Edgar Filing: WHITNEY INFORMATION NETWORK INC

WHITNEY INFORMATION NETWORK, INC.

Dated: September 5, 2003

/s/ RICHARD W. BREVOORT

Richard W. Brevoort

President

Amendment to Form 10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

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

Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2001

Whitney Information Network, Inc.

(Exact name of registrant as specified in its charter)

Colorado

(State or other

jurisdiction of incorporation)

0-27403

(Commission

File Number)

84-1475486

(IRS Employer

Identification No.)

4818 Coronado Parkway,

Cape Coral, Florida

(Address of principal executive offices)

33904

(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 ¨

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will be contained, to the best of the Issuer’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

The Issuer’s revenues for the fiscal year ended December 31, 2001, were $42,157,740. The aggregate market value of the voting and non-voting common stock held by non-affiliates of the Issuer, computed by reference to the closing sale price of such common stock as quoted on the OTCBB as of March 28, 2002 was about $ 1,372,000. (Aggregate market value has been estimated solely for the purpose of this report. For the purpose of this report it has been assumed that all officers and directors are affiliates of the Registrant. The statements made herein shall not be construed as an admission for the purposes of determining the affiliate status of any person.)

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

Documents incorporated by reference: See ITEM 13—EXHIBITS AND REPORTS ON FORM 8-K

PART I

ITEM 1.

BUSINESS

History

Whitney Information Network, Inc. (the “Company”) was incorporated in Colorado on February 23, 1996 as Gimmel Enterprises, Inc. On August 18, 1998, the Company acquired all of the issued and outstanding shares of common stock of Whitney Education Group, Inc. (“WEG”), a Florida corporation, organized on November 12, 1992 and WEG became a wholly owned subsidiary of the Company. On August 10, 1998, the Company changed its name to WIN Systems International, Inc. and on February 11, 1999, the Company changed its name to Whitney Information Network, Inc.

General

Since 1994, the Company has been a leading provider of educational and training courses for students throughout the United States and more recently in Canada, the United Kingdom and Central America. These courses provide instruction on real estate investing, business strategies, stock market investment techniques, entering international business markets, cash management and asset protection.

Initially, the Company focused on basic and advanced real estate training programs. Although U.S. based real estate training represents the largest educational segment of the Company’s business, involving the training of over 12,000 students each month, the Company has gradually expanded its course offerings and its markets.

Currently, the Company offers an average of 150 educational courses and training programs per month covering 22 subjects to students in the United States, Canada, the United Kingdom and Central America. Training is offered in the U.S. and internationally in meeting facilities and conference centers, at the Company’s 11 regional training centers, and at the Company’s 11,000 square foot national training facility in Cape Coral, Florida. The Company is also completing the construction of a 7,000 square foot training facility and conference center in Central America.

The Company supports it educational training by providing its students with a series of outlines, magazines, books, cassette tapes, CDs, Web-based interactive discussions and learning tools and software programs. Currently, the Company offers over 25 educational publications and software packages, which are distributed to students registered in the Company’s educational programs and sold directly to the public.

Students are recruited by attending a free informational training session related to a specific educational subject. The subject, date and location of these training programs are advertised in local newspapers, in radio and television advertisements and through direct mailings and telemarketing. The Company employs over 45 trainers who educate over 15,000 students per year.

Following the initial training session, students interested in learning more on the lecture subject may subscribe to the Company’s periodic publications, purchase books or software programs or attend advanced training courses. In addition to its over 45 resource publications, the Company offers from

three to five day advanced training programs. These advanced training programs are held at the Company’s 11 regional training centers located in hotels or other temporarily rented facilities, at training centers in Canada, the United Kingdom and Central America and at the Company’s national training center located in Cape Coral, Florida. The Company also provides post training programs conducted by over 30 Company mentors who do not have any educational or other qualifications, other than training by the Company who travel to the student’s hometown for “hands on” business training. Substantially all of the Company’s revenue is generated from domestic sales. Approximately 80% of the Company’s revenue is derived from its various real estate training courses, which include leveraged residential and commercial real estate acquisition, real estate financing techniques, the use of purchase/lease options, property management and real estate foreclosure techniques. The balance of the Company’s revenue is divided between courses offering other business strategies, such as stock market strategies, options trading, asset protection, acquisition of commercial properties, creative financing techniques, international finance and other topical business subjects.

The Company conducts its operations through 14 U.S. based and foreign corporate subsidiaries. In recent years the Company has expanded its course offerings and its marketing areas, which has resulted in significant revenue and earnings growth. The Company’s strategy is to continue its leadership in for-profit educational services by adding new educational courses, continuing to increase its number of course offerings and by further expanding its educational products internationally. Additional emphases will also be placed upon the direct sale of educational products and reference materials through media and direct mail advertisements as well as through the Company’s Web sites. The Company is accredited as a proprietary school in Texas and may seek similar academic and educational accreditation in other states and foreign countries. The Company does not compete with companies that offer undergraduate or advanced degrees or continuing education programs.

The for-profit education industry is extremely varied in scope and intensely competitive. In a broad sense, the Company competes with post-secondary education companies that offer technical and industrial training and career training, as well as courses leading to undergraduate and advanced degrees. More specifically, the Company competes with a number of other companies that offer training on specific business subjects including real estate and stock market investing. Generally, competitive factors within the proprietary educational market include the range and depth of course offerings, the quality of teachers and trainers, the quality of reference materials provided in connection with course studies and the cost of the educational process. The Company believes that the range and depth of its course offerings and the “Whitney” brand name offer it competitive advantages over most of its competitors. The Company also believes that it competes favorably with respect to the remaining competitive factors.

The Company employs over 160 full time employees.

ITEM 2.

PROPERTIES

The Company leases office space from Russ Whitney, Chief Executive Officer and Chairman of the Board of Directors, pursuant to the terms of a three-year lease, which commenced on September 1, 1999 and terminates on October 31, 2002 with a monthly rental payment of $5,805. Russ Whitney is the President of the Company and a member of its Board of Directors. The terms of the lease are no less favorable as can be obtained from independent third parties.

Whitney Consulting Services, Inc. leases 6,840 square feet of office space from Draper Business Park L.C. at Suite 230, Building #7, 12244 South Business Park Drive, Draper, Utah pursuant to a written lease agreement. The term of the lease is from November 1, 2001 to October 31, 2006. The aggregate monthly rental is $6,128 per month.

Whitney Canada, Inc. leases an office building at Unit 20, 3780-14^th Avenue, Ontario, Canada, pursuant to a written lease agreement. The term of the lease is from May 1, 2000 to April 30, 2003. The monthly rental is $1,081 for the first year and $1,654 for the second in Canadian dollars.

Cape Coral Parkway Land Trust owns an office building at 1612 E. Cape Coral, Cape Coral, FL. The Company has been leasing space to two tenants pursuant to written lease agreements. One of the leases expires in 2005 and the other lease was cancelled as of March 1, 2002. The Company will occupy the vacated premises in 2002.

ITEM 3.

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 4.

SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders, through the solicitation of proxies or otherwise.

PART II

ITEM 5.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company’s shares are traded on the Bulletin Board operated by the National Association of Securities Dealers, Inc. (the ‘Bulletin Board’) under the trading symbol ‘RUSS.’ The Company’s shares began trading in August 1998. These quotations reflected inter-dealer prices, without retail mark-up, markdown or commissions and may not represent actual transactions. Summary trading by quarter for the 2001, 2000 and 1999 fiscal years are as follows:

	High Ask		Low Bid
Fiscal quarter 2001
Fourth Quarter	$	1.85	$	1.50
Third Quarter	$	2.95	$	1.65
Second Quarter	$	1.90	$	1.05
First Quarter	$	2.00	$	95
Fiscal quarter 2000
Fourth Quarter	$	1.25	$	1.00
Third Quarter	$	1.25	$	1.05
Second Quarter	$	4.00	$	3.25
First Quarter	$	3.87	$	3.50
Fiscal quarter 1999
Fourth Quarter	$	2.50	$	1.88
Third Quarter	$	2.00	$	1.44
Second Quarter	$	2.00	$	1.87
First Quarter	$	2.00	$	1.75

The source for the foregoing high and low bid information was Michael Kirby a registered representative of Spencer Edwards, Inc. a market maker in the Company’s common stock and from Big Charts.com on the Internet.

As of December 31, 2001, the Company had 172 holders of record of its Common Stock.

The Company has not paid any dividends since its inception and does not anticipate paying any dividends on its Common Stock in the foreseeable future.

RECENT SALES OF UNREGISTERED SECURITIES

The Company has 7,878,023 shares of Common Stock issued and outstanding as of December 31, 2001. Of the shares of the Company’s Common Stock outstanding, 750,023 shares are freely tradable and 7,128,000 shares can only be resold in compliance with Reg. 144 adopted under the Securities Act of 1933 (the ‘Act’).

In general, under Rule 144 as currently in effect, a person (or persons whose Shares are aggregated) who has beneficially owned Shares privately acquired directly or indirectly from the Company or from an affiliate, for at least one year, or who is an affiliate, is entitled to sell within any three month period a number of such Shares that does not exceed the greater of 1% of the then outstanding shares of the Company’s Common Stock or the average weekly trading volume in the Company’s Common Stock during the four calendar weeks, immediately preceding such sale. Sales under Rule 144 are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about the Company. A person (or persons whose Shares are aggregated) who is not deemed to have been an affiliate at any time during the 90 day preceding a sale, and who has beneficially owned Restricted Shares for at least two years, is entitled to sell all such Shares under Rule 144 without regard to the volume limitations, current public information requirements, manner of sale provisions or notice requirements.

In 1996, the Company issued 976,200 shares of common stock to its officers, directors and others pursuant to Reg. 504 of the Securities Act of 1933.

On or about August 18, 1998, the Company reverse split its shares of common stock on a 1-for-1.3016 basis.

On or about August 18, 1998, the Company issued 93,750 Class A Warrants to Earnest Mathis, Jr. in consideration of $100.00 and 93,750 Class A Warrants to Gary Agron in consideration of $100.00. Mathis and Agron are former directors of the Company. The Class A Warrants were issued pursuant to Section 4(2) of the Securities Act of 1933 (the ‘Act’) and are deemed ‘restricted’ securities as that term is defined in Reg. 144 of the Act. As of the date hereof, Messrs. Mathis and Agron have not exercised any of the foregoing Class A Warrants. For a description of the Class A Warrants, see ‘Description of Securities.’

On August 18, 1998, the Company acquired all of the issued and outstanding shares of common stock of Win Systems, Inc., a corporation controlled by Russell Whitney, the Company’s Chief Executive Officer and Chairman of the Board of Directors in consideration of 6,750,000 shares of the Company’s common stock and 340,000 Class B Warrant entitling the holders thereof to acquire an additional 340,000 shares of the Company’s common stock at an exercise price of $4.00 per share up to August 18, 2002. The shares of common stock and warrants were issued pursuant to Section 4(2) of the Securities Act of 1933. For a description of the Class B Warrants, see ‘Description of Securities.’

On February 1, 1999, the Company issued 20,000 shares of its common stock in exchange for all 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 shares at $2.00 on May 31, 1999; and 2,000 shares at $1.875 on June 30, 1999; and 2,000 at $1.75 on July 31, 1999; and 2,000 shares on August 31, 1999 at $1.625 per share). The issuances of the foregoing shares were exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) of the Act.

On April 24, 2000, the Company converted their 340,000 class B warrants to stock options. The exercise price of the warrants was changed from $4 to $2 in this transaction. This transaction has since been accounted for using variable accounting in accordance with FIN44.

On or about November 1, 2001 the Company acquired 100% of the outstanding shares of Precision Software Services, Inc. (which Russ Whitney, CEO and director owned 51% of the issued and outstanding shares). The Company issued 333,334 shares of its common stock, valued at $1.50 in exchange for the stock of Precision Software Services, Inc. (PSS) Mr. Whitney received 170,000 shares and an employee/shareholder of PSS received the remaining shares in the exchange.

Also, 16,667 shares (valued at $1.50) were issued to an instructor/trainer of the Company for services on or about November 1, 2001.

ITEM 6.

SELECTED FINANCIAL DATA (FOR 2001, 2000, 1999, 1998)

The following table sets forth our consolidated selected financial data as of and for the five year period ended December 31, 2002. The data for the five years has been derived from our consolidated financial statements, which have been audited by Ehrhardt, Keefe, Steiner and Hottman, PC for 2000, 2001 and 2002 and Larry Legel CPA, for 1998 and 1999, independent certified public auditors, and which appear elsewhere in this prospectus. The following selected consolidated financial data should be read in conjunction with the consolidated financial statements and the notes thereto.

	Year Ended December 31,
	2001			2000			1999			1998			1997
Operating revenue	$	42,157,740		$	32,859,857		$	26,775,589		$	13,760,208
Profit (loss) from continuing operations	$	2,534,247		$	(8,703,127	)	$	(1,962,266	)	$	(2,238,307	)
Profit (loss) from continuing operations per share	$	.33		$	(1.16	)	$	(.26	)	$	(.30	)
Total assets	$	16,626,475		$	13,654,597		$	6,284,403		$	2,327,228
Long-term obligations	$	575,000		$	1,200,000		$	––		$	64,979
Stockholders’ (deficit) equity	$	(10,382,725	)	$	(12,936,972	)	$	4,233,845		$	2,336,079
Cash flow from operations	$	5,276,500		$	3,545,361		$	1,250,950		$	619,468

ITEM 7.

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.

FORWARD-LOOKING STATEMENTS

This Form 10-K contains forward-looking statements within the meaning of the ‘safe harbor’ provisions under section 21E of the Securities and Exchange Act of 1934 and the Private Securities Litigation Act of 1995. The Company uses forward-looking statements in its description of its plans and objectives for future operations and assumptions underlying these plans and objectives. Forward-looking terminology includes the words ‘may’, ‘expects’, ‘believes’, ‘anticipates’, ‘intends’, ‘forecasts’, ‘projects’, or similar terms, variations of such terms or the negative of such terms. These forward-looking statements are based on management’s current expectations and are subject to factors and uncertainties which could cause actual results to differ materially from those described in such forward-looking statements. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this Form 10-K to reflect any change in its expectations or any changes in events, conditions or circumstances on which any forward-looking statement is based. Factors which could cause such results to differ materially from those described in the forward-looking statements include those set forth under ‘Risk Factors,’ and elsewhere, in or incorporated by reference into this Form 10-K.

OVERVIEW

The following discussion of our financial condition and results of operations for the periods indicated should be read in conjunction with our financial statements, the notes related thereto and the other financial data included elsewhere in this Report.

Critical Accounting Policies

We are engaged primarily in the business of providing financial education through training courses, which we also refer to as “programs” and through educational resource materials.

Historically, approximately 80% of our revenue has been derived from our various real estate training courses. We record revenue from these courses and other training programs when both the course fees have been received and the earlier of the student’s attendance at the training program or the expiration of our obligation to provide training. We record deferred revenue when the training program proceeds are received in full prior to the time the related program takes place. Students pay for the courses in advance and the fees may be refundable in certain circumstances. We allow our students one year to complete their program.

Speaker fee commission payments for revenue generated are deferred until such time as the revenue is earned. We expense advertising costs as incurred. Advertising paid in advance is recorded as prepaid until such time as the advertisement is published.

Our business strategy involves geographically focused advertising which attracts potential students to a free training session which tells them about opportunities we offer. If students are interested, they may enter into a contract for future training. Historically, the amount of advertising we incur is directly related to the amount of revenue we generally earn in the form of course revenue. The revenue from the training courses can be recognized as much as one year after the initial advertising. From a financial reporting standpoint, this business model, coupled with the nature of our expenditures, will create increased losses, or reduced net income, in periods in which we accelerate our advertising expenditures in relation to prior periods and create income, or reduced losses, in periods in which we decrease our advertising expenditures in relation to prior periods.

From a balance sheet prospective, the liability, which we designate as “deferred revenue,” will increase in times of business growth and decrease in times of business contraction. Furthermore, since we generally receive cash in advance of providing the training, we must retain sufficient cash to pay both income taxes on future profits and final training costs. A significant decrease in the number of students completing our training courses on an ongoing basis will cause our deferred revenue to decrease and therefore increase our taxable income.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO DECEMBER 31, 2000

Revenue

Total revenue for the year ended December 31, 2001 was $42,200,000, an increase of $9,300,000 or 28% compared to the same period in 2000 of $32,900,000. Revenue earned from deferred revenue was $23,600,000 for the year ended December 31, 2001 compared to $11,300,000 for the comparable period in 2000. Of these amounts, $12,557,000 and $2,092,000 respectively, was recognized due to the expiration of a student’s contract period. The entire increase was due to increases in course attendance which is illustrated in the increase in revenue earned from deferred revenue.

Direct Course Expenses

There are two components of costs included in direct course expenses. The first component is variable and is consistent with the costs associated with revenues received. These costs include instructor fees, facility costs, and travel expenses. The second component relates to the costs associated with the initial free course that is provided. The introductory course is offered to provide information to the student about our products and services. There is no revenue associated with the initial course. The revenue that is generated relates to future courses that are purchased and attended at a later date. The costs relating to these initial courses then have a significant impact on the relationship between revenue and costs. In periods in which there is a significant amount of new initial courses, as compared to advanced courses, the percentage relationship between direct course expenses and revenue increases. In periods in which there are more advanced courses, as compared to initial courses, the percentage relationship between direct course expenses and revenue decreases.

Direct course expenses decreased to $19,500,000 for the year ended December 31, 2001 from $22,200,000 for the year ended December 31, 2000, due in part to a $3.4 million reduction in costs related to our internet division. Due to rapid advances in Internet technology, the lack of suitable web site designers, and lower than expected revenues, we ceased offering Internet courses in 2001. The decrease is also due to the decrease in the amount of courses that were held during the year ended December 31, 2001 of 600 compared to 728 in the comparable prior period and is also due to the increase in initial courses offered to 216 courses for the year ended December 31, 2001 compared to 290 courses for the comparable prior period.

Advertising, Selling and General and Administrative Expenses

Advertising, selling and general and administrative expenses increased for the year ended December 31, 2001 to approximately $20,300,000 from $19,600,000 in 2000. The increase in expenses and the corresponding increase in revenue for 2001 over 2000 reflect a general increase in business activity, our expansion into new markets and our development of new products. Separately, general and administrative expenses increased from $7,100,000 to $8,300,000 due to increased staffing and related expenses associated with our increased business activity.

Sales and marketing expenses consist primarily of television and newspaper advertising, direct mailings, travel, public relations, trade shows, preparation of marketing literature and overhead allocations. General and administrative expenses consist primarily of salaries and other personnel-related expenses for our administrative, executive and finance personnel as well as outside legal and auditing costs.

Net Income

Net income of $2,500,000 or $1.49 per share for the year ended December 31, 2001 increased by $11,200,000 over the net loss for the year ended December 31, 2000 of $8,700,000, or $1.16 per share.

After continued losses in the Internet division, we terminated our outside training operations in 2001 but continued to maintain Web site operations and sales in that division. We also decided during 2001, after a test period, not to proceed with our Building Wealth Centers in Georgia and Mississippi, due to unacceptable returns and higher than anticipated fixed costs.

Liquidity and Capital Resources at December 31, 2001

At December 31, 2001, we had cash of $6,900,000 as compared with $3,300,000 at December 31, 2000. This increase of $3,600,000 was attributable primarily to cash provided by operations due to our net income reported for respective periods.

Our cash provided by operating activities was $5.2 million versus $3.5 million for the year ended December 31, 2001 and 2000, respectively. In the year ended December 31, 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.

Our cash used in investing activities was $829,000 and $1,500,000 for the year ended December 31, 2001 and 2000, respectively. Our investing activities for the years ended December 31, 2001 and 2000 were primarily attributed to the purchase of office property and equipment, $658,000 compared to $1,440,000 and related party transactions, $89,000 compared to $63,000, as described in the accompanying financial statements. We also used $875,000 during the year ended December 31, 2001 reducing our long term and officer/stockholder debt.

From time to time, we evaluate potential acquisitions of business products or technologies that complement our business. To the extent that resources are insufficient to fund future activities, we may need to raise additional funds. However, there can be no assurance that additional funding, if needed, will be available. If adequate funds are not available on acceptable terms, we may be unable to expand our business, develop or enhance our products and services, take advantage of future opportunities or respond to competitive pressures, any of which could have a material adverse effect on our business, operating results and financial condition.

We believe our cash resources are more than sufficient to fund our operation and growth plans for the next 12 months.

YEAR ENDED DECEMBER 31, 2000 COMPARED TO DECEMBER 31, 1999

Revenue

Revenue for the year ended December 31, 2000 increased to $32,900,000 from $26,800,000 for the year ended December 31, 1999, an increase of $6,100,000, or 23%. Total deferred revenue on the balance sheet was $22,600,000 and $9,300,000 at December 31, 2000 and 1999, respectively. Cost of sales increased to $22,200,000 for the year ended December 31, 2000 from $11,500,000 for the year ended December 31, 1999, an increase of 93%. The increase in cost of sales reflected the increase in revenue and the costs of our Internet division which generated only negligible revenues.

Advertising, Selling and General and Administrative Expenses

Advertising, selling and general and administrative expenses increased for the year ended December 31, 2000 to $19,600,000 from $17,200,000 in 1999. This increase in expenses and the corresponding increase in revenue for 2000 over 1999 reflects a general increase in business activity and the results of our plan to expand our business into new markets and develop new products. Separately, general and administrative expenses increased from $4,500,000 to $7,100,000 due to increased staffing and related expenses associated with our increased business activity.

Sales and marketing expenses consisted primarily of television and newspaper advertising, direct mailings, travel, public relations, trade shows and preparation of marketing literature and overhead allocations. General and administrative expenses consisted primarily of salaries and other personnel-related expenses for our administrative, executive and finance personnel as well as outside legal and auditing costs.

Net Loss

The net loss of $8,700,000 or $1.16 per share for the year ended December 31, 2000 increased by 343% over the net loss for the year ended December 31, 1999 of just under $2,000,000, or $.26 per share.

Losses before interest, taxes, depreciation and amortization for the years ended December 31, 2000 and 1999 were $8,533,194 and $1,923,999, respectively.

Seasonality and Fluctuations in Quarterly Operating Results

Our quarterly operating results have varied in the past and are expected to vary in the future as a result of a variety of factors, some of which are outside our control. Factors that may adversely affect our quarterly operating results include the demand for educational training, the timing of educational sessions and registrations, the mix of revenue from products and services and market acceptance for our products. Typically, our revenue is strongest in the first two quarters of the year and weakest in the fourth quarter.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Market risk generally represents the risk that losses may occur in the values of financial instruments as a result of movements in interest rates, foreign currency exchange rates and commodity prices. The Company does not have foreign currency exchange rate and commodity price market risk.

Interest Rate Risk – From time to time the Company temporarily invests its excess cash and restricted cash in interest-bearing securities issued by high-quality issuers. The Company’s management monitors risk exposure to monies invested in securities of its financial institutions. Due to the short time the investments are outstanding and their general liquidity, these instruments are classified as cash equivalents in the consolidated balance sheet and do not represent a material interest rate risk to the Company. The Company’s primary market risk exposure for changes in interest rates relates to the Company’s long-term debt obligations. The Company manages its exposure to changing interest rates principally through the use of a combination of fixed and floating rate debt. In addition, certain of the Company’s debt instruments have interest rate floors and ceilings.

Office Building

Whitney Information Network, Inc. entered into a purchase agreement on August 11, 2000 to purchase real property in Cape Coral, Florida known as the SunBank Building at 1612 E. Cape Coral Parkway at a purchase price of $2,200,000. The closing of this commercial office building took place on November 9, 2000. A deposit of $500,000 was made on August 11, 2000 and an additional down payment of $500,000 was paid at closing.

The Seller took back a $1,200,000 purchase money balloon payment mortgage due November 9, 2004, interest payable monthly at an initial rate of 9% per annum due on the first of each month. The interest rate of 9% is adjustable on a semi-annual basis by the amount of change, if any, in the prime rate charged by the Chase Manhattan Bank, New York, using the rate in effect each June 1st and each December 1st as the basis for the change. During the first three years of this mortgage, the interest rate shall not exceed 10% or fall below 8%. During the fourth year the interest shall not be less than 8.5%. Principal payments may be paid in whole or in part at any time without penalty.

Conference Center

The Company entered into an agreement to build an international conference center in Costa Rica at an approximate cost of $550,000 (including land and building). The 7,000 square foot conference center is expected be completed approximately the 3^rd quarter of 2002. Expenditures to December 31, 2001 were $105,562, with additional construction draws in February and March of 2002 of approximately $145,000.

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

ITEM 8.

FINANCIAL STATEMENTS

Table of Contents


		Page

Independent Auditors’ Reports		F-1

Consolidated Financial Statements

Consolidated Balance Sheets		F-3

Consolidated Statements of Income		F-4

Consolidated Statement of Changes in Stockholders’ Deficit		F-5

Consolidated Statements of Cash Flows		F-6

Notes to Consolidated Financial Statements		F-8

INDEPENDENT AUDITORS’ REPORT

Board of Directors and Stockholders

Whitney Information Network, Inc. and Subsidiaries

Cape Coral, Florida

We have audited the accompanying consolidated balance sheets of Whitney Information Network, Inc. and Subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the years then ended . These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Whitney Information Network, Inc. and Subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

EHRHARDT KEEFE STEINER & HOTTMAN PC

March 20, 2002

Denver, Colorado

LARRY LEGEL, CPA

Practice Concentrating in

Taxation and Securities

5100 N. Federal Highway, Suite 409

Ft. Lauderdale, FL 33308

(954) 493-8900 Office

(954) 493-8300 Fax

e-mail: LarryLegel@aol.com

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors of the

Whitney Information Network, Inc.

Cape Coral, FL 33907

I have audited the accompanying consolidated balance sheet of Whitney Information Network, Inc. (formerly WIN Systems, International, Inc.) as of December 31,1999, and the related statements of consolidated operations, changes in consolidated stockholders’ equity, and consolidated cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on these consolidated financial statements based on my audits.

I have conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.

In my opinion, the consolidated financial statements referred to above present fairly, the financial position of Whitney Information Network, Inc. as of December 31,1999, and the results of its consolidated operations and its consolidated cash flows for the year then ended, in conformity with generally accepted accounting principles consistently applied.

/S/ LARRY LEGEL

Larry Legel

Certified Public Accountant

January 19, 2001

Ft. Lauderdale, Florida

F-2

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

	December 31,
	2001			2000
Assets
Current assets
Cash and cash equivalents	$	6,889,275		$	3,316,905
Accounts receivable, net of allowance of $0 (2001) $91,885 (2000)		525,878			1,793,454
Due from affiliates, net		159,591			70,490
Prepaid advertising and other		953,661			625,028
Income taxes receivable and prepayments		497,499			1,893,999
Inventory		136,544			268,663
Deferred seminar expenses		3,638,556			2,644,404

Total current assets		12,801,004			10,612,943

Property and equipment, net		3,628,447			2,965,925
Investment in foreign corporation		82,500			—
Other assets		32,918			75,729

Total non-current assets		3,743,865			3,041,654

Total assets	$	16,544,869		$	13,654,597

Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable	$	1,152,337		$	1,942,804
Accrued seminar expenses		435,360			349,341
Deferred revenue		23,937,349			22,640,442
Accrued expenses		702,548			458,982
Current portion of long-term debt		62,500			—
Current portion of note payable—officer/stockholder		62,500			—

Total current liabilities		26,352,594			25,391,569
Long-term debt, less current portion		512,500			1,200,000
Note payable—officer/stockholder, less current portion		62,500			—

Total liabilities		26,927,594			26,591,569

Commitments and contingencies
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, issued and outstanding shares 7,878,023 (2001) and 7,528,022 (2000)		337,102			67,102
Paid-in capital		900			900
Accumulated deficit		(10,720,727	)		(13,004,974	)

Total stockholders’ deficit		(10,382,725	)		(12,936,972	)

Total liabilities and stockholders’ deficit	$	16,544,869		$	13,654,597

See notes to consolidated financial statements.

F-3

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Consolidated Statements of Income

	For the Years Ended December 31,
	2001			2000			1999
Sales	$	42,157,740		$	32,859,857		$	26,775,589

Expenses
Seminar expenses		19,574,682			22,232,387			11,529,312
Advertising and sales expense		11,563,640			12,529,615			12,708,275
General and administrative expense		8,571,319			7,058,318			4,500,268

Total expenses		39,917,257			41,820,320			28,737,855

Income (loss) from operations		2,240,483			(8,960,463	)		(1,962,266	)

Other income (expense)
Interest and other income		356,989			267,344			—
Interest expense		(104,105	)		(10,008	)		—

		252,884			257,336			—

Net income (loss)	$	2,493,367		$	(8,703,127	)	$	(1,962,266	)

Basic weighted average common shares outstanding		8,509,274			7,528,022			7,502,346

Basic income (loss) per common share	$	.30		$	(1.16	)	$	(0.26	)

See notes to consolidated financial statements.

F-4

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Deficit

For the Years Ended December 31, 2001, 2000 and 1999

				Additional Paid-in Capital		Accumulated Deficit			Total Stockholders’ Deficit
	Common Stock
	Shares	Amount
Balance—December 31, 1998	7,500,047	$	2,602	$	900	$	(2,339,581	)	$	(2,336,079	)
Issuance of stock	27,975		64,500		—		—			64,500
Net loss	—		—		—		(1,962,266	)		(1,962,266	)

Balance—December 31, 1999	7,528,022		67,102		900		(4,301,847	)		(4,233,845	)
Net loss	—		—		—		(8,703,127	)		(8,703,127	)

Balance—December 31, 2000	7,528,022		67,102		900		(13,004,974	)		(12,936,972	)
Issuance of stock for software	163,334		245,000		—		—			245,000
Issuance of stock, cash and note payable to majority stockholder for interest in Precision Software Services, Inc.	170,000		—		—		(250,000	)		(250,000	)
Issuance of stock for services	16,667		25,000		—		—			25,000
Net income	—		—		—		2,534,247			2,534,247

Balance—December 31, 2001	7,878,023	$	337,102	$	900	$	(10,720,727	)	$	(10,382,725	)

See notes to consolidated financial statements.

F-5

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	For the Years Ended December 31,
	2001			2000			1999
Cash flows from operating activities
Net income (loss)	$	2,534,247		$	(8,703,127	)	$	(1,962,266	)

Adjustments to reconcile net income (loss) to net cash provided by operating activities
Allowance for doubtful accounts		(91,885	)		91,885			—
Depreciation and amortization		292,522			169,933			18,267
Loss on disposal of assets		72,485			—			—
Stock issued for services		25,000			—			—
Changes in assets and liabilities
Accounts receivable		1,359,461			(489,780	)		(415,296	)
Prepaid advertising and other		(328,633	)		44,079			(527,659	)
Income taxes receivable and prepayments		1,396,500			(925,867	)		(968,132	)
Inventory		132,119			(268,663	)		—
Deferred seminar expenses		(994,152	)		(1,283,078	)		(684,427	)
Other assets		42,811			36,658			(141,905	)
Accounts payable		(790,467	)		1,346,341			31,755
Accrued seminar expenses		86,019			101,481			247,860
Deferred revenue		1,296,907			13,328,868			5,353,330
Accrued expenses		243,566			96,631			299,423

		2,742,253			12,248,488			3,213,216

Net cash provided by operating activities		5,276,500			3,545,361			1,250,950

Cash flows from investing activities
Purchase of property and equipment		(657,529	)		(1,439,920	)		(278,540	)
Loans to affiliates, net		(89,101	)		(63,244	)		(120,345	)
Investment in foreign corporation and land		(82,500	)		—			—

Net cash used in investing activities		(829,130	)		(1,503,164	)		(398,885	)

Cash flows from financing activities
Proceeds from sale of common stock		—			—			64,500
Payments of principal on long-term debt		(750,000	)		—			—
Distribution to officer/stockholder		(125,000	)		—			—
Net repayments of loans from affiliates		—			—			(12,428	)

Net cash (used in) provided by financing activities		(875,000	)		—			52,072

Net increase in cash and cash equivalents		3,572,370			2,042,197			904,137
Cash and cash equivalents—beginning of year		3,316,905			1,274,708			370,571

Cash and cash equivalents—end of year	$	6,889,275		$	3,316,905		$	1,274,708

(Continued on following page.)

See notes to consolidated financial statements.

F-6

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Continued from previous page.)

Supplemental disclosure of cash flow information

Cash paid for income taxes was $0, $925,867 and $968,132 for 2001, 2000 and 1999, respectively.

Cash paid for interest was $104,105, $10,008 and $0 for 2001, 2000 and 1999, respectively.

Supplemental disclosure of non-cash activity:

During 2001, the Company acquired software rights of $370,000 through the issuance of common stock of $245,000 and debt of $125,000.

During 2001, the Company acquired software rights owned by an officer/shareholder through the issuance of stock at zero value and debt of $125,000. These transactions were recorded as distributions in the accompanying financial statements.

During 2000, a building was acquired through a mortgage note payable of $1,200,000.

During 2000, $168,715 of fixed assets were acquired, at net book value, from a related entity through related party advances.

See notes to consolidated financial statements.

F-7

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1—Description of Business and Summary of Significant Accounting Policies

Organization and History

Whitney Information Network, Inc. and Subsidiaries (the Company) is engaged primarily in the business of providing financial education and training services through seminars, workshops and publications. The Company’s educational and training services are concentrated in the area of financial management and real estate investment. The Company markets its services and products primarily through periodic publications, telemarketing, television and radio.

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 operation in the industry subsequent to the aforesaid exchange of shares and name change to Whitney Education Group, Inc.

Whitney Education Group, Inc. is licensed by the State of Texas as a Certified Proprietary School, effective January 8, 1999.

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 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. There are no significant differences on comprehensive income and foreign exchange.

Whitney Internet Services, Inc. incorporated in Wyoming on June 8, 1999, is located in Cape Coral, Florida and provides web programming and maintenance services to the Company. The Company’s other operating subsidiaries use the site to offer their products and services for sale and the site also includes general information on the Company, its products and services.

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. acquired the shares of Wealth Intelligence Network, 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.

F-8

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

Note 1—Description of Business and Summary of Significant Accounting Policies (continued)

Organization and History (continued)

Whitney Mortgage.com, Inc. incorporated in Florida on September 30, 1999 has no significant operations and is intended to operate as a full service internet mortgage broker affiliated with a national internet mortgage provider. Brokering mortgages represents an expansion from educational seminars into a different 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, Mississippi and Atlanta, Georgia. 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 was opened in June 2000. The Wealth Education Centers were closed during 2001.

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. which then changed its name 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 that markets training programs and financial training seminars and an individual one-on-one mentor program.

Precision Software Services, Inc. was acquired during 2001. Precision Software Services, Inc. was incorporated August 1993 and is a Florida corporation that holds a license to distribute and sell certain real estate and business software that several subsidiaries of the Company have been selling. Precision Software Services, Inc. was formerly owned 51% by the Chairman of the Board and majority stockholder of the Company.

Whitney U.K. Limited is a British corporation formed and incorporated in October 2001 to engage in educational and training seminars throughout the United Kingdom. This subsidiary had no significant operations in 2001.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Whitney Information Network, Inc. and the following wholly owned subsidiary corporations: Whitney Education Group, Inc.; Whitney Internet Services, Inc.; Russ Whitney’s Wealth Education Centers, Inc. and its wholly owned subsidiary corporations, Russ Whitney’s Wealth Education Center of Jackson, MS, Inc. and Russ Whitney’s Wealth Education Center of Atlanta, GA, Inc.; Whitney Consulting Services, Inc.; Whitney Canada, Inc.; Whitney Mortgage.com, Inc.; Wealth Intelligence Network, Inc.; Precision Software Services, Inc.; and Whitney U.K. Limited; All material intercompany accounts and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company continually monitors its positions with, and the credit quality of, the financial institutions it invests with.

F-9

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

Note 1—Description of Business and Summary of Significant Accounting Policies (continued)

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk consist principally of cash and short-term cash investments and accounts receivable. The Company places its temporary cash investments with what management believes are high-credit, quality financial institutions. As of the balance sheet date, and periodically throughout the year, the Company has maintained balances in various operating accounts in excess of federally insured limits. The Company periodically performs credit analysis and monitors the financial condition of its customers in order to minimize credit risk.

Accounts Receivable

Accounts receivable consists of trade receivables from the sale of educational seminars and services for which a contract has been entered into, payments has not been received, and the related revenue has been deferred. An adjustment is recorded to write off any amounts deemed to be unrealizable and uncollectible. Generally, this adjustment is applied to deferred revenue resulting in no net effect on the Company’s income statement. As such, the Company believes no allowance for doubtful accounts is necessary as of 2002 and 2001.

Inventory

Inventory consists primarily of books, videos and training materials and is stated at the lower of cost or market, determined using the first-in, first-out method (FIFO).

Fair Value of Financial Instruments

The carrying amounts of financial instruments including cash and cash equivalents, short-term investments, receivables, deferred seminar expense, accounts payable, accrued expenses, deferred educational revenues, and notes payable approximated fair value as of December 31, 2002 because of the relatively short maturity of these instruments.

Revenue Recognition, Deferred Revenue and Deferred Expenses

The Company recognizes revenue for the sale of products and software, upon delivery. Revenue from educational seminars and services is recognized upon the earlier of (1) when the non-refundable deposit is received for the seminars and the seminar has taken place; or (2) upon the contractual expiration of the Company’s obligation to provide a seminar only if the seminar was paid for. Deferred revenue is recorded when the seminar proceeds are received or a contract is entered into for a seminar prior to the related seminar taking place. Expenses for commission payments made to Company speakers for revenues generated are deferred until the related revenue is recognized.

Advertising Expense and Prepaid Advertising

The Company expenses advertising costs as incurred. Advertising costs were approximately $7,829,406, $7,340,540 and $4,696,000 for the years ended December 31, 2001, 2000 and 1999, respectively. Advertising paid for in advance is recorded as prepaid until such time as the advertisement is published. Advertising costs recorded as prepaid as of December 31, 2002 and 2001 were $733,227 and $467,737 respectively.

F-10

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

Note 1—Description of Business and Summary of Significant Accounting Policies (continued)

Property and Equipment

Property and equipment is stated at cost. Depreciation is provided utilizing the straight-line method over the estimated useful lives for owned assets. The estimated useful life of the buildings is 40 years. The furniture and fixtures’ estimated useful life is seven years, the airplane, equipment and leasehold improvements is five years, and the software is three years.

Intangible/Long-Lived Assets

Intangible/long-lived assets include customer lists, trademarks, and loan costs and are recorded at cost. Customer lists and trademarks are being amortized over their estimated useful lives of fifteen years. Loan costs are amortized over the term of the loan. The Company reviews its long-lived assets under SFAS No. 144 for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Company looks primarily to the undiscounted future cash flows in its assessment of whether or not long-lived assets have been impaired. At December 31, 2002, management performed impairment testing in accordance with SFAS 144 and determined that impairment was not considered necessary.

Investment in Foreign Corporation

The Company acquired a 20% ownership interest in a Central American corporation in 2001. The Company accounts for its investment using the equity method of accounting and records its proportionate share of the corporation’s profit or loss. The Company’s share of the corporation’s profits for the year ended December 31, 2002 was $102,257. Operations of the investee corporation were not significant in 2001.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Income Taxes

The Company recognizes deferred tax liabilities and assets based on the differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. The Company’s temporary differences result primarily from the recognition of deferred revenues and expenses for tax purposes.

Basic Income Loss Per Share

The Company applies the provisions of Statement of Financial Accounting Standard No. 128, “Earnings Per Share” (FAS 128). Prior to 2001, all dilutive potential common shares had an antidilutive effect on diluted per share amounts and therefore were excluded in determining net loss per share.

Note 12—Income Taxes (TAKEN FROM QUIZNO’S)

Basic Loss Per Share

The Company applies the provisions of Statement of Financial Accounting Standard No. 128, “Earnings Per Share” (FAS 128). All dilutive potential common shares have an antidilutive effect on diluted per share amounts and therefore have been excluded in determining net loss per share. The Company’s basic and diluted loss per share are equivalent and accordingly only basic loss per share has been presented.

Recently Issued Accounting Pronouncements

In July 2001, the FASB issued SFAS Nos. 141 and 142 “Business Combinations” and “Goodwill and other Intangible Assets”. Statement 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. Under the guidance of Statement 142, goodwill is no longer subject to amortization over its estimated useful life. Rather, goodwill will be subject to at least an annual assessment for impairment by applying a fair value base test. Statement 142 is effective for financial statement dates beginning after January 1, 2001.

F-11

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In August 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 requires the fair value of a liability for an asset retirement obligation to be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 is effective for the Company for fiscal years beginning after June 15, 2002. The Company believes the adoption of this statement will have no material impact on its consolidated financial statements.

In October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment of Disposal of Long-Lived Assets.” SFAS No. 144 requires that those long-lived assets be measured at the lower of carrying amount or fair value, less cost to sell, whether reported in continuing operations or discontinued operations. Therefore, discontinued operations will no longer be measured at net realizable value or included amounts for operating losses that have not yet occurred. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 and, generally, is to be applied prospectively.

Reclassifications

Certain amounts in the 2000 consolidated financial statements have been reclassified to conform to the 2001 presentation.

Note 2—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. (WIN). The financial statements from January 1, 1997 through December 31, 1999 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, WIN issued 187,500 Class A stock purchase warrants and 340,000 Class B stock purchase warrants. Both the Class A and Class B warrants were exercisable at $4.00 per share.

The Company also instituted 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 ten-year period after the grant with a three-year vesting schedule. The Company has reserved 2,000,000 shares for the stock option plan of which 1,406,175 option shares have been granted, net of forfeitures and cancellations, at exercise prices from $1.70 to $3.10 per share. No options have been exercised.

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 issued (during the period from May to August 1999) 7,975 shares to a financial public relations firm in lieu of cash for services valued at $14,500.

F-12

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In April 2000, the Company converted their 340,000 class B warrants issued to employees in August 1998 into stock options. In the conversion, the Company reduced the exercise price from $4 to $2 (fair market value at date of conversion). This transaction has since been accounted for using variable accounting in accordance with FIN 44: Accounting for Certain Transactions Involving Stock Compensation an Interpretation of APB Opinion No. 25 (FIN 44). At December 31, 2002, 136,500 of these options have been forfeited. At December 31, 2002, $447,700 was recorded as additional compensation expense to employees based on a market value of $4.20 per share. No adjustment was made for the periods ending December 31, 2001 and 2000 because the market price of the stock was less than the $2 exercise price.

In November 2001, the Company issued 333,334 shares of common stock valued at $500,000 and $250,000 in notes payable for all of the outstanding stock of Precision Software Services, Inc. which had a minimal net book value at the time of the acquisition. Precision Software Services, Inc. was 51% owned by the Chairman and majority stockholder of the Company who received 170,000 of the shares and $125,000 in notes payable. The excess of the purchase price over material, identifiable net assets relating to the minority interest was allocated to software rights. The shares issued to the officer were recorded as a distribution as the Company and Precision Software Services, Inc. are under common control.

In November 2001, the Company paid $212,500 for a 20% interest in a Central American corporation named Rancho Monterrey, S.A. which was formed in April 2001 to own, operate, improve and sell certain real estate in Central America. As part of the investment in Rancho Monterrey, S.A., the Company received a 12 acre parcel of land valued at $130,000, resulting in a net investment of $82,500. An entity affiliated with the majority stockholder of the Company purchased an additional 20% interest during 2001.

Note 3—Related Party Transactions

The following balances due from (to) related parties are as follows:

	December 31,
	2001			2000
Due from Whitney Leadership Group	$	232,126		$	160,587
Due from RAW, Inc.		9,071			11,743
Due to Precision Software Services, Inc.		—			(32,425	)
Due to Trade Marketing, Inc.		(16,000	)		—
Due to MRS Equity Corp		(65,606	)		(69,415	)

	$	159,591		$	70,490

The Company has rented its corporate headquarters located 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 $86,944, $69,644 and $35,622 during 2001, 2000 and 1999, respectively. The Company leases approximately 8,700 square feet and the lease expires in October 2002.

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 $53,105, $170,422 and $111,724 during 2001, 2000 and 1999, respectively. MRS Equity Corp. provided Whitney Information Network, Inc. with $720,504, $273,525 and $254,826 for product costs during 2001, 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.

F-13

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

owns a controlling interest.

Precision Software Services, Inc. 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 (Note 1). Prior to November 2001, the Chairman of the Board of Directors of Whitney Information Network, Inc. owned a majority interest in Precision Software Services. During 2001 (prior to the acquisition), 2000 and 1999, Precision Software Services provided Whitney Information Network, Inc. $371,644, $378,525 and $318,089 in product cost, respectively. Precision Software Services sold 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 Precision Software Services in the amount of $0, $68,811 and $38,605 during 2001, 2000 and 1999, respectively.

Whitney Information Network, Inc. provided payroll services to Whitney Leadership Group, Inc. in the amount of $0, $80,956 and $82,787 during 2001, 2000 and 1999, respectively. During 2001, 2000 and 1999, Whitney Information Network made payments of $279,313, $230,476 and $368,702 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.

Corporation Corp., formerly known as United States Fiduciary Corp, is a company which 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 Corporation Corp. During 2001, 2000 and 1999, Whitney Information Network, Inc. paid $458,877, $418,096 and $0 in commissions to Corporation 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 2000,Whitney Information Network Inc. provided $10,869 in payroll services to RAW, Inc.

Trade Marketing, Inc. is a company owned by a relative of the Chairman of the Board of Whitney Information Network, 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.

Note 4—Property and Equipment

Property and equipment consist of the following:

	December 31,
	2001		2000
Building	$	2,266,053	$	2,207,482
Equipment		1,158,694		517,718
Furniture and fixtures		364,893		316,770
Land		132,500		—
Construction in progress		103,063		—
Leasehold improvements		81,516		122,658

		4,106,719		3,164,628

F-14

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Less accumulated depreciation		(478,272	)		(198,703	)

	$	3,628,447		$	2,965,925

Depreciation expense for the periods ended December 31,:

2001	$	289,682
2000	$	166,434
1999	$	18,267

Note 5—Long-Term Debt and Note Payable—Related Party

Long-term debt consists of:

	December 31,
	2001			2000
Note payable to seller of building, interest at a variable interest rate, adjusted semi-annually based on the prime rate (8.0% total as of December 31, 2001) and shall not exceed 10% or fall below 8% during the first three years of the mortgage. Monthly interest-only payments of $9,000 are payable through December 2004 at which time the note matures and all principal and accrued interest is due. Collateralized by real property.	$	450,000		$	1,200,000
Note payable to the previous minority shareholder of Precision Software Services, Inc. relating to the Company’s acquisition. Principal and interest payments due beginning in January 2002. Interest at the prime rate plus 1.5% (7.0% total at December 31, 2001). The note matures in December 2003.		125,000			—

		575,000			1,200,000
Less current portion		(62,500	)		—

	$	512,500		$	1,200,000

Note payable- related party consists of:

	December 31,
	2001			2000
Note payable to the previous majority shareholder of Precision Software Services, Inc., an officer and majority shareholder of the Company, relating to the Company’s acquisition. Principal and interest payments due beginning in January 2002. Interest at the prime rate plus 1.5% (7.0% total at December 31, 2001). The note matures in December 2003.	$	125,000		$	—
Less current portion		(62,500	)		—

	$	62,500		$	—

F-15

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements.

Maturities of long-term obligations are as follows:

Year Ending December 31,	Related Party Notes		Other Notes		Total
2002	$	62,500	$	62,500	$	125,000
2003		62,500		62,500		125,000
2004		—		450,000		450,000

	$	125,000	$	575,000	$	700,000

Note 6—Commitments and Contingencies

Operating Leases

The Company leases the following properties: (1) its headquarters building in Cape Coral, Florida (Note 3); (2) its telemarketing facility in Draper, Utah; and (3) its Whitney Canada location in Ontario. These leases expire from May 2002 to October 2006.

Rent expense for all operating leases was:

Year Ending December 31,
2001	$	225,232
2000	$	257,198
1999	$	139,105

Future minimum lease payments under these leases are approximately as follows:

Year Ending December 31,	Related Party Leases		Other Leases		Total
2002	$	58,053	$	79,321	$	137,374
2003		—		78,771		78,771
2004		—		81,929		81,929
2005		—		85,199		85,199
2006		—		73,350		73,350

	$	58,053	$	398,570	$	456,623

Litigation

The Company is not involved in any material unasserted claims and action 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.

F-16

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements.

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.

Construction Agreement

In 2001, the Company entered into an agreement to construct a 7,000 square-foot international conference and training center in Panama at a total estimated cost of $550,000. The Company had expenditures of approximately $105,000 through December 31, 2001 and has since made additional construction draws of approximately $145,000. Completion of the project is expected to occur in the third quarter of 2002.

Note 7—Stockholders’ Equity and Transactions

Stock Based Compensation Plans

The Company’s stock option plans provide for the granting of stock options to key employees. Under the terms and conditions of the plans, any time between the grant date and two years of service, the employee may purchase up to 25% of the option shares. After three years of continuous service, the employee may purchase all remaining option shares. All options expire ten years from the date of the grant.

The following table presents the activity for options outstanding:

	Options Not Related To A Plan		Weighted Average Exercise Price
Outstanding—December 31, 1998	369,000		$	2.00
Granted	471,650		$	1.88
Forfeited/canceled	(52,850	)	$	(1.96	)

Outstanding—December 31, 1999	787,800		$	1.92
Granted	385,000		$	1.97
Forfeited/canceled	(79,150	)	$	(1.92	)

Outstanding—December 31, 2000	1,093,650		$	1.94
Granted	10,000		$	1.70
Forfeited/canceled	(181,850	)	$	(1.94	)

Outstanding—December 31, 2001	921,800		$	1.94

The following table presents the composition of options outstanding:

Range of Exercise Prices	Number of Options Outstanding	Price*	Life*	Number of Options Exercisable
$ 1.70	10,000	$ 1.70	9.74	—
$ 1.75	45,000	$ 1.75	8.35	—
$ 1.88	309,800	$ 1.88	7.68	309,800

F-17

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

$2.00	557,000	$	2.00	7.61	139,250

$1.70 to $2.00	921,800	$	1.94	7.69	449,050

*Price and Life reflect the weighted average exercise price and weighted average remaining contractual life, respectively.

The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation.” Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation cost for the Company’s option plan been determined based on the fair value at the grant date for awards consistent with the provisions of SFAS No. 123, the Company’s net income (loss) and basic income (loss) per common share would have been changed to the pro forma amounts indicated below:

	For the Years Ended December 31,
	2001		2000			1999
Net income (loss)—as reported	$	2,493,367	$	(8,703,127	)	$	(1,962,266	)
Net income (loss)—pro forma	$	2,519,497	$	(9,423,077	)	$	(2,764,071	)
Basic income (loss) per common share—as reported	$	0.33	$	(1.16	)	$	(0.26	)
Basic income (loss) per common share—pro forma	$	0.33	$	(1.25	)	$	(0.36	)

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used:

	For the Years Ended December 31,
	2001			2000			1999
Approximate risk free rate		6.00	%		6.00	%		6.00	%
Average expected life		10 years			10 years			10 years
Dividend yield		0	%		0	%		0	%
Volatility		85.00	%		115.00	%		115.00	%
Estimated fair value of total options granted	$	14,750		$	719,950		$	801,805

Note 8—Income (Loss) Per Share

The following table sets forth the computation for basic and diluted earnings per share:

	For the Years Ended December 31,
	2001		2000			1999
Numerator for diluted income (loss) per common share	$	2,534,247	$	(8,703,127	)	(1,962,266	)

Denominator for basic earnings per share—weighted average shares		7,587,474		7,528,022		7,502,396
Effect of dilutive securities—options and warrants		921,800		—

Denominator for diluted earnings per share—adjusted weighted average shares		8,509,274		7,528,022		7,502,396

Diluted income (loss) per common share	$	0.30	$	(1.16	)	(0.26	)

Where the inclusion of potential common shares is anti-dilutive, such shares are excluded from the computation.

Note 9—Business Segment Information

The Company and its subsidiaries operate primarily in only one business segment. The Company’s revenues are generated through the sale of real estate seminars, programs and products. The Company and each of its subsidiaries either directly participate in the real estate market or provide services to one of the subsidiaries. The Company does maintain operations in foreign countries outside the United States. The following provides both revenues and long-lived asset values by location for the period and year ending December 31, 2002. Foreign operations prior to 2002 are not significant.

Location	Revenues		Long-Lived Assets
United States	$	57,091,029	$	8,722,138
Canada		2,648,171		19,689
United Kingdom		2,406,037		47,976
Costa Rica		—		817,513

	$	62,145,237	$	9,607,316

The following provides revenues received by external customers for each group of similar products and services for the years ended Deember 31, 2002, 2001 and 2000.

	For the Years Ended December 31,
Segment	2001		2000		1999
Real Estate Products/Services	$	38,024,356	$	24,851,765
Real Estate Mentoring/Coaching		3,315,936		3,460,842
Commission/Other		805,049		1,113,686
Teach Me To Trade		—		—
Internet sales		12,399		3,433,564

Total revenues	$	42,157,740	$	32,859,857

F-18

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 10—Income Taxes

At December 31, 2001, the Company had net operating losses(NOL) of approximately $168,000 related to US federal, foreign and state jurisdictions. Utilization of the net operating losses, which expire at various times starting in the years 2002 through 2021, may be subject to certain limitations under Section 382 of the Internal Revenue Code of 1986, as amended, and other limitations under state and foreign tax laws.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax asset are approximately as follows:

	December 31,
	2001			2000
Deferred tax asset from NOL carryforward	$	62,500		$	5,252,000
Deferred tax asset from deferred revenue		4,647,000
Deferred tax asset (liability) from deferred expense/revenue		(1,606,000	)		(1,005,000	)

Total deferred tax assets		3,103,500			4,247,000
Valuation allowance for deferred tax assets		(3,103,500	)		(4,247,000	)

Net deferred tax asset	$	—		$	—

F-19

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On July 28, 2000, the Company replaced its auditor, Larry Legal CPA with BDO Siedman effective August 17, 2000. During the period from August 17, 2000 to November 14, 2000, the Company worked with BDO Siedman until the Board terminated their services. The series of events that transpired from August 17, 2000 may appear to suggest a disagreement over accounting; however, the Company does not believe a disagreement exists.

The matter is explained simply in that at the time that the Company terminated the services of BDO Seidman, LLP there was no dispute with BDO Seidman inasmuch as the Company had already agreed to restate the financial statements.

Please be advised of the chronology of related events:


11/14/00		The Company terminated BDO Seidman, LLP as auditors on November 14, 2000 subsequent to the Whitney Board of Directors meeting on that morning approving both the termination of BDO Seidman and tentatively approving the restating of the financial statements subject to evaluation of the results of the forthcoming discussion to be held with the SEC on November 17, 2000 and recommendation by management thereafter. BDO’s last communication to the Company was that BDO had agreed to prepare the financial statements either way as long as the SEC approved the way that was chosen. The Company agreed with BDO that the financial statements could be prepared either way subject to SEC approval. Therefore, there was no disagreement with BDO at the time they were terminated. The Company did not disagree with BDO over an accounting method, but did disagree with BDO over their fees. The fees dispute is not the subject of this filing.

11/17/00		The Company representatives attended a meeting in Washington, DC with SEC staff re: deferred expenses at which time the SEC stated that the Company should restate the financial statements

11/20/00		The Company approved and filed Edgar Form 8-K reporting on the termination of BDO Seidman, LLP without having received any letter from BDO Seidman, LLP. Their letter was received later in the day on November 20, 2000

11/21/00		Actual date of acceptance of transmission of 11/20 filing as accepted by SEC/Edgar

11/20/00		The Company received cessation of services letter from BDO Seidman, LLP which was dated November 14, 2000, but not received until the afternoon of November 20, 2000

11/22/00		The Company filed Edgar Form 8-K/A#1 reporting the BDO Seidman, LLP letter received November 20, 2000.

11/29/00		The Company filed the third Edgar form on the issue, Form 8-K/A#2 with corrections and additions required by the SEC pertaining to the BDO Seidman auditor termination.

12/4/00		The Company’s Board of Directors approved management’s decision to restate financial statements for change of accounting method.

12/4/00		Company received letter from SEC re: correcting the Forms 8K and 8-K/A to an Item 4 matter instead of an Item 1 matter.

12/4/00		Company received second letter from BDO Seidman, LLP re: termination of services, which letter included for the first time a notice by BDO Seidman of a disagreement over accounting issues.

12/5/00		Company issued a Press Release which had been prepared days earlier announcing the decision to restate financial statements.

12/7/00		Company approved for filing Edgar Form 8-K/A#3 reporting second BDO Seidman letter.

12/7/00		The Company approved for filing Edgar Form 8-K reporting the Press Release

12/8/00		The Company filed Edgar Form 8-K/A#3 reporting second BDO Seidman letter.

12/8/00		The Company filed Edgar Form 8-K reporting Press Release.

12/13/00		The Company received a fax from SEC requesting an additional Form 8-K/A filing to explain the disagreement

12/20/00		The Company filed Edgar Form 8-K/A#4 explaining that the timing differences caused the appearance of a disagreement with BDO Seidman but actually at the time BDO Seidman was terminated, there were no disagreements.

12/20/00		The Company sent a copy of Amendment #4 to BDO Seidman.

It should be further noted that BDO Seidman was hired by the Company in August, 2000. In September, 2000, BDO sent an SOP 93-7 research paper which was marked preliminary draft agreeing with the position of the Company.

At that time, the Miami partner of BDO Seidman and the audit manager agreed with the position of the Company that the financial statements had been correctly prepared.

It was not until October, 2000 that the Chicago office and national SEC partner of BDO Seidman overruled their Miami audit partners and reversed the position of BDO Seidman on the issue. There was disagreement with the BDO partners over the issue. At that point, there was also a disagreement between the revised and official BDO position and the Company’s position.

However, later, and prior to dismissing BDO Seidman, the Company did agree to accept the SEC position which was also BDO’s revised position. The Company has taken the position that all interim disagreements with BDO Seidman had been resolved prior to the dismissal and therefore were not required to be explained in Form 8-K, which requires the disclosure of any disagreements at the time of the dismissal.

On February 8, 2000, the Board of Directors of Whitney Information Network, Inc. passed a resolution to engage the audit services of Ehrhardt Keefe Steiner & Hottman, PC. There have been no disagreements with Ehrhardt Keefe Steiner & Hottman, PC.

PART III

ITEM 10.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The officers and directors of the Company are as follows:

Name	Age	Position
Russell A. Whitney	44	Chief Executive Officer and Chairman of the Board of Directors
Richard W. Brevoort	63	President and a member of the Board of Directors
Ronald S. Simon	58	Secretary/Treasurer, Chief Financial Officer, and a member of the Board of Directors

Each director serves for a term of three years and one-third of the directors are elected at the annual meeting of shareholders. The Company’s officers are appointed by the Board of Directors and hold office at the discretion of the Board.

Russell A. Whitney – Chief Executive Officer and Chairman of the Board of Directors

Mr. Whitney was a founder and has been the Chief Executive Officer and Chairman of the Board of Directors of the Company and its predecessor, since 1987. Since 1992, Mr. Whitney has been Chief Executive Officer of Whitney Education Group, Inc. (formerly Win Systems, Inc.) that is engaged in the business of education and training. Since October 1998, Mr. Whitney has been the President and a member of the Board of Directors of 1311448 Ontario, Inc. 1311448 Ontario is in the business of education and training. Since October 1998, Mr. Whitney has been the President and a member of the Board of Directors of Whitney Canada, Inc. Whitney Canada is in the business of education and training. Since February 1999, Mr. Whitney has been the President and a member of the Board of Directors of Wealth Intelligence Network, Inc. Wealth Intelligence Network is in the business of education and training. Since June 1999, Mr. Whitney has been the President and a member of the Board of Directors of Whitney Internet Services, Inc. Whitney Internet Services is in the business of providing Internet services, education and training. Since June 1999, Mr. Whitney has been the President and a member of the Board of Directors of Whitney Consulting Services, Inc. Whitney Consulting is in the business of providing telemarketing services. Since June 1999, Mr. Whitney has been the President and a member of the Board of Directors of Russ Whitney’s Wealth Education Centers, Inc. Russ Whitney’s Wealth Education Centers are in the business of education and training. Since June 1999, Mr. Whitney has been the President and a member of the Board of Directors of Russ Whitney’s Wealth Education Centers of Jackson, Mississippi, Inc. Since March 1991, Mr. Whitney has been Chief Executive Officer of Whitney Leadership Group, Inc., a Florida corporation located in Cape Coral, Florida engaged in the business of publishing and marketing. Since February 1995, Mr. Whitney has been President of RAW, Inc., a Florida corporation engaged in the business of buying, selling and investing in real estate which is located in Cape Coral, Florida. From August 1993 to November 2001, Mr. Whitney was the Vice President of Precision Software Services, Inc., a Florida corporation located in Cape Coral, Florida, which is engaged in the business of developing and licensing software primarily for the real estate and small business industries. Precision Software Services, Inc. was acquired by Whitney Information Network in November 2001. Since this time, Mr. Whitney has been the President and a member of the Board of Precision Software Services, Inc. Since March 1992, Mr. Whitney has been President of MRS Equity Corp., a Florida corporation located in Cape Coral, Florida, which is

engaged in the business of selling mortgage related products and services. Since November 1996, Mr. Whitney has been affiliated with Teamwork Communications, Inc., a company that provides sales and marketing services located in Cape Coral, Florida.

Richard W. Brevoort – President and a member of the Board of Directors.

Since August 1998, Mr. Brevoort has been a member of the Board of Directors of the Company and spends substantially full-time on Company matters. Mr. Brevoort became the President of Whitney Education Group, Inc. (formerly, Win Systems, Inc.) in February 1997, and President of the Company in August 1998. From January 1984 to February 1991, Mr. Brevoort was the President of the Hudson Agency, a marketing company based in New York City. From September 1970 to October 1975, Mr. Brevoort was a Deputy Finance Administrator and Commissioner of Tax Collection. From June 1969 to August 1970, Mr. Brevoort was an Assistant Administrator of Economic Development. From August 1968 to March 1969, Mr. Brevoort was a Deputy Commissioner of Commerce. From March 1966 to November 1966, Mr. Brevoort was a Director of Weights and Measures for the City of New York. From November 1975 to December 1983, Mr. Brevoort was the Chief of Staff for the Democratic Party in the New York State Senate. From 1982 to 1987, Mr. Brevoort was a member of the Board of Directors of the New York City Convention Center. From 1996 to 1997, Mr. Brevoort was an Instructional Supervisor of the Trace Program at Bronx Community College. From 1968 to 1969, Mr. Brevoort was a member of an Advisory Committee for the New York City Superintendent of Schools. Mr. Brevoort has been included in the 1996 Who’s Who in America and 1996 Who’s Who in the World.

Ronald S. Simon – Secretary/Treasurer, Chief Financial Officer, and a member of the Board of Directors.

Since August 1998, Mr. Simon has been the Secretary/Treasurer, Chief Financial Officer, and a member of the Board of Directors of the Company and spends such time that is necessary on Company matters. Since August 1998, Mr. Simon has been the Secretary/Treasurer and a member of the Board of Directors of Whitney Education Group, Inc. (formerly, Win Systems, Inc.). Whitney Education Group is in the business of education and training. Since August 1998, Mr. Simon has been the Secretary/Treasurer and a member of the Board of Directors of Wealth Intelligence Network, Inc. Wealth Intelligence Network is in the business of education and training. Since June 1999, Mr. Simon has been the Secretary/Treasurer and a member of the Board of Directors of Whitney Consulting Group, Inc. Whitney Consulting Group is in the business of telemarketing. From October 1995 to January 1999, Mr. Simon was the President of On Line Services USA, Inc., an Internet service provider and web site design company. Since 1971, Mr. Simon has been Certified Public Accountant in the states of Florida and Illinois. Since 1993, Mr. Simon has had his real estate license in the state of Florida. Since 1996,. Mr. Simon graduated from the University of Illinois with Bachelor of Science degree in accounting.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s officers, directors, and persons who own more than 10% of the registered class of the Company’s equity securities to file reports of ownership with the Securities and Exchange Commission. Officers, directors and greater than 10% stockholders are required by the regulations of the Securities and Exchange Commission to furnish the Company with copies of all Section 16(a)forms they file.

Based solely on a review of the Forms 3 and 4 furnished to the Company, the Company believes that all filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with.

Form 5 is not required to be filed if there are not previously unreported transactions or holdings to report. Nevertheless, the Company is required to disclose the name of directors, executive officers and 10% shareholders who did not file a Form 5, unless the Company has obtained a written statement that no filing is due. The Company has been advised by those required to file Form 5 that no filings were due.

ITEM 11.

EXECUTIVE COMPENSATION

Summary Compensation.

The following table sets forth the compensation paid by the Company during the last three years, for each officer and director of the Company. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any.

Name and Principal Position	Year	Annual Salary ($)		Bonus ($)	Other Compensation ($)	Underlying Stock Options/ Award (s) (#)	LTIP Payouts ($)	All Compensation ($)
Russell Whitney, CEO	2001 2000 1999	$ $ $	250,000 250,000 67,344	— — —	— — —	— — —	— — —	$ $ $	250,000 250,000 67,344
Richard Brevoort, President	2001 2000 1999	$ $ $	100,000 75,000 44,093	— — —	— — —	— — —	— — —	$ $ $	100,000 75,000 44,093
Ronald Simon, CFO	2001 2000 1999	$ $ $	55,000 47,500 42,770	— — —	— — —	— — —	— — —	$ $ $	55,000 47,500 42,770

There are no retirement, pension, or profit sharing plans for the benefit of the Company’s officers and directors. The Company has adopted a Non-Qualified Incentive Stock Option Plan and the Company supplies health insurance to its officers, directors and employees.

The following grants of stock options, whether or not in tandem with stock appreciation rights (‘SARs’) and freestanding SARs have been made to officers and/or directors:

Name

Number of
Underlying
Securities
Options/SARs
Granted

Number of
Underlying
Securities
Options/SARs
Granted During

Last 12 Months

Exercise or
Base

Price ($/Sh)

No. of Options
Exercised

Expiration Date

Richard Brevoort

243,000

68,000

2.00

—

09/01/2008

Ronald Simon

218,000

68,000

2.00

—

09/01/2008

(1)

75,000 options were granted to Mr. Brevoort and 125,000 options were granted to Mr. Simon, all at an exercise price of $1.875, on August 31, 1999. Mr. Brevoort and Mr. Simon were previously granted 25,000 options each at an exercise price of $2.00 on September 1, 1998. On May 1, 2000, Mr. Brevoort and Mr. Simon each held 68,000 warrants which were converted to option shares at an exercise price of $2.00 per share. The expiration date of such option shares is September 1, 2008. At the date of this report no options have been exercised.

Long-Term Incentive Plan Awards.

The Company does not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.

Compensation of Directors.

Directors do not receive any compensation for serving as members of the Board of Directors. The Board has not implemented a plan to award options to any Directors. There are no contractual arrangements with any member of the Board of Directors

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the Common Stock ownership of each person known by the Company to be the beneficial owner of five percent or more of the Company’s Common Stock, each director individually and all officers and directors of the Company as a group. Each person has sole voting and investment power with respect to the shares of Common Stock shown, unless otherwise noted, and all ownership is of record and beneficial.

Name and Address of Owner	Number of Shares	Position	Percent of Class
Russell A. Whitney 4818 Coronado Parkway Cape Coral, Florida 33904	6,650,000	Chief Executive Officer and Chairman of the Board of Directors	84.41	%
Richard W. Brevoort 4500 S.E. Fifth Place #206 Cape Coral, Florida 33904	146,500	President Director	1.86	%
Ronald S. Simon 1402 Beechwood Trail Fort Myers, Florida 33919	34,000	Secretary/Treasurer Chief Financial Officer Director	0.43	%
All officers and directors as a group (3 persons)	6,830,000		86.70	%

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has leased office space from Russ Whitney, its Chief Executive Officer and a member of the Board of Directors pursuant to the terms of a three-year lease, which commenced on September 1, 1999 and terminates on October 31, 2002 with a monthly rental payment of $5,805.34. Russ Whitney is the Chief Executive Officer of the Company and Chairman of its Board of Directors. The terms of the lease are no less favorable as can be obtained from independent third parties.

At December 31, 2001, the Company was owed $232,126 by Whitney Leadership Group, Inc., a company owned and controlled by Mr. Whitney, which owns the rights to our television real estate infomercials which we use to attract students to our free informational training sessions.

MRS Equity Corp. provides software products and services to the company which it markets that allow mortgagees to pay their mortgages every two weeks rather than monthly thereby reducing mortgage costs over the life of the mortgage and the Company provides MRS Equity Corp. with payroll services. MRS Equity is a wholly owned subsidiary corporation of Equity Corp. Holdings, which is owned and controlled by Mr. Whitney.

Precision Software Services, Inc., develops and licenses software to the Company. Mr. Whitney owned a controlling interest in Precision Software Services, Inc. until it was acquired by the Company on November 1, 2001 in an exchange of stock with Mr. Whitney and an employee/shareholder of Precision Software Services, Inc. for 333,334 shares of the Company’s common stock valued at $1.50 per share. Mr. Whitney received 170,000 shares of the Company’s stock.

The Company provides payroll services to Whitney Leadership Group, Inc. and in the past, Whitney Leadership Group, Inc. has lent money to the Company. Mr. Whitney is President and Chief Operating Officer of Whitney Leadership Group.

Corporation Service Company, formally, United States Fiduciary Corp., provides telemarketing and instructor services for the Company. Mr. Whitney and Mr. Simon are directors of the board of United States Fiduciary Corp. Corporation Company provided trainers for some of our asset protection courses and formation services under which it created legal entities, for use by our students. We collected the formation fees and passed the funds to Corporation Company.

The amount of purchased products (software books, tapes, and supplies) from affiliates is as follows:

	2001		2000		1999
MRS Equity Corp.	$	720,504	$	273,525	$	254,826
Precision Software Services, Inc.	$	371,644	$	378,525	$	318,089

The amount of payments made for commissions and fees from affiliates is as follows:

	2001		2000		1999
Whitney Leadership Group, Inc.	$	279,313	$	230,476	$	368,702
Corporation Corp (formerly United States Fiduciary Corp.)	$	458,877	$	418,096	$	—

The payroll service amounts are as follows:

	2001		2000		1999
MRS Equity Corp.	$	53,105	$	170,422	$	111,724
Precision Software Services, Inc.	$	—	$	68,811	$	38,605
Whitney Leadership Group, Inc.	$	—	$	80,956	$	82,787
Raw, Inc.	$	—	$	10,869	$	—

The terms of all of the transactions between related parties were no less favorable than could be obtained from independent third parties.

ITEM 13.

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.

27.1*		Financial Data Schedule

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 amended report to be signed on its behalf by the undersigned, thereunto duly authorized.

In accordance with the Exchange Act, this amended 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 Russell A. Whitney	Chief Executive Officer Chairman	September 5, 2003

/s/ RICHARD W. BREVOORT Richard W. Brevoort	President and Director	September 5, 2003

/s/ RICHARD S. SIMON Ronald S. Simon	Secretary/Treasurer/Chief Financial Officer/ Principal Accounting Officer and Director	September 5, 2003