form_10q-033102
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 March 31, 2002
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.)
1612 Cape Coral Parkway, Suite A, Cape Coral, Florida 33904
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (239) 542-8999
(Former name or former address, if changed since last report)
4818 Coronado Parkway, Cape Coral, Florida 33904
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 7,878,023 common shares of common stock outstanding as of March 31, 2002 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, 2001
And for the Three Months Ended March 31, 2002 and 2001
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,
2002 2001
----------- -----------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $11,487,222 $ 6,889,275
Accounts receivable 382,455 525,878
Due from affiliates, net 245,553 159,591
Note receivable 100,000 -
Prepaid advertising and other 785,315 953,661
Income taxes receivable and prepayments 170,999 497,499
Inventory 136,964 136,544
Deferred seminar expenses 3,052,726 3,638,556
----------- -----------
Total current assets 16,361,234 12,801,004
----------- -----------
Other assets
Property and equipment, net 3,716,583 3,628,447
Investment in foreign corporation 82,500 82,500
Other assets 35,109 32,918
----------- -----------
Total other assets 3,834,192 3,743,865
----------- -----------
Total assets $20,195,426 $16,544,869
=========== ===========
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable $ 1,320,417 $ 1,152,337
Accrued seminar expenses 479,209 435,360
Deferred revenue 23,410,895 23,937,349
Accrued expenses 1,335,871 702,548
Current portion of long-term debt 42,859 62,500
Current portion of note payable-officer/stockholder 42,859 62,500
----------- -----------
Total current liabilities 26,632,110 26,352,594
Long-term debt, less current portion 512,500 512,500
Note payable-officer/stockholder, less current portion 62,500 62,500
----------- -----------
Total liabilities 27,207,110 26,927,594
----------- -----------
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, 7,878,023 shares issued and outstanding. 337,102 337,102
Paid-in capital 900 900
Accumulated deficit (7,349,686) (10,720,727)
----------- -----------
Total stockholders' deficit (7,011,684) (10,382,725)
----------- -----------
Total liabilities and stockholders' deficit $20,195,426 $16,544,869
=========== ===========
See notes to consolidated financial statements.
WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three Months Ended
March 31,
2002 2001
----------- -----------
(Unaudited) (Unaudited)
Sales $15,453,018 $11,233,678
----------- -----------
Expenses
Seminar expenses 6,148,203 4,444,735
Advertising and sales expense 3,074,267 2,847,130
General and administrative expense 2,951,493 1,935,496
----------- -----------
Total expenses 12,173,963 9,227,361
----------- -----------
Income (loss) from operations 3,279,055 2,006,317
Other income (expense)
Interest and other income 103,593 -
Interest expense (11,607) (47,700)
----------- -----------
Income (loss) before income taxes 3,371,041 1,958,617
Income taxes - -
----------- -----------
Net income (loss) $ 3,371,041 $ 1,958,617
=========== ===========
Basic and fully diluted income (loss) per share $ .43 $ .26
=========== ===========
Weighted average shares outstanding 7,878,023 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,
----------------------------
2002 2001
------------ ----------
(Unaudited) (Unaudited)
Cash flows from operating activities
Net income (loss) $3,371,041 $1,958,617
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Allowance for doubtful accounts - (15,127)
Depreciation and amortization 92,129 59,984
Changes in assets and liabilities
Accounts receivable 143,423 (327,874)
Prepaid advertising and other 168,346 (465,209)
Income taxes receivables and prepayments 326,500 -
Inventory (420) 4,407
Deferred seminar expenses 585,830 (31,732)
Other assets (2,191) 15,014
Accounts payable 168,080 (794,992)
Accrued seminar expense 43,849 (203,433)
Deferred revenues (526,454) 1,321,519
Accrued expenses 633,323 (73,245)
------------ ----------
1,632,415 (510,688)
------------ ----------
Net cash provided by operating activities 5,003,456 1,447,929
------------ ----------
Cash flows from investing activities
Note receivable (100,000) -
Purchases of property and equipment (180,265) (26,040)
Loans (to) from affiliates, net (85,962) 121,000
------------ ----------
Net cash provided (used) by investing activities (366,227) 94,960
------------ ----------
Cash flows from financing activities
Payments of principal on long-term debt (39,282) -
------------ ----------
Net cash used in financing activities (39,282) -
------------ ----------
Net increase in cash and cash equivalents 4,597,947 1,542,889
Cash and cash equivalents, beginning of period 6,889,275 3,316,905
------------ ----------
Cash and cash equivalents, end of period $11,487,222 $4,859,794
============ ==========
Supplemental cash flow information:
Cash paid for interest was $11,600 and $47,700 for the three months ended
March 31, 2002 and 2001, 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-K filed
with the Securities and Exchange Commission April 9, 2002, which includes audited
financial statements for the years ended December 31, 2001 and 2000. The results
of operations for the three months ended March 31, 2002, may not be indicative of
the results of operations for the year ended December 31, 2002.
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 for the three months ended March 31,
2002 and 2001, 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 $29,381 and
$37,481 for the three months ended March 31, 2002 and 2001, respectively. MRS
Equity Corp. provided Whitney Information Network, Inc. with $136,650 and
$187,500 for product costs for the three months ended March 31, 2002 and 2001,
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.
Precision Software Services, Inc. (PSS) is a company that develops and licenses
software primarily for the real estate and small business industries and was
acquired by the Company in 2001. The Chairman of the Board of Directors of
Whitney Information Network, Inc. owned a majority interest in PSS. During the
three months ended March 31, 2001, PSS provided Whitney Information Network, Inc.
$102,500 in product cost. 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 for the three months ended March 31, 2001.
Whitney Information Network, Inc. provided payroll services to Whitney Leadership
Group, Inc. in the amount or $0 and $16,954 for the three months ended March 31,
2002 and 2001, respectively. During 2002 and 2001, Whitney Information Network
made payments of $49,999 and $62,134, respectively, 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 Fiduciary Corp. During 2002 and 2001, Whitney Information Network, Inc.
paid $121,115 and $127,991, respectively, in commission payments to United States
Fiduciary Corp.
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.
The following balances are due from (to) related parties:
March 31, December 31,
2002 2001
------------ ------------
(Unaudited)
Due from Whitney Leadership Group $ 315,443 $ 232,126
Due from RAW, Inc. 55,835 9,071
Due to Trade Marketing, Inc. (16,000) (16,000)
Due to MRS Equity Corp (109,725) (65,606)
------------ ------------
$ 245,553 $ 159,591
============ ===========
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, 2002 and December 31, 2001, the Company has net operating loss
(NOL) carryforwards for tax purposes of approximately $1,865,000 and $168,000,
respectively, which expire in the years 2002 through 2022.
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,
2002 2001
------------ ------------
(Unaudited)
Deferred tax asset from NOL carryforward $ 696,000 $ 62,500
Deferred tax asset (liability) from deferred
expense/revenue recognition 1,283,000 3,041,000
------------ ------------
Total deferred tax assets 1,979,000 3,103,500
Valuation allowance for deferred tax assets (1,979,000) (3,103,500)
------------ ------------
Net deferred tax asset $ - $ -
============ ============
Note 5 - Subsequent Event
In April 2002, the Board of Directors authorized the issuance of 591,250 stock
options to employees at an exercise price of $1.81, which was equal to market
value. The Board also approved the conversion of 187,500 Class A warrants to
stock options at an exercise price of $2.00.
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, 2002 was $15,453,018, an
increase of $4,219,340 or 37.6% compared to the same period in 2001 of $11,233,678. 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, 2002, was
$3,074,267, an increase of $227,137 or 8% compared to the same period in 2001. The increase
in Advertising and Sales expense is due to a slight increase in media buys.
General and Administrative expenses increased to $2,951,493 an increase of $1,015,997, or
52.6% over the comparable period in 2001 of $1,935,496. This increase is due primarily to
increased personnel hired in the last half of 2001 to handle the increase in the Company's
volume and management bonuses issued for the first quarter of 2002, which approximated
$640,000.
Seminar expenses increased proportionately in comparison with the increase in sales for the
first quarter of 2002 to $6,148,203 an increase of $1,703,468 or 38.3% over the prior
comparable period in 2001. This increase is consistent with the increase in sales.
Net Income for the three months ending March 31, 2002 was $3,371,041 as compared with a net
income of $1,958,617 for the three months ending March 31, 2001, an increase of $1,412,424
or 71.9% or $.43 per share as compared to $.26 per share for the prior period. The increase
is directly attributable to increased sales in 2002 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, 2002 and 2001 was $3,474,777 and $2,066,301 respectively.
EBITDA is defined as net income (loss) before income taxes, and interest, plus depreciation
and amortization. Net income per share was $.44 for the three months ending March 31, 2002
as compared to a net income $.27 per share for the prior year period ending March 31, 2001.
More than 24,000 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, became
profitable this quarter. The Company expects the Internet division to become a mainstay
division promoting the Company and its products. We have been test marketing training and
product sales on the Internet in the last half of 2001 and are realizing those efforts in
the current 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
$4,597,947 to $11,487,222, an increase of 67% over the previous comparable period in 2001.
The Company's cash provided by operating activities was $5.00 million and $1.45 million for
the three months ended March 31, 2002 and 2001, 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 (used in) provided by investing activities was $(366,227) and $94,960 for
the three months ended March 31, 2002 and 2001, respectively. The Company's investing
activities for the three months ended March 31, 2002 and 2001 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, 2002 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:_____________ 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 ___, 2002
Russell A. Whitney
/s/Richard W. Brevoort President and Director May ___, 2002
Richard W. Brevoort
/s/Richard S. Simon Secretary/Treasurer/Chief May ___, 2002
Richard S. Simon Financial Officer/
Principal Accounting Officer
and Director