Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

For the quarterly period ended June 30, 2008

For the transition period from                to                   

Commission file number: 0-27403

WHITNEY INFORMATION NETWORK, INC.

(Exact name of registrant as specified in its charter)

(239) 542-0643

 (Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yeso   No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o   No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

There were 11,738,587 shares of common stock outstanding as of February 27, 2009.

Table of Contents

TABLE OF CONTENTS

1

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1 FINANCIAL STATEMENTS

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share data)

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

Table of Contents

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited, in thousands, except per share data)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Table of Contents

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)

4

Table of Contents

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Table of Contents

WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 — Basis of Presentation

The unaudited Condensed Consolidated Financial Statements include the accounts of Whitney Information Network, Inc. and its wholly-owned subsidiaries (collectively referred to herein as the “Company,” “we,” “us,” or “our”).  All intercompany balances and transactions have been eliminated in consolidation.

The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements for the year ended December 31, 2007 included in the Company’s Annual Report on Form 10-K for its year ended December 31, 2007 (“2007 Form 10-K”) as filed with the Securities and Exchange Commission (“SEC”) on January 15, 2009.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations.

In the opinion of management, all adjustments, consisting of normal recurring accruals, which are considered necessary to make a fair presentation of the Company’s financial position and operating results have been included.  The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period.

The results for the three and six months ended June 30, 2008 are not necessarily indicative of the results expected for the year ending December 31, 2008.

Note 2 — Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Summary of Significant Accounting Policies

The Company’s significant accounting policies are discussed in Note 2 to its audited Consolidated Financial Statements for the fiscal year ended December 31, 2007, included in the 2007 Form 10-K filed January 15, 2009.  These accounting policies have not significantly changed.

Reclassifications

Certain reclassifications have been made in the 2007 Condensed Consolidated Financial Statements to conform to the 2008 presentation.

Recently Adopted Accounting Pronouncements

In January 2008, the Company adopted the Statement of Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“SFAS No. 157”).  SFAS No. 157 defines fair value as used in other accounting pronouncements that require or permit fair value measurements, establishes a framework for measuring fair value in GAAP and expands disclosures related to the use of fair value measures in financial statements.  SFAS No. 157 does not expand the use of fair value measures in financial statements, but standardizes its definition and guidance in GAAP and emphasizes that fair value is a market-based measurement and not an entity-specific measurement based on an exchange transaction in which the entity sells an asset or transfers a liability (exit price).  SFAS No. 157 establishes a fair value hierarchy from observable market data as the highest level to fair value base on an entity’s own fair value assumptions as the lowest level.  On February 6, 2008, the Financial Accounting Standards Board (“FASB”) deferred the effective date of SFAS No. 157 for all nonfinanical assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis.  These nonfinancial items include assets and liabilities such as reporting units measured at fair value in a goodwill impairment test and nonfinancial assets acquired and liabilities assumed in a business combination.  The effect of the adoption of SFAS No. 157 did not have a material effect on our fair value measurements.

6

Table of Contents

Recently Issued Accounting Pronouncements

In April 2008, the FASB issued FSP No. 142-3, Determination of the Useful Life of Intangible Assets (“FSP No. 142-3”).  FSP No. 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under FASB Statement No. 142, “Goodwill and Other Intangible Assets.”  This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions.  FSP No. 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008 and is applied prospectively.  FSP No. 142-3 is not expected to have a material impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 (“SFAS No 160”).  SFAS No. 160 establishes accounting and reporting standards for a parent company’s noncontrolling, or minority, interests in its subsidiaries.  SFAS No.160 also provides accounting and reporting standards for changes in a parent’s ownership interest of a noncontrolling interest as well as deconsolidation procedures.  This statement aligns the reporting of noncontrolling interests in subsidiaries with the requirements in International Accounting Standards 27 and is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years.  We do not expect the adoption of this statement to have a material effect on our consolidated financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 141, Business Combinations - Revised (“SFAS No. 141R”).  SFAS No. 141R changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition related transaction costs and the recognition of changes in the acquirer’s income tax valuation allowance. SFAS No. 141R is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited.  The Company will be required to adopt SFAS No. 141R in the first quarter of fiscal year 2009.  We do not expect the adoption of this statement to have a material effect on our consolidated financial position, results of operations or cash flows.

Note 3 — Special Items

Special items

Special items incurred during the three and six months ended June 30, 2008 were approximately $(39,000) and $194,000, respectively.  The $(39,000) credit recorded for the three months ended June 30, 2008 was the result of the receipt of proceeds related to an insurance claim for reimbursement of costs associated with the SEC and DOJ investigation.  For the three months and six months ended June 30, 2007, special items were approximately $3.5 million and $6.8 million, respectively.  These special items include the professional fees associated with the SEC and DOJ proceedings which began November 14, 2006, and December 11, 2006, respectively.

7

Table of Contents

Note 4 — Notes Receivable

Notes receivable consists of the following (in thousands):

See Note 12 — Commitments and Contingencies Litigation for further discussion of Tranquility Bay.

Note 5 —Assets Held for Sale

Assets held for sale at June 30, 2008 and December 31, 2007 consisted of the following (in thousands):

The investments in Rancho Monterey, S.A., Monterey del Este, S.A, and Beautiful Hill, S.A. were sold in January 2008 for approximately $2.5 million resulting in a net gain of approximately $1.1 million.  The corporate aircraft was sold January 20, 2009, the net proceeds from the sale were approximately $3.7 million resulting in net loss of approximately $2.3 million.  See Note 13 — Subsequent Events.  Our investment in Monterey del Mar, S.A. has not been sold and has been removed from assets held for sale during the six months ended June 30, 2008.

8

Table of Contents

Note 6 — Long-Term Debt

Long-term debt consists of (in thousands):

Note 7 — Certain Relationships and Related Transactions

The Company leases from Cape Promenade Trust (“Trust”) approximately 2,200 square feet of training facilities at 1611 East Cape Coral Parkway, approximately 9,000 square feet of space at 1625 East Cape Coral Parkway which is used for offices and shipping, and 4,802 square feet at 1630 Southeast 47th Terrace which the Company uses as a training facility, all located in Cape Coral, Florida.  The Trust is for the benefit of our former Chairman and Chief Executive Officer, Mr. Whitney and Ingrid Whitney.  The leases are for three years and began on March 1, 2003, March 1, 2003, and June 1, 2004, respectively.  The monthly rentals are $1,943, $13,913 and $7,238 in 2008, respectively.  The 1611 East Cape Coral Parkway and 1630 Southeast 47th Terrace properties leases expired March 2006; the Company is on a month-to-month basis with respect to these leases.  The Company previously extended the lease with respect to 1625 East Cape Coral Parkway through December 31, 2008.  See Note 13 - Subsequent Events for further discussion.

Gulfstream Development Group, LLC

At June 30, 2008 and December 31, 2007, the Company had an agreement with Gulfstream Development Group, LLC (“Gulfstream”), in which the Company was compensated for appointing Gulfstream as the exclusive offeror of homes for its students at the Company’s advanced real estate courses.  Students were offered the opportunity to purchase residential lots in Southwest Florida from Gulfstream, other lot owners, or Mr. Whitney.  The Company has no ownership interest in Gulfstream and had no involvement in the students’ decision to purchase lots or in their dealings with the realtor or Gulfstream.  Gulfstream often constructs homes on lots owned by our students.  The Company originally received a referral fee of $1,000 for every Gulfstream home built for our students subsequent to the closing of each sale.  During 2007, the referral fee was increased to $2,500 with $500 of that being paid to the Company trainers who assisted in the referral.  The referral fees paid to the Company by Gulfstream amounted to $0.1 million for each of the three and six months ended June 30, 2008 and 2007.

As of June 30, 2008, Mr. Whitney held an indirect 12.5% interest in Gulfstream and received certain payments and distributions from this entity.  Mr. Whitney holds his investment in Gulfstream through Rec One, Inc. (“Rec One”), an entity that he and Ingrid Whitney jointly own.  Gulfstream also had an informal agreement with Mr. Whitney, in which Gulfstream paid him a referral fee of $4,000—$5,000 for each Gulfstream home built for our students.

Mr. Whitney received the following payments from Gulfstream during the quarter ended June 30, 2008; (i) salary of $30,000: and (ii) transaction-based compensation of $334,636.

For the six months ended June 30, 2008, Mr. Whitney received the following payments from Gulfstream (i) salary of $60,000; (ii) transaction-based compensation of $898,100 and (iii) distributions to Rec One of $225,000.

A committee of independent members of the Board of Directors is reviewing the Gulfstream transactions in regards to compliance with the applicable governance and related party transaction requirements.

9

Table of Contents

Costa Rica

As of June 30, 2008, the Company had an ownership interest of 62.9% of a hotel property located in Costa Rica.

In January 2008, the Company sold three of our investments in the Costa Rican and Panamanian entities.  Those entities were: Rancho Monterey, S.A., Monterey del Este, S.A. and Beautiful Hill, S.A. in which the Company owned 30%, 8% and 100%, respectively.  Proceeds from these entities, net of commissions and other expenses, were $0.9 million, $0.2 million and $1.4 million, respectively.  Payment of working capital advances of $0.8 million related to these entities and their management company, Monterey Management, S.A., were received in May 2008.  Commissions related to the sale were paid to Russell Whitney, our former Chief Executive Officer and Chairman of the Board in the amount of $0.4 million.  Commissions related to this sale were also paid to two of our former employees and a former independent contractor in the amount of $0.2 million, $0.1 million and $0.1 million, respectively.

A committee of independent members of the Board of Directors is reviewing the Costa Rican transactions in regards to compliance with the applicable governance and related party transaction requirements.

Note 8 — Income Taxes

The Company follows SFAS No. 109 “Accounting for Income Taxes” (“SFAS No. 109”).  Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax base.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  According to SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  If it is more likely than not that some portion of a deferred tax asset will not be realized, a valuation allowance is recognized.

Significant management judgment is required in developing our provision for income taxes, including the determination of foreign tax liabilities, deferred tax assets and liabilities and any valuation allowances that might be required against the deferred tax assets. Management evaluates its ability to realize its deferred tax assets on an annual basis and adjusts its valuation allowance when it believes that it is more likely that the asset will not be realized.

During the period ended June 30, 2008 the Company recorded $200,000 of alternative minimum tax (“AMT”) income tax expense due to tax regulations which limit the offset of taxable income with net operating loss carryforwards to 90%.  The remaining 10% is subject to alternative minimum tax.  The Company also recorded $248,000 of state income tax expense related to jurisdictions where we do not have sufficient net operating losses to offset taxable income.

Note 9 - Loss per Share

Basic loss per share is calculated by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding for the period.  Diluted EPS is calculated by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding plus the assumed exercise of all dilutive securities using the treasury stock method or the “as converted” method, as appropriate.  There are a total of 1,032,650 stock options and 890,719 warrants outstanding as of June 30, 2008 to purchase common stock as compared with a total of 1,214,900 stock options and 890,719 warrants outstanding as of June 30, 2007.  Additionally, the Company has combined 450,000 unit placement warrants issued to our placement agent in connection with our December 2005 offering which would be anti-dilutive and as such were excluded from the computation of diluted loss per share.

10

Table of Contents

The following table sets forth the computation for basic and diluted earnings per share (in thousands, except for per share data):

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

Note 10 - Segment Information

The Company operates primarily in two business segments: Proprietary Brands and Rich Dad Education.  Our revenues are generated through the sale of real estate and financial market education courses, programs and products and categorized into segments, depending upon the channel from which the student was acquired.  Operating results for the segments as reported below are evaluated regularly by Executive Management.

 Our segment revenues and gross profit are included in the following tables (in thousands):

11

Table of Contents

Note 11 - Stockholders’ Deficit

On March 28, 2008, the Company recorded $1.6 million in distributions to our joint venture partner, Rich Global, LLC.  The distribution was made in accordance with the Operating Agreement between Whitney Education Group and Rich Global, LLC.

Note 12 - Commitments and Contingencies

Software purchase commitment

In December 2005, the Company entered into a purchase commitment for new Customer Relationship Management software (“CRM”) for approximately $3.0 million which includes licensing, training and maintenance.  During the three and six months ended June 30, 2007, the Company recorded $0.1 million and $0.5 million in expense, respectively.  The Company has not incurred any additional expense for the CRM software during the three and six months ended June 30, 2008.  Our annual commitments for the licensing and maintenance of other software are approximately $0.4 million.

Operating lease

The Company leases office space for administrative and training requirements.  These leases expire through January 2013.  See Note 7 — Certain Relationships and Related Transactions for related party leases.

The following table includes the rental expense for the three and six months ended June 30, 2008 and 2007 (in thousands):

Future minimum rental payments under non-cancelable leases included above as of June 30, 2008 are as follows (in thousands):

12

Table of Contents

Litigation

On November 14, 2006, the Company was notified by the SEC that the Commission is conducting a formal, nonpublic investigation to determine whether the Company complied with securities laws in connection with (i) the claimed efficacy or trading success of our stock market education programs, and, (ii) our acquisition of certain other companies.  The SEC has requested documents and information from us in the course of their investigation.

On December 11, 2006, the Company received a subpoena from the DOJ requesting documents and information in connection with an investigation relating to our marketing activities from January 1, 2002 to the present.  The Company was notified that a grand jury investigation related to this matter had commenced.  Criminal indictments have been returned and civil charges have been filed against two former contractors.  On March 6, 2008, a federal grand jury in the Eastern District of Virginia returned an indictment charging Linda Woolf (“Woolf”) and David Gengler (“Gengler”), the two former contractors, with one count of conspiracy to commit mail fraud and wire fraud.  Woolf and Gengler are alleged in the indictment to have been independent contractors of the Company’s EduTrades, Inc., subsidiary at the time of their alleged criminal activities.  The defendants are no longer independent contractors for the Company or any of its subsidiaries.  The Company and its subsidiaries were not charged in the indictment, and none of the Company’s present or former directors or officers were charged in the indictment.  On March 11, 2008, the SEC filed civil fraud charges against Woolf and Gengler alleging that Woolf and Gengler made false and misleading statements to sell “Teach Me to Trade” packages for the Company’s EduTrades, Inc., subsidiary.

On January 11, 2007, Whitney Canada, Inc., a wholly-owned subsidiary, and Whitney Information Network, Inc. received notice of an Amended Motion for Authorization to Institute a Class Action in the Province of Québec, Canada.  A class action was requested for all persons who have made various real estate investments, at the alleged inducement, or through, Marc Jémus, François Roy, Robert Primeau and/or their companies, and/or B2B Trust, and/or Whitney Canada, Inc., and/or Whitney Information Network, Inc. and/or Jean Lafrenière.  The complaint seeks repayment of $39,235 to the Petitioner, unspecified payment to each member of the class of an amount corresponding to their lost investments, payment of $10,000 to each member of the class as general damages, recovery of costs and other litigation expenses, and unspecified equitable relief.  We believe that the lawsuit is without merit and will vigorously defend against the claims made.

On January 30, 2007, the Company was served a complaint by Rodney Durham on behalf of himself and all others similarly situated v. Whitney Information Network, Inc., Russell A. Whitney and Nicholas S. Maturo, filed on December 28, 2006 in the United States District Court in the Middle District of Florida accusing the Company of securities violations.  The complaint seeks damages for violations of federal securities laws on behalf of all investors who acquired the Company’s Common Stock from November 18, 2003, through and including December 15, 2006.  The plaintiff seeks unspecified compensatory damages, unspecified equitable relief, and attorney’s fees and costs.  We believe that the lawsuit is without merit and will vigorously defend against the claims made.  This case has not been certified as a class action.  See Note 13 — Subsequent Events for further discussion.

On March 8, 2007, the Company was served a complaint styled Robert Ghosio, Jr. on behalf of nominal defendant Whitney Information Network, Inc. v. Russell A. Whitney, Nicholas S. Maturo, Frederick A. Cardin, Chester P. Schwartz, Ronald S. Simon and Whitney Information Network, Inc., filed in the United States District Court in the Middle District of Florida.  This action is a shareholder derivative complaint alleging that the named defendants breached certain fiduciary duties and violated certain securities laws.  The plaintiff seeks unspecified monetary damages, unspecified equitable relief, unspecified restitution and disgorgement of profits from individual defendants, and fees and costs.  We believe that the lawsuit is without merit and will vigorously defend against the claims made.  See Note 13 — Subsequent Events for further discussion.

On March 22, 2007, a complaint was received by our wholly-owned subsidiary, Whitney Education Group, Inc.  The case is Glenn Acciard, et. al. vs. Russell Whitney, individually, John Kane, individually and Whitney Education Group, Inc. et. al., Case No. 07-CA-002190 in the Circuit Court of the Twentieth Judicial Court in and for Lee County, Florida alleging that the Company, including two of our executive officers, and 18 other defendants not associated with the Company, breached certain of their fiduciary duties to the named plaintiffs, all of whom were our alleged students.  The allegations in the complaint include claims of constructive and common law fraud and other violations.  The plaintiffs seek unspecified monetary damages, unspecified punitive damages, interest, a refund of the purchase price of the lots sold to the plaintiffs, costs, attorney’s fees and unspecified equitable relief.  We believe that the lawsuit is without merit and will vigorously defend against the claims made.

13

Table of Contents

On August 23, 2007, a complaint was received by our subsidiary, Whitney Education Group, Inc.  Plaintiffs Sirli Jehe and Kalev Kruuk brought suit against Russell Whitney, John Kane, Whitney Education Group, Inc. et. al., in the Twelfth Judicial Circuit Court in and for Sarasota County, Florida alleging breach of fiduciary duty, fraudulent misrepresentation, a violation of mortgage broker and lending laws, Florida Land Sales Practices Act and Florida Unfair and Deceptive Trade Practices Act based on an alleged scheme to induce real estate investors to purchase real property at inflated prices. .Numerous motions to dismiss are currently pending.  The plaintiffs seek a refund of the price of the lots sold to them, monetary damages in excess of $100,000, unspecified punitive damages, costs, attorney’s fees, and unspecified equitable relief.  We believe that the lawsuit is without merit and will vigorously defend against the claims made.

On September 21, 2007, a complaint was received by our wholly-owned subsidiary, Whitney Education Group, Inc.  The lawsuit is Jeffrey Watson v. Whitney Education Group, Inc, and Russell Whitney in the Twentieth Judicial Circuit Court in and for Lee County, Florida and alleges that Whitney Education Group, Inc,  and Russell Whitney breached a student contract, violated the Florida Unfair and Deceptive Trade Practices Act, breached the implied covenant of good faith and fair dealing, and conspired to commit fraud by failing to recommend fair and objective vendors in connection with the development and purchase of real estate in an investment program purchased by Plaintiff.  Motions to Dismiss Plaintiff’s complaint are currently pending.  The plaintiff seeks unspecified compensatory damages, unspecified punitive damages, a declaratory judgment determining the rights of the parties, attorney’s fees and costs.  We believe that the lawsuit is without merit and will vigorously defend against the claims made.

On November 7, 2007, two complaints were received by our wholly-owned subsidiary, Whitney Education Group, Inc.  The case is Huron River Area Credit Union v. James M. Easterly.  In both lawsuits, James M. Easterly filed third party complaints against Russell Whitney, Whitney Information Network, Inc., John Kane, and other third party co-defendants alleging breach of fiduciary duty, constructive fraud, violation of Florida Land Sales Practices Act, violation of Florida’s Deceptive and Unfair Trade Practices Act, civil conspiracy to defraud, and Florida RICO conspiracy through an alleged scheme to entice persons to invest in real estate at inflated prices through real estate education courses offered by the Company.  In each third party complaint, Easterly alleges losses in excess of $100,000 as a result of the purchase of two separate properties from Gulfstream Development Group, LLC.  Multiple motions to dismiss are pending and await a decision by the court.  Easterly seeks unspecified damages, including a refund of the purchase price of lots sold to him, unspecified interest, taxes paid on the lots, costs, attorney’s fees, and unspecified equitable relief.  We believe that the lawsuit is without merit and will vigorously defend against the claims made.

On January 9, 2008, the Company entered into an Assurance of Voluntary Compliance (“AVC”) with the Office of the Attorney General of the State of Florida to close a previously disclosed investigation.  The AVC was entered into without an admission or judicial determination that the Company violated any laws, rules or regulations.  The Company agreed in the AVC to make refunds in the additional amount of approximately $450,000 to certain consumers, and also set aside, in an escrow account, $125,000 for refunds for potential claims arising from sales prior to the execution of the AVC.  The Company also agreed to make a payment to the Attorney General in the amount of $150,000 in satisfaction of the Attorney General’s investigative and attorney’s fees.  The Company also made a contribution in the amount of $150,000 to the “Seniors vs. Crime, Inc.” project for educational, investigative and crime prevention programs for the benefit of senior citizens and the community as a whole, in connection with the delivery of the AVC.

On January 23, 2008, the Company filed a foreclosure lawsuit against Tranquility Bay of Southwest Florida LLC, Gulf Gateway Enterprises, LLC, Anthony Scott Dunlap, and Dunlap Enterprises, LLC—parties to the mortgage and/or security agreement.  Tranquility Bay of Southwest Florida, LLC (“Tranquility Bay”), defaulted on its mortgage payment of $4.5 million to Whitney Information Network, Inc., that was due on or before December 31, 2007.  The lawsuit seeks a judgment of foreclosure on the mortgage instrument.  In the alternative, the lawsuit seeks a judgment of foreclosure on a security agreement which would permit the Company to take control of Tranquility Bay and the resulting real property.  Further in the alternative, we seek damages from Anthony Scott Dunlap due to a personal guarantee that Mr. Dunlap signed in relation to the mortgage.  The lawsuit is currently pending in the Circuit Court in Lee County, Florida, and is in the discovery phase.

The Company and one of its directors, Russell A. Whitney (“Whitney”) and WIN CR II Trust (“Trust’), a Company affiliate, are engaged in a series of legal actions with M. Barry Strudwick (“Strudwick”) and Susan Weiss (“Weiss”), and others relating to Monterey del Mar, S. A. (“MDMSA”), a Panamanian Company.

14

Table of Contents

The Company is involved from time to time in routine legal matters incidental to our business.  Based upon available information, the Company believes that the resolution of such matters will not have a material adverse effect on our consolidated financial position or results of operations.

Note 13 - Subsequent Events

On July 8, 2008, the Company received a letter from the South Dakota Department of Revenue and Regulation requesting certain information and documents with respect to the issue of whether or not the Company was selling business opportunities as defined by South Dakota statute.  The Company has provided information and documentation in response to this request.

On July 9, 2008, the Company entered into an Assurance of Voluntary Compliance (the “North Dakota AVC”) with the Office of the Attorney General of the State of North Dakota.  The North Dakota AVC was entered into without an admission or judicial determination that the Company violated any laws, rules or regulations.  Pursuant to the North Dakota AVC, the Company agreed to comply with North Dakota’s Transient Merchant statute, including the posting of a $50,000 bond, when required to do so by North Dakota law.  The Company also agreed to offer refunds to North Dakota consumers who entered into contracts while the Company did not have a North Dakota Transient Merchant’s license.  Finally, the Company agreed to make a payment of $10,000 to the Office of the Attorney General of North Dakota.  No civil penalties were imposed on the Company under the AVC.

On September 17, 2008, the Company appointed Charles M. Peck as Chief Executive Officer and a member of the Board of Directors.

On September 17, 2008, the leases for the training facility located at 1611 East Cape Coral Parkway and the training facility at 1630 Southeast 47th Terrace were terminated.  The leases were on a month-to-month basis prior to termination.

On October 17, 2008, John F. Kane resigned as the Company’s President and Chief Operating Officer.  He also resigned from his position as a member of the Board of Directors.

During October 2008, Mr. Whitney, our former Chairman and Chief Executive Officer, asserted a claim against the Company for $1.1 million in funds allegedly owed to him principally for a 2007 annual bonus, speaking fees, and other reimbursements.  The Company believes this claim is without merit.

On October 21, 2008, Mr. Simon, our former Co-President and Chief Operating Officer, filed a lawsuit against the Company in the Circuit Court for the 20th Judicial District for Lee County, Florida for $1.4 million for funds allegedly owed to him due to the improper termination of his employment agreement.  The Company believes this lawsuit is without merit.

On November 3, 2008, the Office of Attorney General of the State of Florida issued an investigative subpoena pursuant to the Florida Deceptive and Unfair Trade Practices Act.  The subpoena seeks information about consumer-investors that attended Whitney Information Network, Inc.’s Millionaire University (“MU”) and invested in Florida homes built by Gulfstream

15

Table of Contents

Development Group LLC, Gulfstream Realty and Gulfstream Realty and Development, LLC since August 1, 2004.  Further the subpoena seeks documents and records comprising advertising, marketing, investments and sales materials presented to those MU students along with documents and records describing the Company’s earnings derived from Gulfstream Development Group, LLC and Gulfstream Realty and Development, LLC.  On January 15, 2009 the company produced documents responsive to the subpoena.

On November 17, 2008, the Florida Middle District Court issued an order granting the Company’s motion to dismiss the Durham Class Action Lawsuit without prejudice.  On December 8, 2008, the Company was served a consolidated amended class action complaint filed by Arnold Friedman individually and on behalf of all others similarly situated in the Middle District Court alleging violations of the federal securities laws.  Friedman seeks damages, injunctive relief, attorney costs and fees and any other relief deemed appropriate by the Florida Middle District Court.  By an order dated November 17, 2008, the Court granted the defendants’ motion to dismiss without prejudice the initial complaint styled Durham v. Whitney Information Network, Inc. et al. filed by the plaintiffs on December 28, 2006.See Note 12 —Commitments and Contingencies.

On November 19, 2008, the Florida Middle District Court issued an order granting the Company’s motion to dismiss the Ghosio Derivative Complaint without prejudice.  On December 4, 2008, Robert Ghosio Jr. on behalf of nominal defendant Whitney Information Network, Inc. filed an amended derivative lawsuit in the Florida Middle District Court alleging the breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment.  Ghosio seeks damages, injunctive relief, attorney costs and fees and any other relief deemed appropriated by the Florida Middle District Court.  See Note 12 — Commitments and Contingencies.

On November 21, 2008, we notified Cape Promenade Trust that we will be terminating the lease at 1625 East Cape Coral Parkway effective December 31, 2008.

On January 20, 2009, the Company sold the corporate aircraft, a Cessna Citation VII to an unrelated third party for $3.8 million in cash less commissions of $0.1 million.

16

Table of Contents

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q for the three and six months ended June 30, 2008 (“Quarterly Report” or “Report”) includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements other than statements of historical fact, including statements regarding guidance, industry prospects or future results of operations or financial position, made in this Quarterly Report are forward-looking.  We use words such as anticipates, believes, expects, future, intends, and similar expressions to identify forward-looking statements.  Forward-looking statements reflect management’s current expectations and are inherently uncertain.  Actual results could differ materially for a variety of reasons, including those risks described in our Annual Report on Form 10-K for the year ended December 31, 2007 (“2007 Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on January 15, 2009 and the risks discussed in other SEC filings.  These risks and uncertainties, as well as other risks and uncertainties, could cause our actual results to differ significantly from management’s expectations.  The forward-looking statements included in this Report reflect the beliefs of our management on the date of this Quarterly Report.  We undertake no obligation to update publicly any forward-looking statements for any reason.

Executive Overview

Our business

In the United States, the United Kingdom and Canada, we offer post-secondary non-accredited preview workshops, primary and advanced courses and training in two primary fields of study:

·              Real estate education

·              Financial markets education

Through our branded and private label curricula, our content is expansive and our significant investment in these brands provides for the opportunity to build long-term value.  Our brand portfolio includes:

·             For real estate investment workshops and preview courses:

·                       Russ Whitney®’s Building Wealth™

·                       Teach Me™ Foreclosure and Real Estate Investing

·                       Rich Dad® Education (“RDE”)

·                       Private label brands:

·                  M2 Advantage®

·                  Real Estate Success System

·             For financial markets investment workshops and preview courses:

·                       Teach Me to Trade®

·                       Private label brand:

·                  Stock Success System®

·             Our umbrella brand for advanced courses:

·                       Wealth Intelligence Academy®

17

Table of Contents

The advanced courses of study under the Wealth Intelligence Academy® brand include:

All of the trademarks mentioned herein belong to us, except Rich Dad® Education and CashFlow® which we license from Rich Global, LLC.

We offer our students several ways to access our educational content:

·                  Live instruction in classroom settings

·                  Onsite mentoring

·                  Telephonic coaching

·                  Electronic access

·                  Online Live

·                  On Demand Recorded

·                  Conferences

·                  Teleconferences

18

Table of Contents

Results of Operations

Our operating results are expressed as a percentage of revenue in the table below:

(a)          Special items expense includes direct costs associated with the SEC and the DOJ investigations.

Non-GAAP Financial Measures

Adjusted EBITDA

As used in our operating data, EBITDA is defined as net (loss) income excluding the impact of special items (including the costs associated with the SEC and the DOJ investigations, class action and derivative lawsuits); interest income; interest expense; other income (expense), net; income tax (provision) benefit; stock option compensation expense; depreciation and amortization expense; and equity income (loss) from related parties.  We define “Adjusted EBITDA” as EBITDA adjusted for the net change in deferred revenue less the net change in deferred course expenses.  Adjusted EBITDA is not a financial performance measurement according to accounting principles generally accepted in the United States (“GAAP”).

We use Adjusted EBITDA as a key measure in evaluating our operations and decision-making.  We feel it is a useful measure in determining our performance since it takes into account the change in deferred revenue and deferred course expenses in combination with our operating expenses.  We reference Adjusted EBITDA frequently, since it provides supplemental information that facilitates internal comparisons to historical operating performance of prior periods and external comparisons to competitors’ historical operating performance in our industry.  We plan and forecast our business using Adjusted EBITDA, with comparisons of actual to planned and forecasted Adjusted EBITDA and we provide incentives to management based on Adjusted EBITDA goals.  In addition, we provide Adjusted EBITDA because we believe investors and security analysts find it to be a useful measure for evaluating our performance.

19

Table of Contents

The vast majority of our costs to acquire students have been expended before a student attends any basic or advanced training.  Those costs include media, travel, facilities and instructor fees for the preview workshops and are expensed when incurred.  However, revenue recognition of the tuition paid by students to enroll in any basic or advanced training courses at registration is deferred until (i) the course is attended by the student, (ii) the student has received the course content in an electronic format, (iii) the contract expires, or (iv) revenue is recognized through course breakage.  It is only after one of those four occurrences that revenue is considered earned.  Thus, reporting in accordance with GAAP creates significant timing differences with respect to revenue and expenses, both in our condensed consolidated statements of cash flows and condensed consolidated statements of operations.  As a result of these factors, our operating cash flows can vary significantly from our results of operations for the same period.  For this reason, we believe Adjusted EBITDA is an important non-GAAP financial measure.

Adjusted EBITDA has material limitations and should not be considered as an alternative to net (loss) income, cash flows provided by operations, investing or financing activities or other financial statement data presented in the condensed consolidated financial statements as indicators of financial performance or liquidity.  Items excluded from Adjusted EBITDA are significant components in understanding our financial performance.  Because Adjusted EBITDA is not a financial measurement calculated in accordance with GAAP and is subject to varying calculations, Adjusted EBITDA as presented may not be comparable to other similar titled measures of performance used by other companies.

The table below is a reconciliation of the Company’s net loss to EBITDA and Adjusted EBITDA for the periods set forth below (in thousands):