Use these links to rapidly review the documentTABLE OF CONTENTS ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA



SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-K

Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2005

Whitney Information Network, Inc.(Exact name of registrant as specified in its charter)

|Colorado(State or other jurisdiction of
Incorporation)                                                   |  | 0-27403(Commission File
Number) |  | 84-1475486(IRS Employer
Identification No.)
|-------------------------------------------------------------------------------------------------------- |  | ------------------------------- |  | -------------------------------------------
|1612 E. Cape Coral Parkway, Cape Coral, Florida 33904(Address of principal executive offices) (Zip Code)

Registrant's
telephone number, including area code:(239) 542-0643

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)

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 ý

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 ý

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 for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate by a 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 the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K. ý

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

|o Large accelerated filer |  | o Accelerated Filer |  | ý Non-accelerated filer
|------------------------- |  | ------------------- |  | -----------------------

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

The aggregate market value of the voting and nonvoting common equity held by non-affiliates of the Registrant, computed by reference to the closing
sale price of such common equity as quoted on the NASD's Over the Counter Electronic Bulletin Board of $9.50 per share as of March 30, 2006 was $49,073,703.

The
Registrant had 10,878,016 shares of common stock outstanding as of March 27, 2006.

The
Registrant's revenues for the fiscal year ended December 31, 2005, were $178.6 million.

Documents
incorporated by reference: None



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TABLE OF CONTENTS



|PART I    
|----------
|ITEM 1.   
|ITEM 1A.  
|ITEM 2.   
|ITEM 3.   
|ITEM 4.   
|PART II   
|ITEM 5.   
|ITEM 6.   
|ITEM 7.   
|ITEM 7A.  
|ITEM 8.   
|ITEM 9.   
|ITEM 9A.  
|PART III  
|ITEM 10.  
|ITEM 11.  
|ITEM 12.  
|ITEM 13.  
|ITEM 14.  
|PART IV   
|ITEM 15.  
|SIGNATURES

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PART I

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 our actual results and performance 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, we have identified important
factors that could cause actual results to differ materially from such expectations, including but not limited to those factors described in "Risk Factors" below.

ITEM 1. BUSINESS

Current Operations

Since 1992 we have provided postsecondary 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:



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 an substantial part of our business, as reflected in the following table showing the relative percentage of revenue by segment.

|                            |  | Years ended December 31, |  
|--------------------------- |  | ------------------------ | -
|
|Real estate education       |  | 69.4                     | %
|Financial markets education |  | 30.6                     |  
|                            |  |                          |  
|                            |  | 100.0                    | %
|                            |  |                          |  

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 27 financially-oriented subjects which we provide either for free or on a fee basis.

For
the year ended December 31, 2005, approximately 95% of our revenue was generated from domestic sales and 5% was generated from sales made in Canada and the United Kingdom. Our
tuition weighted average is approximately $411 for a basic course and $14,159 for an advanced course package. We conduct our coursework at:



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Our
students are primarily recruited by attending free introductory workshops related to a specific educational subject which is 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 our Web site at www.russwhitney.com, in
television advertisements and through direct mailings and telemarketing. We hold these sessions in metropolitan areas throughout
the United States, Canada, United Kingdom and Costa Rica. 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 over 200 trainers, instructors 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, in Canada and the United Kingdom. We
also provide post-training programs conducted by over 80 mentors, who travel to students' hometowns for "hands on" business training.

Our
telemarketing business is responsible for approximately 20.6% of cash receipts. We telemarket our products and services to four types of people, those who:



Our Strategy

Our goal is to continue to expand our coursework breadth and geographic reach within the real estate education and financial market education industry operations
in the financial education industry. In order to do so, we have implemented a strategy that includes:



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Educational Training

Following a free informational 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 home town or at local or regional camps. Our trainers take students step-by-step through a curriculum that stresses a broad range
of financial educational training, money management and asset protection. We do not have any specific educational requirements for our trainers, but we do require that they have experience with
respect to the subjects they teach and that they have completed training programs which we provide that prepares them to teach their particular subjects. Our financial 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 in the student's home town.

Real Estate.OurBuilding Wealth workshop training is a local
training 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
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 Cash Flow Generator® training is also a local training program offering a curriculum in real estate but with a different
emphasis. It concentrates on the "buy, fix up and sell concept." It emphasizes turning real estate quickly rather than holding long-term.

Business.Our three-day business local training workshops currently are in development and are being designed to
teach students how to organize and build a business, how to broker or buy judgments, discount notes and mortgages, how to fund a retirement plan at maximum levels, how to purchase property at discount
prices through auctions or online trading and how to arrange E-commerce accounts for clients and customers.

Financial.OurTeach Me To Trade® is a local training program
offering a 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 maximize returns in both bull and bear markets.

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Our Star Tradertraining is similar to theTeach Me To Trade® training, but
with different emphasis.Star Trader emphasizes stock trading and the use of options and option trading in its program. Similar to our two
real estate training brands,Star Traderappeals to students who have a higher risk tolerance than Teach Me To Trade students.

Advanced Real Estate Courses

Upon completion of a local basic training program, students may seek more advanced training at our specialized regional training centers, which are generally
three days in length and are held in locations around the country. Many of these programs offer local tours so that students can observe negotiating techniques and view properties in the area.
Students are led through real estate acquisition and financing transactions from beginning to end and are provided with a number of real estate acquisition strategies.

MillionaireUIntensified Real Estate Training.Our Intensified
Real Estate Training course is offered at training centers in Cape Coral, Florida and in other locations in Florida and in other states. This course expands upon the students' knowledge of real estate
gained from our basic course. During Intensified Real Estate Training, 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 offered for sale throughout the Cape Coral and Fort Myers, Florida areas. Students then conduct real estate investment negotiations and may
complete transactions under the supervision of their instructor. 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.

Wholesale Buying.Our Wholesale Buying training 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 Foreclosure Training course teaches the intricacies of the real estate foreclosure process, how and why
foreclosures occur, the role of secured lenders in foreclosure actions and discusses laws that affect lenders and borrowers. Students visit a local county courthouse to search foreclosure records and
review title and tax information. Students visit with owners of properties that are in foreclosure and learn how to negotiate transactions for properties in foreclosure. Our instructors also 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.

Purchase Options.Our Purchase Option training 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 and how to generate cash from purchase
real estate transactions. Included with the course is a field trip and detailed information on how to select appropriate properties for option or purchase. Other sessions include negotiating with
prospective sellers and prospecting for tenants, buyers and lessees.

Property Management Cash Flow.Our Property Management & Cash Flow training 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 resolving tenant-landlord problems such as delinquent rents, raising rents and evicting tenants. Our instructors discuss governmental regulations and the tax
implications associated with real estate. Students learn about the profit

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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.

Investing in Mobile Homes.Our Manufactured/Mobile Homes & RV Parks training 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 training 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 various
legal forms used in commercial property management. Students finish their training with a four-hour analysis tour of commercial properties.

Keys to Creative Real Estate Financing.Our Keys to Creative Real Estate Financing course teaches students how to create and
refinance mortgages, how to exchange properties without tax consequences 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.

Business Success Training

Our Business Success programs offer a series of training courses associated with starting a business, growing a business and protecting assets.

Asset Protection and Tax Relief.Our Asset Protection and Tax Relief training course 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 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.

Financial Market Education Courses

Our Financial Training programs are designed to help students learn about stock market and international equity investing.

Master Trader.Our Master Trader Advanced Training 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 and uses state of the art proprietary software. Course work includes technical analysis, fundamental analysis and our Master Training techniques.

Trading P.I.T.Our Trading P.I.T. ("pros-in-training") course describes the trading
approaches of top money managers. The course teaches students how to create an income stream using more

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conservative
trading techniques and other strategies designed to limit risk while increasing the probability of success. Strategies covered include a number of trading approaches such as bidirectional
trading, hedged directional trading, non-directional trading, floor-trading strategies and capital preservation. Our 5-Point STAR Trader Formula allows users to quickly scan
the market, generate forecasts and select strategies.

Single Stock Futures.Our Single Stock Futures course addresses changes in rules regarding single stock futures. We discuss
new tools associated with spread trading and leveraged trading. Students are taught the legal framework of single stock futures, set-ups and strategies and where single stock futures fit
into their diversified portfolios.

Advanced P.I.T. Training Camp.Our Advanced P.I.T. Training 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, portfolio repair and creating a personal mutual fund.

International Finance and Investment Training Course.We have recently developed a new advanced training program in
international finance and investment which is offered in our Costa Rica conference center. 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, raising venture and working capital internationally and asset protection.

Mentoring Programs

We offer advanced training programs conducted by our over 80 mentors, who work with students individually in "hands-on" business training.

Real Estate.Our real estate mentoring program applies the curriculum of the basic real estate camps to the student's city of
choice. Under this program, one of our mentors travels to the student's city for three to four days and often guides the student through an investment transaction. 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.For mentored financial markets education, our students travel to our
state-of-the-art learning center in Salt Lake City and spend three and one-half days coached by an experienced stock market trader.

Each
of these brands 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.

Sales and Marketing

We create interest in and demand for our educational programs, products and services through a mix of television advertising, print advertising, direct mail,
e-mail, attendance at trade shows and Internet marketing. We employ a sales force of over 100 individuals trained to handle the needs of new

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students,
to promote new products and services to existing and former students and to respond to customer inquiries via phone, e-mail or the Internet.

Our
marketing programs include:



We
also enter into strategic alliances with promoters that market products and services other than ours to potential students in large and small venues. These alliances allow us an
agreed upon amount of time at the programs to attract students for our initial three-day basic training. Our alliances are with unrelated third parties and create students for us with no
requirement for us to expend funds on initial advertising or marketing. Our strategic alliance partners receive from us a portion of our advanced course tuition in exchange for providing us students.
The amount of compensation these alliance partners receive varies depending on the quality of the student, the negotiated amounts with the partner, the costs associated with enrollment and the cost of
delivery.

Competition

The financial education training business is highly-fragmented and intensely competitive. In a broad sense, we compete with national and international
postsecondary education companies, such as Apollo Group, Inc., ITT Education Services, Inc., DeVry, 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., 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 own teachers and trainers
and we prepare most of our own course materials which we believe offer us competitive advantages over companies that do not train their own teachers 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

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teachers,
trainers and reference materials are consistent or superior to those of our competitors. Our 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 and trade symbols as proprietary and we rely primarily on statutory and common law
protections, such as copyrights and trademarks, to protect our interests in these materials. While some of our products and trade names are commonly used terms and do not afford us significant
copyright or trademark protection, we also use employee and third-party noncompetition and nondisclosure agreements and other contractual methods of protecting proprietary rights to safeguard our
intellectual property.

Employees

At March 27, 2006, we had approximately 370 employees, plus 187 independent contractors who act as trainers, instructors 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 are paid fixed fees for teaching and mentoring individual courses. All independent contractors execute letter agreements with us which set forth
commission structure and provide for confidentiality and covenants not to compete.

Government Regulation

We rely on advertising to attract new students and most states regulate postsecondary education advertising practices. Since our inception we are aware of four
occasions in which states have investigated our advertising practices. These states were Florida, Michigan, Pennsylvania and Tennessee. In 1996 Florida terminated its investigation into our
advertising practices without charges or penalties. In 1998 we agreed to a Michigan Assurance of Discontinuance that required us to be licensed to sell business opportunities. We paid an investigation
fee of $250, did not admit wrongdoing and have been conducting business in Michigan since 1998 without incident. In 1998 we agreed to a Pennsylvania Assurance of Voluntary Compliance pursuant to which
we agreed to comply with all applicable requirements of the Consumer Protection Law. We did not admit wrongdoing and have been conducting business in Pennsylvania since 1998 without incident. We paid
Pennsylvania $4,000 to cover investigative costs. In 1997 we agreed to a Tennessee Agreed Final Order in which we agreed not to violate the Tennessee Consumer Protection Act in connection with our
advertisements. We did not admit wrongdoing and have been conducting business in Tennessee since 1997 without incident. We paid Tennessee $9,500, of which $7,500 was to cover investigative costs.

From
time to time, we receive inquires from state regulators relative to our business operations and our advertising efforts to attract new students. Although we believe we are currently
in full compliance with all applicable state regulations, we are aware of four current inquiries or investigations in the states of Florida, Kansas, Wisconsin and Illinois.

The
Florida investigation was commenced in 2005 and stems from consumer complaints made to the state from years 2002-2005. According to information provided to us by
the state, there were approximately 50 complaints from across the country made to the Attorney General's telephone hotline over the past four years. This averages about 13 complaints per year
or approximately 1 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 any further legal proceedings.

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Indiana
filed a lawsuit against us in March of 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
March of 2005 and February of 2006 we received subpoenas from Wisconsin and Kansas, respectively, requesting information about our advertising and student testimonials. We believe
these are routine inquires and expect no further action.

Subsidiaries

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



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ITEM 1A. RISK FACTORS

You should carefully consider the risks and uncertainties described below and the other information in this filing before deciding whether to invest in the common
stock.

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 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.

If we do not successfully introduce new programs, products and services, our growth rate and revenue will be reduced.

Our
growth strategy is dependent on our ability to sell existing 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.

If we fail to develop and then maintain an effective system of internal controls, we may not be able 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
are not currently subject to the internal control requirements of Section 404 of theSarbanes-Oxley Act of 2002but expect to be
subject to Section 404 requirements for our 2007 calendar year. Should we fail to develop an effective system of internal controls for our 2007 calendar year, our ability to obtain subsequent
financing as well as our stock price would be reduced. We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement. For example, in 2005 our
independent auditors noted in a letter to management some potential material weaknesses in our internal controls regarding financial reporting and offered suggestions regarding our internal controls
and operations. According to the letter, we currently do not have a sufficient amount or type of staff in the financial, accounting and external reporting areas. We are seeking additional experienced
finance and accounting professionals with a background in public reporting responsibilities, and we intend to add further to our financial and reporting staff in order to meet our public reporting
responsibilities. Areas for improvement in our accounting and financial reporting functions related to reconciliation of our accounts; proper recordation of expenses and liabilities in the period to
which they relate; proof of internal review and approval of accounting items; documentation of key accounting assumptions, estimates and/or conclusions; and documentation of accounting policies and
procedures.

We
have taken steps to address these issues including hiring an experienced Chief Financial Officer and recruiting 15 employees to our 30 person finance organization, but
we may be hampered in this regard by our current level of staffing and our current accounting system. We cannot be certain

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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. 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, 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. 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 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.

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

The
market price of our common stock was $9.80 per share at the close of business on March 27, 2006 and greatly exceeded our December 31, 2005 book value, which was a
deficit of $(9.8) million or $(0.93) per share. 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 owns over 50% of our outstanding capital stock, which means that he has the ability to approve or disapprove any matter requiring
stockholder approval or prevent a change of control in our Company.

Russell
A. Whitney, our Chairman and Chief Executive Officer, owns over 50% of our outstanding capital stock. As such, Mr. Whitney can approve or disapprove any matter requiring
the vote of our stockholders, including the election of directors. Mr. Whitney could, without 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, Mr. Whitney's 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.
Mr. Whitney's stock ownership would likely prevent such an event from occurring.

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

Our
future success depends to a significant extent on the continued services of our senior 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 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 2. PROPERTIES

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

|Purpose                            |  | Location             |  | Own/Lease |  | Approximate
Square Footage |  | Lease Expiration |  | Annual Rental
|---------------------------------- |  | -------------------- |  | --------- |  | -------------------------- |  | ---------------- |  | -------------
|Corporate headquarters             |  | Cape Coral, FL       |  | Own       |  | 30,000                     |  |                 |  |              
|Conference center                  |  | San Jose, Costa Rica |  | Own       |  | 7,000                      |  |                 |  |              
|European headquarters              |  | London, England      |  | Own       |  | 5,600                      |  |                 |  |              
|EDX and Telemarketing headquarters |  | Draper, UT           |  | Lease     |  | 13,553                     |  | October 2006     |  | $            
|Canadian headquarters              |  | Ontario, Canada      |  | Lease     |  | 1,200                      |  | May 2005         |  |              
|Training center                    |  | Salt Lake City, UT   |  | Lease     |  | 6,783                      |  | June 2010        |  |              
|Training center                    |  | Cape Coral, FL       |  | Lease(1)  |  | 2,200                      |  | February 2007    |  |              
|Support facility                   |  | Cape Coral, FL       |  | Lease(1)  |  | 9,000                      |  | February 2007    |  |              
|Training center                    |  | Cape Coral, FL       |  | Lease(1)  |  | 5,000                      |  | June 2007        |  |              
|                                   |  |                      |  |           |  |                            |  |                  |  |              
|                                   |  |                      |  |           |  | 80,336                     |  |                  |  | $            
|                                   |  |                      |  |           |  |                            |  |                  |  |              

---

Our
executive offices are located in an approximately 30,000 square foot office building we own at 1612 East Cape Coral Parkway, Cape Coral, Florida 33904. We own a 7,000
square foot conference and training center in Costa Rica, which we designed and built in 2002. We also own a 5,600 square foot
building on Bath Road, Chiswick, London, England which is our European headquarter offices and a training facility.

We
lease 13,553 square feet of office space at 12244 South Business Park Drive, Suite 230, in Draper, Utah. The lease expires in October 2006 and is payable at the rate of $6,128
per month. We are actively negotiating for new office space in the metropolitan Salt Lake City market to support our expanding business operations.

Our
Canadian subsidiary leases 1,200 square feet of office space at 3780-14th Avenue, Unit 20, Ontario, Canada. The lease expires in May 2005 and is
payable at rates increasing from $1,081 to $1,654 per month over the term of the lease.

We
lease approximately 6,783 square feet of office space at 2 South 400 West in Salt Lake City, Utah. The lease expires in 2010 and is payable at the rate of $9,327 per month. The
facilities are being used as a training center.

Related party leases

We lease 2,200 square feet of training facilities at 1611 East Cape Coral Parkway ("1611 Cape Coral"), 9,000 square feet of space at 1625 East Cape Coral Parkway
("1625 Cape Coral") which is used for shipping, and 5,000 square feet at 1630 SE 47th Terrace which we use as a training facility and for storage, all in Cape Coral, Florida from Cape
Promenade Trust which is for the benefit of Russell A. Whitney, our Chief Executive Officer and his wife, Ingrid. The leases are for three years and began on March 1, 2003, March 1, 2003
and June 1, 2004 respectively. The monthly rentals are $1,943, $7,950 and $7,238 respectively. We are on a month-to-month basis with respect to the 1611 Cape Coral and 1625 Cape Coral leases
that expired in March 2006.

12

---



We
locate what we refer to as regional training centers in hotels in a number of cities across our market areas. We rent, generally for three to five days, meeting rooms in these hotels
for use in training our students.

ITEM 3. LEGAL PROCEEDINGS

From time to time, Whitney is involved in legal proceedings that we consider to be in the normal course of business. We do not believe that any of these
proceedings will have a material adverse effect on our business.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

None

13

---





PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is quoted on NASD's Over-the-Counter Bulletin Board under the trading symbol "RUSS" since August 1998. The high
and low closing prices of our common stock for the last two years, by calendar quarter, are set forth below. These quotations reflect inter-dealer prices, without retail mark-up, markdown
or commissions and may not represent actual transactions.

High Closing Price

Low Closing PriceYear ended December 31, 2005Fourth Quarter

$
9.75

$
4.55Third Quarter

$
5.00

$
2.82Second Quarter

$
3.40

$
1.20First Quarter

$
2.38

$
1.10


High Closing Price

Low Closing PriceYear ended December 31, 2004Fourth Quarter

$
4.00

$
1.90Third Quarter

$
4.65

$
3.25Second Quarter

$
4.90

$
3.95First Quarter

$
5.05

$
4.20


As
of March 27, 2006, we had approximately 406 record and beneficial stockholders.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth our selected consolidated financial information as of and for the five year period ended December 31, 2005. The data for the
five years has been derived from our audited consolidated financial statements, which appear elsewhere in this filing. The following selected consolidated financial data should be read in conjunction
with the consolidated financial statements and the notes thereto.

All
financial information, except per share data, is expressed in thousands.

|                                  |  | Years ended December 31,
|--------------------------------- |  | ------------------------
|
|Income Statement Data:            |  |                         
|Revenue                           |  | $                       
|Earnings (loss) from operations   |  | $                       
|Net earnings (loss)               |  | $                       
|Diluted earnings (loss) per share |  | $                       

14

---



Balance Sheet Data:

|                             |  | December 31, |       
|---------------------------- |  | ------------ | ------
|
|Total assets                 |  | $            | 97,216
|Long term debt               |  | $            | 2,912 
|Stockholders' deficit        |  | $            | (9,052
|Book value per share deficit |  | $            | (0.87 
|Shares outstanding           |  |              | 10,456

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our consolidated financial condition and results of operations for the periods indicated should be read in
conjunction with ourconsolidated financial statements, related notes and the other financial data included elsewhere in this report. The discussion contains forward-looking statements involving risks,
uncertainties and assumptions that could cause our results to differ materially from expectations. Factors that might cause such differences include those described under "Risk Factors", "Special Note
Regarding Forward-Looking Starements" and elsewhere in this filing.

Executive Overview

In the United States, the United Kingdom and Canada, we offer postsecondary nonaccredited introductory workshops, primary and advanced courses and training in two
primary fields of study:



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



15

---





The
advanced courses of study under theWealth Intelligence Academy brand include:

| |  | Intensified real estate training                          
| | - | ----------------------------------------------------------
| |  | Wholesale buying                                          
| |  | Foreclosure training                                      
| |  | Lease option                                              
| |  | Property management and cash flow                         
| |  | Keys to creative real estate financing                    
| |  | Asset protection & tax relief                             
| |  | Mentor field training                                     
| |  | Discount notes and mortgages                              
| |  | Manufactured mobile homes and recreational vehicle parks  
| |  | Rehabbing for profit                                      
| |  | Tax liens and deeds                                       
| |  | Commercial real estate investing                          
| |  | Domestic and international land investment and development
| |  | Master Trader                                            
| |  | The Trading P.I.T.                                       
| |  | The Advanced P.I.T.                                      
| |  | H.I.T.S.                                                 
| |  | The Trading Room                                         
| |  | Advanced Covered Calls                                    

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



We
are also aware of other macroeconomic trendsincluding changes in the real estate markets, financial markets, overall employment, early retirement, consumer confidence
that may impact overall demand, and believe we can adapt our curriculum development and marketing message accordingly to changing trends. Moreover, we are also cognizant that we compete in an area
where the barrier is low with respect to content development, however, access to students and the fulfillment of the courses require substantial cash outflow before cash inflow is realized in the form
of tuition.

Our
international presence in the United Kingdom and Canada represents approximately 5.4% of the cash received from course and product sales in 2005. We intend to review our entire
international strategy during the upcoming year.

Over
the past five years, revenue has grown at a compounded annual rate of 40.3% while our operating expenses grew at a 33.1% compounded annual growth rate. Through continued leveraging
of our fixed costs, improving our overall marketing efficiency and course delivery, we endeavor to grow revenue at a faster rate than the growth of operating expenses.

16

---



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

Years ended December 31,2005

2004

2003

2002

2001Revenue

100.0
%
100.0
%
100.0
%
100.0
%
100.0
%Operating expenses:Direct course expenses

54.1

66.7

54.0

45.7

46.8Advertising and sales expenses

28.0

35.5

31.7

22.4

27.4General and administrative expense

15.3

19.3

16.1

22.3

20.397.5

121.5

101.8

90.4

94.6Earnings (loss) from operations

2.5

(21.5
)
(1.8
)
9.6

5.4Other income (expense):Interest and other income

1.3

0.1

0.6

0.5

0.8Interest expense

(0.3
)
(0.4
)
(0.1
)
(0.1
)
(0.2
)Equity earnings from related parties

(0.1
)
0.1Gain on sale of assets

3.7

0.24.6

0.0

0.5

0.4

0.6Earnings (loss) before income taxes

7.0

(21.5
)
(1.3
)
10.0

6.0Income tax benefit

3.8Minority interest

(1.1
)Net earnings (loss)

9.7
%
(21.5
)%
(1.3
)%
10.0
%
6.0
%


Our
cost structure is particularly sensitive to increasing television advertising and production costs and travel related expenses. However, a very meaningful part of our cost structure
is variable in nature, such as instructor related costs which are primarily a function of sales realized.

We
obtain the majority of our students through introductory workshops. These introductory workshops are established in various metropolitan areas in the United States, the United Kingdom
and Canada. Prior to the actual workshop, we expend a significant amount of money in the form of advertising through various media channels, as reflected in the following chart:

|            |  | Years ended December 31, |  
|----------- |  | ------------------------ | -
|
|Television  |  | 79.8                     | %
|Direct mail |  | 12.1                     |  
|Newspaper   |  | 8.0                      |  
|Other       |  | 0.1                      |  
|            |  |                          |  
|            |  | 100.0                    | %
|            |  |                          |  

Our
advertising and sales expense represented approximately 28.0% of our revenue in 2005. Overall advertising and sales expense over the past five years have grown at a 32.6% compound
annual growth rate, 7.7 percentage points below revenue's compound annual growth rate of 40.3%.

Approximately
22.4% of those students attending the introductory workshops purchase one or more of our courses. For advanced courses the student pays the tuition at the time of
registering for the course or program and has the opportunity to attend that course over the next 12 months. As

17

---



reflected
in the following chart, cash sales from course or product sales differs from the revenue reported for financial statement purposes (in thousands).

|                                           |  | Years ended December 31,
|------------------------------------------ |  | ------------------------
|
|Cash received from course or product sales |  | $                       
|Less: Net change in deferred revenue       |  |                         
|                                           |  |                         
|Revenue for financial reporting purposes   |  | $                       
|                                           |  |                         

Due
to the timing differences between cash collection and the time at which our students actually take the course (or course expiration, which ever is earlier), we have historically
recorded a substantial amount of deferred revenue. Most of the deferred revenue at the end of each year will result in reported revenues in the next year. As reflected in the table below, our deferred
revenue as a percentage of total revenue have ranged from the high 30% to mid 40% range since 2002 (in thousands).

|                                         |  | Year ended December 31, |        
|---------------------------------------- |  | ----------------------- | -------
|
|Deferred revenue                         |  | $                       | 80,580 
|Revenue for financial reporting purposes |  |                         | 178,564
|Deferred as a percentage of revenue      |  |                         | 45.1   

The
vast majority of our costs to acquire the student has been expended up to the point of registration, such as media, travel, facilities and instructor fees for the introductory
workshops; these costs are expensed when incurred. However, the tuition paid at registration is deferred until the course is attended by the student, the student received the course content in an
electronic format, or the contract expires, at which time the revenue is deemed earned. Thus, reporting under generally accepted accounting principles in the United States of America creates
significant timing differences with respect to revenue and expenses, both in the form of cash flows and in the form of our consolidated income statement. As a result of these factors, our operating
cash flows can vary significantly from our results of operations for the same period. For this reason we believe Adjusted EBITDA is an important non generally accepted accounting principles operating
metric.

We
can continue to have differences between cash flows and reported revenues in our consolidated income statement as the students have yet to take the courses they have paid for. The
overall expenses associated with delivering the advanced courses are significantly lower than the expenses surrounding the introductory courses. We hire speakers, instructors, trainers and mentors on
an independent contractor basis. These individuals are compensated primarily on a commission basis or sometimes on a fixed fee basis.

EduTrades

EduTrades, our financial markets education division, began operations in July 2002, with the acquisition ofTeach Me to
Trade®, with sales commencing in the fourth quarter of 2002.

One-half
of all U.S. households own stocks, either directly or through a mutual fund or retirement plan, according to a 2005 survey by the Securities Industry Association.
Federal Reserve Board and U.S. Census Bureau. This represents 56.9 million households in 2005, when compared to 40.0 million ten years ago, and 15.9 million in 1983. Investment in
the stock market and in mutual funds continues to be significant. In 2005, equity fund inflows amounted to $147.6 billion.

Approximately
67% of all equity investors are between the ages of 35 and 64, with a 51 years of age mean and median, the peak earning and investing years, according to the
Securities Industry

18

---



Association/Investment
Company Institute survey. According to the U.S. Census Bureau and the same survey, of the 9.1 million, or approximately one-third of all individuals in the
U.S., individuals who own equities, the median household income is $65,000, the median financial household assets are $125,000 70% are married, 56% college graduates and 70% are employed.

Since
that time, investment in the stock market and mutual funds continues to be substantial, and there has been significant growth in investments in alternate financial instruments such
as options, single stock futures and indexes. Trading in option contracts reached record levels in 2005. According to the Chicago Board of Options Exchange, there were 468.2 million option
contracts traded in 2005 compared to 361.1 million in 2004, a 29.7% increase. This trend has continued through January and February 2006, where trades in option contracts have increased 49.5%
over the same period in 2005.

Accordingly,
in July 2005, we established EduTrades as a separate subsidiary for our financial markets education division. In November 2005 EduTrades filed a registration
statement with the Securities and Exchange Commission to sell a minority interest to the public. The registration statement has not been declared effective by the SEC. We are expected to own 66.7% of
EduTrades after its initial public offering and have agreed to an Administrative Services Agreement to provide shared administrative services for both EduTrades and us to maximize our cost leverage in
both companies. Also, we have entered into a Fulfillment Agreement with EduTrades, a Revised Lead Marketing Agreement, an Assignment Agreement and a Voting Agreement with EduTrades. A summary of each
agreement follows:



We will provide administrative and operational assistance as needed, in the following areas:



We
shall be compensated for all services provided under this Agreement at a monthly rate consisting of actual expenses incurred or an allocation of shared expenses plus an administrative
fee of 15%.



We are obligated to fulfill all of EduTrades's outstanding financial market education obligations sold to students and incurred by EduTrades prior to
August 1, 2005. These training obligations shall encompass all obligations related to the stock market training, including mentoring sessions, sold by us or any of our business entities prior
to August 1, 2005 that have not yet been fulfilled. We are entitled to and will retain all revenue for courses sold prior to August 1, 2005. Each outstanding course or

19

---



mentorship
that has not been fulfilled by August 1, 2006 shall be deemed an unfulfilled training obligation.



We will provide marketing services to EduTrades to be conducted and targeted at EduTrades's customer leads database.



We assigned to EduTrades as of July 25, 2005 all of our rights, title and interest, on a worldwide basis, including, without limitation, all intellectual
property rights, including copyrights, and moral rights, in and to certain proprietary products, patent applications, copyrights, internet property and proprietary information related to financial
market education products and services.



Commencing on the date of the consummation of EduTrades's initial public offering and for a period of five years thereafter, we agreed that the voting securities
we now own or hereafter acquire in EduTrades will be voted by a majority vote of the independent directors serving on our Board of Directors with respect to any vote submitted to the shareholders of
EduTrades at any annual or special meeting of the shareholders of EduTrades. In the event there are no independent directors serving on our Board at the time of any such meeting during the five year
term of the agreement, we agreed that the voting securities we now own or hereafter acquire in EduTrades will be voted by the remaining directors serving on the our Board at any such meeting in the
same manner as the majority of the voting securities not owned by us are voted at a shareholders meeting.

We
have and are operating EduTrades as we have been since we started financial markets education in 2002. We do not expect a significant disruption to our day to day operations of the
business as a result of EduTrades public offering. However, additional staff is being added to support the administrative needs of EduTrades as a public company.

On
an operating basis, EduTrades contributed approximately 30.6%, 27.8% and 18.0% of our revenue for 2005, 2004 and 2003, respectively.

Noncore Investments

We also have investments in various projects that are noncore to our mission. These investments were opportunistic in nature and leverage the experience of our
Chief Executive Officer and management team in real estate development. The investments we currently hold have not materially impacted our liquidity.

As
of December 31, 2005, our noncore investments consisted of equity interests in real estate ventures in Costa Rica and Southwest Florida.



Our total investment, including initial and working capital advances, in Costa Rica as of December 31, 2005 and 2004, amounted to $2.1 million and
$1.8 million, respectively, representing a:



20

---





Included
in these amounts are working capital advances of $1.4 million and $1.1 million as of December 31, 2005 and 2004, respectively.

For
the year ended December 31, 2005, 2004 and 2003, under the equity method of accounting, we reflected our share of the (loss) earnings in the amounts of $(0.2) million,
$0.2 million and nil, respectively.

It
is our intention to divest our interests in Costa Rica at the appropriate time.



In 2004, we entered into a joint venture under which we hold a 50% interest in Tranquility Bay of Southwest Florida, LLC which owns 74 acres of land zoned
for residential development in Southwest Florida. We do not intend to keep our interest as a long term holding and will divest this investment at the appropriate time. The investment entity has no
ongoing activity other than minimal costs of carrying the land. Under the equity method of accounting, we record our share of these costs which were less than $0.1 million in 2005 and nil in
2004.

Critical Accounting Policies

Deferred revenue

We are engaged primarily in the business of providing real estate and financial education to individual investors through courses of study, as well as educational
materials. Students pay for the courses in advance and we record the proceeds from the sale of courses as deferred revenue when it is received. Revenue is earned when the student attends the training
program or at the expiration of our obligation to provide training, whichever comes first. The fees are generally nonrefundable, and the students are allowed one year to complete their program. A
student may receive a refund within three days of their purchase by exercising a right of rescission. In such cases, the corresponding amount of deferred revenue is relieved with no impact on the
consolidated income statement.

Advertising and sales expense and prepaid advertising

Advertising costs and direct sales expenses are expensed as incurred. Advertising paid in advance is recorded as prepaid until such time as the advertisement is
published.

Deferred expenses

Certain direct course expenses are deferred until such time the course is conducted and the related revenue is earned.

Historically,
the amount of revenue collected is directly related to the amount of advertising and direct sales expenses incurred. The revenue from the training courses can be deferred
as much as one year after the advertising and sales expenses are incurred. An income statement can show increase losses, or reduced net earnings, in periods in which course registration and cash
receipts are growing at a fast rate.

From
a balance sheet perspective, the liability which we designate as "deferred revenue," will increase as cash receipts are collected in advance and the classes to which they pertain
have not yet taken place or have not expired. When there are more training courses completed, as compared to the amount of new program sales, our deferred revenue will decrease and therefore increase
our earnings. Furthermore, since we receive cash in advance of providing the training, we need to retain sufficient cash to pay final course costs.

21

---





We make no estimates with respect to our critical accounting policies. All amounts recorded under these policies reflect the actual amount of cash collected or expended.

2005 compared to 2004

Revenue and Deferred Revenue

Our revenue for the year ended December 31, 2005 amounted to $178.6 million, an increase of 27.7% over revenue of $139.9 million in 2004. The
increase was driven by expanded advance course offerings and attendees per event, offset by a decrease in the number of introductory courses, as reflected in the following chart (in thousands):

Year ended December 31,2005

2004

% changeCash received from course and product sales:Basic courses

$
25,017


34,202

(26.9
)%Advanced courses


112,008


91,855

21.9Outreach programs


40,415


23,723

70.4Products sales


12,317


8,828

39.5Other


6,698


5,347

25.3Total cash received from course and product sales


196,455


163,955

19.8Net change in deferred revenue


(17,891
)

(24,096
)
(25.8
)Revenue for financial reporting purposes

$
178,564

$
139,859

27.7
%


The
following illustrates the number of educational events, the number of students, the average number of students and average tuition paid per course for the comparative periods:

|                            |                      | Years ended December 31, |         |         |        
|--------------------------- | -------------------- | ------------------------ | ------- | ------- | -------
|
|
|Number of Courses           |                      |                          |         |         |        
|                            | Free workshops       |                          | 4,744   |         | 4,826  
|                            | Introductory courses |                          | 992     |         | 915    
|                            | Advanced courses     |                          | 582     |         | 537    
|                            | Electronic courses   |                          | 162     |         | 25     
|                            |                      |                          |         |         |        
|                            |                      | 6,480                    |         | 6,303   |        
|                            |                      |                          |         |         |        
|Number of Students          |                      |                          |         |         |        
|                            | Free workshops       |                          | 282,925 |         | 286,509
|                            | Introductory courses |                          | 53,742  |         | 30,280 
|                            | Advanced courses     |                          | 21,662  |         | 19,978 
|                            | Electronic courses   |                          | 9,832   |         | 741    
|                            |                      |                          |         |         |        
|                            |                      | 368,161                  |         | 337,508 |        
|                            |                      |                          |         |         |        
|Average Students per Course |                      |                          |         |         |        
|                            | Free workshops       |                          | 59.6    |         | 59.4   
|                            | Introductory courses |                          | 54.2    |         | 33.1   
|                            | Advanced courses     |                          | 37.2    |         | 37.2   
|                            |                      |                          |         |         |        
|                            |                      | 56.7                     |         | 53.6    |        
|                            |                      |                          |         |         |        

We
decided to reduce the tuition prices at our basic courses to provide the opportunity for more students to benefit from our offerings and provide the opportunity for
our students to be exposed to

22

---



our
advanced courses. Our blended average tuition level per student declined 63.9%, while the number of students taking the basic courses increased 95.2%.

Our
weighted average tuition for advanced courses fell slightly by 3.8% reflecting a shift in course mix, while the number of students enrolled increased by 8.4%.

Our
financial markets education division's cash received from courses and product sales grew 72.3% over 2004, to $78.3 million, while the domestic real estate division increased
9.1% to $108.1 million. International saw a 32.1% decline in 2004 to $10.1 million.

On
a brand level, all domestic brands had strong performance over 2004. Leading the way wasStar Trader with a 214% increase
in cash received from course and product sales over 2004, followed byTeach Me To Trade® with a 38.8% increase, while our most mature brand, Building Wealth grew at 15.5% andCash Flow Generator® at 10.8%, rounding out
our major brands.

Revenue
recognized on expired contracts was $38.5 million in 2005, compared to $17.9 million in 2004, an increase of $20.6 million. $11.3 million of this
increase was in our financial markets education division, corresponding to the 131% increase in this division's collections in 2004 over 2003. Of the $9.3 million increase in the real estate
division, $4.9 million is in our United Kingdom subsidiary which began enforcing its contract expiration terms in the second quarter of 2005 and recorded $1.3 million in revenue in the
third quarter of 2005 for contracts expired in previous periods. As a percentage of the previous years cash collections for tuition, revenue from expired contracts was 24.2% and 18.7%, respectively
for 2005 and 2004.

We
have expanded our options for course delivery towards our goal of minimizing the number of expired contracts. We have increased the number of courses offered on DVD and the
opportunities to take courses via the Internet, and have expanded our live presentations within the United States. We have also implemented outreach notifications as courses near expiration by e-mail
and the U.S. mail.

Direct Course Expenses

Direct course expenses relate to our basic and advanced courses and consist of instructor fees, facility costs, salaries associaied with our field travel team
coordinators and related travel expenses.

In
2005, direct course expenses increased $3.2 million to $96.5 million or 3.5% from $93.3 million in 2004. As a percentage of revenue, direct course expenses
decreased from 66.7% of revenue in 2004 to 54.1% in 2005. The components of this 12.6 percentage point (pp) reduction include:

Margin change
2005 vs. 2004Efficiency gains in course delivery


2.7

ppReduced effective sales commissions rate


3.6Event administration


5.6Other direct course expenses


2.7Improved direct course expense margins


12.6

pp


The
effective sales commission rate is indicative of the increase in the average number of students attending our introductory courses and free workshops. The improvement
in course delivery and event management is the result of cost control measures implemented in the 4th quarter of 2004 that were realized throughout 2005 along with our ability to leverage revenue
increases without corresponding increases in costs.

We
anticipate direct course expense efficiencies in 2006, however, not at the same level as achieved in 2005.

23

---



Advertising and Sales Expense

Advertising and sales expense as a category consists of two components:



Approximately
80% of all advertising is through television commercials and infomercials, with the balance consisting of direct mail and newspaper advertisement. Sales expenses are costs
of staging the initial free workshops and acquiring new students, including presenter's sales commissions, assistants and coordinators expenses and travel expenses.

Advertising
and sales expense for 2005 amounted to $50.0 million, an increase of 0.7% or $0.3 million compared to $49.7 million in 2004. Advertising and sales
expense in 2005 was 28.0% of revenue, as compared to 35.5% of revenue for 2004. The following chart illustrates this improvement of 7.5 percentage points:

Margin change
2005 vs. 2004Television


4.0

ppDirect Mail


2.1Other media


1.2Sales expenses, net


0.27.5

pp


The
number of prospective students registering for our events increased 15.6% over 2004, and yet our advertising expenditures in 2005 on a dollar basis was essentially
flat compared to 2004. Many improvements with respect to media purchases and scheduling were realized in 2005. We also benefited from our cost per television placement, which decreased by 4.0% in 2005
compared to 2004.

While
continued improvement is expected into the future, efficiency gains are not expected to be realized at the same levels realized in 2005.

General and Administrative Expenses

General and administrative expenses primarily consist of compensation, benefits, insurance, facility expenses, and travel for the corporate staff.

General
and administrative expenses were $27.7 million in 2005, an increase of $0.7 million, or 2.3% as compared to $27.0 million in 2004. As a percentage of
revenue, general and administrative expenses decreased from 19.3% of revenues in 2004, to 15.5% in 2005, due primarily to cost control measures initiated in the fourth quarter of 2004 and realized
throughout 2005, and our ability to leverage the increase in revenue without a corresponding increase in overhead.

Primary
contributers to the 3.8% reduction in general and administrative costs as a percentage of revenue include:

Margin change
2005 vs. 2004Payroll and benefit costs


2.0

ppProfessional fees


0.7Other general and administrative expenses, net


1.13.8

pp


24

---



We
expect to continue benefiting from overhead leverage, however not at the same levels realized in 2005. Moreover, we continue to invest in our infrastructure to support
the continued growth. Staff increases of approximately 50 employees worldwide, additional research and development of new education courses and support necessary to further expand our
geographical penetration within the United States will all require increased resources in 2006.

Earnings (loss) from operations

We earned $4.4 million from operations in 2005, compared to a loss from operations of $30.1 million in 2004. Our increase in revenues combined with
the marketing efficiencies, reduced sales costs and reduced general and administrative expenses described above were the primary contributing factors to this year over year improvement. Earnings from
operations in 2005 was 2.5% of revenues as compared to a loss from operations of 21.5% of revenues in 2004.

Other income (expense)

Other income was $8.2 million in 2005, an $8.1 million increase over the $0.1 million for 2004. The increase was primarily due to increases
in gain on sale of assets of $6.6 million, and interest and other income of $2.4 million. The increase in gain on sale of assets was primarily due to a gain of $5.6 million
($3.5 million after minority interest expense) realized on the sale of an office building in Orlando, Florida.

Interest
and other income increased by $2.3 million to $2.4 million. Other income for 2005 includes $1.2 million in insurance proceeds from a business interruption
claim arising from the impact of hurricane Charley in 2004. In addition, interest and investment income increased as a result of the increase in cash on hand resulting from increased course
registration receipts, and proceeds from the real estate investment sales and stock offering.

Interest
expense increased 13.7% to $0.6 million in 2005.

Equity
loss for our related parties investment in Costa Rica amounted to a $0.2 million compared to $0.2 million in equity earnings to 2004.

Income tax benefit

We recognize deferred tax assets and liabilities, at enacted income tax rates, based on the temporary differences between the financial reporting basis and the
tax basis of our asset and liabilities. We include any effects of changes in income tax rates or tax laws in the provision for income taxes in the period of enactment. When it is more likely than not
that a portion or all of a deferred tax asset will not be realized in the future, we provide a corresponding valuation allowance against the deferred tax asset. In 2005, we determined that it was more
likely than not that we would realize our deferred tax assets and we reversed our valuation allowance of $11.3 million. Accordingly, this resulted in a net tax benefit of $6.0 million
being realized in our consolidated income statement.

Net earnings (loss)

Net earnings in 2005 amounted to $17.4 million, a $47.5 million improvement over 2004's $30.1 million net loss. Improved revenue growth,
operating and overhead cost controls, sale of assets, gain on sale of noncore investments, along with the recognition of a deferred tax asset contributed to the improved 2005 results.

Liquidity and Capital Resources at December 31, 2005

In December 2005, we closed a private placement of 3.0 million units of our securities, each unit consisting of one share of common stock at $4.50
per share and one-half common stock purchase

25

---



warrant
to purchase an additional share at $6.00 per share. We have filed a Form S-1 and amendment thereto with the Securities and Exchange Commission to register these securities for sale. The
registration has not yet been declared effective by the SEC. Russell A. Whitney, our Chief Executive Officer, sold 1.25 million of the units and we sold the remaining 1.75 million units.
The private placement generated net proceeds to us of $7.2 million after offering costs.

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 $28.6 million in 2005 to $33.2 million, compared to a decrease of $10.3 million in 2004. Cash generation from tuition, proceeds
from the sale of noncore investments and the sale of common stock were the primary reasons for the $38.9 million year over year improvement, with respect to cash generation.

Cash
provided by operations was $17.1 million versus $1.5 million in 2004. The increase is primarily attributable to cash collections on courses and products, evidenced by
the increase in deferred revenue of $17.9 million, offset by an increase in deferred course expenses of $0.7 million.

Cash
provided by investing activities was $8.6 million in 2005, as compared to a usage of $7.9 million for the same period last year. The increase is primarily due to the
sale of real estate investments resulting in cash proceeds of $9.8 million in 2005. In 2004, we purchased $7.0 million in property and equipment and invested $2.8 million in
related parties, as compared to $0.7 million in property and equipment purchases in 2005. We will continue to invest in property and equipment in future periods for expansion, computer and
software upgrades and geographic expansion. We will continue to pursue other opportunistic, strategic acquisitions.

Cash
provided by financing activities amounted to $3.0 million in 2005. Nearly $12.3 million in cash was received from the sale of stock in December 2005, comprised of
$7.2 million net proceeds to the Company and $5.1 million from shares sold by our Chairman and Chief Executive Officer that was subsequently paid in January 2006. Offsetting this was
$9.0 million in payments of long term debt, principally from the proceeds of the SCB Building sale. As we continue to generate cash flow from operations, we may consider some additional reduction of
long term debt as a financing option.

Merchant
account reserves which represent funds on deposit with credit card processors, was $5.4 million on December 31, 2005 as compared with $2.2 million on
December 31, 2004. At December 31, 2005, we had used letters of credit to secure merchant accounts and certain state bonding requirements aggregating $1.8 million, which are
supported by certificates of deposit which carry an interest rate of 2.9% and 3.7%, respectively

Historically,
we have been able to fund all of our operations primarily through existing working capital.

As
a result of significant and growing deferred revenue balance, our working capital deficit will continue to grow. We intend to continue to use working capital for operating purposes.
We intend to establish a credit facility to support the our growth strategy. From time to time, we evaluate potential acquisitions of business products or technologies that complement our business. To
the extent that resources are insufficient to fund future activities, we may need to raise additional funds. However, there can be no assurance that additional funding, if needed, will be available.
If adequate funds are not available on acceptable terms, we may be unable to expand our business, develop or enhance our products and services, take advantage of future opportunities or respond to
competitive pressures, any of which could have a material adverse effect on our business, operating results and financial condition.

26

---



The
following reflects our commitments for debt and other commitments as of December 31, 2005 (in thousands):

Debt

Operating
Lease
Commitments

Total2006

$
462

$
748

$
1,2102007


444


446


8902008


377


186


5632009


307


192


499Thereafter


1,784


137


1,921$
3,374

$
1,709

$
5,083


Additionally
in December 2005 we entered into a commitment for a new computer software package. The total commitment of approximately $2.5 million includes
installation, training and support services.

We
believe our cash resources are sufficient to fund our operations and growth plans in 2006.

Impact of Inflation

Inflationary factors such as increases in the cost of labor directly affect our operations. Most of our leases provide for cost-of-living
adjustments and require us to pay taxes, insurance and maintenance expenses, all of which are subject to inflation. Additionally, our future lease costs for new facilities may include potentially
escalating costs of real estate and construction. There is no assurance that we will be able to pass on increased costs to our customers.

Depreciation
expense is based on historical cost of fixed assets, and is therefore potentially less than it would be if it were based on current replacement cost. While property and
equipment acquired in prior years will ultimately have to be replaced at higher prices, it is expected that replacement will be a gradual process over many years.

Reclassification

Certain amounts in 2004 and 2003 have been reclassified to conform to the 2005 presentation.

2004 Compared to 2003

Revenue

Revenue for the year ended December 31, 2004 was $139.9 million, an increase of $44.9 million or 47.3%, compared to revenue of
$95.0 million in 2003. There was significant growth in all segments of the business. Within the real estate segment, theCash Flow
Generator®brand, which was introduced in 2003, had revenue of $22.5 million in 2004. Revenue in the financial markets segment were insignificant in 2003
but accounted for 28% of total revenue in 2004. Within the financial markets segment theStar Traderbrand began training programs in
November 2003 and did not show significant revenue in 2003, but had revenue of $8.7 million in 2004. OurTeach Me To
Trade®brand showed a 100% increase in sales ($36.0 million vs. $18.0 million in 2003). In addition to growth in our training segments, our
telemarketing sales increased by 107% from $12.1 million in 2003 to $25.1 million in 2004. The foreign-based sales for 2004 were approximately 14% of gross revenue, or
$17.3 million, an increase of $4.0 million, or 30%, of the 2003 revenue of $13.3 million.

Revenue
from expired contracts increased to $17.9 million from $15.1 million in 2003. As a percentage of total revenue, expired contracts decreased to 12.8% in 2004 from
15.9% in 2003. As a

27

---



percentage
of the previous years cash collections for tuition, revenue from expired contracts was 18.7% and 24.0%, respectively.

In
addition to an increase in the number of courses held, in November, 2004, we raised the price of our courses an average of 10.2%. It was the first price increase in our courses for
over two years.

Direct Course Expenses

Direct course expenses were $93.3 million for the year ended December 31, 2004, an increase of $42.0 million or 82.0% compared to
$51.3 million in 2003. Direct course expenses as a percent of revenue were 66.7% for 2004 versus 54.0% for 2003. The overall increase in direct course expenses is primarily attributable to the
increase in number of courses held which were 2,468 in 2004 compared to 2,132 in 2003. Speaker fee commissions are approximately 8.4% of the revenue amount generated.

The
primary components of the 12.7% increase in direct course expenses as a percentage of revenue are:

Margin change
2004 vs. 2003Speaker fees and commissions


6.6

ppIntroductory course delivery


5.2Coaching and mentoring


2.0Event administration


2.2Product cost


(3.3
)12.7

pp


Advertising and Sales Expenses

Advertising and sales expense, of which advertising represents approximately 86% of the expense for the year ended December 31, 2004, were
$49.7 million, an increase of $19.6 million or 65.0%, compared to $30.1 million in 2003. As a percentage of revenue, advertising and sales expenses were 35.5% and 31.7%,
respectively, in 2004 and 2003. The growth of the advertising and sales expense over the comparable period of 2003 is primarily due to the increase in free preview trainings held, from 476 to
842 in 2003 and 2004, respectively. Advertising and sales expense is primarily driven by the number of free previews held as this is where the initial investment is made. The addition of more brands,
the continued expansion of the brands internationally, and the expansion in the number of selling teams for each brand are also reflected in this increase.

The
increase in advertsing and sales expense from 2003 as a percentage of revenue by component is illustrated below:

Margin change
2004 vs. 2003Television


1.5

ppDirect mail


0.9Newspaper


0.9Other media


0.8Sales expenses


(0.4
)3.8

pp


General and Administrative Expenses

General and administrative expenses were $27.7 million in 2004, an increase of $12.4 million or 80.6%, compared to $15.3 million in 2003.
This increase was due primarily to increased personnel hired

28

---



to
handle the increase in our volume of business. Payroll and payroll benefits account for approximately 89% of general and administrative expenses. It includes bonuses to executive officers of
$1.5 million. This makes general and administrative expenses highly variable and thus controllable as our volume grows or contracts. General and administrative expenses as a percent of sales
were 19.8% and 16.1% in 2004 and 2003, respectively.

The
3.2% increase in general and administrative expenses as a percentage of revenue are illustrated in the chart below:

Margin change
2004 vs. 2003Payroll and benefit costs


2.4

ppProfessional fees


0.9Other general and administrative expenses


(0.1
)3.2

pp


Loss from operations

Loss from operations for 2004 was $(30.1) million, as compared with a net loss of $(1.7) million for 2003. The increased loss from operations is directly
attributable to increased expenses in all categories
in 2004 over the prior period, and to the fact that new sales of advanced training courses continue to outpace the rate at which courses are offered and delivered to students. This is reflected in the
fact that deferred revenue increased by $24.1 million in 2004, as compared to an increase of only $14.0 million in 2003.

Other income

Other income decreased by $0.4 million from 2003. This was primarily due to an increase in interest expense of $0.5 million due to additional
borrowings in 2004 used to finance improvements to a real estate investment.

Net loss

Net loss for 2004 was $30.1 million or $3.50 per share compared to $1.2 million or $.15 per share, in 2003. The increase in net loss is attributable
to the aforementioned increase in loss from operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Market risk generally represents the risk that losses may occur in the values of financial instruments as a result of movements in interest rates, foreign
currency exchange rates and commodity prices. We do not have commodity price market risk. We are exposed to market risk from changes in foreign currency exchange rates and interest rates which could
impact our results of operations and financial condition. We manage our exposure to these market risks through our regular operating and financing activities.

Foreign
Currency Exchange Rate Risk- We may face foreign currency exchange risk because of the growth of our United Kingdom and Canadian subsidiaries and our plans to expand
into other European markets. The fluctuations in the foreign exchange rate between the U.S. and foreign currencies will result in fluctuations in our annual and quarterly results. Management does not
expect that it will employ the use of foreign currency derivative financial instruments that would allow the reduction in our exposure to exchange rate movements.

Interest
Rate RiskFrom time to time we temporarily invest our excess cash and restricted cash in interest-bearing securities issued by high-quality issuers. Our
management monitors risk exposure to

29

---



monies
invested in securities of these financial institutions. Due to the sort time the investments are outstanding and their general liquidity, these instruments are classified as cash equivalents in
the consolidated balance sheet and do not represent a material interest rate risk to us. Our primary market risk exposure for changes in interest rates relates to our long-term debt
obligations. We manage our exposure to changing interest rates principally through the use of a combination of fixed and floating rate debt. In addition, certain of our debt instruments have interest
rate floors and ceilings.

We
evaluated the potential effect that near term changes in interest rates would have had on the fair value of its interest rate risk sensitive financial instruments at
December 31, 2005. Assuming a 100 basis point increase in the prime interest rate at December 31, 2005 the potential increase in the fair value of our debt obligations would have been
approximately $36,000 at December 31, 2005.

30

---





ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

Whitney Information Network, Inc. and Subsidiaries



|As of December 31, 2005, 2004 and 2003 and for the years ended December 31, 2005, 2004 and 2003
|-----------------------------------------------------------------------------------------------
|Consolidated Balance Sheets                                                                    
|Consolidated Statements of Operations and Comprehensive Earnings (Loss)                        
|Consolidated Statements of Cash Flows                                                          
|Consolidated Statements of Changes in Stockholders' Deficit                                    
|Notes to Consolidated Financial Statements                                                     
|Report of Independent Registered Public Accounting Firm                                        

F-1

---





WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES        Consolidated Balance Sheets        (in thousands, except share data)

|                                            |                                                                                                                                                                  | December 31,
2005 |        | December 31,
2004 |  
|------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | ------ | ----------------- | -
|Assets                                      |                                                                                                                                                                  |                   |        |                   |  
|Current assets:                             |                                                                                                                                                                  |                   |        |                   |  
|                                            | Cash and cash equivalents                                                                                                                                        |                   | $      | 33,244            |  
|                                            | Restricted cash                                                                                                                                                  |                   |        | 5,406             |  
|                                            | Accounts receivable, net                                                                                                                                         |                   |        | 3,789             |  
|                                            | Accounts receivable, related parties                                                                                                                             |                   |        |                   |  
|                                            | Notes receivable, current portion                                                                                                                                |                   |        | 1,785             |  
|                                            | Deferred course expenses                                                                                                                                         |                   |        | 9,513             |  
|                                            | Prepaid advertising and other                                                                                                                                    |                   |        | 2,841             |  
|                                            | Inventory                                                                                                                                                        |                   |        | 1,087             |  
|                                            | Deferred registration costs                                                                                                                                      |                   |        | 315               |  
|                                            |                                                                                                                                                                  |                   |        |                   |  
|Total current assets                        |                                                                                                                                                                  |                   | 57,980 |                   |  
|                                            |                                                                                                                                                                  |                   |        |                   |  
|                                            | Notes receivable, net of current portion                                                                                                                         |                   |        | 9,158             |  
|                                            | Property and equipment, net                                                                                                                                      |                   |        | 10,082            |  
|                                            | Investment in related parties                                                                                                                                    |                   |        | 2,103             |  
|                                            | Investment in real estate joint venture                                                                                                                          |                   |        | 2,716             |  
|                                            | Intangible assets, net                                                                                                                                           |                   |        | 5,754             |  
|                                            | Goodwill                                                                                                                                                         |                   |        | 2,000             |  
|                                            | Deferred income tax asset                                                                                                                                        |                   |        | 7,287             |  
|                                            | Other assets                                                                                                                                                     |                   |        | 136               |  
|                                            |                                                                                                                                                                  |                   |        |                   |  
|                                            |                                                                                                                                                                  | $                 | 97,216 |                   | $
|                                            |                                                                                                                                                                  |                   |        |                   |  
|Liabilities and Stockholders' Deficit       |                                                                                                                                                                  |                   |        |                   |  
|Current liabilities:                        |                                                                                                                                                                  |                   |        |                   |  
|                                            | Accounts payable                                                                                                                                                 |                   | $      | 3,691             |  
|                                            | Income taxes payable                                                                                                                                             |                   |        | 356               |  
|                                            | Accrued course expenses                                                                                                                                          |                   |        | 1,841             |  
|                                            | Other accrued expenses                                                                                                                                           |                   |        | 7,377             |  
|                                            | Due to stockholders from sale of common stock                                                                                                                    |                   |        | 5,110             |  
|                                            | Current installments of long term debt                                                                                                                           |                   |        | 462               |  
|                                            | Deferred revenue                                                                                                                                                 |                   |        | 80,580            |  
|                                            |                                                                                                                                                                  |                   |        |                   |  
|Total current liabilities                   |                                                                                                                                                                  |                   | 99,417 |                   |  
|Long term debt, net of current installments |                                                                                                                                                                  |                   | 2,912  |                   |  
|Minority interest                           |                                                                                                                                                                  |                   | 3,939  |                   |  
|Stockholders' deficit:                      |                                                                                                                                                                  |                   |        |                   |  
|                                            | Preferred stock, no par value, 10,000,000 shares authorized, no shares issued and outstanding                                                                    |                   |        |                   |  
|                                            | Common stock, no par value, 25,000,000 shares authorized, 10,455,910 and 8,618,186 shares issued and outstanding, as of December 31, 2005 and 2004, respectively |                   |        | 10,593            |  
|                                            | Paid-in capital                                                                                                                                                  |                   |        | 449               |  
|                                            | Foreign currency translation adjustment                                                                                                                          |                   |        | (337              | )
|                                            | Accumulated deficit                                                                                                                                              |                   |        | (19,757           | )
|                                            |                                                                                                                                                                  |                   |        |                   |  
|Total stockholders' deficit                 |                                                                                                                                                                  |                   | (9,052 | )                 |  
|                                            |                                                                                                                                                                  |                   |        |                   |  
|                                            |                                                                                                                                                                  | $                 | 97,216 |                   | $
|                                            |                                                                                                                                                                  |                   |        |                   |  

See notes to consolidated financial statements.

F-2

---





WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES        Consolidated Statement of Operations and Comprehensive Earnings (Loss)        (in thousands, except per share data)

|                                            |                                      | Years ended December 31, |        
|------------------------------------------- | ------------------------------------ | ------------------------ | -------
|
|Revenue                                     |                                      | $                        | 178,564
|                                            |                                      |                          |        
|Operating expenses:                         |                                      |                          |        
|                                            | Direct course expenses               |                          |        
|                                            | Advertising and sales expense        |                          |        
|                                            | General and administrative expense   |                          |        
|                                            |                                      |                          |        
|                                            |                                      |                          | 174,187
|                                            |                                      |                          |        
|Earnings (loss) from operations             |                                      |                          | 4,377  
|                                            |                                      |                          |        
|Other income (expense):                     |                                      |                          |        
|                                            | Interest and other income            |                          |        
|                                            | Interest expense                     |                          |        
|                                            | Equity earnings from related parties |                          |        
|                                            | Gain on sale of assets               |                          |        
|                                            |                                      |                          |        
|                                            |                                      |                          | 8,175  
|                                            |                                      |                          |        
|Earnings (loss) before income taxes         |                                      |                          | 12,552 
|                                            | Minority interest                    |                          |        
|                                            | Income tax benefit                   |                          |        
|                                            |                                      |                          |        
|Net earnings (loss)                         |                                      | $                        | 17,388 
|                                            | Effect of foreign exchange rates     |                          |        
|Comprehensive earnings (loss)               |                                      | $                        | 17,233 
|                                            |                                      |                          |        
|Earnings (loss) per share:                  |                                      |                          |        
|                                            | Diluted                              |                          | $      
|                                            |                                      |                          |        
|                                            | Basic                                |                          | $      
|                                            |                                      |                          |        
|Weighted average common shares outstanding: |                                      |                          |        
|                                            | Diluted                              |                          |        
|                                            |                                      |                          |        
|                                            | Basic                                |                          |        
|                                            |                                      |                          |        

See
notes to consolidated financial statements.

F-3

---





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

|                                                                                           |                                                      | Years ended December 31, |       
|------------------------------------------------------------------------------------------ | ---------------------------------------------------- | ------------------------ | ------
|
|Operating activities:                                                                      |                                                      |                          |       
|Net earnings (loss)                                                                        |                                                      | $                        | 17,388
|Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: |                                                      |                          |       
|                                                                                           | Depreciation and amortization                        |                          |       
|                                                                                           | Gain on sale of assets                               |                          |       
|                                                                                           | Minority interest                                    |                          |       
|Changes in operating assets and liabilities:                                               |                                                      |                          |       
|                                                                                           | Restricted cash                                      |                          |       
|                                                                                           | Accounts receivable, net                             |                          |       
|                                                                                           | Prepaid advertising and other                        |                          |       
|                                                                                           | Inventory                                            |                          |       
|                                                                                           | Deferred tax asset, net of deferred tax liability    |                          |       
|                                                                                           | Deferred course expenses                             |                          |       
|                                                                                           | Other assets                                         |                          |       
|                                                                                           | Accounts payable                                     |                          |       
|                                                                                           | Accrued course expenses                              |                          |       
|                                                                                           | Deferred revenue                                     |                          |       
|                                                                                           | Other accrued expenses                               |                          |       
|                                                                                           | Income taxes payable                                 |                          |       
|                                                                                           |                                                      |                          |       
|                                                                                           |                                                      |                          | 2,459 
|                                                                                           |                                                      |                          |       
|Cash provided (used in) by operations                                                      |                                                      |                          | 17,086
|                                                                                           |                                                      |                          |       
|Investing activities:                                                                      |                                                      |                          |       
|                                                                                           | Purchase of property and equipment                   |                          |       
|                                                                                           | Proceeds from sale of investment properties          |                          |       
|                                                                                           | Purchase of goodwill and intangible assets           |                          |       
|                                                                                           | Purchase of equity interest in investment properties |                          |       
|                                                                                           | Investments in and advances to related parties, net  |                          |       
|                                                                                           |                                                      |                          |       
|Cash provided by (used in) investing activities                                            |                                                      |                          | 8,640 
|                                                                                           |                                                      |                          |       
|Financing activities:                                                                      |                                                      |                          |       
|                                                                                           | Proceeds from sale of common stock                   |                          |       
|                                                                                           | Due to stockholders from sale of common stock        |                          |       
|                                                                                           | Proceeds of long term debt                           |                          |       
|                                                                                           | Principal payments on long term debt                 |                          |       
|                                                                                           | Principal payments on note payable to officer        |                          |       
|                                                                                           | Proceeds from exercise of stock options              |                          |       
|                                                                                           | Distribution to officer                              |                          |       
|                                                                                           | Stock registration costs                             |                          |       
|                                                                                           |                                                      |                          |       
|Cash provided by (used in) financing activities                                            |                                                      |                          | 3,015 
|                                                                                           |                                                      |                          |       
|Effect of foreign currency translation                                                     |                                                      |                          | (155  
|                                                                                           |                                                      |                          |       
|Increase (decrease) in cash and cash equivalents                                           |                                                      |                          | 28,586
|                                                                                           | Cash and cash equivalents, beginning of year         |                          |       
|                                                                                           |                                                      |                          |       
|Cash and cash equivalents, end of year                                                     |                                                      | $                        | 33,244
|                                                                                           |                                                      |                          |       

See notes to consolidated financial statements.

Supplemental
cash flow information:

Cash
paid for interest was $0.2 million, $0.5 million and $0.1 million for the years ended December 31, 2005, 2004 and 2003, respectively.

Supplemental
disclosure of noncash activity:

During
the second quarter of 2005, 85,470 shares of common stock valued at $0.2 were issued along with cash of $0.3 million for the final payment of the Star Trader brand purchase agreement, with
the total of $0.5 million being recorded as goodwill.

A
portion of the consideration received on the sale of the SCB Building, as discussed in Note 1, includes $11.0 million in notes receivable out of $20.3 million in
total proceeds.

F-4

---





WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES        Consolidated Statement of Changes in Stockholders' Deficit        Years ended December 31, 2005, 2004 and 2003    
(in thousands)

|                             |                                                                                                          | Common Stock |       |   |        | Foreign
Currency
Translatioin
Adjustment |   |     |   |   |     
|---------------------------- | -------------------------------------------------------------------------------------------------------- | ------------ | ----- | - | ------ | ---------------------------------------- | - | --- | - | - | ----
|
|
|Balance at December 31, 2002 |                                                                                                          | 8,097        |       | $ | 940    |                                          | $ | 449 |   |   |    
|                             | Issuance of stock for the stock purchased of MRS Equity Corp.                                            |              | 63    |   |        | 125                                      |   |     |  |   |     
|                             | Issuance of stock for assets purchased of Success Development, Inc.                                      |              | 180   |   |        | 900                                      |   |     |  |   |     
|                             | Issuance of stock for the stock purchased of SpeakTek, Inc.                                              |              | 200   |   |        | 1,000                                    |   |     |  |   |     
|                             | Issuance of stock for assets purchased                                                                   |              | 2     |   |        | 10                                       |   |     |  |   |     
|                             | Issuance of stock for stock options exercised                                                            |              | 6     |   |        | 16                                       |   |     |  |   |     
|                             | Issuance of cash and note payable to majority stockholder for interest in Whitney Leadership Group, Inc. |              |      |   |        |                                         |   |     |  |   |     
|                             | Foreign currency translation adjustment                                                                  |              |      |   |        |                                         |   |     |  |   |     
|                             | Net loss                                                                                                 |              |      |   |        |                                         |   |     |  |   |     
|                             |                                                                                                          |              |       |   |        |                                          |   |     |   |   |     
|Balance at December 31, 2003 |                                                                                                          | 8,548        |       |   | 2,991  |                                          |   | 449 |   |   | (348
|                             | Issuance of stock for the stock purchased of SpeakTek, Inc.                                              |              | 56    |   |        | 250                                      |   |     |   |   |     
|                             | Issuance of stock for stock options exercised                                                            |              | 15    |   |        | 28                                       |   |     |   |   |     
|                             | Foreign currency translation adjustment                                                                  |              |       |   |        |                                          |   |     |   |   |     
|                             | Net loss                                                                                                 |              |      |   |        |                                         |   |     |  |   |     
|                             |                                                                                                          |              |       |   |        |                                          |   |     |   |   |     
|Balance at December 31, 2004 |                                                                                                          | 8,619        |       | $ | 3,269  |                                          | $ | 449 |   | $ | (182
|                             | Issuance of stock for the stock purchased of SpeakTek, Inc.                                              |              | 85    |   |        | 166                                      |   |     |   |   |     
|                             | Issuance of stock for stock options exercised                                                            |              | 2     |   |        | 3                                        |   |     |   |   |     
|                             | Private placement of securities, net of offering costs of $720                                           |              | 1,750 |   |        | 7,155                                    |   |     |   |   |     
|                             | Foreign currency translation adjustment                                                                  |              |       |   |        |                                          |   |     |   |   |     
|                             | Net earnings                                                                                             |              |       |   |        |                                          |   |     |   |   |     
|                             |                                                                                                          |              |       |   |        |                                          |   |     |   |   |     
|Balance at December 31, 2005 |                                                                                                          | 10,456       |       | $ | 10,593 |                                          | $ | 449 |   | $ | (337
|                             |                                                                                                          |              |       |   |        |                                          |   |     |   |   |     

See notes to consolidated financial statements.

F-5

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WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES        Notes to Consolidated Financial Statements

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

Organization and History

Whitney Information Network, Inc. and Subsidiaries (collectively referred to a the "Company" or "WIN") has provided postsecondary education and training
courses for students throughout the United States, Canada and Europe, interested in learning about the real estate and financial markets.

The
Company incorporated in Colorado in 1996 under the name Gimmel Enterprises, Inc. In 1998, we acquired all of the outstanding common stock of Whitney Education
Group, Inc. ("WEG"), a Florida company organized in 1992, and changed our name to WIN Systems International, Inc. In 1999, we changed our name to Whitney Information Network, Inc.

In
July 2005, EduTrades, Inc. ("EDX") was formed as a wholly owned subsidiary for holding the rights and brands of the financial markets education division of the Company. In
November 2005 and February 2006, the Company filed a registration statement of Form S-1 and Amended Form S-1, respectively, with the Securities and Exchange
commission for the purpose of an initial public offering. The registration statement has not been declared effective by the Securities and Exchange Commission.

Principles of Consolidation

The consolidated financial statements of the Company include the accounts and balances of Whitney Information Network, Inc. and its wholly owned and
majority owned subsidiaries.

Significant Accounting Policies

The vast majority of our costs to acquire the student has been expended up to the point of registration, such as media, travel, facilities and instructor fees for
the introductory workshops; these costs are expensed when incurred. However, the tuition paid at registration is deferred until the course is attended by the student, the student received the course
content in an electronic format, or the contract expires, at which time the revenue is deemed earned.

Thus,
reporting under generally accepted accounting principles in the United States of America creates significant timing differences with respect to revenue and expenses, both in the
form of cash flows and in the form of our operating results in that we recognize the bulk of our expenses before we recognize revenue in the form of fees and tuition from attendees at our introductory
courses. In addition, we recognize all our expenses associated with the introductory courses at the time they occur and any money that is collected as a result of those programs is deferred until the
student actually takes the course or receives the product offered. As a result of these factors, our cash flows are significantly different than our reported results of operations.

Speaker
fee commission payments earned for generating revenue are deferred until such time as the revenue is earned. Advertising costs, training room rentals and direct selling expenses
are expensed as incurred. Advertising paid in advance is recorded as prepaid until such time as the advertisement is published.

The
Company's contracts for courses require that courses must be attended within one year of registration. The Company's policy has been to recognize revenue at the earlier of the
attendance of the course or one year from the date of registration. Prior to 2005, our United Kingdom subsidiary allowed students to attend courses after the expiration of our one year obligation to
provide the course as specified in the contract and continued to report these student's tuition collected as deferred revenue past the expiration date. During the second quarter of 2005, the Company's
United Kingdom subsidiary changed its practices and began to enforce the terms of its contracts to be consistent with

F-6

---



that
of its North American subsidiaries and recognized approximately $1.3 million of revenue from course registrations that had been outstanding for greater than one year.

Cash, Cash Equivalents and Restricted Cash

We consider all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company continually monitors its
positions with, and the credit quality of, the financial institutions it invests with. Restricted cash reflects amount retained by credit card merchants as a reserve for returns on credit card
transactions and deposit balances required under letters of credit. We consider restricted cash as a current asset as credit card merchants can typically hold such reserve funds only up to one year,
and our letters of credit are for annual terms.

Concentrations of Credit Risk

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

Accounts Receivable

Accounts receivable consists of trade receivables from the sale of educational products and services for which a contract has been entered into, payments have not
been received, and the related revenue has been deferred. An adjustment is recorded to write off any amounts deemed to be unrealizable and uncollectible.

Inventory

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

Fair Value of Financial Instruments

The carrying amounts of financial instruments including cash and cash equivalents, short-term investments, receivables, deferred seminar expense,
accounts payable, accrued expenses, deferred educational revenues, and notes payable approximated fair value as of December 31, 2005 because of the relatively short maturity of these
instruments. The fair value of long term notes payable approximates fair value based on current market rates available for similar debt instruments.

Prepaid Advertising and Sales Expense

We expense advertising and sales costs as incurred. Advertising and sales expenses were approximately $50.0 million, $49.7 million, and
$30.1 million for the years ended December 31, 2005, 2004 and 2003, respectively. Advertising paid for in advance is recorded as prepaid until such time as the advertisement is
published. Advertising costs recorded as prepaid as of December 31, 2005 and 2004 were $1.9 million and $1.5 million respectively.

Deferred Registration Costs

We are in the process of a registration of the Company's EDX subsidiary. Expenses related to this offering have been accounted for as deferred registration costs,
and will be charged against the gross

F-7

---



proceeds
received. The registration statement has not been declared effective by the Securities and Exchange Commission.

Property and Equipment

Property and equipment is stated at cost. Depreciation is provided utilizing the straight-line method over the estimated useful lives for owned assets
as follows:

Buildings

40 yearsFurniture fixtures and equipment

7 yearsOther assets

5 yearsPurchased software

3 years


Intangible Assets and Goodwill

Intangible assets include customer lists, trademarks, and loan costs and are recorded at cost. Customer lists and trademarks are being amortized over their
estimated useful lives of 3 and 15 years, respectively. Loan costs are amortized over the term of the loan. Goodwill is not amortized. At December 31, 2005, management performed impairment
testing in accordance with Statement of Financial Accounting Standard ("SFAS") No. 142,Goodwill and Other Intangible Assetsand SFAS
No. 144,Accounting for the Impairment or Disposal of Long Lived Assetsfor all intangible assets and goodwill determined that impairment was not
considered necessary.

Investments in Related Parties

We acquired a 20% ownership interest in Rancho Monterey, S.A., a Panama corporation, in 2001. This corporation was formed with the purpose of acquiring,
developing, and selling land on the Pacific coast of Costa Rica. We are an investor in phase one of this project which includes approximately 830 acres.
Prior to January 2004, this venture has incurred solely capitalized development costs and had not had any sales activity. We account for our investment using the equity method of accounting and record
its proportionate share of the corporation's profit or loss. In 2003, we acquired an additional 10% equity interest in the investment for $0.7 million through the issuance of debt. As part of
this transaction, we also received an 8% interest in Monterey del Este, a Panama Corporation organized to develop unimproved real estate in Costa Rica; and a 20% interest in Monterey del Mar, a Panama
Corporation organized to develop an ocean front hotel on the Pacific coast of Costa Rica. The Company's share of the corporation's losses and profits for the years ended December 31, 2005 and
2004 were a loss of $(0.2) million and a profit of $0.2 million respectively. Our Chief Executive Officer individually indirectly owns 11% of Rancho Monterey, S.A. and 6% of Monterey del Este.
Our Company's Executive Vice President individually indirectly owns 1% of Rancho Monterey, S.A.

We
have, at times, advanced funds to this entity for working capital purposes to secure and protect its investment. Our agreement with the management of this venture is that we will be
repaid for these funds from future land sales. At December 31, 2005, $1.4 million in such advances is included in investment in related parties. At December 31, 2004
$1.2 million of such advances is shown on the consolidated balance sheet as accounts receivable related parties.

Investment in Joint Ventures

In 2003 we acquired a 50% equity interest in SCB Building, LLC ("SCB"), an office building in Orlando, Florida. The other 50% member had a $2.0 million
minority interest in SCB, which was contributed in the form of a $4.0 million building subject to a $2.0 million mortgage. Subsequent improvements of approximately $9.6 million
were made to the building and were financed primarily by long term debt. As the guarantor of the debt of SCB, the financial statements and results from

F-8

---



operations
are consolidated in the accompanying consolidated financial statements with a provision for minority interest of the other 50% owner.

In
November 2005 we sold the office building, which was the primary asset of SCB, for a pretax gain of $5.6 million, before minority interest, or a pretax $3.5 million
after minority interest expense. The debt on the building was paid in full and SCB issued a note receivable, secured by the building, totaling $11.0 million as part of the $20.3 million
selling price.

In
2004, we entered into a joint venture with an unrelated party. Our contribution to the joint venture of $2.7 million represents a 50% interest in Tranquility Bay of Southwest
Florida LLC ("Tranquility"), which owns 74 acres of land for residential development in Lee County Florida. Tranquility has no ongoing activity other than the costs of holding the land. Under the
equity method of accounting we record our share of these costs which for 2005 and 2004 were insignificant.

Revenue Recognition, Deferred Revenue and Deferred Seminar Expenses

We recognize revenue for the sale of products and software, upon delivery. Revenue from educational seminars is recognized upon the earlier of (1) when the
nonrefundable deposit is received for the seminars and the seminar has taken place; or (2) upon the contractual expiration of our obligation to provide a seminar only if the seminar was paid
for. Deferred revenue is recorded when the seminar proceeds are received prior to the related seminar taking place. Expenses for commission payments made to our speakers directly related to additional
courses sold are considered acquisition costs of those revenues and deferred until the related revenue is recognized in accordance with the guidance in SAB 104.

The
following table illustrates the impact of deferring revenue by reconciling gross receipts to recorded revenue for the years ended 2005 and 2004.

Year ended December 31,2005

2004

%
changeCash received from course and product sales:Basic courses

$
25,017

$
34,202

(26.9
)%Advanced courses


112,008


91,855

21.9Outreach programs


40,415


23,723

70.4Products sales


12,317


8,828

39.5Other


6,698


5,347

25.3Total cash received from course and product sales


196,455


163,955

19.8Net change in deferred revenue


(17,891
)

(24,096
)
(25.8
)Revenue for financial reporting purposes

$
178,564

$
139,859

27.7
%


We
record commission revenue related to sales made by the Company for other parties. Only the commission part of these transactions is recorded. The commissions are recognized as revenue
when the amount is earned.

Long-Lived Assets

The Company reviews propery and equipment, intangible assets and goodwill for impairment whenever events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. Recoverability is measured by the comparison of its carrying amount with the future net cash flows the assets are expected to generate. We look primarily to
the undiscounted future cash flows in the assessment of whether or not long-lived assets have been impaired. If such assets are considered to be impaired, the impaired amount is measured
as the amount by which the carrying amount of the

F-9

---



asset
exceeds the present value of the future net cash flows expected to be generated by the respective long lived assets. As of December 31, 2005, according our most recent assessments, there
are no impairments in the carrying values of our long-lived assets.

Reclassifications

Certain reclassifications have been made in the 2004 and 2003 consolidated financial statements to conform to the 2005 presentation.

Use of Estimates

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

Income Taxes

We recognize deferred tax liabilities and assets based on the differences between the tax basis of assets and liabilities and their reported amounts in the
financial statements that will result in taxable or deductible amounts in future years. The temporary differences result primarily from the recognition of deferred expenses for tax purposes. A
valuation allowance is established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

Translation of Foreign Currency

We account for foreign currency translation in accordance with SFAS No. 52,Foreign Currency Translation.
As such, the financial position and results of operations of our foreign subsidiaries are measured using local currency as the functional currency. Revenues and expenses of the subsidiaries have been
translated into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange as of December 31, 2005 and 2004,
respectively.

Earnings (Loss) Per Share

We apply the provisions of SFAS No. 128, Earnings Per Share. All dilutive potential common shares in 2005
were included in the diluted earnings per share calculation. All dilutive potential common shares in 2004 had an antidilutive effect on diluted per share amounts and therefore were excluded in
determining net loss per share. At December 31, 2005 we had 1,677 stock options, 1,075 warrants and 300 warrants to purchase units offered to our offering (Note 3) for 300 shares of
stock and 150 warrants which were excluded from earnings per share as their effect was antidilutive. The total 3,202 potential dilutive securities exchanged could be dilutive to future earnings.

Stock Options and Stock-Based Compensation

SFAS No. 123,Accounting for Stock-Based Compensationencourages, but does not require companies to record
compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25 (APB No. 25),Accounting for Stock Issued to Employeesand provides the required pro forma
disclosures prescribed by SFAS No. 123 and SFAS No. 148.

F-10

---



We
have adopted the disclosure-only provisions of SFAS No. 123. Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation cost
for the Company's option plan and the option plan of our wholly owned subsidiary EduTrades, Inc. 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 earnings (loss) and basic earnings (loss) per common share would have been changed to the pro forma amounts indicated below (in thousands, except for per share
data):

Years ended December 312005

2004

2003Net earnings (loss)as reported

$
17,388

$
(30,062
)
$
(1,210
)Add: stock-based compensation included in net profit (loss) as reportedDeduct: Total stock-based compensation using the fair market value method under SFAS No. 123


1,535


1,374


398Net earnings (loss)pro forma

$
15,853

$
(31,436
)
$
(1,608
)Basic loss per common shareas reported

$
1.96

$
(3.50
)
$
(0.15
)Basic loss per common sharepro forma

$
1.79

$
(3.66
)
$
(0.20
)


The
fair value of each option is estimated on the date of grant using the Black-Scholes option pricing mode with the following assumptions (average weight):

Years ended December 312005

2004

2003Expected life in years

7

10

10Expected volatility

77.88
%
56.97
%
33.77
%Risk free interest rate

4.39
%
4.24
%
4.25
%Expected dividend


The
pro forma disclosure includes approximately $0.8 million of compensation expense for stock options granted by our wholly owned subsidiary EduTrades, Inc. for the year ended
December 31, 2005.

Recently Issued Accounting Pronouncements

In December 2004, SFAS No. 123R,Share-Based Payment,was issued, which supersedes APB No. 25, Accounting
for Stock Issued to Employees,and its related implementation guidance. Under SFAS No. 123R all share-based payments would be treated
as other forms of compensation by recognizing the costs, generally measured as the fair market value at the date of grant, in the consolidated income statement. The Company will adopt, as required,
SFAS No. 123R for its fiscal year beginning January 1, 2006. Share-based payment expense amounts historically disclosed as required by SFAS No.123R will now be recognized as an expense
in the consolidated income statement.

We
have chosen the modified prospective application (MPA) method for implementing SFAS No. 123(R). Under the MPA method, new awards will be valued and accounted for prospectively
upon adoption. Outstanding prior awards that are unvested will be recognized as compensation expense over the remaining requisite service period. Prior periods will not be restated. At
December 31, 2005 we had approximately $1.8 million of unvested stock compensation that will be recognized as an expense over future service periods.

The
impact of adoption of SFAS No. 123(R) is that future share based payment awards will be recorded as compensation expense over their requisite service period, and such expense
is expected to be material to future earnings. Had we adopted SFAS No. 123(R) in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as
described in the disclosure of pro forma net earnings (loss) per share above.

F-11

---



Note 2Mergers, Acquisitions and Capital Accounts

In September 2004, we entered into a six-month agreement with Discount Buyers Association of America ("DBAA") to assume operational control over it
business and postsecondary education products. Simultaneously, we were granted an option to purchase all of the assets of DBAA.
We paid $0.5 million to DBAA for control of the business operations. We have allowed the option to expire and charged $0.5 million to expense for the year ended December 31, 2004.

In
June 2004, we issued warrants to purchase 200,000 shares of our no par value common stock in exchange for professional services provided for the Company. The warrants will expire in
June 2008, and are exercisable at the following prices: 100,000 shares at $5.25 per share; and 100,000 shares at $8.00 per share

In
October 2003, we acquired the stock of SpeakTek, Inc. for $1.6 million, which resulted in $1.0 million in goodwill, $0.5 million in customer lists and
other intangibles and $0.1 million in current assets. SpeakTek, Inc. is the holding company for Quantum Vision, Inc., which is the operating entity and provides financial markets
education. Of this amount $0.6 million is payable in cash, and $1.0 million is payable through 200,000 shares of our newly issued, restricted common stock.

In
July 2003, we purchased two related companies, Equity Corp. Holdings, Inc. ("Equity Corp.") and Whitney Leadership Group, Inc. The purchase price of Whitney
Leadership, Inc. was $1.2 million paid to our Chairman and Chief Executive Officer and his wife, payable $0.3 million in cash at closing and a $0.9 million promissory note
payable in semiannual installments beginning in February 2004 bearing an interest rate of 7% per annum. The payments and debt issued were recorded as a distribution as Whitney Leadership
Group, Inc. and we were under common control. The acquisition of Equity Corp. from our Executive Vice President, Real Estate Education Division resulted in $4.9 million of intellectual
property. The purchase price of $0.3 million, comprised of $0.1 million in cash, 62,500 shares of our common stock valued at $0.1 million at closing, and $0.1 million
payable one year from the closing date evidenced by a promissory note bearing interest at 7% per annum. We also agreed to assume and pay a promissory note issued to our chairman by Equity Corp. in
June, 2002 in the amount of $4.8 million payable $1.0 million in July 2003 and July 2004 and ten installments of $0.3 million payable in January and July beginning in 2005 through
2009. The unpaid balance bears interest at 7% per annum. Equity Corp. incurred this $4.8 million obligation when it elected to redeem all of our chairman's stock ownership in Equity Corp.,
which amounted to 90% of the outstanding stock of Equity Corp., as of June 1, 2002. This note was paid in full during 2004.

In
May 2003, we paid $0.5 million under a six-month management agreement with Success Development, Inc. ("SDI"). Under the agreement, we acquired SDI's customer
database and operated is Cash Flow Generator brand. Under this agreement, we received 30% of SDI's profits. During this time period, we also made advances to SDI for working capital purposes. We
believe that this balance is collateralized by a bank account maintained by SDI. In November 2003, we exercised the option to purchase Success Development, Inc. for 180,000 shares of common
stock, valued at $0.9 million. This resulted in a $0.6 million trademark, $0.3 million customer list and $0.1 million noncompete agreement.

Note 3The Offering

In December 2005, 3.0 million shares of common stock and common stock purchase warrants representing 1.5 million shares of common stock were sold.
The Company sold 1.75 million shares of common stock and issued warrants for 875,000 shares. The Company's Chairman and Chief Executive Officer sold 1.25 million shares and
warrants for 625,000 shares. In both cases, each warrant allows one share to be purchased for $6.00. The Company received $7.9 million in proceeds and netted $7.2 million after
expenses for its 1.75 million shares.

F-12

---



The
common stock and warrants were issued as a $13.5 million private placement in which 3.0 million units of our securities, each unit consisting of one share of common
stock and one-half common stock purchase warrant at $4.50 per unit, were issued to a group of 17 nonaffiliated accredited investors. In addition, a unit warrant was issued to our placement
agent exercisable to purchase 0.3 million units at $4.50 per unit including the underlying one-half common stock purchase warrants. Including the units to our placement agent, the
Company is registering a total 3.3 million shares of common stock, plus 1.65 million units underlying common stock purchase warrants. We collected $5.6 milion of proceeds on
behalf of our Chief Executive Officer, who was a selling shareholder in the offering. At December 31, 2005 we have recorded a liability to our Chief Executive Officer of $5.1 million,
net of $0.5 million in offering costs, on the accompanying consolidated balance sheet, which was paid in the first quarter of 2006.

In
connection with this transaction, the Company entered into a registration rights agreement which provides for the Company to use its "best efforts" to file a registration
statement for the resale of the 3.3 million common shares and the shares underlying the common stock purchase warrant to be declared effective by April 11, 2006 as well as require us to
maintain the effectiveness of the registration statement for one year subsequent to the effective date. If the Company fails to have the registration statement declared effective by April 11,
2006 (or if effectiveness is not maintained), the registration rights agreement requires the payment of liquidated damages to the investors on a daily basis of $4,500 (which represents 1% per month of
the proceeds in cash) until the registration statement is declared effective or effectiveness is maintained. We have a maximum liability of one year under the registration rights agreement.

The
Financial Accounting Standard Board's Emerging Issues Task Force (EITF) has exposed for deliberation the Financial Accounting Standards Board Emerging Issues Task Force Issue
No. 05-04,The Effect of a Liquidated Damages Clause on a Freestanding Financial Instrument Subject to EITF Issue No. 00-19, "Accounting
for a Derivative Financial Instrument Indexed to, and Potentially Settled in, a Company's Own Stock." (See Note 14Committments and Contingencies).

Accordingly,
the Company estimates a probable liability of approximately $0.2 million in connection with the liquidated damages provision of the registration rights agreement and
is reflected as a current liability in other accrued expenses in our consolidated balance sheet as of December 31, 2005.

Note 4Related Parties Transactions

MRS Equity Corp. was wholly owned by Equity Corp. Holdings, Inc., which manages the processing of payments through customers' accounts to the mortgage
holder. Equity Corp. Holdings, Inc. was acquired by the Company in 2003 and was previously owned by our Executive Vice President, Real Estate Division (See Note 2)Mergers,
Acquisitions and Capital Accounts.

In
2003, the Company provided payroll services in the amount of $0.1 million to MRS Equity Corp., and purchased goods and services in the aggregate amount of $0.1 million
from MRS Equity Corp., and Whitney Leadership Group, Inc. prior to its acquisition.

Whitney
Leadership Group, Inc. is a company that holds all the copyright and intellectual property rights associated with the education materials and licenses. It was acquired in
July, 2003 and was previously owned by the Company's Chairman and his wife (who is also employed by the Company) (See Note 2Mergers, Acquisitions and Capital Accounts).

We
have rented a training facility located in Cape Coral, Florida, since 1992 from the Chairman of the Board and chief Executive Officer which pays rent on annual leases. Rentals under
the related party lease were $0.2 million, $0.2 million, and $0.1 million during 2005, 2004 and 2003, respectively. We lease 2,200 square feet of training facilities at 1611 East
Cape Coral Parkway, 9,000 square feet of

F-13

---



space
at 1625 East Cape Coral Parkway which is used for shipping, and 5,000 square feet at 1630 SE 47th Terrace which we use as a Training Center and for storage, all in Cape Coral Florida,
from Cape Promenade Trust which is for the benefit of Russell A. Whitney, our Chairman and Chief Executive Officer and his wife Ingrid. The leases are for three years and began in March 2003,
March 2003 and June 2004, respectively. We are currently paying rent on a month-to-month basis on two of the leases that expired March 2006.

Included
in revenue for 2005 and 2004 is $0.3 million and $0.3 million, respectively, received under an arrangement with Gulfstream Development Corp., a company owned 25%
by our Chairman and Chief Executive Officer. Under this arrangement we receive $1,000 for each home constructed by Gulfstream for one of our students, who are presented an opportunity to purchase lots
at one of our advanced real
estate courses by realtors representing Gulfstream. We have no interest in the lots nor any involvement in dealings between students and the realtors or Gulfstream.

Those
items above that are reasonably expected to be collected within one year are shown as current.

Note 5Property and Equipment

Property and equipment consist of the following (in thousands):

December 31,2005

2004Building

$
4,778

$
17,437Airplane


2,114


2,114Software


1,114


1,000Land


1,728


2,807Equipment


1,253


1,173Furniture and fixtures


772


819Leasehold improvements


1,474


1,42813,233


26,778Less accumulated depreciation


(3,151
)

(2,220
)$
10,082

$
24,558


Years ended December 31,2005

2004

2003Depreciation expense

$
1,034

$
964

$
692


F-14

---



Note 6Intangible Assets

Intangible assets consist of the following (in thousands):

December 31,2005

2004Customer lists

$
5,943

$
5,943Trademarks


1,050


1,050Other intangibles


795


7957,788


7,788Less accumulated amortization


(2,034
)

(1,212
)$
5,754

$
6,576


Years ended December 31,2005

2004

2003Amortization expense

$
822

$
646

$
258


Future
amortization expense of intangibles is as follows:

Years ending December 31,2006

$
7902007


6292008


6292009


6292010


629Thereafter


2,448$
5,754


F-15

---



Note 7Long Term Debt

Long term debt consists of (in thousands):

December 31,2005

2004Mortgage payable to a bank. Principal plus interest at 5.7% due monthly until August 2014 and is collateralized by real estate located in the United Kingdom.

$
1,962

$
2,442Note payable to a finance company. Monthly principal and interest through December 2018. Interest at the LIBOR rate plus 3.4% and is collateralized by an airplane. The note
is personally guaranteed (up to $0.2 million) by the majority stockholder.


1,035


1,090Note payable to an individual for purchase of equity interest in Rancho Monterey. Principal and interest payments beginning in July 2003 at an interest rate of 5%. The note
matures in June 2008 and is collateralized by the Company's stock.


345


472Note payable to a bank. Interest only payments beginning in July 2003 due monthly until June 2005. Principal and interest payments due beginning July 2005 and amortized over
20 years. Interest at a fixed rate of 7.5%. The note was paid in full in 2005.





7,289Mortgage payable to a bank. Monthly principal and interest payments through June 2007 with a balloon payment of $1.0 million due on July 28, 2007 and is collateralized by
the building on North Frontage Road, Orlando, Florida. This was paid in full in June 2005.





1,019Other installment notes payable


323,374


12,312Less current portion


(462
)

(504
)$
2,912

$
11,808


Maturities
of long term obligations are as follows (in thousands):

Years ending December 31,2006

$
4622007


4442008


3772009


3072010


310Thereafter


1,474$
3,374


Note 8Stock Options and Warrants

Stock Based Compensation Plans

The Company's 1998 Stock Option Plan provides for the granting of stock options to key employees. Under the terms and conditions of this plan, any time between
the grant date and two years of service, the employee may purchase up to 25% of the option shares. Between two and three years of

F-16

---



continuous
service, the employee may purchase up to 50% of the option share, and after three years of continuous service, the employee may purchase all remaining option shares. All options expire ten
years from the date of the grant.

The
following table presents the activity for options outstanding (in thousands, except per share data):

Number of Options

Weighted
Average
Exercise
PriceOutstanding as of December 31, 2002

1,376

$
1.93Granted

203


3.79Forfeited/canceled

(165
)

(2.16
)Exercised

(5
)

(3.00
)Outstanding as of December 31, 2003

1,409

$
2.16Granted

435


4.47Forfeited/canceled

(77
)

(3.94
)Exercised

(15
)

(1.87
)Outstanding as of December 31, 2004

1,752

$
2.66Granted

540


5.43Forfeited/canceled

(112
)

(3.05
)Exercised

(2
)

(1.50
)Outstanding as of December 31, 2005

2,178

$
3.33


The
following table presents the composition of options outstanding and exercisable (options in thousands):

Range of Exercise Prices

Options
Outstanding

Price(a)

Options
Exercisable

Price(a)

Life(a)$1.75

20

$
1.75

20

$
1.75

4.33$1.81

297

$
1.81

297

$
1.81

6.25$1.88

242

$
1.88

242

$
1.88

3.75$2.00

557

$
2.00

557

$
2.00

4.58$2.55

30

$
2.55

8

$
2.55

9.50$3.10

15

$
3.10

15

$
3.10

6.67$3.70

142

$
3.70

71

$
3.70

7.16$3.90

40

$
3.90

15

$
3.90

8.00$4.10

10

$
4.10

5

$
4.10

7.25$4.50

315

$
4.50

79

$
4.50

7.25$5.60

510

$
5.60

127

$
5.60

9.80$1.75 to $5.60

2,178

$
3.33

1,436

$
2.52

5.61


---

F-17

---



Warrants

The following table illustrates the activity for warrants outstanding (in thousands except per share data);

Number of
Warrants

Weighted
Average
Exercise PriceOutstanding as of December 31, 2003




Granted

200

$
6.63Forfeited/canceledExercisedOutstanding as of December 31, 2004

200


6.63Granted

875

$
6.00Forfeited/canceledExercisedOutstanding as of December 31, 2005

1,075

$
6.12


The
following table presents the composition of warrants outstanding (warrants in thousands):

Exercise Prices

Warrants
Granted

Warrants
Exercisable

Remaining
Life$5.25

100

100

3.50$6.00

875

875

4.00$8.00

100

100

3.50$5.25 - $8.00

1,075

1,075

3.90


In
conjunction with the offering, the Company issued a unit warrant to our placement agent exercisable to purchase 300,000 units at $4.50 per share and another unit warrant
exercisable to purchase 150,000 shares at $6.00 per share.

During
2005:



Note 9Employee Benefit Plan

We have a 401(k) employee savings plan for eligible employees, which provide for a matching contribution from us, determined each year at our discretion. Our
contributions, charged to earnings for the years ended December 31, 2005, 2004, and 2003, were $0.2 million, $0.1 million, and $0.0 million, respectively.

F-18

---



Note 10Income Taxes

We had net operating losses of approximately $27.4 million at December 31, 2005 to offset future federal taxable income for U.S. domestic
operations. The net operating losses expire in the years 2020 through 2024. The Company also has $19.5 million representing net operating losses for state income taxes that expire in years 2010
through 2024. Generally accepted accounting principles requires the future utilization to be recorded as a deferred tax asset if management believes if it is more likely than not that the Company will
generate future taxable income.

As
of the end of 2004, the Company established a valuation allowance to offset all future tax benefits from the operating losses that would have been recorded as deferred tax assets. In
assessing the recoverability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax
liabilities, projected future taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible. During 2005, management concluded that it is
more likely than not that the Company will realize the benefits of some of our net operating loss carryforwards creating future tax deductible amounts for the current year and future periods beyond
2005.

We
estimate that we will be liable for approximately $0.2 million in alternative minimum taxes for 2005, which will be carried forward into future periods to offset future taxes.
The net operating loss carryforwards from prior years can only be applied to 90% of the current year profits. The deferred tax assets recorded in 2005 represent management's estimate of all deferred
tax benefits to be utilized in the current fiscal year and future periods beyond 2005.

F-19

---



A
change in the valuation allowance for net operating losses that affect deferred tax assets is as follows (in thousands):

Our
income tax provision is as follows (in thousands):

|                                   |          | Years ended December 31, |        
|---------------------------------- | -------- | ------------------------ | -------
|
|Earnings before taxes:             |          |                          |        
|                                   | U.S.     |                          | $      
|                                   | Non-U.S. |                          |        
|                                   |          |                          |        
|Total earnings before income taxes |          | $                        | 10,632 
|                                   |          |                          |        
|Provision for taxes:               |          |                          |        
|Current:                           |          |                          |        
|                                   | Federal  |                          | $      
|                                   | State    |                          |        
|                                   | Non-U.S. |                          |        
|                                   |          |                          |        
|                                   |          |                          | 489    
|                                   |          |                          |        
|Deferred:                          |          |                          |        
|                                   | Federal  |                          |        
|                                   | State    |                          |        
|                                   | Non-U.S. |                          |        
|                                   |          |                          |        
|                                   |          |                          | 3,698  
|                                   |          |                          |        
|Valuation allowance                |          |                          | (10,985
|                                   |          |                          |        
|Total income tax provision         |          | $                        | (6,798 
|                                   |          |                          |        
|Effective income tax rate          |          |                          | (63.9  
|                                   |          |                          |        

The
difference between the tax provision at the statutory federal income tax rate and the tax provision attributable to income before income taxes was as follows:

Years ended December 31,2005

2004

2003(in percentages)Statutory federal income tax rate

35.0
%
35.0
%
35.0
%State income net of federal benefit

4.0
%
3.2
%
4.1
%Non-U.S. income taxed at different notes

0.4
%
2.5
%Valuation allowance

(103.3
)%
(39.3
)%
(39.1
)%Other



(1.4
)%Effective income tax rate

(63.9
)%
0.0
%
0.0
%


F-20

---



Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the
amounts for income tax purposes. Significant components of the Company's deferred tax assets and liabilities were as follows:

December 31,2005

2004

2003Deferred tax assets:Net operating losses, federal

$
9,595

$
12,120

$
906Net operating losses, state


790


1,104


49Net operating losses, non-U.S.


31


764Depreciation


44Intangible amortization


421


53710,881


14,525


955Valuation allowance


(31
)

(11,016
)

(955
)Total deferred tax assets

$
10,850

$
3,509

$
Deferred tax liabilities:Deferred course expenses


3,563


3,035Depreciation





474Total deferred tax liabilities

$
3,563

$
3,509

$
Reported as:Current deferred tax assetsNoncurrent deferred tax assets


7,287


3,509Current deferred tax liabilities





(3,509
)Net deferred taxes

$
7,287

$


$



Note 11Earnings (Loss) Per Share

Basic earnings per share are calculated using the weighted average number of common shares outstanding. Diluted earnings per share reflect the potential dilution
that could occur from common shares issuable through stock options and warrants, including 0.5 million, nil and nil options that were dilutive for the years ended December 31, 2005, 2004
and 2003 respectively. There are a total of 2,178,350 stock options, 1,075,000 warrants to purchase common stock outstanding as of December 31, 2005 and a combined 450,000 unit placement
warrants issued to our placement agent. The following table sets forth the computation for basic and diluted earnings per share (in thousands, except for per share data):

Years ended December 31,2005

2004

2003Numerator for diluted earnings (loss) per common share

$
17,388

$
(30,062
)
$
(1,210
)Denominator for basic earnings per shareweighted average shares


8,859


8,589


8,188Effect of dilutive securitiesoptions and warrants


501Denominator for diluted earnings per shareadjusted weighted average shares


9,360


8,589


8,188Diluted earnings (loss) per common share

$
1.86

$
(3.50
)
$
(0.15
)


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

F-21

---



Note 12Business Segment Information

We operate primarily in two business segments: Real estate education and Financial market education. Our revenues are generated through the sale of real estate
and financial market education courses, programs and products. The operating segments reported below are for which segments financial information is available and for which operating results are
evaluated regularly by executive management in deciding how to allocate resources and in assessing performance.

Segment
operating results evaluates earnings before corporate and unallocated shared expenses, amortization of intangible assets, gain on sale of assets, net interest income, equity
earnings from foreign investment, income tax benefits and minority interests.

The
following segment results include allocations of certain costs, including shared administrative costs-based metrics designed to correlate with the consumption of such services. These
allocations are agreed-upon amounts between the businesses and may differ from amounts that would be negotiated in arm's length transactions (in thousands):

Years ended December 31,Segment revenues2005

2004

2003Real estate education

$
123,960

$
101,000

$
77,833Financial market education


54,604


38,859


17,125$
178,564

$
139,859

$
94,958


Years ended December 31,Segment operating earnings (loss)2005

2004

2003Real estate education

$
13,551

$
(17,888
)
$
6,828Financial market education


(9,174
)

(12,888
)

(8,537
)$
4,377

$
(30,776
)
$
(1,709
)


Years ended December 31,Depreciation expense2005

2004

2003Real estate education

$
789

$
719

$
471Financial market education


245


245


221$
1,034

$
964

$
692


Years ended December 31,Segment identifiable assets2005

2004

2003Real estate education

$
14,369

$
29,032

$
24,584Financial market education


3,782


3,602$
18,151

$
32,634

$
24,584


F-22

---



Years ended December 31,Geographic revenues2005

2004

2003United States

$
162,762

$
122,559

$
81,633Foreign


15,802


17,300


13,325$
178,564

$
139,859

$
94,958


Years ended December 31,Geographic identifiable assets2005

2004

2003United States

$
14,518

$
28,738

$
24,469Foreign


3,633


3,896


115$
18,151

$
32,634

$
24,584


Note 13Summarized Quarterly Results (Unaudited)

The following table presents unaudited operating results for each quarter within the two most recent years. We believe that all necessary adjustments consisting
only of normal recurring adjustments have been included in the amounts stated below to present fairly the following quarterly results when read in conjunction with the consolidated financial
statements. Results of operations for any particular quarter are not necessarily indicative of results of operations for a full year (in thousands, except for per share data)

|                                     |  | Three months ended, |       
|------------------------------------ |  | ------------------- | ------
|
|2005                                 |  |                     |       
|Revenues                             |  | $                   | 40,170
|Operating expenses                   |  |                     | 36,062
|Earnings (loss) from operations      |  |                     | 4,108 
|Net earnings (loss)                  |  |                     | 4,149 
|Basic earnings per share(1)          |  |                     | 0.48  
|Diluted earnings per share(1)        |  |                     | 0.48  
|2004                                 |  |                     |       
|Revenues                             |  | $                   | 38,509
|Operating expenses                   |  |                     | 38,461
|Earnings (loss) from operations      |  |                     | 48    
|Net earnings (loss)                  |  |                     | 208   
|Basic earnings (loss) per share(1)   |  |                     | 0.02  
|Diluted earnings (loss) per share(1) |  |                     | 0.02  

---

F-23

---



Note 14Commitments and Contingencies

Liquidated Damages Provision in Registration Rights Agreement

In December 2005, 3.0 million shares of common stock and 1.5 million shares of common stock underlying common stock purchase warrants were
sold. The Company sold 1.75 million shares of common stock and issued a warrant for 50% of those shares. The Company's Chairman and Chief Executive Officer concurrently the Company's Chairman
and Chief Executive Officer sold 1.25 million and issued common stock purchase warrants for 50% of those shares.

We
issued the common stock and warrants in a December 2005, $13.5 million in private placement in which we sold 3.0 million units of our securities, each unit
consisting of one share of common stock and one-half common stock purchase warrant, at $4.50 per unit, to a group of 17 nonaffiliated accredited investors and issued a unit warrant to our
placement agent exercisable to purchase 0.3 million units at $4.50 per unit. The Company received $7.9 million in proceeds and netted $7.4 million after expenses.

In
connection with the transaction, the Company entered into a registration rights agreement which provides, for the Company to use its "best efforts" to file a registration
statement for the resale of the 3.3 million common shares and the 1.65 million shares underlying the common stock purchase warrant to be declared effective by April 11, 2006 as
well as require us to maintain the effectiveness of the registration statement for a one year period subsequent to the effective date. If the issuer fails to have the registration statement declared
effective by April 11, 2006 (or if effectiveness is not maintained), the
registration rights agreement requires the payment of liquidated damages to the investors on a daily basis of $4,500 (which represents 1% (per month) of the proceeds in cash) until the registration
statement is declared effective or effectiveness is maintained. We have a maximum liability of six months under the registration rights agreement.

The
Financial Accounting Standard Board's Emerging Issues Task Force (EITF) has exposed for deliberation the Financial Accounting Standards Board Emerging Issues Task Force Issue
No. 05-04,the Effect of a Liquidated Damages Clause on a Freestanding Financial Instrument Subject to EITF Issue No. 00-19, "Accounting
for a Derivative Financial Instrument Indexed to and Potentially Settled in, a Company's Own Stock."As articulated under View C in Issue No. 05-04, the
Company views the registration rights agreement and the common stock purchase warrant agreement as separate freestanding agreements which should be accounted for separately. The common stock purchase
warrant is classified as equity under the provisions of Issue 00-19, and the registration rights agreement is accounted for under SFAS No. 133 Accounting for Derivative Instruments and Hedging
Activities.

Accordingly,
the Company estimates a probable liability of approximately $0.2 million in connection with the liquidated damages provision of the registration rights agreement and
is reflected as a current liability in Other Accrued Expenses in our consolidated balance sheet as of December 31, 2005.

Software Commitment

In December 2005 we entered into a commitment for approximately $2.5 million for new software which includes licensing, training and maintenance.

F-24

---



Operating Leases

The Company leases office space for administrative and training requirements. These leases expire from May 2005 to October 2010 (in thousands).

Years ended December 31,2005

2004

2003Rental expense for operating leases

$
823

$
425

$
384


Future
minimum rental payments under these noncancelable leases are as follows (in thousands):

Years ending December 31,2006

$
7482007


4462008


1862009


1922010


137$
1,709


Litigation

The Company is not involved in any material asserted or unasserted claims and action arising out of the normal course of its business that in our opinion, based
upon knowledge of facts and advice of counsel, will result in a material adverse effect on our financial position.

Other

The Company, in the ordinary course of conducting our business, is subject to various state and federal requirements. In the opinion of management, the Company is
in compliance with these requirements.

Note 15Subsequent Event

On March 8, 2006, the Company issued 98,156 shares of common stock as a gift to the estate of Richard Brevoort, the Company's former President and
Chief Operating Officer who passed away in 2002. The Company has recorded an expense in the first quarter of $0.9 million representing the fair value of the securities issued, and the gross up
of related income taxes of $0.3 million.

F-25

---





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board
of Directors and Stockholders
Whitney Information Network, Inc. and Subsidiaries
Cape Coral, Florida

We
have audited the accompanying consolidated balance sheet of Whitney Information Network, Inc. and Subsidiaries as of December 31, 2005 and 2004, and the related
consolidated statements of operations and comprehensive earnings (loss), stockholders' deficit and cash flows for each of the three years in the period ended December 31, 2005. We have also
audited the financial statement schedule II for the year ended December 31, 2005. These consolidated financial statements and schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Whitney Information Network, Inc. and
Subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity
with accounting principles generally
accepted in the United States of America. Also, in our opinion, the financial statement schedule II for the year ended December 31, 2005, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

|                                | /s/EHRHARDT KEEFE STEINER & HOTTMAN PCEhrhardt Keefe Steiner & Hottman PC
|------------------------------- | -------------------------------------------------------------------------
|March 31, 2006
Denver, Colorado |                                                                          

F-26

---





ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

(a)   We
maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports under the 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 chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, with the
participation and oversight of our chief executive officer 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. In conducting this evaluation, several material weaknesses were identified in our internal control over financial reporting relating to timely account reconciliations,
preparation and review of financial statements and disclosures, accounting for foreign currency, deferred revenue, inventory valuation, and recordkeeping for equity incentive awards and agreements.
Specifically, our personnel lacked sufficient knowledge and experience and did not have appropriate oversight. The Company's accounting department has experienced significant turnover at various
levels. This turnover and abilities of these personnel have contributed to the internal control issues described above.

On
the basis of these findings, our chief executive officer and our 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 connection with the 2005 audit of our financial statements, our independent registered public accounting firm, issued a management letter which noted that we
had the material weaknesses described above in our internal control over financial reporting.

(b)   There
have been no changes in our internal control over financial reporting during the period covered by this report that materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.

Subsequent
to identifying the material weaknesses in our internal control over financial reporting our CEO and acting CFO have initiated corrective actions to address these internal
control deficiencies, and will continue to evaluate the effectiveness of our disclosure controls and internal controls and procedures on an ongoing basis, taking corrective action as appropriate. The
actions implemented include recruiting additional experienced staff for newly created positions that will directly address the control deficiencies, and the formalization of policies and procedures
and addition of monitoring controls. Should additional significant deficiencies in our internal controls be discovered in the future, a failure to remediate them or to implement required new or
improved controls could harm our operating results, cause us to fail to meet our reporting obligations or result in misstatements in our financial statements.

On
September 21, 2005, the SEC extended the compliance dates related to Section 404 of the Sarbanes-Oxley Act for non-accelerated filers. Under this extension a
company that is not required to file its annual and quarterly reports on an accelerated basis (non-accelerated filer) must begin to comply with the internal control over financial
reporting requirements for its first fiscal year ending on or after July 15, 2007. We anticipate that we may become an accelerated filer in calendar 2006 and therefore we could be required to
comply with these requirements for the year ending December 31, 2006. We are currently in the process of documenting our internal control structure.

31

---





PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

Information concerning each of our executives and directors is set forth below:

|Name                |  | Age |  | Position                                                      
|------------------- |  | --- |  | --------------------------------------------------------------
|Russell A. Whitney  |  | 50  |  | Chairman of the Board of Directors and Chief Executive Officer
|Nicholas S. Maturo  |  | 58  |  | President and Chief Operating Officer                         
|Ronald S. Simon     |  | 62  |  | Executive Vice President, Secretary and Director              
|John F. Kane        |  | 51  |  | Executive Vice President, Real Estate Education Division      
|Anil K. Singh       |  | 50  |  | Vice President, Marketing                                     
|Frederick A. Cardin |  | 58  |  | Director                                                      
|Chester P. Schwartz |  | 60  |  | Director                                                      
|Stephen L. Cootey   |  | 37  |  | Director                                                      
|Anthony B. Petrelli |  | 53  |  | Director                                                      

Directors
hold office for a period of one year from their election at the annual meeting of stockholders or until their successors is duly elected and qualified. Officers
are elected by, and serve at the discretion of, the Board of Directors.

Russell A. Whitney, Chairman of the Board of Directors and Chief Executive Officer, is our founder and has been Chief Executive Officer of
our company and its predecessors since 1987. Mr. Whitney is also an active real estate investor for his own account and has written and published several books on wealth building topics.

Nicholas S. Maturo, President and Chief Operating Officer, joined us in 2002 and became our Chief Operating Officer in 2003 and was
elected as President in 2004. He was the Chief Operating Officer of Food Trader, Inc. from 2000 to 2002. From 1981 to 2000, he held a number of executive positions with Kraft Foods and was
Chief Information Officer when he left Kraft.

Ronald S. Simon, Executive Vice President, Secretary and Director, is a Certified Public Accountant and has been our Acting Chief
Financial Officer from 2004 through 2006 and a member of our Board of Directors since 1998. Mr. Simon was a self-employed certified public accountant from 1987 until he joined us as
our Chief Financial Officer in 1998. In 2002, he was appointed our Executive Vice President. Mr. Simon holds a Bachelor of Science degree in accounting from the University of Illinois.

John F. Kane, Executive Vice President, Real Estate Education Division, has been the President of Precision Software
Services, Inc., one of our wholly owned subsidiaries since 1993. Precision develops real estate investment and other basic business software and was purchased by us in 2001. We appointed
Mr. Kane our Executive Vice President, Real Estate Education Division in 2003.

Anil K. Singh, Vice President, Marketing, was appointed in 2004. Prior to joining us, he was Vice President, Marketing for The Markets,
LLC from 2002 to 2004. Mr. Singh was Chief Marketing Officer at Paytrust, Inc. from 2000 to 2001. He also held senior marketing positions at American Business Financial Services, Inc., Advanta
Corporation and Time Warner, Inc.

Frederick A. Cardin, Director, joined us as a director in 2003. Since 1996, Mr. Cardin has been managing director of Harvard Growth
Strategies, a consulting firm which advises clients on business strategies, financing and marketing. Dr. Cardin publishes articles and lectures on such topics as corporate, investment and
international finance, strategic planning, financing, entrepreneurship, management, merger and acquisition planning and health care and environmental economics. Dr. Cardin earned his MBA with
distinction and his Doctorate in Finance from the Harvard Graduate School of Business Administration. He earned a Bachelor's degree in economics summa cum laude from Tufts University, where he
fulfilled degree requirements in economics, math and astronomy, minoring in physics. In 1968 he was elected to Phi Beta Kappa.

32

---



Chester P. Schwartz, Director, joined us as a director in 2003. Since 1970 he has been engaged in the private practice of law in Denver,
Colorado, specializing in real estate and commercial law. He earned a Bachelor of Science and Juris Doctor degree from the University of Colorado.

Stephen L. Cootey, Director, joined us as a director in 2006. Since 2004 he has been a Principal at Prides Capital LLC, an investment firm
specializing in strategic block, active investing in small- and micro-cap public and private companies. From 2001 to 2004, Mr. Cootey was a Vice President with Credit Suisse First
Boston. Prior to that time, Mr. Cootey maintained over six years of management, consulting and operational experience at the Goldman Sachs Group, Inc. and Andersen Consulting.
Mr. Cootey holds a B.A. in Physics and Government from Bowdoin College in Brunswick, Maine and a Masters in Business Administration from the Columbia Business School in New York, New York.

Anthony B. Petrelli, Director, joined as a director in 2006. Since 1987 he has been the Senior Vice President and a director of Neidiger,
Tucker, Bruner, Inc. a Denver, Colorado based securities brokerage firm. His responsibilities at Neidiger include managing its Corporate Finance and Investment Banking Department. He is also a
member of the firm's Management Committee and administers the distribution and syndication of its public underwritings and private placements. Since 2003 he has been Chairman, President and a director
of the National Investment Banking Association (NIBA). Since 1991 he has served on a number of committees of the National Association of Securities Dealers, Inc. (NASD), most recently as a member of
the NASD's Statutory Disqualifications Committee, Vice Chairman of the NASD's National Adjudicatory Council and member of the NASD's Corporate Finance Committee and its Small Firm Advisory Board. He
earned a Bachelor of Science degree and Master of Business Administration degree from the University of Colorado.

Committees of the Board of Directors

Audit Committee

Our Board of Directors has established a standing Audit Committee that consists of three directors. The current members of the Audit Committee are
Messrs. Schwartz, Cardin and Petrelli. Mr. Schwartz is the Audit Committee Chairman. The Board of Directors has determined that each of these directors is "independent" as defined by the
applicable rules of the American Stock Exchange and as required by the Securities and Exchange Commission. The Board of Directors has also determined that each of these directors is financially
literate and that Mr. Schwartz further qualifies as an "audit committee financial expert" as such term is defined in the applicable rules of the Securities and Exchange Commission.

The
Audit Committee assists the Board in fulfilling its responsibility to provide oversight with respect to our financial statements and reports and other disclosures provided to
stockholders, the system of internal controls and the audit process. Its duties include reviewing the adequacy of our internal accounting and financial controls, reviewing the scope and results of the
audit plans of our independent and internal auditors, reviewing the objectivity, effectiveness and resources of the internal audit function, and assessing our financial reporting activities and
accounting standards and principles. The Audit Committee also selects and engages our independent auditors and approves their fees. In 2005, the Committee met four times.

The
Audit Committee has considered whether the provision of nonaudit services performed by our independent auditors is compatible with maintaining that firm's independence.

Compensation Committee

Our Compensation Committee is comprised of Messrs. Schwartz, Cardin and Cootey, all of whom are independent directors. Mr. Cardin is our
Compensation Committee Chairman. The Compensation Committee recommends approval by the Board of the compensation of our executive officers, the

33

---



annual
compensation budget for all other employees, together with bonuses, grants of stock options and any changes to our benefit plans.

Although
bound by the negotiated annual salary requirements of employment agreements we have with our executives, the Compensation Committee is charged with determining bonus
compensation for our executive officers. The Compensation Committee is charged with determining bonus compensation for our executive officers. Under our bonus plan, executive officers are limited to
50% of their salaries. Bonuses for our Chief Executive Officer may range from 50% to 150% of his salary. Within these parameters, we consider year over year net earnings, cash flows and revenue
growth, as well as whether we met business plans and forecasts set for the year. We do not have a specific formula to apply these factors which are weighed on an individual basis by our Compensation
Committee.

Governance and Nominating Committee

Our Governance and Nominating Committee consists of Messrs. Schwartz, Cardin and Perrelli. Mr. Schwartz is our Governance and Nominating Committee
Chairman. The Governance and Nominating Committee monitor the implementation of the Company's corporate Governance Guidelines, to prepare and supervise the Board's Annual Reviews and Director
Independence and to identify review and evaluate candidates for election as director.

34

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Code of Ethics

Our Board of Directors has adopted a Code of Ethics that applies to our executive officers, senior financial officers and directors of our company. We have filed
a copy of our Code of Ethics with the Securities and Exchange Commission and have also posted the Code of Ethics on our Web site.

In
accordance with theSarbanes-Oxley Act of 2002, we have adopted procedures to facilitate the submission, on a confidential and
anonymous basis, of complaints, reports and concerns by any person regarding (1) accounting, internal accounting controls or auditing matters, (2) actual or potential violations of laws,
rules or regulations, and (3) other suspected wrongdoing, including in connection with our Code of Ethics.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth certain summary information concerning compensation paid to our executive officers for the calendar years indicated.

|                                                                                              |  |                |  |   |                         |  |   |                         |  | Long Term Compensation Awards
|--------------------------------------------------------------------------------------------- |  | -------------- |  | - | ----------------------- |  | - | ----------------------- |  | -----------------------------
|
|
|
|Russell A. Whitney, Chairman of the Board and Chief Executive Officer                         |  | 2005
2004
2003 |  | $ | 659,189
553,846
400,000 |  | $ | 850,000
600,000
275,000 |  | $                            
|Nicholas S. Maturo, President and Chief Operating Officer                                     |  | 2005
2004
2003 |  | $ | 275,000
230,769
180,000 |  | $ | 250,000
125,000
20,000  |  |                              
|Ronald S. Simon, Exec. Vice President, Acting Chief Financial Officer, Secretary and Director |  | 2005
2004
2003 |  | $ | 275,000
230,769
180,000 |  | $ | 300,000
125,000
75,000  |  |                              
|John F. Kane, Executive Vice President, Real Estate Education Division                        |  | 2005
2004
2003 |  | $ | 215,385
190,785
120,000 |  | $ | 200,000
75,000
15,000   |  |                              
|Anil K. Singh, Vice President, Marketing                                                      |  | 2005
2004      |  | $ | 184,423
131,924         |  | $ | 100,000
15,000          |  | $                            

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Employment Agreements

In 2003, we entered into an employment agreement with Mr. Whitney which expires at the end of 2007. The agreement provided an initial salary of $400,000
per year, together with bonuses to be granted by the Compensation Committee of our Board of Directors, and customary employee benefits, including health insurance. The Compensation Committee
established Mr. Whitney's salary at $659,189 and $600,000 for 2005 and 2006, respectively. Bonuses granted by the Board of Directors to Mr. Whitney are determined by the Compensation
Committee and have historically been between 50% and 150% of his salary, depending upon our level of net earnings, cash flows and revenue growth.

Also
in 2003, we also entered into employment agreements with Messrs. Maturo, Simon and Kane, providing for initial annual salaries of $180,000, $180,000, and $172,000,
respectively, which expire in 2007. The Compensation Committee established annual salaries of $275,000, $275,000 and $215,385 for

35

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Messrs. Maturo,
Simon and Kane, respectively in 2005. The Compensation Committee established annual salaries of $300,000, $300,000 and $250,000 for Messrs. Maturo, Simon and Kane, respectively
in 2006. We have instituted a cash bonus plan which will be administered by the Compensation Committee of our Board of Directors. Under the bonus plan, employees, including all of our executive
officers, except our Chief Executive Officer, may receive cash bonuses in accordance with the Company's Incentive Plan based upon a number of factors, including the meeting or exceeding of internally
prepared budgets and forecasts, along with other subjective criteria.

The
following table sets forth certain information regarding grants of stock options to Russell A. Whitney, Nicholas S. Maturo, Ronald S. Simon, John F. Kane and Anil K. Singh,
the executive officers who received stock options during the years 2003 through 2005. The fair value of the grants has been estimated utilizing the Black-Scholes option pricing.

|Name               |  | Number of Underlying Securities Options/SARs Granted During Last 12 Months |  | % of Total Options/SARs Granted During Last 12 Months |   | Exercise or Base Price Per Share |      | Expiration Date |           | Grant Date Present Value
|------------------ |  | -------------------------------------------------------------------------- |  | ----------------------------------------------------- | - | -------------------------------- | ---- | --------------- | --------- | ------------------------
|Russell A. Whitney |  | 125,000                                                                    |  | 21.2                                                  | % | $                                | 5.60 |                 | 11/1/2015 |                         
|Nicholas S. Maturo |  | 100,000                                                                    |  | 16.9                                                  | % | $                                | 5.60 |                 | 11/1/2015 |                         
|Ronald S. Simon    |  | 100,000                                                                    |  | 16.9                                                  | % | $                                | 5.60 |                 | 11/1/2015 |                         
|John F. Kane       |  | 100,000                                                                    |  | 16.9                                                  | % | $                                | 5.60 |                 | 11/1/2015 |                         
|Anil K. Singh      |  | 50,000                                                                     |  | 8.5                                                   | % | $                                | 5.60 |                 | 11/1/2015 |                         

---

The
following table sets forth, on an aggregated basis, each exercise of stock options (or tandem SARs) and freestanding SARs during the last completed fiscal year by each of the named
executive officers and the fiscal year-end value of unexercised options.

|Name               |  | Shares Acquired on Exercise |  | Value Realized |  | # of Securities Underlying Unexercised Options/SARs at December 31, 2005 |  | Value of Unexercised
In-The-Money
Options/SARs at December 31, 2005
|------------------ |  | --------------------------- |  | -------------- |  | ------------------------------------------------------------------------ |  | -------------------------------------------------------------------
|Russell A. Whitney |  | 0                           |  | 0              |  | 192,200                                                                  |  | $                                                                  
|Nicholas S. Maturo |  | 0                           |  | 0              |  | 245,000                                                                  |  | $                                                                  
|Ronald S. Simon    |  | 0                           |  | 0              |  | 543,000                                                                  |  | $                                                                  
|John F. Kane       |  | 0                           |  | 0              |  | 165,000                                                                  |  | $                                                                  
|Anil K. Singh      |  | 0                           |  | 0              |  | 70,500                                                                   |  | $                                                                  

We
have not adopted any retirement, pension or profit sharing plans for the benefit of our officers or directors although we adopted our 1998 Stock Option Plan for the benefit of our
officers, directors, employees and consultants. We also offer our employees a 401(k) plan. Our contributions to the plan, charged to operations, for the years ended December 31, 2005, 2004, and
2003, were $0.2 million, $0.1 million, $0.0 million, respectively.

Compensation of Directors

Independent directors receive $10,000 per year for serving as members of the Board of Directors. Members of the Audit Committee receive an additional $2,500 per
year. Expenses incurred by our directors in attending Board meetings are reimbursed, and independent directors each receive 5,000

36

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stock
options under our 1998 Stock Option Plan upon joining our Board. Additional stock options have been and will be granted to our Board members from time to time in the future.

Stock Option Plan

In 1998 we adopted a stock option plan which provides for the grant of options intended to qualify as "incentive stock options" or "nonqualified stock options"
within the meaning of Section 422 of the United States Internal Revenue Code of 1986 (the "Code"). Incentive stock options are issuable only to employees.

The
purposes of the plan are to attract and retain the best available personnel, to provide additional incentives to our employees and to promote the success of our business.

We
have reserved 2,187,500 shares of common stock for issuance under the plan, which is administered by the Compensation Committee of our Board of Directors. Under the plan, the
Compensation Committee determines which individuals will receive options, the time period during which the options may be partially or fully exercised, the number of shares of common stock that may be
purchased under each option and the option price. As of March 27, 2006, options to purchase 2,178,350 shares of common stock at exercise prices ranging from $1.75 per share to $10.80 per
share were outstanding under the plan. Of these options, 1,308,000 have been issued to executives and directors at exercise prices ranging from $1.81 per share to $10.80 per share.

The
per share exercise price of the common stock subject to options must not be less than the fair market value of the common stock on the date the option is granted. In the case of
incentive stock options, the aggregate fair market value, determined as of the date the option is granted, of the common stock that any person may purchase in any calendar year pursuant to the
exercise of incentive stock options must not exceed $100,000. No person who owns, directly or indirectly, at the time of the granting of an incentive stock option, more than 10% of the total combined
voting power of all classes of our stock is eligible to receive incentive stock options under the plan unless the option price is at least 110% of the fair market value of the common stock subject to
the option on the date of grant.
The stock options are subject to anti-dilution provisions in the event of stock splits, stock dividends and the like.

No
incentive stock options are transferable by an optionee other than by will or the laws of descent and distribution, and during the lifetime of an optionee, the option is only
exercisable by the optionee. The exercise date of an option granted under the plan must not be later than ten years from the date of grant. Any options that expire unexercised or that terminate upon
an optionee's ceasing to be employed by us will become available once again for issuance. Shares issued upon exercise of an option rank equally with other shares then outstanding.

37

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND RELATED STOCKHOLDER MATTERS

The following table sets forth the common stock ownership of each person known by us to be the beneficial owner of five percent or more of our common stock, by
each of our officers and directors and by all officers and directors as a group. Each person holds record and beneficial ownership and has sole voting and investment power with respect to the shares
of common stock shown. The address of all of these individuals is in our care at 1612 East Cape Coral Parkway, Cape Coral, Florida 33904.

Name of Owner

Number of Shares

Percent of Class(1)Russell A. Whitney(2)

5,638,619

51.8
%Nicholas S. Maturo(3)

250,000

2.3
%Ronald S. Simon(4)

578,175

5.3
%John F. Kane(5)

390,000

3.6
%Anil K. Singh(6)

60,500

*Frederick A. Cardin(7)

25,000

*Chester P. Schwartz(8)

25,269

*Stephen L. Cootey(9)

5,000

*Anthony B. Petrelli(10)

5,000

*All officers and directors as a group (nine persons)

6,977,563

64.1
%Prides Capital Fund I, LP(11)

1,650,000

15.2
%Heartland Value Fund(12)

900,000

8.3
%QVT Financial Group LLC(13)

600,000

5.5
%


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38

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We lease 2,200 square feet of training facilities at 1611 East Cape Coral Parkway, 9,000 square feet of space at 1625 E. Cape Coral Parkway which is used for
shipping, and 5,000 square feet at 1630 SE 47th Terrace which we use as a Training Center and for storage, all in Cape Coral, Florida from Cape Promenade Trust which is for the benefit
of Russell A. Whitney, our Chairman of the Board and Chief Executive Officer, and his wife, Ingrid Whitney. The leases are for three years and began on March 1, 2003, March 1, 2003 and
June 1, 2004, respectively. We are on a month-to-month basis on two of the leases that expire in March 2006 while an extension is negotiated.

From
time to time, Mr. Whitney benefits from our students' purchase of residential lots and the construction of homes on lots they acquire in the Cape Coral, Florida area because
the students may purchase these lots from Mr. Whitney or from other lot owners. The students are presented this opportunity at one of our advanced real estate courses by realtors representing
Gulfstream Development Corp. ("Gulfstream"), a company owned 25% by Mr. Whitney. We have no involvement in the students' decision to purchase lots or in their dealings with the realtor or
Gulfstream. The purchase price of lots sold by Mr. Whitney is consistent with lot prices sold by others in the Cape Coral area. Gulfstream often constructs homes on lots owned by our students.
Through an informal arrangement with Gulfstream, we receive $1,000 for every Gulfstream home built for our students, amounting to $0.3 million and $0.3 million for the years ended
December 31, 2005 and 2004, respectively.

We
also have investments in entities in which our Chairman and Chief Executive Officer and Executive Vice President, Secretary have minority ownership interests. The entities are Rancho
Monterey, S.A., Monterey del Este and Monterey del Mar, which is described in more detail under Noncore Investments under Management's Discussion and Analysis of Financial Condition and Results of
Operation. Our Chief Executive Officer owns 11% of Rancho Monterey, S.A. and 6% of Monterey del Este. Our Executive Vice President, Secretary owns 1% of Rancho Monterey, S.A.

In
our view, the terms of the transactions described above are no less favorable than could have been obtained from independent third parties. All affiliated transactions must be
approved by a majority of the independent and disinterested members of our Board of Directors.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Ehrhardt Keefe Steiner & Hottman, P.C., Denver, Colorado ("EKS&H"), conducted the audit of our financial statements for the year ended December 31,
2005. It is our understanding that this firm is obligated to maintain audit independence as prescribed by the accounting profession and certain requirements of the Securities and Exchange Commission.
As a result, our directors do specifically approve, in advance, nonaudit services provided by EKS&H, and it considers the effect, if any, of such services on audit independence.

EKS&H's
audit fees billed to us during 2005 were $339,520 Audit related fees billed to us during 2005 were approximately $29,196 for the audit of the Company's 401(k) plan, tax fees
billed to us during 2005 for tax services were approximately $74,815 and other fees billed to us during 2005 were $233,783 which was primarily to work related to Form S-1 registration
statements filed with the Securities and Exchange Commission. We have concluded that the provision of services by EKS&H is compatible with maintaining its independence.

39

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PART IV

ITEM 15. EXHIBITS AND REPORTS ON FORM 8-K

|Exhibit No. |  | Title                                                                                                         
|----------- |  | --------------------------------------------------------------------------------------------------------------
|3.01        |  | Articles of Incorporation of the Registrant, as amended(1)                                                    
|3.02        |  | Bylaws of the Registrant(2)                                                                                   
|5.01        |  | Opinion of Law Office of Gary A. Agron regarding legality of the common stock (includes consent)(5)           
|10.01       |  | Securities Purchase AgreementPrivate Placement(5)                                                            
|10.02       |  | Stockholders AgreementPrivate Placement(5)                                                                   
|10.03       |  | Registration Rights AgreementPrivate Placement(5)                                                            
|10.04       |  | Warrant AgreementPrivate Placement(5)                                                                        
|10.05       |  | 1998 Stock Option Plan(3)                                                                                     
|10.06       |  | Employment Agreement with Mr. Whitney(4)                                                                      
|10.07       |  | Employment Agreement with Mr. Simon(4)                                                                        
|10.08       |  | Employment Agreement with Mr. Maturo(4)                                                                       
|10.10       |  | Employment Agreement with Mr. Kane(4)                                                                         
|21.01       |  | List of subsidiaries                                                                                          
|23.01       |  | Consent of Law Office of Gary A. Agron (included in Exhibit 5.01 above)(5)                                    
|23.02       |  | Consent of Ehrhardt Keefe Steiner & Hottman, PC, an independent registered certified public accounting firm(5)
|23.03       |  | Consent of Ehrhardt Keefe Steiner & Hottman, PC, an independent registered certified public accounting firm   
|31.1        |  | Certification of Periodic ReportChief Executive Officer                                                      
|31.2        |  | Certification of Periodic ReportChief Financial Officer                                                      
|32.1        |  | Certification of Periodic ReportChief Executive Officer                                                      
|32.2        |  | Certification of Periodic ReportChief Financial Officer                                                      

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40

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, we have caused this Report to be signed on our behalf by the undersigned, thereunto duly
authorized.

|                      |  | WHITNEY INFORMATION NETWORK, INC.
|--------------------- |  | ---------------------------------
|Dated: March 31, 2006 |  | By:                              

In
accordance with the Exchange Act, this Report has been signed below by the following persons on our behalf and in the capacities and on the dates indicated:

|Signature                                 |  | Title                                            |  | Date          
|----------------------------------------- |  | ------------------------------------------------ |  | --------------
|                                          |  |                                                  |  |               
|/s/RUSSELL A. WHITNEYRussell A. Whitney   |  | Chief Executive Officer                          |  | March 31, 2006
|/s/NICHOLAS S. MATURONicholas S. Maturo   |  | President and Chief Operating Officer            |  | March 31, 2006
|/s/ALFRED R. NOVASAlfred R. Novas         |  | Chief Financial Officer                          |  | March 31, 2006
|/s/RONALD S. SIMONRonald S. Simon         |  | Executive Vice President, Secretary and Director |  | March 31, 2006
|/s/FREDERICK A. CARDINFrederick A. Cardin |  | Director                                         |  | March 31, 2006
|/s/CHESTER P. SCHWARTZChester P. Schwartz |  | Director                                         |  | March 31, 2006
|/s/STEPHEN L. COOTEYStephen L. Cootey     |  | Director                                         |  | March 31, 2006
|/s/ANTHONY B. PETRELLIAnthony B. Petrelli |  | Director                                         |  | March 31, 2006

41

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WHITNEY INFORMATION NETWORK, INC. AND SUBSIDIARIES  VALUATION AND QUALIFYING ACCOUNTS AND RESERVES  (in thousands)

Schedule II

|Description                                                           |                               | Balance at
Beginning Of
Period     |       | Addition
Charged and
Expense |   | Deductions |   | Balance
at End of
Period
|--------------------------------------------------------------------- | ----------------------------- | ---------------------------------- | ----- | ---------------------------- | - | ---------- | - | ------------------------
|Deducted from asset accounts:                                         |                               |                                    |       |                              |   |            |   |                         
|Provisions for losses on trade accounts receivable and sales returns: |                               |                                    |       |                              |   |            |   |                         
|                                                                      | Year Ended December 31, 2005: |                                    |       |                              |   |            |   |                         
|                                                                      |                               | Allowance for merchant receivables |       | $                            |  |            | $ | 867                     
|                                                                      |                               |                                    |       |                              |   |            |   |                         
|                                                                      |                               |                                    | Total |                              | $ |           |   | $                       
|                                                                      |                               |                                    |       |                              |   |            |   |                         

S-1

---