SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q/A

 

Quarterly Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

For the Quarter Ended June 30, 2002

 

Whitney Information Network, Inc.

(Exact name of registrant as specified in its charter)

 

 

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  ý     No  o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes  o  No  ý

 

The Issuer had 7,878,023 common shares of common stock outstanding as of June 30, 2002 and December 31, 2001.

 

 

PART I

 

Item 1. Financial Statements
Whitney Information Network, Inc.
Consolidated Financial Statements
As of June 30, 2002 and December 31, 2001
And for the Six Months Ended June 30, 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

 

		June 30,			December 31,
		2002			2001
		(Unaudited)
Assets
Current assets
Cash and cash equivalents		$	12,619,019		$	6,889,275
Accounts receivable		1,075,664			525,878
Due from affiliates, net		185,978			159,591
Prepaid advertising and other		329,286			953,661
Income taxes receivable and prepayments		170,999			497,499
Inventory		361,108			136,544
Deferred seminar expenses		3,172,822			3,638,556
Total current assets		17,914,876			12,801,004
Other assets
Property and equipment, net		4,775,808			3,628,447
Note receivable		165,030			—
Investment in foreign corporation		82,500			82,500
Other assets		34,373			32,918
Total other assets		5,057,711			3,743,865
Total assets		$	22,972,587		$	16,544,869
Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable		$	740,959		$	1,152,337
Accrued seminar expenses		497,194			435,360
Deferred revenues		23,110,730			23,937,349
Accrued expenses		2,240,795			702,548
Current portion of long-term debt		27,826			62,500
Current portion of note payable-officer/stockholder		27,826			62,500
Total current liabilities		26,645,330			26,352,594
Long-term debt, less current portion		512,500			512,500
Note payable-officer/stockholder		62,500			62,500
Total liabilities		27,220,330			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		(4,585,745		)	(10,720,727		)
Total stockholders’ deficit		(4,247,743		)	(10,382,725		)
Total liabilities and stockholders’ deficit		$	22,972,587		$	16,544,869

 

See notes to consolidated financial statements.

 

F-1

 

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

 

Consolidated Statements of Operations

 

		For the Three Months Ended June 30,						For the Six Months Ended June 30,
		2002			2001			2002			2001
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Sales		$	17,535,080		$	11,950,654		$	32,988,098		$	23,184,332
Expenses
Seminar expenses		6,178,397			5,517,334			12,326,600			9,962,069
Advertising and sales expense		4,444,758			3,638,757			7,519,025			6,485,887
General and administrative expense		2,871,039			1,959,442			5,822,532			3,894,938
Total expenses		13,494,194			11,115,533			25,668,157			20,342,894
Income from operations		4,040,886			835,121			7,319,941			2,841,438
Other income (expense)
Interest and other income		(11,146		)	85,806			92,447			38,106
Interest expense		(26,249		)	—			(37,856		)	—
Income before income taxes		4,003,491			920,927			7,374,532			2,879,544
Income taxes		(1,239,550		)	—			(1,239,550		)	—
Net income		$	2,763,941		$	920,927		$	6,134,982		$	2,879,544
Basic weighted average shares outstanding		7,878,023			7,528,022			7,878,023			7,528,022
Basic income per share		$	0.35		$	.12		$	0.78		$	.38
Diluted weighted average common shares outstanding		8,948,565			7,528,022			8,948,565			7,528,022
Diluted income per common share		$	.31		$	.12		$	.69		$	.38

 

See notes to consolidated financial statements.

 

F-2

 

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

 

Consolidated Statements of Cash Flows

 

		For the Six Months Ended June 30,
		2002			2001
		(Unaudited)			(Unaudited)
Cash flows from operating activities
Net income		$	6,134,982		$	2,879,544
Adjustments to reconcile net income to net cash
provided by operating activities
Allowance for doubtful accounts		—			32,660
Depreciation and amortization		186,965			124,104
(Gain) loss of disposal of fixed assets		(11,487		)	41,410
Changes in assets and liabilities
Accounts receivable		(549,786		)	(1,230,232		)
Prepaid advertising and other		624,375			(432,838		)
Income tax receivable and payments		326,500			—
Inventory		(224,564		)	104,057
Deferred seminar expenses		465,734			(586,200		)
Other assets		(1,455		)	61,879
Accounts payable		(411,378		)	(1,406,575		)
Accrued seminar expense		61,834			59,148
Deferred revenues		(826,619		)	2,520,078
Other liabilities		1,538,247			653,027
		1,178,366			(59,482		)
Net cash provided by operating activities		7,313,348			2,820,062
Cash flows from investing activities
Purchases of property and equipment		(1,322,839		)	(90,278		)
Notes receivable from investment		(165,030		)	—
Loans (to) from affiliates, net		(26,387		)	(88,585		)
Net cash used by investing activities		(1,514,256		)	(178,863		)
Cash flows from financing activities
Payments on long-term debt		(34,674		)	—
Payments on note payable - officer/stockholder		(34,674		)	—
Net cash used by financing activities		(69,348		)	—
Net increase in cash and cash equivalents		5,729,744			2,641,199
Cash and cash equivalents, beginning of year		6,889,275			3,316,905
Cash and cash equivalents, end of period		$	12,619,019		$	5,958,104
Supplemental cash flow information:
Cash paid for income taxes was $0 for the six months ended June 30, 2002 and 2001, respectively.
Cash paid for interest was $38,000 and $54,000 for the six months ended June 30, 2002 and 2001, respectively.

 

See notes to consolidated financial statements.

 

F-3

 

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 six months ended June 30, 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 one of its locations 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 $36,922 for the six months ended June 30, 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 $72,522 and $71,197 for the six months ended June 30, 2002 and 2001, respectively. MRS Equity Corp. provided Whitney Information Network, Inc. with $389,350 and $367,950 for product costs for the six months ended June 30, 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. owned a controlling interest prior to June 2002. In June 2002, an officer of the Company purchased the Chairman of the Board’s 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 six months ended June 30, 2001, PSS provided Whitney Information Network, Inc. $202,500 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 $72,066 for the six months ended June 30, 2001.

 

Whitney Information Network, Inc. provided payroll services to Whitney Leadership Group, Inc. in the amount of $14,204 and $33,986 for the six months ended June 30, 2002 and 2001, respectively. During 2002 and 2001, Whitney Information Network made payments of $128,312 and $117,970, 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.

 

F-4

 

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:

 

		June 30,			December 31,
		2002			2001
		(Unaudited)
Due from Whitney Leadership Group		$	375,360		$	232,126
Due from RAW, Inc.		6,215			9,071
Due to Trade Marketing, Inc.		(16,000		)	(16,000		)
Due to MRS Equity Corp		(179,597		)	(65,606		)
		$	185,978		$	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.

 

F-5

 

Note 4 - Income Taxes

 

As of June 30, 2002 and December 31, 2001, the Company has net operating loss (NOL) carryforwards for tax purposes of approximately $0 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:

 

		June 30,			December 31,
		2002			2001
		(Unaudited)
Deferred tax asset from NOL carryforward		$	—		$	62,500
Deferred tax (liability) asset from deferred expense/revenue recognition		(1,007,000		)	3,041,000
Total deferred tax (liability) asset		(1,007,000		)	3,103,500
Valuation allowance for deferred tax asset		—			(3,103,500		)
Net deferred tax liability		$	(1,007,000	)	$	—

 

Note 5 - Stockholders’ Equity

 

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.

 

F-6

 

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, 2002 was $32,988,098, an increase of $9,803,766 or 42% compared to the same period in 2001 of $23,184,332. Revenues for the three months ending June 30, 2002 were $17,535,080, an increase of $5,584,426 over the prior quarter ending June 30, 2001 of $11,950,654. The combination of the increase in advance training courses held, higher registrations, and co-marketing efforts via strategic alliances with other educational training companies contributed to the increase above. In addition, during the three months ending June 30, 2002, the Company recognized approximately $4,500,000 on contracts with customers entered into prior to June 1, 2001. A large portion of this revenue was recognized because the customer’s contract period had expired and the Company changed its refund policies. Due to minor changes in the Company’s contract terms with its customers and its refund policies, quarterly revenue levels may not be indicative of the Company’s performance going forward.

 

Advertising and Sales Expense: Advertising and sales expense, of which advertising represents approximately 60% of the expenses for the six months ended June 30, 2002, was $7,519,025, an increase of $1,033,138 or 16% compared to the same period in 2001. The increase in advertising and sales expense for the quarter ending June 30, 2002 was $806,001 or 22% resulting in advertising and sales expense for the quarter of $4,444,758. The increase in advertising and sales expense is due to increased media buying, and new marketing programs entering the market in the second quarter of this year.

 

General and administrative expenses consist primarily of payroll related expenses, insurances office and facility expenses, and depreciation expenses.

 

General and Administrative expenses increased to $5,822,532, an increase of $1,927,594 or 49% over the comparable period in 2001 of $3,894,938. The increase in general and administrative expenses to $2,871,039 for the quarter ended June 30, 2002 from $1,959,442 for the quarter ending June 30, 2001 was $911,957 or 47%. This increase is due primarily to increased personnel hired to handle the increase in the Company’s volume.

 

Seminar expenses increased disproportionately in comparison with the increase in sales for the first six months of 2002 to $12,326,600 an increase of $2,364,531 or 24% over the prior comparable period in 2001 and to $,6,178,397 for the quarter ending June 30, 2002 an increase of 12% over the comparable period in 2001. This was due primarily to a slight change in the product mix in addition to the revenue realized due to the expiration of contracts as described above.

 

Net Income for the six months ending June 30, 2002 was $6,134,982 as compared with net income of $2,879,544 for the six months ending June 30, 2001, an increase of $3,255,438 or 113% or $.78 per share as compared to $.38 per share for the prior period. Net Income for the three months ending June 30, 2002 was $2,763,941 as compared with net income of $920,927 for the three months ending June 30, 2001, an increase of $1,843,014 or 200% or $.35 per share as compared to $.12 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 increase 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 to be effective.

 

 

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 $6,660,915 to $12,619,019, an increase of 112% over the previous comparable period in 2001 and an increase of $1,131,797 or 10% 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 $7.31 million and $2.82 million for the six months ended June 30, 2002 and 2001, respectively. In the first half of 2002, 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 $1,514,256 and $178,863 for the six months ended June 30, 2002 and 2001, respectively. The Company’s investing activities for the three months ended June 30, 2002 and 2001 were primarily attributable to the purchase of property and equipment.

 

FORWARD-LOOKING STATEMENTS

 

Certain information included in this report contains forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995 (“Reform Act”). Such statements are based on current expectations and involve a number of known and unknown risks and uncertainties that could cause the actual results and performance of the Company to differ materially from any expected future results or performance, expressed or implied, by the forward-looking statements. In connection with the safe harbor provisions of the reform act, the Company has identified important factors that could cause actual results to differ materially from such expectations, including operating uncertainty, acquisition uncertainty, uncertainties relating to economic and political conditions and uncertainties regarding the impact of regulations, changes in government policy and competition. Reference is made to all of the Company’s SEC filings, including the Company’s Report on Form 10SB, incorporated herein by reference, for a description of certain risk factors. The Company assumes no responsibility to update forward-looking information contained herein.

 

Item 4. CONTROLS AND PROCEDURES

 

Controls and Procedures

 

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report. Based on such evaluation, such officers have concluded that, as of June 30, 2002, our disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to our Company (including our consolidated subsidiaries) required to be included in our reports filed or submitted under the Exchange Act.

 

During the period covered by this report, there have not been any changes in our internal controls that have materially affected or are reasonably likely to materially affect, our internal controls over financial reporting.

 

 

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, 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.

 

(a)
	Exhibit No.		Description
	31.1		Certification of Periodic Report-Chief Executive Officer
	31.2		Certification of Periodic Report-Chief Financial Officer
	32.1		Certification of Periodic Report-Chief Executive Officer
	32.2		Certification of Periodic Report-Chief Financial Officer

 

(b)                                 Reports on Form 8-K

 

No reports were filed on Form 8-K during the quarter ended June 30, 2002

 

 

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: June 2, 2004	By:	/s/ RUSSELL A. WHITNEY
		Russell A. Whitney
		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/President/Director		June 2, 2004
Russell A. Whitney
/s/ RONALD S. SIMON		Secretary/Treasurer/Chief Financial Officer/Principal Accounting Officer and Director		June 2, 2004
Ronald S. Simon