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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2006

WHITNEY INFORMATION NETWORK, INC.

(Exact name of registrant as specified in charter)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No x

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Exchange Act.  Yes o No x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by section 13 or 15 (d) of the Exchange Act during the preceding 12 months (or 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.  Yes o No x

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this From 10-K or any amendment to this form 10-K. o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in rule 12b-2 of the Exchange Act.

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

The aggregate market value of the voting and nonvoting common equity held by nonaffiliates of the registrant, as of June 30, 2006, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $45.5 million based on the closing sale price of the registrant’s common stock as traded on the NASD Over the Counter Electronic Bulletin Board on such date of $8.30 per share.  As of March 30, 2007, there were 11,738,587 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

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EXPLANATORY NOTE

Whitney Information Network, Inc., (the “Company,” “we,” “us,” “our” or “Whitney”) is filing this Amendment No. 1 to its Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission (the “SEC”) as of April 2, 2007, (the “Original Filing”) to amend and restate financial statements and other financial information for the years 2006, 2005, and 2004, and financial information for the years 2003 and 2002, and for each of the quarters in the years 2005 and 2006.  This restatement corrects errors relating to: (i) disclosures of related party transactions, (ii) the method and disclosure of certain acquisitions, and (iii) depreciable lives of intangible assets and property, plant and equipment.  The restatement also includes certain other corrections and conforming changes and had minimal effect on the Company’s cash flows, liquidity, or our financial position for the respective restated periods.

Revisions in this Amended Annual Report

This Amendment No. 1 to our Annual Report on Form 10-K  for the year ended December 31, 2006 (“Form 10-K/A”) includes restatements, revisions and certain conforming changes to Part 1 — Item 1 — Business, Part II — Item 5 — Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, Item 6 — Selected Financial Data, Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 8 — Financial Statements and Supplementary Data (including the 2006 Financial Statements, Notes to the 2006 Financial Statements and the Report of Independent Certified Public Accountants), Item 9A(T) — Controls and Procedures, Part III — Item 10 — Directors, Executive Officers and Corporate Governance, Item 11 — Executive Compensation, Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, Item 13 — Certain Relationships and Related Transactions and Director Independence, Item 14 — Principal Accounting Fees and Services and Part IV — Item 15 — Exhibits and Financial Statement Schedules.  This Form 10-K/A includes certifications as of the date of this filing from our Chief Executive Officer and Chief Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.

Except for the amended or restated information described in the following tables or as otherwise indicated herein, this Form 10-K/A continues to speak as of the date of the Original Filing, April 2, 2007 (unless explicitly identified as of another date).  Other events or circumstances occurring after the filing of the Original Filing or other disclosures necessary to reflect subsequent events have been or will be addressed in other reports filed with the SEC subsequent to the date of the Original Filing.  Accordingly, this Form 10-K/A should be read in conjunction with our periodic filings, including any amendments to those filings, as well as any Current Reports on Form 8-K filed with the SEC, subsequent to the date of the Original Filing of our Annual Report on Form 10-K.

Certain individuals referred to in this document, including the Chairman and Chief Executive Officer, Mr. Whitney, Co-President and Chief Operating Officer, Mr. Simon, and Co-President and Chief Financial Officer, Mr. Novas, were in their respective positions as of the date of the Original Filing on April 2, 2007.  As of the date of the filing of this Form 10-K/A, these individuals no longer held those positions.  As a result, in the areas of this Form 10-K/A that are restated, we have sometimes referred to Mr. Whitney, Mr. Simon, Mr. Kane and Mr. Novas as “former” officers.  For those items that were not restated in this Form 10-K/A, there is no reference to “former” as these individuals were officers at the time of the Original Filing.

Background

On November 14, 2006, we were notified that the SEC was conducting a formal investigation to determine whether the Company complied with securities laws in connection with (i) the claimed efficacy or trading success of its stock market educational programs, and (ii) its acquisition of certain other companies.  On December 11, 2006, the Company received a subpoena requesting documents in connection with the commencement of a grand jury investigation by the United States Attorney’s Office for the Eastern District of Virginia.  This investigation is related to the Company’s marketing activities from January 1, 2002, to the present.

In December 2006, our Board of Directors established a Special Committee of independent directors to conduct an internal investigation of the activities that are the subject of the government investigations, and the Special Committee engaged the law firm of Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) to assist with this investigation.  The Special Committee has reported its findings and made recommendations to the Board of Directors, as reported in the Company’s Current Report on Form 8-K filed with the SEC on November 9, 2007, and such recommendations have either been implemented or are being implemented as discussed herein.

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Acquisition accounting

With respect to our acquisition of certain companies, the method of accounting related to the transactions was, in some cases, incorrect.  The proper accounting treatment, together with additional disclosures related to the acquisitions are included in Item 8 — Financial Statements and Supplementary Data, Note 1— Restatement in the Notes to the Consolidated Financial Statements for the year ended December 31, 2006 (the “Financial Statements” or the “2006 Financial Statements”).

Other adjustments

We have corrected errors in our calculation of depreciation assigned to various intangible assets and property plant and equipment, inventory balances for amounts that were impaired and incorrectly recorded accounts payables invoices.  Additionally, certain conforming changes and reclassifications were made between direct course expense and advertising and sales expense categories in our Consolidated Statement of Operations and Comprehensive Income (Loss).  Corrections to these errors are included in Item 8 — Financial Statements and Supplementary Data, Note 1 — Restatement in the Notes to the Consolidated Financial Statements and in the tables below.

Executive Compensation and Related Party Disclosures

At the request of the Special Committee, we reviewed disclosure of certain executive compensation matters related to perquisites including personal use of the corporate aircraft, compensation to family members of the named executive officers, personal use of corporate employees and personal use of corporate credit cards.  The required disclosures per the applicable SEC rules and the additional disclosures as requested by the Special Committee regarding the matters listed above are included in Item 11 — Executive Compensation.

In addition, we reviewed our related party transactions for the years 2002 through 2006.  As a result, we have included additional related party disclosures concerning transactions in Costa Rica and Gulfstream Development Group, LLC, in Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 8 —Financial Statements and Supplementary Data and Note 6 — Certain relationships and related transactions in the Notes to Consolidated Financial Statements.

Effects of the Restatement

The following charts reflect the impact of applying the proper accounting treatment for the above listed transactions in our consolidated financial statements (in thousands):

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PART 1

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This document contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements deal with our current plans, intentions, beliefs and expectations and statements of future economic performance.  In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” or “predicts” or the negative of such terms.  These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  Forward-looking statements involve known and unknown risks and uncertainties which may cause our actual results in future periods to differ materially from what is currently anticipated.  We make cautionary statements in certain sections of this document, including under the heading “Risk Factors.”  You should read these cautionary statements as being applicable to all related forward-looking statements wherever they appear in this document, in the materials referred to in this document, in the materials incorporated by reference into this document, or in our press releases.  No forward-looking statement is a guarantee of future performance, and you should not place undue reliance on any forward-looking statement.  We undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

Industry data and other statistical information used in this document are based on independent publications, government publications, reports by market research firms or other published independent sources.  Some data is based on pure good faith estimates, derived from our review of internal surveys and the independent sources.  Although we believe these sources to be reliable, we have not independently verified the information.

ITEM 1.  BUSINESS.(Restated)

Current operations

Since 1992, we have provided post-secondary educational and training courses for students throughout the United States.  In recent years, we have expanded our operations to include course offerings to students in Canada and the United Kingdom.  Our courses provide instruction in:

·                  real estate investing

·                  business strategies

·                  stock market investment techniques

·                  cash management

·                  asset protection

·                  other financially-oriented subjects

We also develop and sell educational resource materials, which we prepare, to support our course offerings and for sale to the general public.

Beginning in 1992, we focused primarily on basic and advanced real estate training programs which we offered throughout the United States.  In 2002, we expanded our offerings to include financial markets education, which has come to represent a substantial part of our business.

Since 2001, we have gradually expanded our course offerings and geographical markets.  We currently offer approximately 200 educational courses and training programs per month, covering more than 22 financially-oriented subjects which we provide either for free or on a fee basis.

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For the year ended December 31, 2006, approximately 92.2% of our revenue was generated from domestic operations and 7.8% of revenue was generated from operations in Canada and the United Kingdom.  Additional financial information regarding our international sales is contained in Note 15 — Business Segment Information to the Consolidated Financial Statements included in Item 8 herein.

Our tuition weighted average is approximately $364 for a basic training session and approximately $14,159 for an advanced course package.  We conduct our coursework at:

·                  leased training and meeting facilities and conference centers;

·                  regional training centers located in hotels or other temporarily rented facilities selected by us; and

·                  our own facilities in the United States, United Kingdom or Costa Rica.

Our students are primarily recruited by attending free introductory workshops related to a specific educational subject which are hosted by one of our trainers or others and held at a local hotel or other rented auditorium facility.  The subject, date and location of the training session are generally advertised in local newspapers, on the Web site of our respective brands, in television advertisements and through direct mailings and telemarketing.  We hold these sessions in metropolitan areas throughout the United States, Canada, and the United Kingdom.  Following the free informational training workshop, the student may purchase reference materials on the subject discussed or may elect to receive further fee-based training in the many courses we offer, either in the student’s hometown or in regional training centers.  We engage approximately 272 trainers, instructors, coaches, and mentors in connection with our various educational course offerings.

Following the first fee-based training session, students interested in learning more on the course topics may also subscribe to our periodic publications, purchase books or software programs, or attend advanced training courses.  In addition to our over 25 resource publications, we offer advanced courses throughout the United States, Canada, the United Kingdom, and Costa Rica.  We also provide post training programs conducted by over 100 mentors.

Our outreach (or telemarketing) business is responsible for approximately 26.8% of cash receipts.  We currently telemarket our products and services to two types of potential students, consisting of those who:

·                  attended one of our workshop events, who purchased another of our courses, and who completed training within the last six months

·                  contacted us via the Internet and requested to be contacted

In 2007, we intend to telemarket our products to two additional types of potential students, consisting of those who:

·                  registered to attend one of our free preview workshops, but did not attend

·                  attended one of our free introductory workshops and chose not to purchase anything

Our strategy

Our purpose is to be the leading content developer and distributor of non-degreed post-secondary education and related services in the world.  We will maintain a motivated and dedicated employee base by providing opportunities for our employees to expand their capabilities through training and by developing succession planning processes.  Customer centricity will be a defining value in everything we do.  In order to accomplish our purpose, we have implemented a strategy that includes:

·                  Talent acquisition and development.  Without the right people skills, we will not be able to easily sustain additional growth objectives.  To allow for future growth, the talent acquisition and development strategy has been identified as a crucial step.  Key points in this area include:

·                  identifying talent needs;

·                  enacting effective hiring approaches;

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·                  creating a training strategy for all strata of employees;

·                  developing and implementing enhanced motivation and rewards guidelines; and

·                  implementing succession planning approaches.

·                  Improved technology and innovation capabilities.  Achieving the necessary steps for us to grow may require significant improvements to our technology and innovation structure and external delivery platforms.  We intend to develop enhanced technology platforms capable of streaming video, interactive e-learning, distributed e-learning, and Web advertising.  We also intend to improve the technology platforms currently used in our financial markets and real estate courses.  Further, we intend to enhance our internal financial systems and fully utilize our customer relationship management (CRM) capabilities.

·                  Expanded channel reach.  Through strategic partnerships, alliances, and new business models, we may be able to generate new revenues without incurring significant additional marketing or administrative costs.  We intend to identify potential partnerships and alliances that can result in increased revenues.  We will research underserved market segments and changes in the post-secondary market that will provide insights to reach new market segments.  We will evaluate complementary business possibilities, including potentially entering business-to-business markets.

·                  Enhanced core offerings and e-enablements.  Our overall brand strategy will be redefined and redirected to maximize marketing effectiveness and to improve customer understanding.  We intend to develop a system of ongoing student involvement to enhance the student life cycle, resulting in an enhancement to the student experience.  Further, we intend to develop new interactive and online distributed course content for all brands.

·                  Increased lifetime customer value.  We intend to continually enhance the student experience and increase the lifetime value of a customer in order to retain customers, attract new customers, and generate additional revenues.  We intend to accomplish this in part by creating student communities through online channels, thus allowing us to better control customer “touch points.”  This may allow us to provide valuable ancillary services and create additional revenue flows through implementation of CRM and data mining results.

·                  International expansion.  We believe that there are many valuable international markets where we could introduce our products in a cost-effective and profitable manner.  It is our intention to explore potential market expansion in Canada, the United Kingdom, Europe, and Asia.  We believe that with the right resources and technological support, we can potentially increase our student base across the globe.

·                  New business acquisition and opportunities.  We believe that viable, new markets exist where we could utilize our existing resources for additional growth within the same (or similar) industries.  We intend to identify potential new markets to enter within our current scope of core competencies and industries.  Further, we will identify attractive markets and acquisition targets outside of our current core competencies within adjacent, complementary markets.

Educational training

Following a free introductory workshop, we offer our students a variety of educational courses, as well as educational materials.  These courses provide the opportunity to train either in the student’s hometown or at local or regional locations.  Our trainers take students step-by-step through a curriculum that stresses a broad range of real estate and financial educational training, risk management and asset protection.  Our educational training is taught to students in the United States, Canada and the United Kingdom through traditional course study and hands-on training, and includes the following subjects:

Basic Training

Following the free educational training session, our students may elect to learn more about the subject by attending a basic course.

Our Russ Whitney’s Building Wealth™ basic training is a program offering a curriculum that focuses on the general business of real estate and teaches the fundamentals of negotiating real estate purchases with sellers, rehabilitating distressed

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properties, leasing rental units to tenants, and using a database to generate multiple sources of cash flow.  Students are taught the mechanics of completing a real estate transaction in their community, from making an offer to closing the transaction, with emphasis upon creative financing strategies.

Our Teach Me™ Foreclosure & Real Estate Investing basic training is a local training program offering a curriculum in real estate focusing on pre-foreclosures.  The course teaches how to locate and purchase homes in foreclosure.  Students will also learn strategies for improving return on their investment in foreclosed properties including wholesaling, rehabilitation and creative financing.

Our Rich Dad® Education basic training was created by Rich Dad Education, LLC, our 51% owned subsidiary, in conjunction with Rich Global, LLC.  The course focuses on the real estate teachings and philosophies of Robert Kiyosaki, author of Rich Dad, Poor Dad.  The course concentrates on real estate principles while allowing students to apply what they have learned from playing the board game, CASHFLOW®.  The Rich Dad® and CASHFLOW® word marks and/or logos are owned by CASHFLOW Technologies, Inc., and any use of such marks by Rich Dad Education, LLC is under license.

Our Teach Me To Trade® basic training program offers curriculum that focuses on stock market trading strategies and uses software and specific teaching techniques designed by us.  Students are taught to understand the stock markets, investment strategies, risks and how to improve returns in both bull and bear markets.

Advanced real estate courses

Upon completion of a local basic training program, students may seek more advanced training, which are generally three days in length and are held in locations around the student’s respective country. Some of these programs offer local tours so that students can observe market segmentation techniques and view properties in the area.

MillionaireU™ Real Estate Training.  Our Millionaire U™ real estate training course is offered at our training center in Cape Coral, Florida, and in other states.  This course expands upon the students’ knowledge of real estate gained from our basic course.  During Millionaire U™, students learn how to locate and analyze various property types and how to effectively analyze property income and expense.  Students telephone actual sellers and then tour properties throughout the Cape Coral and Fort Myers, Florida, areas.  Guest speakers including investors, property managers, developers, grant officers, loan officers, realtors and mortgage brokers explain how students can locate financing for a variety of transactions, from multi-unit apartment complexes to unimproved land.

Our Rich U™ advanced course teaches Rich Dad® Education students how to locate properties using conventional and unconventional strategies, evaluate property deals, create marketing techniques and strategies for the real estate entrepreneur, and utilize various financing options.  Students will also learn about the various types of agreements and documents utilized in typical real estate transactions, creation of a real estate action plan, and the selection process of advisors to assist in achieving the students’ objectives.

Wholesale Buying.  Our Wholesale Buying course instructs students on the fundamentals of identifying, locating, negotiating, financing and disposing of wholesale properties.  Students are also taught how to develop an investor database and how to manage out-of-state properties.  While enrolled in this program, students develop a five-year investment plan with the help of our instructors.  This program is focused upon taking students from the level of novice investor to a proficiency in managing a real estate investment portfolio.

Foreclosure.  Our Advanced Foreclosure course teaches the intricacies of the real estate foreclosure process, how and why foreclosures occur and the role of secured lenders in foreclosure actions.  Our instructors teach students how to read foreclosure notices and how to refinance their acquisitions to generate cash at the closing.  Students also learn how to inspect, estimate the value of and rehabilitate houses.

Lease Option.  Our Lease Option advanced course is designed to teach students how to control an equitable interest in property without actually owning the property and how to create lease options on properties.  Students learn how to structure lease options and purchase options.  Other sessions include negotiating with prospective sellers and prospecting for tenants, buyers, and lessees.

Property Management & Cash Flow.  Our Property Management & Cash Flow advanced course teaches students how to manage their rental properties, including how to analyze monthly cash flows.  Students also learn how to earn income by managing the properties of others and how to find and retain tenants.  The course curriculum includes numerous approaches to

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resolving tenant-landlord problems such as delinquent rents, raising rents, and evicting tenants.  Students learn about the profit potential for acquiring student housing and rooming houses as well as learning how to find and rehabilitate distressed properties.  The program also teaches basic marketing techniques to increase profits.

Manufactured/Mobile Homes and RV Parks.  Our Manufactured/Mobile Homes & Recreational Vehicle Parks advanced course teaches students how to buy, sell, and rent mobile homes and parks, an often overlooked segment of the real estate market.  While mobile homes cost far less than frame constructed homes, they can yield a significant rate of return on investment.  Other subjects include developing and operating a mobile home park, expanding rental “pads” and lots to hold more units, obtaining standard and unconventional financings, estimating fix-up, improvement and moving costs, obtaining seller financing terms, and identifying attractive properties at foreclosures and repossessions.

Commercial Real Estate Investing.  Our Commercial Real Estate Investing advanced course highlights the fundamentals of analyzing, buying, managing, and disposing of commercial properties.  Students also learn how to establish relationships with lenders and government financing agencies.  This course, like many of our courses, teaches students how to rehabilitate properties and how to locate and pre-qualify tenants.  Our trainers also teach students about various leasing arrangements and describe forms used in commercial property management.

Keys to Creative Real Estate Financing.  Our Keys to Creative Real Estate Financing advanced course teaches students how to create and refinance mortgages and how to structure financings in light of prior credit problems.  Discussions also include determining home equity, engaging in real estate negotiations, and the use of hard-money lenders.

Tax Liens and Deeds.  Our Tax Liens and Deeds advanced course focuses on the purchase of tax liens and deeds from local tax agencies.  Tax lien certificates have been widely known by real estate agents, bankers, and attorneys for many years. In this class, our students will learn how to build a financial portfolio through the purchase of tax liens and deeds.  During this training, students may attend an actual tax deed sale.

Rehabbing for Profits.  Our Rehabbing for Profits advanced course has been designed to not only teach students, but to show them how to quickly turn an “ugly house” investment into either a wholesaleable or rentable house with the least amount of effort and expense.  The class will teach students, step-by-step, how to inspect, evaluate, and estimate rehabilitation jobs so they can decide how much of the work to do themselves and how much to contract out.  Negotiating the best deals on materials is also discussed.

Land Investment and Development: Domestic.  During this advanced course, land investment and development students are presented with a powerful step-by-step system for locating and developing vacant land.  These strategies will take students from finding the right land through platting, permitting, and zoning, to selling their own developments.

Land Investment and Development: International.  Our Land Investment and Development: International advanced course in international land development and investment is offered in Costa Rica.  This program offers a curriculum that includes wealth building and investment opportunities overseas.  The training also addresses the benefits of establishing a business internationally, investing in foreign markets, and raising venture and working capital.

Asset Protection and Tax Relief.  Our Asset Protection and Tax Relief advanced course, taught by a third party group of attorneys, describes various legal entities used to hold property such as partnerships, corporations, and land and international trusts and the use of these entities to protect assets.  Students also learn how to minimize income tax and estate tax liabilities and to develop their own personal investment plans.

Discount Notes and Mortgages.  Our Discount Notes and Mortgages advanced training course teaches students how to broker and buy commercial paper at a discount.  Students learn how to locate funding sources for discounted notes and mortgages.  Trainers also teach students how to discount other sources of debt such as business leases, business notes, inheritances, lotteries, life insurance policies, and structured settlements.

Advanced financial markets courses

Our advanced financial markets education courses are designed to help students learn about equity and options investing.

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Master Trader™.  Our Master Trader™ advanced course is a three-day program offering intensified training designed to provide traders and investors with the knowledge needed to prosper in various market environments.  This program offers the students a selection of long and short-term strategies.  Course work includes technical analysis and fundamental analysis.

Advanced Covered Calls.  Our Advanced Covered Calls course describes step-by-step how to create cash flow in trading options.  The course covers the basic terminology of a call, put, covered call, LEAPS, and spread trading.  The course offers long and short-term strategies for trading options.

Trading P.I.T. ™ Our Trading P.I.T. ™ advanced course describes the trading approaches of top money managers.  The course teaches students how to create an income stream using more conservative trading techniques and other strategies designed to limit risk while increasing the probability of profits.  Strategies covered include a number of trading approaches, such as bidirectional trading, hedged directional trading, nondirectional trading, floor-trading strategies, and capital preservation.  We teach students the skills to quickly scan the market, generate forecasts, and select strategies.

The Trading Room.™  The Trading Room™ advanced class provides a framework of discipline and strategy.  Students have the opportunity to develop a system that fits their personal trading style and objectives.  This course instructs students to identify trades, triggers, manage price action, and targets.

Advanced Technical Analysis.  As part of the Advanced Technical Analysis class, our students learn strategies that sharpen their trading skills.  The course breaks down the mystery of trading into a manageable study of price action, pivot points, price extensions, and average range.  Students learn high probability trading techniques for finding trade set-ups, triggers and targets.

Advanced P.I.T. ™ Our Advanced P.I.T. ™ course offers our students the opportunity to experience the market from the inside, directly from the floor of an organized exchange during a market visit followed by a simulated floor trading session after the market closes.  Instruction is provided by our options trainers.  Subjects include advanced spread trading strategies and portfolio repair.

H.I.T.S.  Our single stock futures advanced course addresses changes in rules regarding single stock futures.  We discuss tools associated with spread trading and leveraged trading.  Students are taught the framework of single stock futures, set-ups and strategies, and where single stock futures may fit into their diversified portfolios.

Mentoring Programs

We offer advanced training programs conducted by over 100 mentors, who work with students individually in “hands-on” training sessions.

Real estate mentors.  Our real estate mentoring program applies the curriculum of our real estate classes to the student’s city of choice.  Under this program, one of our mentors travels to the student’s city for three days.  Students review the real estate acquisition techniques involved and learn the real estate characteristics of the local market.  Students can put to practice the skills they have gained while working directly with an experienced mentor.

Financial markets mentors.  For mentored financial markets education, our students travel to our mentor’s location and spend two days coached by an experienced mentor.

Each of these mentorship programs appeals to different students depending upon business acumen and risk tolerances.

Additional Offerings

We market directly to customers a wide range of educational and reference products that supplement our training programs, such as our Building Wealth™ Real Estate Home Study Course; Real Estate Success System software; Business Success System software; Discount Notes and Mortgages Home Study Course; self-help courses and manuals that provide students with information about their credit along with first-time homebuyers’ manuals.

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Marketing

We create an awareness of and demand for our educational programs, products, and services through a mix of television advertising, print advertising, direct mail, email, attendance at trade shows, and Internet marketing.  We employ approximately 200 individuals trained to handle the needs of new students, to promote new products and services to existing and former students, and to respond to customer inquiries via phone, email, or the Internet.

Our marketing programs include:

·                  Television advertising, which is our primary means for promoting our educational courses.  We generally concentrate our television advertising in the cities where our courses are scheduled to be held.  Television advertising is often used in coordination with direct mail marketing and newspaper advertising in order to maximize sales efforts and create greater name recognition within the target population.

·                  Limited newsprint advertising, which we also purchase in markets where our training courses are scheduled to be held.

·                  Direct mail and email marketing, which we use in promoting our educational training courses and marketing new educational products, programs and services to our current and former students and to prospects whose names have been provided to us by third-party vendors.

·                  Internet marketing is primarily focused on Web sites of our respective brands.  The sites contain information about our products, programs and services, many of which may be purchased online.

·                  Cross promotional advertising campaigns, which we employ from time to time.

In the past, we entered into strategic alliances with promoters that market products and services other than ours to potential students in large and small venues.  These alliances allowed us an agreed upon amount of time at the programs to attract students for our introductory courses.  Our alliances were with unrelated third parties and created students for us with no requirement for us to expend funds on initial advertising or marketing.  Our strategic alliance partners receive from us a commission on any advanced course tuition we collect resulting from the access provided us to their students.  The amount of compensation these alliances receive varies depending on the quality of the student, the negotiated amounts with the strategic alliance partner, the costs associated with enrollment and the cost of delivery.

Cash received and commissions paid from course and product sales through strategic alliances are shown in the following table (in thousands, except the number of strategic alliances):

As of March 2007, we do not have any material strategic alliance arrangements.

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Competition

The post-secondary education training business is highly fragmented and intensely competitive.  In a broad sense, we compete with national and international post-secondary education companies, such as Apollo Group, Inc., ITT Education Services, Inc., DeVry, Inc., Corinthian Colleges, Inc., Strayer Education, Inc., and United Technical Institute, Inc., which offer technical and industrial training and career training.  We do not, however, compete with these or other companies that offer undergraduate or advanced degrees or continuing education programs.  More specifically, we compete with a number of smaller companies, such as INVESTools, Inc., Franklin Covey Company, Wizetrade™, Robbins Research International, and Dynetech Corporation, which 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.

We believe that the range and depth of our course offerings and our brand name offer competitive advantages over many of our direct competitors.  We train our instructors and we prepare most of our own course materials which we believe offer us competitive advantages over companies that do not train their own instructors or develop their own educational materials.  As a result of constantly attending the training sessions of our competitors, we believe that the quality of our teachers, trainers and reference materials are comparable or superior to those of our competitors.  Charges for our educational courses are also consistent with those of our competitors.

Intellectual property

We regard our educational materials and products, trademarks, service marks, trade dress, trade names and patents as proprietary and we rely primarily on federal statutory and common law protections to protect our interests in these materials.  While some of our proprietary materials may contain commonly used terms and do not afford us significant trademark protection, we also use employee and third-party non-compete and confidentiality agreements and other contractual methods of protecting proprietary rights to safeguard our intellectual property.

Employees

On March 31, 2007, we had 472 employees, plus 272 independent contractors who act as trainers, instructors, coaches and mentors.  Our employees are not represented by a labor union, and we believe our relations with our employees are satisfactory.  Our independent contractors are paid commissions based upon the tuition dollar value of courses selected by students at our free informational workshops and basic training sessions, or are paid fixed fees for teaching and mentoring advanced courses.  All independent contractors execute agreements with us which set forth commission structures and provide for confidentiality and covenants not to compete.

Government regulation

On November 14, 2006, we were notified by the SEC that it was conducting a formal, nonpublic investigation to determine whether we have 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.  To date, we have provided the Commission with the requested information and intend to continue to do so in the future.

On December 11, 2006, we received a subpoena requesting documents in connection with the commencement of a grand jury investigation by the United States Attorney for the Eastern District of Virginia.  The investigation is related to our marketing activities from January 1, 2002, to the present.  In December 2006, our Board of Directors has established a Special Committee of independent directors to investigate these activities, and the Special Committee engaged the law firm of WilmerHale to assist with this investigation.

A Florida investigation was commenced in 2005 and stems from consumer complaints made to the State from the years 2002 to 2005.  According to information provided to us by the State of Florida, there were approximately 50 complaints from across the country made to the State of Florida’s Attorney General’s telephone hotline during that time period.  This averages about 13 complaints per year or approximately one complaint for every 21,000 students we have educated over the four year period.  Our records indicate that many of these complaints were already handled directly with the consumer or resolved through another agency.  Our legal team has worked diligently to resolve the few remaining complaints and we believe that our continued cooperation with Florida regulators will result in closure of the investigation without further legal proceedings.

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In addition, the Florida Attorney General’s office inquired on July 6, 2005, about approximately 55 complaints related to certain student transactions by and between our students and Gulfstream Development Group, LLC (“Gulfstream”), a company in which our Chairman and Chief Executive Officer has an interest.  The complaints have resulted in the commencement of a lawsuit by Glenn Acciard, et al. naming Gulfstream and, among others, Russell A. Whitney, individually, John Kane, individually, and Whitney Education Group, Inc., a wholly owned subsidiary, as defendants.

The Indiana Attorney General filed a lawsuit against us in March 2005 alleging that our operations fall within certain business opportunity regulations and that we failed to register accordingly.  We believe the lawsuit has no merit and are aggressively defending the action.

In August 2005 and February 2006, we received subpoenas from the Wisconsin Department of Agriculture, Trade and Consumer Protection and the Kansas Attorney General, respectively, requesting information about our advertising and student testimonials.  We believe these are routine inquiries and expect no further action.

Subsidiaries

We conduct a significant portion of our business through the following 11 subsidiaries.

·                  Whitney Education Group, Inc. provides educational programs in the United States.

·                  Wealth Intelligence Academy, Inc. provides advanced educational programs in the United States.

·                  Whitney U.K. Limited provides educational programs throughout the United Kingdom.

·                  Whitney Canada, Inc. provides educational programs in Canada.

·                  Whitney International Limited provides education and training, primarily in the United Kingdom.

·                  Whitney Consulting Services, Inc. performs telemarketing services in real estate, investments and financial training seminars and individual one-on-one coaching programs.

·                  Whitney Leadership Group, Inc. formerly held all of the copyright and intellectual property rights associated with our educational materials and licensed these rights for payments.

·                  Whitney Development Limited.

·                  Mortgage Reduction System Equity Corp. manages the processing of the payments of homeowners that purchase a program we offer that allows for them to pay their mortgages every two weeks instead of monthly.

·                   EduTrades, Inc. provides financial markets education courses.

·                   Rich Dad Education, LLC a 51% owned subsidiary, provides education under Rich Dad® Education in the United States.

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ITEM 1A.  RISK FACTORS

The SEC’s investigation to determine whether we violated any securities laws in connection with (i) the efficacy or trading success of our financial markets education programs, and, (ii) our acquisition of certain other companies, may result in penalties that could have an adverse affect on us, perhaps materially so.

On November 14, 2006, we received a notice from the United States Securities and Exchange Commission that the Commission was conducting a formal, nonpublic investigation to determine whether we complied with securities laws in connection with (i) the 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 and we have provided our full cooperation.  However, we cannot predict the ultimate impact, if any, that the SEC’s investigation may have on our business or operations.  It is possible that the SEC’s investigation may result in penalties.  The nature of the penalties that the SEC may seek against us cannot be predicted at this time but it could have an adverse affect on us, perhaps materially so.

The investigation by the United States Department of Justice for the Eastern District of Virginia in connection with certain of our marketing activities could result in fines or penalties that could have an adverse affect on us.

On December 11, 2006, we received a subpoena from the United States Attorney for the Eastern District of Virginia requesting documents and information in connection with an investigation relating to our product marketing activities from January 1, 2002 to the present.  We were notified that a grand jury investigation related to this matter has commenced.

We intend to cooperate fully with this investigation. Our Board of Directors established a Special Committee of independent directors to conduct an internal investigation of these activities.  The Committee has engaged the law firm of Wilmer Cutler Pickering Hale and Dorr to assist it with this investigation.  While we cannot predict the ultimate impact, if any, that the Department of Justice’s investigation may have on our business or operations, a material adverse affect is possible.

Class action lawsuits filed against us could result in fines or penalties that could have a material affect on our financial results.

On January 30, 2007, we were 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 us of securities violations.  The complaint seeks damages for violations of federal securities laws on behalf of all investors who acquired our stock from November 18, 2003 through and including December 15, 2006 (the “Class Period”).  We will vigorously defend ourselves in this action, but our operating results and management’s attention may be adversely impacted by the outcome of this lawsuit.

On March 8, 2007, we were served a complaint by 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 derivative complaint alleging that the named defendants violated certain fiduciary and securities laws.  We believe that the complaint is without merit and intend to vigorously defend ourselves.  However, our operating results and management’s attention may be adversely impacted by the outcome of this lawsuit.

We have expended significant time and resources to restate our previously submitted Consolidated Financial Statements for years 2001 through 2005.  As a result, our business was adversely affected by the time and expense devoted by our staff and management.  In addition, our investors may call into question future Consolidated Financial Statements issued by us.

The time and resources expended to restate the Consolidated Financial Statements for years 2001 through 2005 increased our cost and required the attention of our financial management personnel.  In addition, our future stock price and volume may be adversely affected by the lack of investor confidence in the accuracy of our future Consolidated Financial Statements.

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We currently have material weaknesses in our internal controls related to our accounting processes and financial records which may result in inaccurate financial reporting, restatements and /or the inability to prevent fraud.

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports under the United States Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chairman and Chief Executive Officer and our Co-President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation and oversight of our Chairman and Chief Executive Officer and our Co-President and Chief Financial Officer, evaluated the design and effectiveness of our disclosure controls and procedures as of the end of the period covered by this report.

On the basis of their findings, our Chairman and Chief Executive Officer and our Co-President and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective, as of the end of the period covered by this report.  In conducting this evaluation, we identified material weaknesses in our internal controls that could cause misstatements in our Consolidated Financial Statements.  These material weaknesses included:

·             Lack of knowledgeable personnel in accounting and financial reporting areas, a lack of formalized processes and procedures over key areas in the accounting and reporting functions, and inadequate supervision and review over the financial reporting function.  These deficiencies are particularly significant in the following areas:

·             Foreign currency translation exchange calculations

·             Income tax provision calculation

We initiated corrective actions to address material internal control deficiencies and have remediated some of the weaknesses reported last year.  We will continue to evaluate the effectiveness of our disclosure controls and internal controls and procedures on an ongoing basis, taking corrective action as appropriate.  In 2006, we hired an experienced Chief Financial Officer (now Co-President and Chief Financial Officer).  In addition, we hired or appointed a new Chief Information Officer, a Vice President, Operations Finance, a Vice President, Strategy and Business Development, a Vice President, Finance, a Director, Financial Systems, a Director, Sarbanes-Oxley Compliance and Implementation, a Manager, Information Technology Sarbanes-Oxley Compliance and Implementation, two Senior Financial Analysts, and two Senior Business Development Analysts.  We are actively recruiting for several new positions that have been approved by the Board of Directors in the areas of financial reporting, financial planning and analysis and financial systems. We will continue to upgrade our personnel and our financial reporting systems to improve our internal controls.

Failure to develop a system to evaluate the effectiveness of our internal controls may impact our ability to accurately report our financial results or prevent financial fraud. As a result, current and potential stockholders could lose confidence in our financial reporting, which could reduce our ability to obtain subsequent financing, if necessary, as well as reduce the trading price of our common stock.

We will need to document and test our internal control procedures, our management will need to assess and report on our internal control over financial reporting and our independent accountants will need to issue an opinion on that assessment and the effectiveness of those controls, subject to the requirements of Section 404 of the  Sarbanes-Oxley Act of 2002 . We will be subject to Section 404 requirements at the end of our fiscal year ending December 31, 2007.  This will require us to develop, fund and staff a department to document and test the design and effectiveness of our internal controls.

Failure to maintain an effective system of internal controls may impact our ability to accurately report our financial results or prevent financial fraud.  As a result, current and potential stockholders could lose confidence in our financial reporting, which would reduce our ability to obtain subsequent financing, if necessary, as well as reduce the trading price of our common stock.

We cannot be certain that our efforts to improve our internal controls will be successful or that we will be able to maintain adequate controls over our financial processes and reporting in the future. We may be hampered in this regard by our current level of staffing or our current accounting system.  Any failure to develop or maintain effective controls, or difficulties encountered in the effective improvement of our internal controls, could harm our operating results, cause us to fail to meet our reporting obligations, result in misstatements in our Consolidated Financial Statements or cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our common stock.

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Issues discovered while evaluating the internal controls could result in having to expend significant time and resources to improve our internal controls which if not successful could adversely affect our reputation and /or the investor’s perception of us and lead to other issues.

Efforts to improve our internal controls could require us to expend significant personnel time, management resources and capital assets or make other substantial changes.  If our internal controls are deemed to be inadequate, or if other unforeseen events occur, our external auditors could resign, leading to a delay in the preparation of our Consolidated Financial Statements and an increase in our audit fees.  If we were required to obtain new external auditors, those auditors could require a lengthy period to become familiar with our operations.  The process of retaining new external auditors could also limit our access to the capital markets for an extended period of time. Multiple issues listed above could lead to reputation and perception issues that could adversely affect the trading price of our common stock.

Accounting errors could adversely affect our ability to meet our reporting obligations, could result in future restatements and/or cause material weaknesses in our internal control over financial reporting.

The accounting errors are directly related to a lack of sufficient and qualified personnel over the accounting and reporting function, a lack of formalized processes and procedures over key areas in the accounting and reporting functions and inadequate supervision and review over the financial reporting function.  These errors, if not corrected, could cause us to fail to meet our reporting obligations, result in misstatements in our Consolidated Financial Statements or cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our common stock.  The accounting errors, if not corrected, could also result in future material weaknesses in our internal control over financial reporting.

Inadequate review of our systems and processes could result in accounting errors, inaccurately reported financial results, financial fraud, and an inability to adequately safeguard our assets.  As a result, current and potential stockholders could lose confidence in our financial reporting, which would reduce our ability to obtain subsequent financing, if necessary, as well as reduce the trading price of our common stock.

Our internal controls, related to accounting processes and financial reporting, have not been effective. We have not developed strong controls that are adequate to ensure that our results are without errors.  If we do not correct this problem, additional material weaknesses could be discovered and disclosed which would result in an inability to rely on our internal controls.

Volatility in the real estate or securities markets may reduce interest in our educational courses, thereby reducing our revenue.

The level of public interest in investing in real estate or in securities significantly influences the demand for our educational and training programs.  The real estate and securities markets have experienced varying levels of volatility in recent years. Negative developments in either market could cause a reduced demand for our programs, products and services, thereby reducing our revenue.

Failure to comply with federal and/or state laws regulating the marketing and sale of our educational courses could harm our reputation and reduce the demand for our course offerings.

Many states regulate the marketing and sale of our educational courses, including the content of advertisements to attract students.  Failure to comply with these regulations could result in legal action instituted by the states, including cease and desist and injunction actions.  In the event we are subject to such legal action, our reputation would be harmed and the demand for our course offerings could be significantly reduced.  In the past, we have been involved in four state regulatory investigations which we have resolved and we are currently involved in four other such regulatory investigations.  See “Government Regulation” for a detailed discussion of these regulatory investigations.

Inability to successfully introduce new programs, products and services would negatively impact our revenue growth.

Our growth strategy is dependent on our ability to sell existing education and training programs, products and services to new students, to open new markets and to develop and introduce new educational programs, products and services.  If we are unable to expand our markets and products, our growth rate and revenue will be reduced.  Market conditions and the level of customer interest may be different for our current products than for new products, and there can be no assurance that we will be able to compete favorably with, and obtain market acceptance for, any such new programs, products or services.

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The current market price of our common stock significantly exceeds our book value per share and increases the risk that our market price per share may decline in the future.

The market price of our common stock was $3.50 per share at the close of business on March 30, 2007 and exceeded our December 31, 2006 book value, which was a stockholders’ deficit of $45.1 million or $(3.84) book value per share deficit.  The lower book value per share compared to our market price per share increases the risk that our market price per share may decline in the future.

Our Chairman and Chief Executive Officer, Russell A. Whitney and Ingrid Whitney, also an employee, beneficially own approximately 44% of our outstanding common stock, which means they have the ability to significantly influence any matter requiring stockholder approval or prevent a change of control in our Company.

Russell A. Whitney, our Chairman and Chief Executive Officer, and Ingrid Whitney, also an employee, beneficially own approximately 44% of our outstanding common stock.  As such, the Whitneys can significantly influence any matter requiring the vote of our stockholders, including the election of directors.  The Whitneys could, with a relatively small number of other stockholders, vote to approve a transaction that may not be in the best interests of other stockholders or reject a transaction that may be in the best interests of other stockholders.  Moreover, the Whitneys’ stock ownership may prevent a third party from acquiring a controlling position in our common stock because in many instances, a third party desiring to purchase a controlling position in a public company is willing to pay a premium to the market price.  The Whitneys’ stock ownership would likely prevent such an event from occurring.

Outside business ventures of Mr. Whitney could result in conflicts of interest that could negatively impact our ability to attract investors.

Mr. Whitney has outside passive investment interests in real estate and owns a 25% interest in Gulfstream Development Corp., a residential construction company.  In the past, Mr. Whitney owned residential real estate lots in Cape Coral, Florida, some of which were purchased by our students.  From time to time, some of our students used Gulfstream to build residences upon lots which they have purchased from Mr. Whitney or others.  These kinds of arrangements could create, or appear to create, conflicts of interest if our students purchased lots from Mr. Whitney or contracted with Gulfstream to construct residences on such lots. Any conflict of interest or appearance of a conflict of interest in connection with our arrangements with our students could negatively impact investor interest in us and therefore our stock price and liquidity.  We do not have any formal procedure for resolving any such conflicts of interest.

On March 22, 2007, a complaint was received by our subsidiary, Whitney Education Group, Inc. The case is Glenn Acciard, et. al. vs. Russell A. Whitney, individually, John Kane, individually and Whitney Education Group, Inc. et. al., Case No. 07-CA-002190 in the Circuit Court of the Fifth Judicial Court in and for Lee County, Florida alleging that a subsidiary of ours and 18 other defendants not associated with the Company, including two of our executive officers, 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.   See “Related Party Transactions” for a more detailed discussion of potential conflicts of interest.

Our relationship with third party providers who introduce real estate investment opportunities to our students may subject us to liability.

In the past and currently, we permit third party providers to provide real estate investment opportunities to our students.  Such arrangements have in the past and may in the future subject us to significant liabilities if such investments do not meet student expectations or result in economic losses to the students.

For instance, in 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.

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The loss of any of our key personnel, especially Mr. Whitney and high performing instructors, could disrupt our operations and reduce our profitability.

Our future success also depends to a significant extent on the continued services of our executive management, including Mr. Whitney.  We do not maintain key-man life insurance on the life of Mr. Whitney.  The loss of the services of Mr. Whitney or other senior management could disrupt our operations and reduce our profitability.

Our future success also depends on our ability to retain and attract high performing instructors.  The loss and/or inability to recruit suitable replacements may impact our performance and reduce our profitability.

The loss of Board of Director members has created a non-independent Board and could create a perception of a lack of stability.

On March 22, 2007, Stephen L. Cootey, a member of the Board of Directors since 2006, resigned.  Mr. Cootey was Chairman of the Compensation Committee.

On March 23, 2007, Anthony B. Petrelli, a member of the Board of Directors since 2006, resigned.  Mr. Petrelli was a member of the Audit Committee, the Governance and Nominating Committee and the Special Committee.

Future departures or perceived instability on our Board may adversely affect investor confidence in the governance of the Company.

Our Board of Directors, without stockholder approval, may issue preferred stock which could reduce the voting power or rights of our other stockholders and make it more difficult for a third party to acquire a majority of our outstanding voters stock.

Our Board of Directors, without stockholder approval, may issue up to 10.0 million shares of preferred stock.  The Board of Directors can fix the rights, preferences and privileges of the shares of each series and any qualifications, limitations or restrictions, which could reduce the voting power or other rights of the holders of common stock.  Issuance of preferred stock could also have the effect of making it more difficult for a third-party to acquire, or of discouraging a third-party from attempting to acquire, a majority of our outstanding voting stock.

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ITEM 1B.  UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 2.  PROPERTIES

The following chart summarizes our office locations (in thousands, except square footage).