Income taxes - - - -
---------- ---------- ----------- -----------
Net income (loss) $ 920,927 $(2,784,641) $ 2,879,544 $(3,489,458)
========== ========== =========== ===========
Basic and fully diluted
income (loss) per share $ .12 $ (.37) $ .38 $ (.46)
=========== ========== =========== ===========
Weighted average shares
outstanding 7,528,022 7,524,488 7,528,022 7,520,953
========== ========== =========== ===========
See notes to consolidated financial statements.
WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended
June 30,
---------------------------
2001 2000
---------- -----------
(Unaudited) (Unaudited)
Cash flows from operating activities
Net income (loss) $2,879,544 $(3,489,458)
---------- -----------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Allowance for doubtful accounts 32,660 -
Depreciation and amortization 124,104 62,000
Loss of disposal of fixed assets 41,410 -
Changes in assets and liabilities
Accounts receivable (1,230,232) (1,220,372)
Prepaid advertising and other (432,838) (74,996)
Income tax receivable and payments - (695,500)
Inventory 104,057 -
Deferred seminar expenses (586,200) (1,218,487)
Other assets 61,879 (256,261)
Accounts payable (1,406,575) 82,863
Accrued seminar expense 59,148 (247,860)
Deferred revenues 2,520,078 8,441,317
Other liabilities 653,027 399,559
---------- -----------
(59,482) 5,272,263
---------- -----------
Net cash provided by operating activities 2,820,062 1,782,805
---------- -----------
Cash flows from investing activities
Purchases of property and equipment (90,278) (235,276)
Sale of real estate - 12,652
Loans (to) from affiliates, net (88,585) (7,336)
---------- -----------
Net cash provided (used) by investing activities (178,863) (229,960)
---------- -----------
Net increase in cash and cash equivalents 2,641,199 1,552,845
Cash and cash equivalents, beginning of period 3,316,905 1,274,708
---------- -----------
Cash and cash equivalents, end of period $5,958,104 $ 2,827,553
========== ===========
Supplemental cash flow information:
Cash paid for income taxes was $0 for the six months ended June 30, 2001 and 2000,
respectively.
Cash paid for interest was $54,000 and $0 for the six months ended June 30, 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 year ended December 31, 2000. The
results of operations for the three and six months ended June 30, 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.
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 $36,923 and $36,922 for the six months ended June 30, 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 $71,197 and $45,283 for the six months ended June 30,
2001 and 2000, respectively. MRS Equity Corp. provided Whitney Information Network, Inc.
with $367,950 and $201,800 for product costs for the six months ended June 30, 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.
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
six months ended June 30, 2001 and 2000, PSS provided Whitney Information Network, Inc.
$202,500 and $137,400 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 $72,066
and $22,367 for the six months ended June 30, 2001 and 2000, respectively.
Whitney Information Network, Inc. provided payroll services to Whitney Leadership Group,
Inc. in the amount of $33,986 and $45,283 for the six months ended June 30, 2001 and 2000,
respectively. During 2001, Whitney Information Network made payments of $11,861 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, Whitney Information Network, Inc. paid $184,812 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 $5,228 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:
June 30, December 31,
2001 2000
------------- -------------
(Unaudited)
Receivables
Due from Whitney Leadership Group $ 213,628 $ 160,587
Due from RAW, Inc. 335 15,619
Due from MRS Equity Corp. 56,859 -
Due from PSS 4,208 -
------------ ------------
275,030 176,206
------------ ------------
Payables
Amounts due to RAW, Inc. - 3,876
Amounts due to MRS Equity Corp. 115,955 69,415
Amounts due to PSS - 32,425
------------ ------------
115,955 105,716
------------ ------------
Net receivable $ 159,075 $ 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 June 30, 2001 and December 31, 2000, the Company has net operating loss (NOL)
carryforwards of approximately $11,700,000 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:
June 30, December 31,
2001 2000
------------ -----------
(Unaudited)
Deferred tax asset from NOL carryforward $ 4,396,000 $ 5,252,000
Deferred tax liability from deferred expense recognition (1,205,000) (1,005,000)
----------- -----------
Net deferred tax asset 3,191,000 4,247,000
Valuation allowance (3,191,000) (4,247,000)
----------- -----------
$ - $ -
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 six months ended June 30, 2001 was $23,184,332, an increase
of $5,766,310 or 33% compared to the same period in 2000 of $17,418,022. Revenues for the
three months ending June 30, 2001 were $11,950,654, an increase of $3,172,649 over the
prior quarter ending June 30, 2000 of $8,778,005. 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 six months ended June 30, 2001, was
$6,485,887, a decrease of $4,327,134 or 40% compared to the same period in 2000. The
decrease in advertising and sales expense for the quarter ending June 30, 2001 was
$2,668,254 or 42% resulting in advertising and sales expense for the quarter of $3,638,757.
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 and second quarters.
General and Administrative expenses increased to $3,894,938, an increase of $825,024 or 27%
over the comparable period in 2000 of $3,069,914. The increase in general and
administrative expenses to $1,959,442 for the quarter ended June 30, 2001 from $1,716,749
for the quarter ending June 30, 2000 was $242,693 or 14%. 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 six months of 2001 to $9,962,070 an increase of $2,937,525 or 42% over the prior
comparable period in 2000 and to $5,517,335 for the quarter ending June 30, 2001 an
increase of 56% over the comparable period in 2000.
Net Income for the six months ending June 30, 2001 was $2,879,544 as compared with a net
loss of ($3,489,458) for the six months ending June 30, 2000, an increase of $6,369,002 or
221% or $.38 per share as compared to $(.46) per share for the prior period. Net Income for
the three months ending June 30, 2001 was $920,927 as compared with a net loss of
($2,784,641) for the three months ending June 30, 2000, an increase of $3,705,568 or 402%
or $.12 per share as compared to $(.37) 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.
More than 20,000 new students register for one or more of the Company's programs each
month. 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 in October of 2000, 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. The Company will be test marketing training and product sales on
the Internet in the last half of 2001. Management believes that the division will 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
$2,641,199 to $5,958,104, an increase of 79% over the previous comparable period in 2000
and an increase of $1,098,310 or 22.5% over the previous quarter. The Company reduced its
loan on its headquarters building by $250,000 in the third quarter of 2001.
The Company's cash provided by operating activities was $2.82 million and $1.78 million for
the six months ended June 30, 2001 and 2000, respectively. In the first half of 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 ($178,863) and $(229,960)
for the six months ended June 30, 2001 and 2000, respectively. The Company's investing
activities for the three months ended June 30, 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 June 30, 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: August 14, 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 August 14, 2001
Russell A. Whitney
/s/Richard W. Brevoort President and Director August 14, 2001
Richard W. Brevoort
/s/Richard S. Simon Secretary/Treasurer/Chief Financial August 14, 2001
Richard S. Simon Officer/Principal Accounting Officer and Director