Whitney Information Network, Inc. Announces the Results of the Special Committee's Investigation and Pending Restatement of Financial Statements



    CAPE CORAL, FLA., November 9 /CNW/ - Whitney Information Network, Inc.
(Pink Sheets:  RUSS) announced the results of the Company's investigation
conducted by a Special Committee of the Company's Board of Directors (the
"Special Committee") and a restatement of its consolidated financial
statements. As previously disclosed, the Company is being investigated by the
United States Securities and Exchange Commission (the "SEC") and Department of
Justice's United States Attorney's Office for the Eastern District of
Virginia.

    The Company's 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 investigation. The Special Committee
engaged the law firm of Wilmer Cutler Pickering Hale and Dorr LLP
("WilmerHale") to assist with this investigation. The matters under
investigation included (i) the efficacy or trading success of the Company's
stock market education programs, and (ii) the Company's acquisitions of
certain other companies.

    The Special Committee has reported its findings and made recommendations
to the Board of Directors. The Special Committee also reported its findings to
the SEC. The Special Committee reported that it was satisfied with the
cooperation it received from the Company's executives, employees and counsel
during the investigation.

    With respect to the Company's education programs, the Special Committee,
based on WilmerHale's investigation, found no evidence that members of the
Company's executive management encouraged live speakers to make
misrepresentations or knew about particular statements on which the government
has focused. However, the Special Committee found that, among other things,
before the start of the government investigations, the Company's marketing
function - including advertising for Company products, solicitation of
customers, presentation of live seminars, telemarketing, coaching and
mentoring - was characterized by inadequate controls, inadequate training and
a failure to devote adequate resources to compliance. The Special Committee
also criticized a variety of practices, including, among others, use of
testimonials obtained for one brand in support of another, failure to disclose
affiliations between endorsers and the Company, failure to adequately disclose
investment risks, and misstatements by certain live speakers.

    In September 2007, the Special Committee made a number of recommendations
with regard to the Company's marketing, telemarketing and live presentation
programs. In light of the Special Committee's recommendations, the Company has
implemented and is implementing improved controls in certain areas of its
operations that include, among other things, (i) new compliance guidelines for
marketing materials issued by the Company; (ii) new compliance guidelines for
the Company's telemarketing operations; (iii) new compliance guidelines for
speakers at live events; (iv) development and implementation of disciplinary
procedures for violations of compliance guidelines; (v) enhanced training and
certification for speakers; (vi) improved policies for customer refund
requests; (vii) the addition of new compliance and supervisory personnel;
(viii) revisions to its student agreements to include additional or emphasize
existing disclosures regarding the Company's policies; (ix) development of an
employee "hotline" to allow employees to report ethical and compliance issues;
and (*) the scheduling of re-training of employees on the Company's ethics
policies for the first quarter of 2008.

    With respect to the Company's acquisitions of certain other companies,
among other findings, based on WilmerHale's investigation, the Special
Committee reported to the Board of Directors in September 2007 and delivered
its final recommendations in November 2007, and reported to the SEC in
November 2007. The Special Committee found that the Company's prior public
disclosures were incorrect in the following respects:

    --  The Company previously disclosed that (1) in July 2003 the Company
acquired Whitney Leadership Group, Inc. ("Whitney Leadership") from Russell A.
Whitney, Chairman of the Board and Chief Executive Officer and his wife for
$1.2 million; (2) at the time, Whitney Leadership held all of the copyright
and intellectual property rights associated with its educational materials and
licensed those rights to the Company for payments; and (3) the Company entered
into the acquisition agreement in order to eliminate those payments and to
gain control of intellectual property rights that form the core of the
Company's business. The Special Committee found that the Company did not
disclose a provision in a document denominated as an exhibit to the agreement
that afforded Mr. Whitney the right to terminate the Company's rights to the
use of his name and likeness under certain circumstances, including if Mr.
Whitney were no longer employed with the Company or no longer owned a
controlling voting interest in the Company. The Special Committee found that
the version of the exhibit containing this provision was created in May 2004.
Mr. Whitney indicated that he believed that the subsequently created exhibit
memorialized a prior oral agreement. In any event, Mr. Whitney never exercised
his right to terminate the Company's rights and Mr. Whitney now has agreed to
void that provision at the request of the Special Committee.

    --  The Company previously disclosed that (1) in July 2003 the Company
purchased Equity Corp. Holdings, Inc. ("Equity Corp.") from John F. Kane; (2)
as part of the transaction, the Company agreed to assume and pay a $4.75
million promissory note issued to Mr. Whitney and his wife by Equity Corp. in
June 2002; and (3) Equity Corp. incurred this obligation when it elected to
redeem all of Mr. and Mrs. Whitney's ownership in Equity Corp., 90% of the
outstanding stock, as of June 1, 2002. The Special Committee concluded that
the redemption did not occur, and no note was issued by Equity Corp. to Mr.
and Mrs. Whitney, in June 2002. The Special Committee found that the
redemption of Mr. and Mrs. Whitney's Equity Corp. shares and Equity Corp's
incurring of this $4.75 million obligation in fact closed on May 31, 2003. The
Special Committee concluded that Equity Corp.'s redemption of Mr. and Mrs.
Whitney's Equity Corp. shares was not a separate transaction from the
Company's acquisition of Mr. Kane's Equity Corp. shares. As previously
reported by the Company in its Current Report on Form 8-K dated November 3,
2007 and filed with the SEC on November 8, 2007, the Board of Directors has
determined that, with respect to the acquisition of Equity Corp., the Company
incorrectly used the acquisition method of accounting for a business
combination and instead should have accounted for the transaction as a
combination of entities under common control, similar to a pooling of
interests. As a result, as the Company reported in its Form 8-K dated November
3, 2007, the Company will need to restate its financial statements for the
years ended December 31, 2002 to the present.

    --  The Company previously disclosed that (1) the Company obtained
fairness opinions from Jewett, Schwartz and Associates, certified public
accountants, in connection with its acquisition of Equity Corp. and Whitney
Leadership, that the prices the Company had agreed to pay for the businesses
did not exceed the values of the businesses as determined based upon the
income of the two businesses; (2) based upon these opinions, the independent
members of the Board of Directors authorized the two acquisitions; and (3) the
Company also engaged independent legal counsel to obtain the fairness opinions
and advise the Company as to their acceptability, and such counsel so advised
the Company in June 2003. The Special Committee concluded that these
disclosures were incorrect, in that (1) Jewett, Schwartz and Associates
provided a Business Valuation Report and did not opine on the fairness of the
transactions; (2) the Business Valuation Report concluded that the fair market
value of Equity Corp. and Whitney Leadership together was $3.87 million, which
was less than the combined $6.2 million acquisition price paid by the Company
for those companies; and (3) the Company's independent counsel did not opine
on the fairness of the transaction. The Special Committee also reported that
two independent directors stated that they were not aware of the nature and
conclusions of the Business Valuation Report at the time they ratified the
transactions, though the member of executive management responsible for the
fairness opinions stated that the directors were informed. Company's
management has concluded that there has been no impairment of the value of the
intangible assets reflected in the Company's consolidated financial statements
with respect to the Equity Corp. and Whitney Leadership transactions.

    --  The Company previously disclosed that (1) the Company purchased all
of the outstanding common stock of Precision Software Services, Inc.
("Precision") from Mr. Whitney and Mr. Kane, who subsequently became an
executive officer of the Company, in exchange for an aggregate of
approximately 333,000 shares of common stock valued at $500,000 and $250,000
in notes; and (2) Mr. Whitney received $125,000 in notes payable. The Special
Committee concluded that the Company did not disclose that (1) the $250,000 in
notes payable (of which Mr. Whitney and Mr. Kane each received $125,000) were
not for the purchase of Precision, but rather the purchase of software that
Mr. Whitney and Mr. Kane had licensed to Precision; and (2) the Company also
paid $250,000 in cash (of which Mr. Whitney and Mr. Kane each received
$125,000) for that software.

    Based on its investigation, the Special Committee provided to the Board
of Directors a number of recommendations which the Company has indicated it
will adopt. These include, among others, continuing the improvements to the
Company's marketing, telemarketing and live presentation programs, correcting
the prior disclosures regarding the Company's acquisitions noted above,
obtaining an independent analysis of whether or not fair value was received by
the Company in the Equity Corp. and Whitney Leadership transactions, having
Mr. Whitney void the provisions in the exhibit to the Whitney Leadership
acquisition agreement noted above, and hiring experienced securities and
disclosure counsel. Additional recommendations of the Special Committee that
are continuing to be reviewed by the Board of Directors relate to (1) the
process of appointing three additional independent members to the Company's
Board of Directors based on the nominations of the independent Nominating
Committee (after consultation with the other Board members), and (2)
management changes, including, among other things, that Mr. Whitney should
step down as Chief Executive Officer and become non-executive Chairman of the
Board (or assume a role as advisor or consultant to the Board) under terms to
be negotiated with the independent Compensation Committee; that Ronald S.
Simon, currently Co-President and Chief Operating Officer, should step down as
an officer and director of the Company; that Mr. Kane, currently Executive
Vice President - Operations, and Alfred R. Novas, currently Co-President and
Chief Financial Officer, should serve as Co-Presidents of the Company on an
interim basis; and that the reconstituted Board of Directors should undertake,
in consultation with Mr. Whitney, a search for a new Chief Executive Officer.

    In addition, the Company is reviewing certain other matters (including
aircraft usage by Mr. Whitney and others, compensation expense of employees
regarding work performed for Mr. Whitney's private businesses, compensation
paid to Mr. Whitney's and Mr. Kane's family members, and Mr. Whitney's
business expenses) to ensure that the Company's accounting and disclosures in
its filings prior to 2006 with the SEC were correct. A disclosure error in the
Executive Compensation section of the Company's Annual Report on Form 10-K for
2005 has been identified regarding the Standard Industry Fare Level rate upon
which the Company relied upon in connection with calculating the value of Mr.
Whitney's personal aircraft usage as a component of his compensation, and this
disclosure will be corrected when the Company's restated consolidated
financial statements are filed.

    As reported in a filing with the SEC yesterday, the Company also has
announced that as a result of the Special Committee investigation, the
Company's Board of Directors has determined that its 2003 acquisition of
Equity Corp. was a related party transaction (the "Equity Corp. Transaction"),
and that the Company incorrectly used the acquisition method of accounting for
the business combination and instead should have accounted for the transaction
as a combination of entities under common control, similar to a pooling of
interests. Thus, the Company will need to restate prior year financial
statements. The Company expects that the change in accounting for the Equity
Corp. Transaction will result in a decline in its reported consolidated total
assets, an increase in the Company's consolidated stockholders' deficit for
the periods restated, and reduce the Company's consolidated net loss. The
Company does not expect the restatement to have a cumulative effect on its
consolidated statement of cash flows. The Company is not yet able to determine
the final amounts or resulting accounting impact of the change in accounting
for the Equity Corp. Transaction.

    Accordingly, the Company's consolidated financial statements for the
years ended December 31, 2002 to the present, the interim periods contained
therein, and the related financial information contained in all earnings and
press releases and similar communications issued by the Company for such
periods should no longer be relied upon.

    About Whitney Information Network, Inc.:

    Whitney Information Network, Inc. (Pink Sheets:  RUSS) is a provider of
postsecondary education focused on individual wealth creation and personal
success. Whitney Information Network, Inc. provides students with
comprehensive instruction and mentorship in real estate education and
financial markets education in the United States, United Kingdom, Canada,
Germany and Costa Rica. Additional information can be found at
www.wincorporate.com.

    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, and include statements regarding the outcomes and
effects of pending regulatory and other investigations. 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. No forward-looking statement is a guarantee of future
performance, and you should not place undue reliance on any forward-looking
statement. The Company undertakes 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.




For further information:

For further information: Whitney Information Network, Inc., Cape Coral
Alfred R. Novas Co-President and Chief Financial Officer 239-542-0643

Organization Profile

WHITNEY INFORMATION NETWORK, INC.

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