SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended March 31, 2003
Whitney Information Network, Inc.
(Exact name of registrant as specified in its charter)
Colorado 0-27403 84-1475486
----------------------------- -------------- --------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1612 Cape Coral Parkway, Suite A, Cape Coral, Florida 33904
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (239) 542-8999
(Former name or former address, if changed since last report)
4818 Coronado Parkway, Cape Coral, Florida 33904
Securities registered under Section 12 (b) of the Exchange Act:
NONE
Securities registered under Section 12 (g) of the Exchange Act:
COMMON STOCK
NO par value per share
(Title of Class)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the Issuer was required to file such reports) and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
The Issuer had 8,102,874 and 8,096,624 common shares of common stock outstanding
as of March 31, 2003 and December 31, 2002.
PART I
Item 1. Financial Statements
Whitney Information Network, Inc.
Consolidated Financial Statements
As of March 31, 2003 and December 31, 2002
And for the Three Months Ended March 31, 2003 and 2002
Table of Contents
-----------------
Page
----
Financial Statements
Consolidated Balance Sheets ....................................... F-1
Consolidated Statements of Operations ............................. F-2
Consolidated Statements of Cash Flows ............................. F-3
Notes to Consolidated Financial Statements ............................... F-4
WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, December 31,
2003 2002
------------ ------------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 15,785,501 $ 12,080,553
Accounts receivable 635,752 507,919
Due from affiliates, net 119,896 4,089
Prepaid advertising and other 1,099,349 696,441
Inventory 296,820 363,555
Deferred tax asset 1,112,000
Deferred seminar expenses 3,993,177 2,907,414
------------ ------------
Total current assets 23,042,495 16,559,971
------------ ------------
Other assets
Property and equipment, net 8,239,646 8,406,370
Intangible assets, net 1,000,926 989,061
Investment in foreign corporation 184,757 184,757
Other assets - 27,128
------------ ------------
Total other assets 9,425,329 9,607,316
------------ ------------
Total assets $ 32,467,824 $ 26,167,287
============ ============
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable $ 3,276,677 $ 1,762,614
Accrued seminar expenses 526,687 63,622
Deferred revenue 30,419,038 24,549,429
Accrued expenses 1,010,063 1,125,662
Current portion of long-term debt 78,049 103,051
Current portion of note payable-officer/stockholder 43,212 59,054
------------ ------------
Total current liabilities 35,353,726 27,663,432
Long-term debt, less current portion 1,606,408 1,606,410
------------ ------------
Total liabilities 36,960,134 29,269,842
------------ ------------
Stockholders' deficit
Common stock, no par value, 25,000,000 shares
authorized, 8,102,874 and 8,096,624 shares issued
and outstanding 961,456 939,832
Paid-in capital 448,600 448,600
Accumulated deficit (5,902,366) (4,490,987)
------------ ------------
Total stockholders' deficit (4,492,310) (3,102,555)
------------ ------------
Total liabilities and stockholders' deficit $ 32,467,824 $ 26,167,287
============ ============
See notes to consolidated financial statements.
F-1
WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three Months Ended
March 31,
------------------------------
2003 2002
------------- -------------
(Unaudited) (Unaudited)
Sales $ 13,303,839 $ 15,453,018
------------- -------------
Expenses
Direct course expenses 7,574,372 6,148,203
Advertising and sales expense 4,540,615 3,074,267
General and administrative expense 3,836,939 2,951,493
------------- -------------
Total expenses 15,951,926 2,173,963
------------- -------------
Income (loss) from operations (2,648,087) 3,279,055
Other income (expense)
Interest and other income 146,918 103,593
Interest expense (22,210) (11,607)
------------- -------------
Income (loss) before income taxes (2,523,379) 3,371,041
Income tax benefit 1,112,000 -
------------- -------------
Net income (loss) $ (1,411,379) $ 3,371,041
============= =============
Basic income (loss) per share $ (.17) $ .43
============= =============
Weighted average shares outstanding 8,099,152 7,878,023
============= =============
Diluted income (loss) per common share $ (.15) $ .43
============= =============
Diluted weighted average common shares outstanding 9,624,077 7,878,023
============= =============
See notes to consolidated financial statements.
F-2
WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Three Months Ended
March 31,
-----------------------------------
2003 2002
------------- ------------
(Unaudited) (Unaudited)
Cash flows from operating activities
Net income (loss) $ (1,411,379) $ 3,371,041
------------- ------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation and amortization 232,172 92,129
Deferred tax asset (1,112,000) -
Changes in assets and liabilities
Accounts receivable (127,833) 143,423
Prepaid advertising and other (402,908) 168,346
Income taxes receivable and prepayments - 326,500
Inventory 66,735 (420)
Deferred seminar expenses (1,085,763) 585,830
Other assets 27,128 (2,191)
Accounts payable 1,514,063 168,080
Accrued seminar expense 463,065 43,849
Deferred revenue 5,869,609 (526,454)
Accrued expenses (115,599) 633,323
------------- ------------
5,328,669 1,632,415
------------- ------------
Net cash provided by operating activities 3,917,290 5,003,456
------------- ------------
Cash flows from investing activities
Note receivable - (100,000)
Purchases of property and equipment (67,313) (180,265)
Loans to affiliates, net (115,807) (85,962)
------------- ------------
Net cash used in investing activities (183,120) (366,227)
------------- ------------
Cash flows from financing activities
Principal payments on note payable - officer/stockholder (15,842) -
Payments of principal on long-term debt (25,004) (39,282)
Proceeds from exercise of stock options 11,624 -
------------- ------------
Net cash used in financing activities (29,222) (39,282)
------------- ------------
Net increase in cash and cash equivalents 3,704,948 4,597,947
Cash and cash equivalents, beginning of period 12,080,553 6,889,275
------------- ------------
Cash and cash equivalents, end of period $ 15,785,501 $ 11,487,222
============= ============
Supplemental cash flow information:
Cash paid for interest was $22,210 and $11,600 for the three months
ended March 31, 2003 and 2002, respectively.
See notes to consolidated financial statements.
F-3
WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES
Supplemental disclosure of non-cash activity:
During 2003, the Company issued 2,500 shares of common stock, valued at
$10,000, in exchange for assets the Company recorded as intangible assets.
See notes to consolidated financial statements.
F-4
WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Significant Accounting Policies
The accompanying consolidated financial statements are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments), which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The consolidated
financial statements should be read in conjunction with the financial statements
and notes thereto contained in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission April 15, 2003, which includes
audited financial statements for the years ended December 31, 2002 and 2001. The
results of operations for the three months ended March 31, 2003, may not be
indicative of the results of operations for the year ended December 31, 2003.
Recently Issued Accounting Pronouncements
In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock-Based
Compensation- Transition and Disclosure". This statement amends SFAS No. 123,
"Accounting for Stock-Based Compensation" to provide alternative methods of
transition for an entity that voluntarily changes to the fair value method of
accounting for stock-based compensation. In addition, SFAS 148 amends the
disclosure provision of SFAS 123 to require more prominent disclosure about the
effects of an entity's accounting policy decisions with respect to stock-based
employee compensation on reported net income. The effective date for this
Statement is for fiscal years ended after December 15, 2002.
The adoption of this statement did not have a material effect on the
consolidated financial statements as the Company continues to account for stock
based compensation under the intrinsic value approach, and follows the pro-forma
disclosure requirements of SFAS 123, as amended by SFAS 148.
Note 2 - Related Party Transactions
The Company has rented its headquarters location in Cape Coral, Florida, since
1992 from the Chairman of the Board and pays rent on annual leases. Rentals
under the related party lease were $15,148 and $18,462 for the three months
ended March 31, 2003 and 2002, respectively. The Company leases approximately
8,700 square feet presently.
MRS Equity Corp. provides certain products and services for Whitney Information
Network, Inc. and Whitney Information Network, Inc. provides MRS Equity Corp.
with payroll services including leased employees. Whitney Information Network,
Inc. provided payroll services to MRS Equity Corp. in the amounts of $59,570 and
$29,381 for the three months ended March 31, 2003 and 2002, respectively. MRS
Equity Corp. provided Whitney Information Network, Inc. with $164,400 and
$136,650 for product costs for the three months ended March 31, 2003 and 2002,
respectively. MRS Equity Corp. is a 100 percent subsidiary of Equity Corp.
Holdings, Inc. of which the Chairman of the Board of Whitney Information
Network, Inc. owns a controlling interest.
During 2003 and 2002, Whitney Information Network made payments of $31,375 and
$49,999, respectively, for registration fees and commissions to Whitney
Leadership Group, Inc. The Chairman of the Board of Whitney Information Network,
Inc. is the President and Chief Operating Officer of Whitney Leadership Group,
Inc.
F-5
WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
United States Fiduciary Corp. is a company that provides telemarketing services
for Whitney Information Network, Inc. The Chairman of the Board of Directors and
the Chief Financial Officer were members of the board of directors of United
States Fiduciary Corp. During 2003 and 2002, Whitney Information Network, Inc.
paid $0 and $121,115, respectively, in commission payments to United States
Fiduciary Corp.
RAW, Inc. is a company owned by the Chairman of the Board of Whitney Information
Network, Inc., which buys, sells and invests in real property.
Those items above that are reasonably expected to be collected within one year
are shown as current and those that are not expected to be collected during the
next year are shown as non-current.
The following balances are due from related parties:
March 31, December 31,
2003 2002
------------ -------------
(Unaudited)
Due from Whitney Leadership Group $ 68,641 $
Due from RAW, Inc. 4,089 4,089
Due from MRS Equity Corp 47,166
------------ ------------
$ 119,896 $ 4,089
============ ============
Note 3 - Commitments and Contingencies
Litigation
The Company is not involved in any material asserted or unasserted claims and
actions arising out of the normal course of its business that in the opinion of
the Company, based upon knowledge of facts and advice of counsel, will result in
a material adverse effect on the Company's financial position.
Other
The Company carries liability insurance coverage, which it considers sufficient
to meet regulatory and consumer requirements and to protect the Company's
employees, assets and operations.
The Company, in the ordinary course of conducting its business, is subject to
various state and federal requirements. In the opinion of management, the
Company is in compliance with these requirements.
F-6
WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 4 - Income Taxes
As of March 31, 2003 and December 31, 2002, the Company has net operating loss
(NOL) carryforwards for tax purposes of approximately $7,175,000 and $3,600,000,
respectively, which expire in the years 2003 through 2022.
Deferred tax liabilities and assets are determined based on the difference
between the financial statement assets and liabilities and tax basis assets and
liabilities using the tax rates in effect for the year in which the differences
occur. The measurement of deferred tax assets is reduced, if necessary, by the
amount of any tax benefits that based on available evidence, are not expected to
be realized.
The accompanying balance sheets include the following:
March 31, December 31,
2003 2002
------------- -------------
(Unaudited)
Deferred tax asset from NOL carryforward $ 2,677,000 $ 1,301,000
Deferred tax liability from deferred expense/revenue recognition (1,565,000) (1,142,000)
------------- -------------
Total deferred tax asset 1,112,000 159,000
Valuation allowance for deferred tax asset - (159,000)
------------- -------------
Net deferred tax asset $ 1,112,000 $ -
============= =============
Note 5 - 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.
F-7
WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table presents the activity for options outstanding:
Weighted
Options Average
Related To Exercise
A Plan Price
------------- -------------
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
Granted 651,750 $ 1.81
Forfeited/canceled (141,000) $ (1.98)
Exercised (26,375) $ (2.13)
-------------
Outstanding - December 31, 2002 1,406,175 $ 1.93
Granted 152,500 $ 3.70
Forfeited/canceled (30,000) $ (2.29)
Exercised (3,750) $ (3.10)
-------------
Outstanding - March 31, 2003 1,524,925 $ 2.11
-------------
The following table presents the composition of options outstanding and
exercisable:
Range of Exercise Prices Number of Options Price* Life*
------------------------ ----------------- ---------- -----------
$ 1.70 10,000 $ 1.70 8.49
$ 1.75 45,000 $ 1.75 7.10
$ 1.81 330,225 $ 1.81 9.00
$ 1.88 288,800 $ 1.88 6.43
$ 2.00 683,400 $ 2.00 7.12
$ 3.10 15,000 $ 3.10 9.43
$ 3.70 152,500 $ 3.70 9.92
-----------------
$1.70 to $3.70 1,524,925 2.11 7.70
============== ================= ========== =========
*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:
F-8
WHITNEY INFORMATION NETWORK, INC. AND SUBIDIARIES
Notes to Consolidated Financial Statements
For the Three Months Ended
March 31,
------------------------------
2003 2002
--------------- -------------
Net income (loss) - as reported $ (1,411,379) $ 3,371,041
Net income (loss) - pro forma $ (1,689,524) $ 3,371,041
Basic income (loss) per common share - as reported $ (.17) $ 0.43
Basic income (loss) per common share - pro forma $ (.21) $ 0.43
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 Periods Ended
March 31,
--------------------------------
2003 2002
------------- ------------
Approximate risk free rate 6.00% 6.00%
Average expected life 10 years 10 years
Dividend yield 0% 0%
Volatility 20% 154%
Estimated fair value of total options granted $278,145 $ 0
Note 6 - Income (Loss) Per Share
The following table sets forth the computation for basic and diluted earnings
per share:
For the Periods Ended
March 31,
-------------------------------
2003 2002
------------ -------------
Numerator for diluted income (loss) per common share $ (1,411,379) $ 3,371,041
============ =============
Denominator for basic earnings per share - weighted
average shares 8,099,152 7,878,023
Effect of dilutive securities - convertible debt,
options and warrants 1,524,925 -
------------ -------------
Denominator for diluted earnings per share -
adjusted weighted average shares 9,624,077 7,878,023
============ =============
Diluted income (loss) per common share $ (.15) $ .43
============ =============
Where the inclusion of potential common shares is anti-dilutive, such shares are
excluded from the computation.
F-9
WHITNEY INFORMATION NETWORK, INC. AND SUBIDIARIES
Notes to Consolidated Financial Statements
Note 7 - 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. Only approximately 2.3% of the Company's revenues are
generated relating to investment trading related 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 ending March 31, 2003.
For the Period Ended
March 31, 2003
-----------------------------------------
Location Revenues Long-Lived Assets
-------------------------------------------------------------------------------------------------
United States $ 10,592,087 $ 8,340,821
Canada 907,388 17,316
United Kingdom 1,804,364 70,970
Costa Rica - 811,465
-----------------------------------------------
$ 13,303,839 $ 9,240,572
================================================
Note 8 - Subsequent Event
In February 2003, the Company entered into an agreement with one of its officers
to purchase all of the outstanding shares of Equity Corp. Holdings, Inc. which
owns MRS Equity Corp. The purchase price was $250,000. In addition, the Company
also assumed a $4,750,000 note payable due to the Company's Chairman of the
Board and majority shareholder. This liability arose from the officers'
redemption of 90% ownership of Equity Corp. Holdings, Inc. of the Chairman of
the Board and majority shareholder in June 2002.
In February 2003, the Company entered into an agreement with the Company's
Chairman of the Board and majority shareholder to purchase all of the
outstanding shares of Whitney Leadership Group, Inc. The purchase price for this
transaction was $1,200,000.
The Company expects these transactions to close in May 2003. Both agreements are
subject to a number of contingencies, including due diligence and a fairness
opinion acceptable to the Company's legal counsel.
F-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Forward-Looking Statements
Certain information included in this report contains forward-looking statements
made pursuant to the Private Securities Litigation Reform Act of 1995 ("Reform
Act"). Such statements are based on current expectations and involve a number of
known and unknown risks and uncertainties that could cause the actual results
and performance of the Company to differ materially from any expected future
results or performance, expressed or implied, by the forward-looking statements.
In connection with the safe harbor provisions of the reform act, the Company has
identified important factors that could cause actual results to differ
materially from such expectations, including operations uncertainty, acquisition
uncertainty, uncertainties relating to economic and political conditions and
uncertainties regarding the impact of regulations, changes in government policy
and competition. Reference is made to all of the Company's SEC filings,
including the Company's Report on Form 10SB, incorporated herein by reference,
for a description of certain risk factors. The Company assumes no responsibility
to update forward-looking information.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2003 Compared to March 31, 2002
Revenue
Total revenue for the three months ended March 31, 2003 was $13,303,839, a
decrease of $2,149,170 or 13.9% compared to the same period in 2002 of
$15,453,018. Recognized revenue from deferred revenue was $5,254,138 for the
three months ended March 31, 2003 compared to $10,250,301 for the comparable
period in 2002. Of these amounts, $449,225 and $7,500,866, respectively, was
recognized due to the expiration of the student's contract period. The decrease
in revenue is due to the decrease in the advanced courses attended by students
in the period compared to the previous period. During the first three months of
2003, there were 650 attendees of advanced courses compared to 1,239 attendees
of advanced courses for the same period in 2002. The levels of registrations and
attendance in all other courses offered by us remained relatively constant.
Despite an overall increase in new student registrations of advanced courses
during this period, attendance and earned revenue were reduced due to travel
concerns by our students, heightened by the war in Iraq. We believe that the
first quarter of 2003 is not a trend and expect revenue to return to the levels
of growth that have been experienced in the previous periods. This belief is
illustrated in the approximately $6,000,000 increase in deferred revenue in 2003
that will ultimately become revenue that was not present in the previous period.
We expect to continue to grow our operations and student base in the future both
domestically and internationally. We expect to grow domestically through the
development of our Teach Me To Trade segment using our same real estate business
model. We expect to grow internationally by continuing to establish our Whitney
UK subsidiary and looking for opportunities to enter new international markets.
We will incur significant course and advertising expenses to establish these new
markets, but expect to generate the student base to support these costs and
allow these markets to be profitable in the long-term.
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 revenue
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 increased for the first quarter of 2003 to $7,574,372, an
increase of $1,426,169 or 23.2% over the prior comparable period in 2002 of
$6,148,203. This increase is consistent with the increase in the amount of all
types of courses that were held during the three months ended March 31, 2003 of
229 compared to 103 in the comparable prior period and is also due to the
increase in initial courses offered to 86 courses for the three months ended
March 31, 2003 compared to 45 courses for the comparable prior period.
Advertising, Selling and General and Administrative Expenses and Sales Expenses
Advertising and sales expenses, of which advertising represented approximately
60% of these expenses for the three months ended March 31, 2003, was $4,540,615,
an increase of $1,466,348 or 47.7% compared to the same period in 2002. The
increase in advertising and sales expenses is due to an increase in media buys
due to the expansion in the number of events being held by the Teach Me To Trade
division, and by the increased events in the United Kingdom. Also, advertising
and sales expenses increased due to recognizing those expenses that gave rise to
the deferred revenues this period while conversely, we were not able to
recognize those revenues which were deferred to future periods under generally
accepted accounting principles.
General and administrative expenses consist primarily of payroll related
expenses, insurance, office and facility expenses, and depreciation expense.
General and administrative expenses consist primarily of payroll related
expenses, insurance, office and facility expenses, and depreciation expense.
General and administrative expenses increased to $3,836,939, an increase of
$885,446, or 30% over the comparable period in 2002 of $2,951,493. This increase
is due primarily to our hiring 64 new employees, net of terminations, to handle
the increase in our volume, which was offset partially by a $250,000 decrease in
merchant fee expense for the use of credit cards due to a change of banks.
Additionally, management bonuses increased in the first quarter of 2003,
approximating $650,000.
Net Income
Net Loss for the three months ended March 31, 2003 was $1,411,379 as compared
with a net income of $3,371,041 for the three months ending March 31, 2002, a
decrease of $4,782,420 or 141.9% or a per share net loss of $.17 per share as
compared to net income of $.43 per share for the prior period. The decrease is
directly attributable to the increase in deferred revenues in 2003 over the
prior period, the decrease in the amount of revenue recognized due to
expirations, increased general and administrative expenses and a proportionate
increase in advertising expenses.
Liquidity and Capital Resources at March 31, 2003
Our capital requirements consist primarily of working capital, capital
expenditures and acquisitions. Historically, we have funded our working capital
and capital expenditures using cash and cash equivalents on hand. Cash increased
by $3,704,948 to $15,785,501 at March 31, 2003, compared to an increase of
$4,597,947 in the previous comparable period in 2002. The decrease in the
increase in cash for the three months ended March 31, 2003 compared to March 31,
2002 is primarily due to a $5,894,420 decrease in before tax income, which was
offset by a $6,396,063 and $1,671,593 increase in the deferred revenue and
deferred expenses balances, respectively.
Our cash provided by operating activities was $3.92 million and $5.0 million for
the three months ended March 31, 2003 and 2002, respectively. In the first
quarter 2002, cash flows from advanced training programs were positively
impacted by increased collection efforts by our sales associates accompanying
the instructors and trainers at the training locations.
Our cash used in investing activities was $183,120 and $366,227 for the three
months ended March 31, 2003 and 2002, respectively. Our investing activities for
the three months ended March 31, 2003 and 2002 were primarily attributable to
the purchase of office property and equipment, $67,313 compared to $180,265, and
related party transactions, $115,807 compared to $85,962 described in the
accompanying financial statements.
The following reflects our commitments for capital expenditures, debt and other
commitments.
Operating
Capital Lease
Expenditures Debt(1) Commitments Total
------------ ---------- ----------- ----------
2003 -- $ 121,261 $ 82,995 $ 204,256
2004 -- 861,073 89,952 951,025
2005 -- 352,341 88,547 440,888
2006 -- 356,405 73,359 429,764
2007 -- 60,784 -- 60,784
Thereafter -- 938,305 -- 938,305
------------ ---------- ---------- ----------
Total -- $2,609,169 $ 334,853 $3,025,022
-------------
(1) Includes the debt associated with our purchase of two related companies,
Equity Corp. Holdings, Inc and Whitney Leadership Group, Inc. The purchase
price of Whitney Leadership was $1,200,000 paid to our Chairman and his
wife, payable $300,000 in cash at closing and a $900,000 promissory note
payable in semiannual installments beginning in February 2004 bearing an
interest rate of 7%. The purchase price of Equity Corp. Holdings was
$250,000 paid to our Vice President--Marketing, payable $62,500 in cash at
closing, 62,500 shares of common stock, and a promissory note of $62,500
due in February 2004 bearing an interest rate of 7%. The Equity Corp.
Holdings transaction additionally provides for the assumption of a
$4,750,000 promissory note due to our Chairman due $1,000,000 in July 2003
and 2004 and ten installments of $275,000 payable in January and July
beginning in 2005 through 2009 at an interest rate of 7%. We expect to be
able to satisfy these commitments by using cash on hand and cash provided
by operations. We do not expect these transactions to have a significant
impact on our financial results due to the fact that the products were
purchased from these entities at cost and these entities have insignificant
operations with nonaffiliates.
Item 4. CONTROLS AND PROCEDURES
The Company, under the supervision of the chief executive and financial officer,
has conducted an evaluation of the effectiveness of the design and operation of
the Company's disclosure controls and procedures within 90 days of the filing
date of this quarterly report. Based upon the results of this evaluation, the
Company believes that they maintain proper procedures for gathering, analyzing
and disclosing all information in a timely fashion that is required to be
disclosed in its Exchange Act reports. There have been no significant changes in
the Company's controls subsequent to the evaluation date.
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party defendant in any material pending or threatened
litigation and to its knowledge, no action, suit or proceedings has been
threatened against its officers and its directors.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The rights of the holders of the Company's securities have not been modified nor
have the rights evidenced by the securities been limited or qualified by the
issuance or modification of any other class of securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There are no senior securities issued by the Company.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matter was submitted during the three months ended March 31, 2003 to a vote
of security holders, through the solicitation of proxies or otherwise.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit No. Description
----------- -----------
10.1 Stock Purchase Agreement for the Whitney Information Network,
Inc.'s purchase of Whitney Leadership Group, Inc.
10.2 Stock Purchase Agreement for the Whitney Information Network,
Inc.'s purchase of Equitycorp Holdings, Inc.
99.1 Certification of the Chief Executive Officer and Chief
Financial Officer of Whitney Information Network, Inc.
Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification of the Chief Executive Officer and Chief
Financial Officer of Whitney Information Network, Inc.
Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the quarter ended March 31, 2003
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WHITNEY INFORMATION NETWORK, INC.
Dated: September 5, 2003 By:/s/ Russell A. Whitney
----------------- ----------------------
Russell A. Whitney
President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated:
Signature Title Date
--------- ----- ----
/s/Russell A. Whitney President/Director/Chairman/ September 5, 2003
---------------------
Russell A. Whitney Chief Executive Officer
/s/Richard S. Simon Secretary/Treasurer/Chief Financial Officer/ September 5, 2003
-------------------
Richard S. Simon Principal Accounting Officer and Director
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
I, Russell A. Whitney, the Chief Executive Officer of Whitney Information
Network, Inc. (the "Company"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of the Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: May 15, 2002
/s/ Russell A. Whitney
----------------------
Name: Russell A. Whitney
Title: Chief Executive Officer
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
I, Ronald S. Simon, the Chief Financial Officer of Whitney Information Network,
Inc. (the "Company"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of the Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: May 15, 2002
/s/ Ronald S. Simon
-------------------
Name: Ronald S. Simon
Title: Chief Financial Officer