800 TRAVEL SYSTEMS INC, 424B1, 2000-09-15

800 TRAVEL SYSTEMS INC
424B1, 2000-09-15
TRANSPORTATION SERVICES

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<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
Registration No. 333-45488

PROSPECTUS

800 TRAVEL SYSTEMS, INC.
3,633,050 Shares of Common Stock

This prospectus concerns the issuance of our common stock upon the
exercise of 3,319,800 outstanding redeemable common stock purchase warrants,
3,105,000 of which were originally sold in our initial public offering. Each
warrant entitles the holder to buy one share of common stock at $6.25 per share
during the five-year period beginning January 21, 1998. The amount of proceeds
we will receive from such sales, if any, depends on how many of the warrants are
exercised. If a warrant holder exercises his or her warrants and designates in
writing that the exercise by him or her of the warrants was solicited by First
London Securities Corporation, one of the underwriters of our initial public
offering, we shall pay to First London upon the exercise of such warrants a fee
equal to 5% of the exercise price of the warrants. If all of the warrants were
exercised and First London solicited the exercise of all of the warrants, we
would receive approximately $19,600,000, after deducting the fee to First London
and other expenses of the offering.

We can redeem the warrants for $.05 per warrant on not less than 30 nor
more than 60 days written notice if the closing price of our common stock for
seven trading days during a 10 consecutive trading day period ending not more
than 15 days before the date the notice of redemption is mailed equals or is
greater than $10.00 per share, subject to adjustment under certain circumstances
and provided there is then a current effective registration statement under the
Securities Act of 1933, as amended, with respect to the issuance and sale of
common stock issuable when the warrants are exercised.

The common stock and warrants are listed on the Boston Stock Exchange
under the symbols "IFL" and "IFLW," respectively, and on the Nasdaq Small Cap
Market under the symbols "IFLY" and "IFLYW," respectively. On September 6, 2000,
the closing bid prices of the common stock and warrants were $1.625 and $0.50,
respectively.

The Registration Statement relating to this Prospectus also covers the
offering of 313,250 shares of common stock consisting of: (i) the offering by
Mark D. Mastrini ("Mr. Mastrini"), our former Chief Executive Officer and Chief
Operating Officer, of 50,000 shares of common stock, and (ii) the offering by
selling security holders (the "Selling Security Holders") of 263,250 shares of
common stock issuable pursuant to 263,250 warrants exercisable as set forth in
this Prospectus (the shares offered by Mr. Mastrini and the Selling Security
Holders are hereinafter referred to as the "Registered Shares"), which were not
underwritten but which may be sold from time to time pursuant to arrangements
made by Mr. Mastrini and the Selling Security Holders. Sales of the Registered
Shares or the potential of such sales at any time, may have an adverse effect on
the market prices of the securities offered under this Prospectus. We will not
receive any of the proceeds from the sale of the Registered Shares by Mr.
Mastrini or the Selling Security Holders (although we will receive the warrant
exercise price set forth in this Prospectus that the Selling Security Holders
shall pay to us in order to receive Registered Shares). We will bear all
expenses incurred by Mr. Mastrini and the Selling Security Holders, other than
brokerage fees and commissions and fees of independent counsel, if any. The
Registered Shares may be sold by Mr. Mastrini and the Selling Security Holders
from time to time directly to purchasers or through agents, underwriters or
dealers. Mr. Mastrini shall no longer be entitled to sell Registered Shares
under this Prospectus once the sale of any such shares may be made by him
pursuant to Rule 144 under the Securities Act. See "Plan of Distribution."

These are speculative securities, and an investment in the securities
offered under this prospectus involves a high degree of risk and should be
considered only by investors who can afford the loss of their entire investment.
See "risk factors" beginning on page 5 for a discussion of certain factors which
you should consider before you invest in the common stock described in the
prospectus.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this Prospectus. Any representation to the contrary is a
criminal offense.

The date of this Prospectus is September 15, 2000

<PAGE> 2

AVAILABLE INFORMATION

We have filed a Registration Statement (the "Registration Statement")
on Form S-3 under the Securities Act of 1933, as amended (the "Securities Act"),
with the Securities and Exchange Commission (the "Commission") with respect to
the common stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement which we have filed with the
Commission, certain portions of which have been omitted pursuant to the rules
and regulations of the Commission, and to which portions reference is hereby
made for further information with respect to the Company and the common stock
offered hereby. Statements contained herein concerning certain documents are not
necessarily complete, and in each instance, reference is made to the copies of
such documents filed as exhibits to the Registration Statement. Each such
statement is qualified in its entirety by such reference.

We are subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith file periodic reports, proxy statements and other information with the
Commission relating to our business, financial statements and other matters. The
Registration Statement, as well as such reports, proxy statements and other
information, may be inspected, and copied at prescribed rates at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. and should be available for
inspection and copying at the regional offices of the Commission located at 7
World Trade Center, Suite 1300, New York, New York 10048 and at Citicorp Center,
500 West Madison Street, Chicago, Illinois. Copies of such material can be
obtained at prescribed rates by writing to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the public reference facilities by calling the
Commission at 1-800-SEC-0330. Our Registration Statement on Form S-3 as well as
any reports to be filed under the Exchange Act can also be obtained
electronically after we have filed such documents with the Commission through a
variety of databases, including among others, the Commission's Electronic Data
Gathering, Analysis And Retrieval ("EDGAR") program, Knight-Ridder Information,
Inc., Federal Filings/Dow Jones and Lexis/Nexis. Additionally, the Commission
also maintains a website that contains reports, proxy statements and other
information regarding registrants that file electronically with the Commission.
The address of such site is HTTP://WWW.SEC.GOV.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

There are hereby incorporated by reference in this Prospectus the
following documents, all of which were previously filed by us with the
Commission:

1. The Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1999.

2. The Company's Definitive Proxy Statement relating to the
Annual Meeting of Shareholders held on July 10, 2000.

3. The Company's quarterly Reports on Form 10-QSB for the
quarters ended March 31, 2000 and June 30, 2000.

4. The Company's Form 8-K dated July 10, 2000, relating to the
resignation of Mark D. Mastrini as the Company's Chief Executive
Officer, Chief Operating Officer and as a director of the Company, the
Company's Form 8-K dated July 24, 2000 announcing the appointment of
certain officers, the election of new directors and a strategic
marketing alliance and a Form 8-K dated August 18, 2000 announcing the
merger of a newly-formed, wholly owned subsidiary of the Company with
Prestige Travel Systems, Inc.

5. The description of securities to be registered contained in
the Registration Statement filed with the Commission on the Company's
Form 8-A under the Exchange Act.

Additionally, all documents subsequently filed by us pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of the offering made hereby shall be deemed to be incorporated by reference into
this Prospectus. Any statement contained in a previously filed document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
modifies or replaces such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or replaced, to constitute
a part of this Prospectus.

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We undertake to provide without charge to any person to whom a copy of
this Prospectus has been delivered, upon the written or oral request of any such
person, a copy of any or all of the documents which have been or may be
incorporated by reference into this Prospectus, other than exhibits to such
documents. Written or oral requests for such copies should be directed to Robert
B. Morgan, Chief Financial Officer and Secretary, at the executive offices of
the Company, which are located at 4802 Gunn Highway, Tampa, Florida 33624. Our
telephone number is (813) 908-0404.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

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PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND INFORMATION UNDER "RISK FACTORS."

THE COMPANY

We are a leading direct marketer of travel related services, focused
primarily on providing air transportation reservation services. We provide
low-priced airline tickets for domestic and international leisure travel to our
customers through our easy-to-remember, toll-free numbers and through our
website on the World Wide Web (at WWW.LOWAIRFARE.COM). We operate two
reservation centers, one in Tampa, Florida and the other in San Diego,
California seven days a week throughout the year.

We generate revenues principally from (i) commissions on air travel
tickets including override commissions on air travel tickets we book on certain
airlines, (ii) segment incentives under our contract with SABRE, and (iii)
service fees that we charge our customers. We market our services primarily by
advertising in Yellow Pages throughout the continental United States with
populations whose general travel profiles are attractive to the Company.

We are currently in the process of integrating an Internet business
model with our existing model. The resulting business model will allow us to
focus on new business to business ("B2B") as well as business to consumer
("B2C") travel markets. We believe this strategy will diversify our future
revenues. Our new diversified strategy seeks to leverage Internet technologies
with our core competencies of low cost, call center operations and travel
industry expertise. This diversified strategy should lessen the current
dependency on air travel reservations and should help offset the anticipated
continued pressure on margins from airline commission reductions and other
competitive forces. To facilitate the changes needed to successfully complete
this new diversified Internet initiative with "brick and mortar," together
commonly called "click and mortar," we have started to recruit and reorganize
management talent, redesign the existing organization and pursue strategic
alliances and acquisitions. We anticipate our operating and marketing expenses
to increase as our growth strategy is executed.

The principal executive office of the Company is located at 4802 Gunn
Highway, Tampa, Florida 33624 and its telephone number is (813) 908-0404.

THE SELLING SECURITY HOLDERS

This Prospectus also covers the offering by Mr. Mastrini of 50,000
shares of Common Stock and the Selling Security Holders of 263,250 shares of
Common Stock issuable under 263,250 warrants exercisable as set forth in this
Prospectus. The Selling Security Holders acquired such warrants from the Company
as the underwriters of the Company's initial public offering, which closed on
January 21, 1998 and January 23, 1998. Mr. Mastrini acquired the shares of
Common Stock as of January 2000 in connection with the second anniversary of his
continued employment with the Company.

RISK FACTORS

You should consider the material risk factors involved in connection
with an investment in the Common Stock and the impact to you from various
events which could adversely affect the Company's business. See "Risk Factors."

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RISK FACTORS

Investors should carefully consider the following risk factors, in
addition to the other information concerning the factors affecting forward
looking statements. Each of these risk factors could adversely affect our
business, operating results and financial condition as well as adversely affect
the value of an investment in 800 Travel Systems. You should be able to bear a
complete loss of your investment.

Certain oral statements made by management from time to time and
certain statements contained herein and in documents incorporated herein by
reference that are not historical facts are "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 and, because such statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. The terms "800 Travel Systems,"
"company," "we," "our," and "us" refer to 800 Travel Systems, Inc. The words
"expect", "believe", "goal", "plan", "intend", "anticipate", "estimate", "will"
and similar expressions and variations thereof if used, are intended to
specifically identify forward-looking statements. Forward-looking statements are
statements regarding the intent, belief or current expectations, estimates or
projections of 800 Travel Systems, our Directors or our Officers about 800
Travel Systems and the industry in which we operate, and assumptions made by
management, and include among other items, (i) our strategies regarding growth,
including our intention to further develop and improve our Internet capabilities
and diversify revenues utilizing our call center operation and travel industry
expertise; (ii) our financing plans; (iii) trends affecting our financial
condition or results of operations; (iv) our ability to continue to control
costs and to meet our liquidity and other financing needs; (v) our ability to
respond to changes in customer demand, including as a result of increased
competition and the increase of Internet activity. Although we believe our
expectations are based on reasonable assumptions, we can give no assurance that
the anticipated results will occur. We disclaim any intention or obligation to
update or revise forward-looking statements, whether as a result of new
information, future events or otherwise.

Investors and prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those in the forward-looking statements as a result of various factors which
include, among others, (i) general economic conditions, particularly those
affecting fuel and other travel costs and their effect on the volume of consumer
air travel; (ii) conditions in the capital markets, including the interest rate
environment and the availability of capital, which could affect our internal
growth and possibilities for strategic alliances in the travel and telemarketing
areas; (iii) changes in the competitive marketplace that could affect our
revenue and/or cost bases, such as increased competition from traditional and
Internet based travel agencies, consolidators and the airlines themselves,
changes in the commissions paid by airlines, and increased labor, marketing,
computer software/hardware and telecommunications costs; (iv) the availability
and capabilities of the SABRE electronic travel reservation system and ancillary
software; (v) the success of our Internet initiatives; (vi) changes in
commission rates; (vii) the improved productivity of our reservation agents as
they gain experience and utilize technological improvements; (viii) our rights
to the use of software and other intellectual property and the potential for
others to challenge and otherwise adversely affect such rights; and (ix) other
factors including those identified in our filings with the SEC including but not
limited to information under the heading "Risk Factors" in the Form SB-2
Registration Statement and Prospectus for our initial public offering as amended
from time to time, and the following risk factors:

WE HAVE A LIMITED OPERATING HISTORY AND A HISTORY OF LOSSES. OUR FUTURE
OPERATING RESULTS MAY NOT BE PROFITABLE.

We have been operating for less than four years and during that time we
have generated a significant accumulated operating loss. There can be no
assurance that we will be able to operate profitably, particularly if we seek to
expand through acquisitions or the addition of new Internet services. We only
recently initiated our online operations and, accordingly, our prospects in this
field must be considered in light of the difficulties encountered in any new
business.

These risks include our failure to:

o attract additional travel suppliers and consumers to our
service
o maintain and enhance our brand
o expand our service offerings

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o operate, expand and develop our operations and systems
efficiently
o maintain adequate control of our expenses
o raise additional capital
o attract and retain qualified personnel
o respond to technological changes
o respond to competitive market conditions
o operate at a profit

OUR LOSSES AND NEGATIVE CASH FLOWS MAY CONTINUE.

We have incurred net losses and negative cash flows on both an annual
and interim basis. For the six months ended June 30, 2000, we had a net loss of
$435,492 and we had a net decrease in cash of $321,518. We may continue to incur
net losses for the foreseeable future and we cannot assure you that we will ever
achieve, or if achieved, sustain profitability or generate positive cash flow.
We expect our operating expenses to grow. These increased expenses will result
primarily from our Internet initiatives, advertising and expansion of our
operations. As a result, we will need to increase our revenues to become
profitable. If our revenues do not grow as expected, or if increases in our
expenses are not in line with our plans, there could be a material adverse
effect on our business, operating results and financial condition.

WE ARE DEPENDENT ON THE SABRE SYSTEM.

Our ability to quote air travel ticket prices, make reservations and
sell tickets is dependent upon our contractual right to use, and the performance
of, the SABRE electronic travel reservation system. In May 1999, we entered into
a five-year agreement with SABRE, Inc. to lease the SABRE system in our Tampa
and San Diego reservation centers. If the SABRE system were to cease
functioning, or if we were to lose our contractual right to use the SABRE system
through our inability to renew the agreement, upon expiration thereof or through
a default by us or other termination event under the agreement during the term
thereof, we would not be able to conduct operations until a replacement system
was installed and became operational. Only a very limited number of companies
provide reservation systems to the travel agency industry. There can be no
assurance that a replacement system could be obtained on comparable terms or if
obtained, installed in time to successfully continue operations.

During any interruption in the operation of SABRE, we would lose
revenues. Other travel agencies using other travel reservation systems would not
be subject to such interruption of their operations, and we may lose market
share to such competitors. Upon the interruption of the operation of the SABRE
system, we could decide to commence operations with another travel reservation
system. Substantial expenses could be required for acquiring the right to use a
new system and retraining reservation agents. In addition, any impairment of the
SABRE system which does not cause us to cease operations could, nevertheless,
adversely affect the quality of our services, resulting in lost revenues or
market share and could require us to subscribe to a different travel reservation
system.

WE ARE SUBJECT TO ADJUSTMENTS IN AIRLINE COMMISSIONS WHICH COULD REDUCE OUR
REVENUES.

In October 1999, the major airlines announced reductions in the
commissions they will pay traditional travel agents from approximately 8% to 5%
and subject to a cap of $50.00 for domestic round trip ticket sales. In
addition, many airlines have implemented a fixed-rate commission of $10.00 for
domestic online round trip ticket sales. We anticipate continued downward
pressure on airline commission rates. Such reductions and future reductions, if
any, could have a material adverse effect on our operations. We may not be paid
commissions by airlines for stand-alone bookings on our web site or online agent
assisted bookings on our web site. We also may not be able to impose service
charges for our Internet services, which could adversely affect our future
online revenues and earnings.

A DECLINE IN COMMISSION RATES OR THE ELIMINATION OF COMMISSIONS COULD REDUCE OUR
REVENUES AND MARGINS.

A substantial majority of our online revenues depends on the
commissions paid by travel suppliers for bookings made through our call centers
and through our online travel service. Generally, we do not have written
commission agreements with most of our suppliers. As is standard practice in the
travel industry, we rely on informal arrangements for the payment of commissions
which applies to all travel agencies. Travel suppliers are not

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obligated to pay any specified commission rate for customer bookings made online
through our websites. We cannot assure you that airlines, hotel chains or other
travel suppliers will not reduce current industry commission rates or eliminate
commissions entirely, either of which could reduce our revenues and margins. For
example, in 1995, most of the major airlines placed a cap on per-ticket
commissions payable to all travel agencies for domestic airline travel. In
September 1997, the major United States airlines reduced the commission rate
payable to traditional travel agencies from 10% to 5%. In 1997, the major United
States airlines reduced the commission rate payable for online reservations from
8% to 5%. In addition, since 1998, many airlines have implemented a commission
cap of $10.00 for domestic online round-trip ticket sales. Because a high
percentage of our business relates to airline ticket sales, a further reduction
in airline ticket commissions could reduce our revenues.

RISKS RELATING TO THE AIRLINE INDUSTRY

Developments in the airline industry may result in a decrease in the
price of tickets or number of tickets we sell. Consolidation of airline carriers
could adversely impact ticket prices, the available discounts on same as well as
commission rates. Concerns about passenger safety may result in a decrease in
passenger air travel and a consequent decrease in the number of tickets we sell.
There can be no assurance that any such developments will not occur or that we
will not be adversely affected by any such decrease in the level of passenger
air travel.

IF TRAVEL RELATED INTERNET SERVICES OR THE DIVERSIFIED USE OF OUR CALL CENTER
OPERATIONS DO NOT ACHIEVE WIDESPREAD MARKET ACCEPTANCE, OUR BUSINESS MAY NOT
GROW.

Our success will depend in large part on widespread market acceptance
of the Internet as a vehicle for the buying of airline tickets and other travel
related products and services as well as the diversified use of our call center
operations. Consumers who have historically purchased airline tickets and other
travel related products and services using traditional commercial channels, such
as local travel agents and calling airlines directly, must instead purchase
these products through our website or through call center operations. Consumers
frequently use our website or call centers for route pricing and other travel
information and then choose to purchase airline tickets or make other
reservations directly from travel suppliers or other travel agencies. If the
online market develops more slowly than expected, or if our services do not
achieve widespread market acceptance, our business may decline, may not grow or
may grow more slowly than expected. Our future growth, if any, will depend on
critical factors including but not limited to: (i) the growth of the Internet as
a tool used in the process of buying airline tickets and other travel related
products and services; (ii) our ability to successfully and cost effectively
market our services to a sufficiently large number of people and thereby attract
new and repeat customers; and (iii) our ability to consistently deliver high
quality and fast and convenient service at competitive prices.

Our revenues will not grow as much as we anticipate if the market for
our services does not continue to develop, our services do not continue to be
adopted or consumers fail to significantly increase their use of the Internet as
a tool in the process of buying airline tickets and other travel related
products and services or opt to use competitors services or airline carriers
Internet services directly.

In order to achieve the acceptance of consumers, travel suppliers and
advertisers contemplated by our business plan, we will need to continue to make
substantial investments in our technology. However, we cannot assure you that
these investments will be successful. Our failure to make progress in these
areas will harm the growth of our business.

WE MAY BE UNABLE TO DEVELOP NEW RELATIONSHIPS WITH STRATEGIC PARTNERS AND
MAINTAIN OUR EXISTING RELATIONSHIPS.

Our business depends on establishing and maintaining relationships with
airlines, SABRE and others. As a result of our agreements to sell discounted
tickets with airlines directly, as well as other ticket suppliers, we are able
to charge our customers a service charge, while still offering low priced
tickets. We cannot assure you that we will be able to establish new
relationships or maintain existing relationships. If we fail to establish or
maintain these relationships, it could adversely affect our business.

Our business model relies on relationships with travel suppliers, and
it would be negatively affected by adverse changes in these relationships. We
depend on travel suppliers to enable us to offer our customers comprehensive
access to travel services and products. It is possible that travel suppliers may
choose not to make

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their inventory of services, discounts and products available through online
distribution. Travel suppliers could elect to sell exclusively through other
sales and distribution channels or to restrict our access to their inventory,
either of which could significantly decrease the amount or breadth of our
inventory of available travel offerings. Of particular note is the proposed
airline direct-distribution website, which is currently named "Orbitz." Orbitz
has announced its intention to launch in August 2000 and is reportedly owned by
American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines and
United Air Lines. Forester Research reports that Orbitz will be the only website
for consumers to find unpublished special fares on these and at least 23 other
airlines. If a substantial number of our airline suppliers collectively agree or
choose to restrict their special fares solely to Orbitz, such action may have a
material adverse affect on our business. Adverse changes in any of these
relationships, whether due to Orbitz or otherwise, could reduce the amount of
travel services which we are able to offer through our websites.

WE OPERATE IN A HIGHLY COMPETITIVE MARKET WITH LOW BARRIERS TO ENTRY WHICH COULD
HARM OUR BUSINESS.

While the market for buying airline tickets and other travel related
products and services on the Internet is relatively new and rapidly evolving, it
is already competitive and characterized by entrants that may develop services
similar to ours. Many of our existing competitors, as well as our potential
competitors, have longer operating histories on the Web, greater name
recognition, higher amounts of user traffic and significantly greater financial,
technical and marketing resources than we do. In addition, there are relatively
low barriers to entry to our business. We do not have patents or other
intellectual property that would preclude or inhibit competitors from entering
the market. Moreover, due to the low cost of entering the market, competition
may intensify and increase in the future. We compete against other online travel
web sites, including those of airline carriers. We also compete with traditional
methods used by travel agents to market airline tickets, including yellow pages,
classified ads, travel brochures and other media advertising. This competition
may limit our ability to become profitable or result in the loss of market
share.

We compete with a variety of companies with respect to each product or service
we offer. These competitors include:

o Internet travel agents such as Travelocity.com, Expedia and
American Express Interactive, Inc.;
o local, regional, national and international traditional travel
agencies;
o consolidators and wholesalers of airline tickets, hotels and
other travel products, including online consolidators such as
Cheaptickets.com and Priceline.com and online wholesalers such
as Hotel Reservations Network, Inc.;
o airlines, hotels, rental car companies, cruise operators and
other travel service providers, whether working individually
or collectively, some of which are suppliers to our websites;
and
o operators of travel industry reservation databases.

In addition to the traditional travel agency channel, many travel
suppliers also offer their travel services as well as third-party travel
services directly through their own websites. These travel suppliers include
many suppliers with which we do business. In particular, five airline suppliers,
American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines and
United Air Lines, have announced their intention to launch a direct-
distribution website, currently named "Orbitz," by the end of August 2000.
Forester Research reports that Orbitz will be the only website for consumers to
find unpublished weekly special fares on at least 23 other airlines. Suppliers
also sell their own services directly to consumers, predominantly by telephone.
As the market for online travel services grows, we believe that travel
suppliers, traditional travel agencies, travel industry information providers
and other companies will increase their efforts to develop services that compete
with our services by selling inventory from a wide variety of suppliers. We
cannot assure you that our online operations will compete successfully with any
current or future competitors.

Many of our current and potential competitors have longer operating
histories, larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources than us and may enter into
strategic or commercial relationships with larger, more established and well
financed companies. Certain of our competitors may be able to secure services
and products from travel suppliers on more favorable terms, devote greater
resources to marketing and promotional campaigns and devote substantially more
resources to website and systems development than us. In addition, new
technologies and the expansion of existing technologies may increase competitive
pressures on us. In particular, Microsoft Corporation has publicly announced its
intent to continue to invest heavily in the area of travel technology and
services. Increased competition may result in reduced operating

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margins, loss of market share and brand recognition. There can be no assurance
that we will be able to compete successfully against current and future
competitors, and competitive pressures faced by us may have a material adverse
effect on our business, operating results and financial condition.

Our sales affiliates and employees are generally not subject to
non-competition agreements. In addition, our business model does not involve the
use of a large amount of proprietary information. As a result, we are subject to
the risk that our sales affiliates or employees may leave us and may work for
competitors or may start competing businesses. The emergence of these
enterprises will further increase the level of competition in our market and
could harm our growth and financial performance.

WE MAY NOT BE ABLE TO MAINTAIN OUR WEB DOMAIN NAME, WHICH MAY CAUSE CONFUSION
AMONG WEB USERS AND DECREASE THE VALUE OF OUR BRAND NAME.

We currently hold a Web domain name relating to our brand. Currently,
the acquisition and maintenance of domain names is regulated by governmental
agencies and their designees. The regulation of domain names in the U.S. and in
foreign countries is expected to change in the near future. As a result, we may
not be able to maintain our domain name. These changes could include the
introduction of additional top level domains, which could cause confusion among
Web users trying to locate our sites. Furthermore, the relationship between
regulations governing domain names and laws protecting trademarks and similar
proprietary rights is unclear. We may be unable to prevent third parties from
acquiring domain names that are similar to ours. The acquisition of similar
domain names by third parties could cause confusion among Web users attempting
to locate our site and could decrease the value of our brand name and the use of
our site.

WE MAY NOT BE ABLE TO ATTRACT AND EXPAND OUR ONLINE TRAFFIC.

We believe that establishing, maintaining and enhancing our
LowAirfare.com website is a critical aspect of our efforts to attract and expand
our online traffic. The number of Internet sites that offer competing services
increases the importance of establishing and maintaining brand recognition. Many
of these Internet sites already have well-established brands in online services
or the travel industry generally. Promotion of the LowAirfare.com website will
depend largely on our success in providing a high-quality online experience
supported by a high level of customer service. In addition, we intend to
increase our spending on marketing and advertising with the intention of
expanding the recognition of our website to attract and retain online users and
to respond to competitive pressures. However, we cannot assure you that these
expenditures will be effective to promote our brand or that our marketing
efforts generally will achieve our goals.

IF WE ARE UNABLE TO INTRODUCE AND SELL NEW PRODUCTS AND SERVICES, OUR BUSINESS
COULD BE ADVERSELY EFFECTED.

We need to broaden the range of travel products and services and
increase the availability of products and services that we offer in order to
enhance our service. We will incur substantial expenses and use significant
resources trying to expand the range of products and services that we offer.
However, we may not be able to attract sufficient travel suppliers and other
participants to provide desired products and services to our consumers. In
addition, consumers may find that delivery through our service is less
attractive than other alternatives. If we launch new products and services and
they are not favorably received by consumers, our reputation, business and the
value of the Lowairfare.com brand could be adversely effected.

Our relationships with consumers and travel suppliers are mutually
dependent since consumers will not use a service that does not offer a broad
range of travel services. Similarly, travel suppliers will not use a service
unless consumers actively make travel purchases through it. We cannot predict
whether we will be successful in expanding the range of products and services
that we offer. If we are unable to expand successfully, this could also
adversely effect our business.

WE MAY NOT BE ABLE TO RECRUIT AND RETAIN THE PERSONNEL WE NEED TO SUCCEED.

We may be unable to retain our key employees and consultants and key
sales agents or attract, assimilate or retain other highly qualified employees
and sales agents in the future. Our future success depends on our ability to
attract, retain and motivate highly skilled employees and sales agents. If we do
not succeed in attracting new

9
<PAGE> 10

personnel or retaining and motivating our current personnel, it may be difficult
for us to manage our business and meet our objectives.

A FAILURE IN THE PERFORMANCE OF OUR WEB HOSTING FACILITY SYSTEMS COULD HARM OUR
BUSINESS AND REPUTATION.

We depend upon a third party Internet service provider to host and
maintain our web site. Any system failure, including network, software or
hardware failure, that causes an interruption in the delivery of our web site or
a decrease in responsiveness of our web site service could result in reduced
revenue, and could be harmful to our reputation and brand. Our Internet service
provider does not guarantee that our Internet access will be uninterrupted,
error free or secure. Any disruption in the Internet service provided by such
provider could significantly harm our business. In the future, we may experience
interruptions from time to time. Our insurance may not adequately compensate us
for any losses that may occur due to any failures in our system or interruptions
in our service. Our Web servers must be able to accommodate a high volume of
traffic and we may in the future experience slower response times for a variety
of reasons. If we are unable to add additional software and hardware to
accommodate increased demand, this could cause unanticipated system disruptions
and result in slower response times. The costs associated with accommodating
such increased demand may exceed the revenues the increased demand may generate.
Ticket buyers may become dissatisfied by any system failure that interrupts our
ability to provide access or results in slower response time and thereby not
return to the site.

Any reduction in performance, disruption in the Internet access or
discontinuation of services provided by our Internet service provider, Verizon
and AT&T, or other telecommunications provider, or any disruption in our ability
to access the SABRE systems, could have a material adverse effect on our
business, operating results and financial condition. There can be no assurance
that our transaction processing systems and network infrastructure will be able
to accommodate increases in traffic in the future, or that we will, in general,
be able to accurately project the rate or timing of such increases or upgrade
our systems and infrastructure to accommodate future traffic levels on our
online sites. In addition, there can be no assurance that we will be able in a
timely manner to effectively upgrade and expand our transaction processing
systems or to successfully integrate any newly developed or purchased modules
with our existing systems. There can be no assurance that we will successfully
utilize new technologies or adapt our online sites, proprietary technology and
transaction processing systems to customer requirements or emerging industry
standards.

Our call center computer and communications hardware is provided under
a leasing arrangement and is located at the respective centers in Tampa, Florida
and San Diego, California. If either call center experiences a disaster that
interrupts service, inbound telephone calls can be re-routed to the other
center. Substantially all of our Internet computer and communications hardware
is provided by Exodus and is located at Exodus' New York Internet data center.
Our systems and operations are vulnerable to damage or interruption from fire,
flood, power loss, telecommunications failure, break-ins, earthquake and similar
events. We currently do not have redundant systems or a formal disaster recovery
plan and may not carry sufficient business interruption insurance to compensate
us for losses that may occur. Despite the implementation of network security
measures by us, our servers are vulnerable to computer viruses, physical or
electrical break-ins and similar disruptions, which could lead to interruptions,
delays, loss of data or the inability to accept and confirm customer
reservations.

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<PAGE> 11

OUR INTERNET SOFTWARE DEVELOPMENT EFFORTS MAY NOT SUCCEED.

We are in the process of working to enhance and expand our business and
opportunities through the use of the Internet and we are exposed to various
risks and uncertainties related to our arrangements or agreements with third
parties for the co-development or development of software systems for use in
conjunction with our Internet initiatives. Such risks and uncertainties include
but are not limited to the following: (i) we may expend significant funds for
co-development or development of software that exceed the benefits, if any,
ultimately derived from such software or the benefits that could be derived from
less expensive software available from other sources; (ii) any software
co-developed by us or developed for us may be functionally or technologically
obsolete by the time co-development or development is completed; (iii) the
timetables necessary to attain the advantages anticipated from such
co-development or development may not be achieved; (iv) others may develop
similar software and make such software available to our competitors or our
competitors may develop similar software or the software developed by others may
have features and benefits beyond the capabilities of the software co-developed,
licensed or otherwise utilized by us; (v) our rights with respect to any
co-development or development arrangement may become the subject of disputes and
may result in our not having any rights in or to such software and result in
claims of violations of intellectual property rights which could result in
significant defense cost and the possibility of damages being assessed against
us; and (vi) key individuals involved in connection with any software
co-development arrangement with us could become unable to complete or continue
the co-development, which could cause the co-development to end, or result in
significant delays and increases in costs to continue such co-development.

WE MAY BE LIABLE FOR INFRINGING THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.

We may receive in the future, notice of claims of infringement of other
parties' proprietary rights. Infringement or other claims could be asserted or
prosecuted against us in the future and it is possible that past or future
assertions or prosecutions could harm our business. Any such claims, with or
without merit, could be time consuming, resulting in costly litigation and
diversion of technical and management personnel, cause delays in the development
and release of new products or services, or require us to develop non-infringing
technology or enter into royalty or licensing arrangements. Such royalty or
licensing arrangements, if required, may not be available on terms acceptable to
us, or at all. For these reasons, infringement claims could harm our business.

OUR FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY COULD ADVERSELY AFFECT OUR
BRAND AND OUR BUSINESS.

We rely on a combination of trademark and copyright law and trademark
protection. Despite our efforts, we cannot be sure that we will be able to
prevent misappropriation of our intellectual property. It is possible that
litigation may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets or to determine the validity and scope of
the proprietary rights of others. Litigation could result in substantial costs
and diversion of our resources away from the operation of our business.

DECLINES OR DISRUPTIONS IN THE TRAVEL INDUSTRY GENERALLY COULD REDUCE OUR
REVENUES.

We rely on the health and growth of the travel industry. Travel is
highly sensitive to business and personal discretionary spending levels, and
thus tends to decline during general economic downturns. In addition, other
adverse trends or events that tend to reduce travel are likely to reduce our
revenues. These may include:

o price escalation in the airline industry or other
travel-related industries
o increased occurrence of travel-related accidents
o airline or other travel-related strikes
o political instability
o regional hostilities and terrorism
o bad weather

REGULATORY AND LEGAL CHANGES MAY IMPOSE TAXES OR OTHER BURDENS ON OUR BUSINESS.

The laws and regulations applicable to the travel industry affect us
and our travel suppliers. We must comply with laws and regulations relating to
the sale of travel services, including those prohibiting unfair and deceptive
practices and those requiring us to register as a seller of travel, comply with
disclosure requirements and

11
<PAGE> 12

participate in state restitution funds. In addition, many of our travel
suppliers and computer reservation systems providers are heavily regulated by
the United States and other governments. Our services are indirectly affected by
regulatory and legal uncertainties affecting the businesses of our travel
suppliers and computer reservation systems providers.

We must also comply with laws and regulations applicable to businesses
generally and online commerce. Currently, few laws and regulations directly
apply to the Internet and commercial online services. Moreover, there is
currently great uncertainty about whether or how existing laws governing issues
such as property ownership, sales and other taxes, libel and personal privacy
apply to the Internet and commercial online services. It is possible that laws
and regulations may be adopted to address these and other issues. Further, the
growth and development of the market for online commerce may prompt calls for
more stringent consumer protection laws. New laws or different applications of
existing laws would likely impose additional burdens on companies conducting
business online and may decrease the growth of the Internet or commercial online
services. In turn, this could decrease the demand for our products and services
or increase our cost of operations.

Federal legislation imposing limitations on the ability of states to
tax Internet-based sales was enacted in 1998. The Internet Tax Freedom Act, as
this legislation is known, exempts specific types of sales transactions
conducted over the Internet from multiple or discriminatory state and local
taxation through October 21, 2001. It is possible that this legislation will not
be renewed when it terminates in October 2001. Failure to renew this legislation
could allow state and local governments to impose taxes on Internet-based sales,
and these taxes could decrease the demand for our products and services or
increase our costs of operations.

RISKS RELATED TO THE INTERNET INDUSTRY

RAPID TECHNOLOGICAL CHANGES MAY RENDER OUR TECHNOLOGY OBSOLETE OR DECREASE THE
COMPETITIVENESS OF OUR SERVICES.

To remain competitive in the online travel industry, we must continue to
enhance and improve the functionality and features of our websites. The Internet
and the online commerce industry are rapidly changing. In particular, the online
travel industry is characterized by increasingly complex systems and
infrastructures. If competitors introduce new services embodying new
technologies, or if new industry standards and practices emerge, our existing
websites and proprietary technology and systems may become obsolete. Our future
success will depend on our ability to do the following:

o enhance our existing services;
o develop and license new services and technologies that address the
increasingly sophisticated and varied needs of our prospective
customers and suppliers;
o respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.

Developing our websites and other proprietary technology entails
significant technical and business risks. We may use new technologies
ineffectively or we may fail to adapt our websites, transaction-processing
systems and network infrastructure to customer requirements or emerging industry
standards. If we face material delays in introducing new services, products and
enhancements, our customers and suppliers may forego the use of our services and
use those of our competitors.

INTERNET RELATED REGULATORY AND LEGAL UNCERTAINTIES COULD HARM OUR BUSINESS.

There are an increasing number of laws and regulations pertaining to
the Internet. In addition, a number of legislative and regulatory proposals are
under consideration by federal, state, local and foreign governments and
agencies. Laws or regulations may be adopted with respect to the Internet
relating to liability for information retrieved from or transmitted over the
Internet, domain name registration, online content regulation, user privacy,
taxation and quality of products and services. Moreover, the applicability to
the Internet of existing laws governing issues including intellectual property
ownership and infringement, copyright, patent, trademark, trade secret,
obscenity, libel, employment and personal privacy is uncertain and developing.
Further, the growth and development of the market for online commerce may prompt
calls for more stringent consumer protection laws.

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<PAGE> 13

New laws or different applications of existing laws would likely impose
additional burdens on companies conducting business online and may decrease the
growth of the Internet or commercial online services. In turn, this could
decrease the demand for our products and services or increase our cost of
operations.

Federal legislation imposing limitations on the ability of states to
impose new state taxes on e-commerce was enacted in 1998. The Internet Tax
Freedom Act, as this legislation is known, exempts specific types of sales
transactions conducted over the Internet from multiple or discriminatory state
and local taxation through October 21, 2001. It is possible that this
legislation will not be renewed when it terminates in October 2001. Failure to
renew this legislation or the enactment of new legislation could allow state and
local governments to impose taxes on Internet-based sales and use. Such taxes
could decrease the demand for our products and services or increase our costs of
operations.

OUR ABILITY TO GENERATE BUSINESS DEPENDS ON CONTINUED GROWTH OF ONLINE COMMERCE.

Our ability to generate business through our web site depends on
continued growth in the use of the Internet and in the acceptance and volume of
commerce transactions on the Internet. Rapid growth in the use of the Internet
and online services is a recent phenomenon. This growth may not continue. A
sufficiently broad base of consumers may not accept, or continue to use, the
Internet as a medium of commerce. We cannot assure you that the number of
Internet users will continue to grow in general or with respect to our site or
that commerce over the Internet will become more widespread or that our sales
will grow at a comparable rate. As is typical in the case of a new and rapidly
evolving industry, demand and market acceptance for recently introduced services
are subject to a high level of uncertainty. The Internet may not prove to be a
viable commercial marketplace for a number of reasons including but not limited
to: (i) the lack of acceptable security technologies; (ii) the lack of access
and ease of use; (iii) congestion of traffic; inconsistent quality of service
and the lack of availability of cost effective, high speed service; (iv)
potentially inadequate development of the necessary infrastructure; (v)
governmental regulation and/or taxation; and (vi) uncertainty regarding
intellectual property ownership or the enforcement of intellectual property
rights.

DUE TO OUR ANTICIPATED GROWTH, WE MAY BE UNABLE TO PLAN OR MANAGE OUR OPERATIONS
AND GROWTH EFFECTIVELY.

Our growth to date has placed, and our anticipated future operations
will continue to place, a significant strain on our management, systems and
resources. We continue to increase the scope of our operations and the size of
our workforce. In addition to needing to train and manage our workforce, we will
need to continue to improve and develop our financial and managerial controls
and our reporting systems and procedures. A failure to plan, implement and
integrate these systems successfully could adversely affect our business.

We cannot assure you that the Internet will support increasing use or
will prove to be a viable commercial marketplace.

The Internet has experienced, and is expected to continue to
experience, significant growth in the number of users and amount of traffic. Our
success will depend upon the development and maintenance of the Internet's
infrastructure to cope with this increased traffic. This will require a reliable
network backbone with the necessary speed, data capacity and security and the
timely development of complementary products for providing reliable Internet
access and services. Major online service providers and the Internet itself have
experienced outages and other delays as a result of software and hardware
failures and could face such outages and delays in the future. Outages and
delays are likely to affect the level of Internet usage and the processing of
transactions on our websites. In addition, the Internet could lose its viability
because of delays in the development or adoption of new standards to handle
increased levels of activity or of increased government regulation. The adoption
of new standards or government regulation may require us to incur substantial
compliance costs.

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<PAGE> 14

INFORMATION DISPLAYED ON OUR WEB SITE MAY SUBJECT US TO LITIGATION AND THE
RELATED COSTS.

We may be subject to claims for defamation, libel, copyright or
trademark infringement or based on other theories relating to information
published or contained on our web site. We could also be subject to claims based
upon the content that is accessible from our web site through links to or from
other web sites. Defending against any such claims could be costly and divert
resources and the attention of management from the operation of our business.

ADDITIONAL RISKS

WE MAY NEED FUTURE CAPITAL.

We intend to increase sales volumes by expanding our business with both
our Internet initiatives as well as our traditional "bricks and mortar" call
center operations. There can be no assurance that our revenues will increase as
a result thereof or even continue at their current levels. As we expend
significant resources to expand our operations, it is possible that we would
continue to incur losses and negative cash flow. In such event it is likely that
we would require additional capital. An increase in capital resulting from a
capital raising transaction could result in dilution to existing holders of our
common stock and adversely impact our stock price. There is no assurance that
such capital will be available to us or, if available, be on terms acceptable to
us.

OUR REVENUES ARE UNPREDICTABLE AND ARE SUBJECT TO FLUCTUATION.

As a result of our limited operating history and the recent addition of
our online operations, we are unable to accurately forecast our revenues. Our
current and future expense levels are based on our operating plans and estimates
of future revenues and are subject to increase as we implement our strategy. We
may be unable to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall. Accordingly, any significant shortfall in revenues
would likely have an immediate material adverse effect on our business,
operating results and financial condition. Further, if we should substantially
increase our operating expenses to offer expanded services, to increase sales
and marketing or to develop our technology and transaction processing systems,
and such expenses are not subsequently followed by increased revenues, our
operating performance and results would be adversely effected and if sustained
could have a material adverse effect on our business.

We will experience seasonality in our business, reflecting seasonal
fluctuations in the travel industry. Seasonality in the travel industry is
likely to cause quarterly fluctuations in our operating results and could have a
material adverse effect on our business, operating results and financial
condition.

OUR BUSINESS IS EXPOSED TO RISKS ASSOCIATED WITH ONLINE COMMERCE SECURITY AND
CREDIT CARD FRAUD.

Consumer concerns over the security of transactions conducted on the
Internet or the privacy of users may inhibit the growth of the Internet and
online commerce. To transmit confidential information such as customer credit
card numbers securely, we rely on encryption and authentication technology.
Unanticipated events or developments could result in a compromise or breach of
the systems we use to protect customer transaction data. Furthermore, our
servers may also be vulnerable to viruses transmitted via the Internet. While we
proactively check for intrusions into our infrastructure, a new and undetected
virus could cause a service disruption.

OUR SUCCESS IS SUBSTANTIALLY DEPENDENT UPON CERTAIN KEY PERSONNEL.

Our success is substantially dependent upon the continuing services of
certain key personnel. While we have employed a number of executives with
industry experience, the loss of any significant members of management could
have a material adverse effect on our business, financial condition and results
of operations.

SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY IMPACT THE MARKET PRICE OF THE
COMMON STOCK.

We are unable to predict the effect, if any, that future sales of
common stock (or the potential for such sales) may have on the market price of
the common stock prevailing from time to time. Future sales of substantial
amounts of common stock in the public market, including those obtained from the
exercise of the warrants, could

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<PAGE> 15

impair our ability to raise capital through an offering of securities and may
adversely affect the market price of the common stock.

THE COMPANY MUST MAINTAIN A CURRENT PROSPECTUS AND REGISTRATION STATEMENT IN
ORDER FOR WARRANTS TO BE EXERCISED BY THEIR HOLDERS.

We must maintain an effective registration statement on file with the
Commission before the holder of any of the warrants may be redeemed or
exercised. It is possible that we may be unable to cause a registration
statement covering the common stock underlying the warrants to be effective. It
is also possible that the warrants could be acquired by persons residing in
states where we are unable to qualify the common stock underlying the warrants
for sale. In either event, the warrants may expire unexercised, which would
result in the holders losing all the value of the warrants. There can be no
assurance that we will be able to maintain an effective registration statement
covering the issuance of common stock upon redemption or exercise of the
warrants. If we are unable to maintain an effective registration for the
issuance of common stock upon redemption of exercise of the warrants, we may be
subject to claims by the warrant holders.

OUR COMMON STOCK PRICE AND WARRANT PRICE MAY BE VOLATILE.

The market price for our common stock and warrants are likely to be
highly volatile and are likely to experience wide fluctuations in response to
factors including the following:

o actual or anticipated variations in our quarterly operating
results
o announcements of technological innovations or new services by
us or our competitors
o changes in financial estimates by securities analysts
o conditions or trends in the Internet or online commerce
industries
o changes in the economic performance or market valuations of
other Internet, online commerce or travel companies
o announcements by us or our competitors of significant
acquisitions, strategic partnerships, joint ventures or
capital commitments
o additions or departures of key personnel
o release of lock-up or other transfer restrictions on our
outstanding shares of common stock or sales of additional
shares of common stock
o potential litigation

The market prices of the securities of Internet-related and online
commerce companies have been especially volatile. Broad market and industry
factors may adversely affect the market price of our common stock and warrants,
regardless of our actual operating performance. In the past, following periods
of volatility in the market price of their stock, many companies have been the
subject of securities class action litigation. If we were sued in a securities
class action, it could result in substantial costs and a diversion of
management's attention and resources and would adversely affect our stock price.

THE COMPANY

We are a leading direct marketer of travel related services, focused
primarily on providing air transportation reservation services. We provide
low-priced airline tickets for domestic and international leisure travel to our
customers through our easy-to-remember, toll-free numbers and through our
website on the World Wide Web (at www.LowAirfare.com). We operate two
reservation centers, one in Tampa, Florida and the other in San Diego,
California seven days a week throughout the year.

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<PAGE> 16

We are currently in the process of integrating an Internet business
model with our existing model. The resulting business model will allow us to
focus on new business to business ("B2B") as well as business to consumer
("B2C") travel markets. We believe this strategy will diversify our future
revenues. Our new diversified strategy seeks to leverage Internet technologies
with our core competencies of low cost, call center operations and travel
industry expertise. This diversified strategy should lessen the current
dependency on air travel reservations and should help offset the anticipated
continued pressure on margins from airline commission reductions and other
competitive forces. To facilitate the changes needed to successfully complete
this new diversified Internet initiative with "brick and mortar", together
commonly called "click and mortar", we have started to recruit and reorganize
management talent, redesign the existing organization and pursue strategic
alliances and acquisitions. We anticipate our operating and marketing expenses
to increase as our growth strategy is executed.

The principal executive office of the Company is located at 4802 Gunn
Highway, Tampa, Florida 33624 and its telephone number is (813) 908-0404.

USE OF PROCEEDS

To date, few warrant holders have exercised their warrants, and we have
not received any indications that the remaining warrant holders wish to exercise
their warrants and there can be no assurance that warrant holders will choose to
exercise all or any of the warrants in the future. However, in the event that
all of the warrants were to be exercised, the net proceeds to us upon such
exercise, estimated at approximately $19,600,000, after deducting the 5% fee
payable to First London upon the exercise of the warrants (the "Solicitation
Fee") and other expenses of the offering, would be used for working capital to
finance our growth, salaries and general corporate purposes.

We intend, when and if the opportunity arises, to acquire other
businesses or products in the travel or telemarketing industries which are
compatible with our business or expertise, for the purpose of expanding our
business and product base. If such a business opportunity arises, we may use a
portion of our working capital for that purpose. We have no specific arrangement
with respect to any such acquisition at the present time, and it is uncertain as
to when or if any acquisition will be made.

Before we spend the net proceeds from the exercise of the warrants, we
will invest such proceeds in short-term interest bearing securities or money
market funds.

At such time that the Selling Security Holders exercise their warrants
and sell any common stock issuable thereunder pursuant to this Prospectus, or
that Mr. Mastrini sells any common stock pursuant to this Prospectus, Mr.
Mastrini and the Selling Security Holders will receive all of the proceeds from
such sales of common stock (although the Company will receive the warrant
exercise price that the Selling Security Holders shall pay to the Company in
order to receive common stock to be sold pursuant to this Prospectus).
Accordingly, the Company will not receive any of the proceeds from the sale of
common stock by Mr. Mastrini or the Selling Security Holders.

SELLING SECURITY HOLDERS

The Selling Security Holders may from time to time offer and sell
pursuant to this Prospectus any or all of such common stock so owned by them
upon exercise of their warrants. See "Plan of Distribution." Upon the closing of
the Company's initial public offering on January 21, 1998 and January 23, 1998,
the Company issued certain warrants to the Company's underwriters, First London
Securities Corporation ("First London") in connection with their Underwriting
Agreement with the Company. First London received 87,750 Common Stock
Representatives' Warrants and 175,500 Warrant Representatives' Warrants. First
London subsequently transferred 35,100 Common Stock Representatives' Warrants
and 70,200 Warrant Representatives' Warrants to Jesse Shelmire IV, one of its
principals. Each Common Stock Representatives' Warrant entitles the holder to
buy one share of common stock at $8.25 per share during the four-year period
beginning December 31, 1998. Each Warrant Representatives' Warrant entitles the
holder to buy one warrant for $.15625 (the "Underlying Warrant") during the
four-year period beginning December 31, 1998. Each Underlying Warrant entitles
the holder to buy one share of common stock at $7.8125 per share.

The common stock owned by Mr. Mastrini which has been included herein
as part of the Registered Shares was acquired by Mr. Mastrini as of January 2000
in connection with the second anniversary of his continued employment with the
Company. Mr. Mastrini may from time to time offer and sell pursuant to this
Prospectus any or

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<PAGE> 17

all of the 50,000 shares of common stock so owned by him which have been
included herein as part of the Registered Shares. See "Plan of Distribution."

The following table sets forth certain information with respect to the
beneficial ownership of the common stock by Mr. Mastrini and of the Common Stock
Representatives' Warrants and Warrants Representatives' Warrants by the Selling
Security Holders as of September 5, 2000, as reported to us by Mr. Mastrini and
the Selling Security Holders, the number of shares of common stock being offered
by Mr. Mastrini and the Selling Security Holders hereby and the amount and
percentage of the common stock to be owned beneficially by Mr. Mastrini and the
Selling Security Holders following this offering. Because the Selling Security
Holders may offer all or some portion of the common stock pursuant to this
Prospectus after they exercise their Common Stock Representatives' Warrants and
Warrant Representatives' Warrants, and because Mr. Mastrini may offer all or
some portion of the common stock pursuant to this Prospectus, no estimate can be
given as to the actual amount of the common stock that will be held by Mr.
Mastrini or the Selling Security Holders upon termination of any such sales.

With the exception of the previous relationship of Selling Security
Holders as underwriters to the Company in connection with its initial public
offering, which closed on January 21, 1998 and January 23, 1998, Mr. Mastrini's
position as Chief Executive Officer and Chief Operating Officer of the Company
since April 1998 and January 1996, respectively, and Mr. Mastrini's position as
a director of the Company, the Selling Security Holders and Mr. Mastrini do not
have, or within the past three years have not had, any relationship with the
Company or any of its predecessors of affiliates.

<TABLE>
<CAPTION>
Number of
Shares of
Warrants Beneficially Owned Common Stock
Selling Security Holders Prior to the Offering Offered (2)
------------------------ ------------------------------ -----------
Number Percent (1)(2)
------ --------------
<S> <C> <C> <C>
First London Securities Corporation 157,950 2.0% 157,950

Jesse Shelmire IV 105,300 1.3% 105,300
------- ------- -------

Total 263,250 3.3% 263,250
======= ======= =======
</TABLE>

--------------------
(1) Based upon 7,895,536 shares of common stock outstanding as of September
5, 2000.
(2) Assumes that all of the warrants held by the Selling Security Holders
are exercised and delivered to the Company.

<TABLE>
<CAPTION>
SHARES OF COMMON STOCK BENEFICIALLY SHARES OF COMMON STOCK BENEFICIALLY
OWNED PRIOR TO THE OFFERING OWNED AFTER THE OFFERING(4)
----------------------------------- -----------------------------------
SELLING SECURITY HOLDERS NUMBER PERCENT (2) NUMBER OFFERED NUMBER PERCENT(2)
------------------------ ------ ----------- -------------- ------ ----------
<S> <C> <C> <C> <C> <C>
Mark D. Mastrini 447,500(1) 5.7% 50,000(3) 397,500 5.0%

</TABLE>

------------------
(1) Includes 310,000 shares issuable upon exercise of options which are
currently exercisable at $5.00 per share and 7,500 shares issuable upon
exercise of options which are currently exercisable at $5.50 per share.
(2) Based upon 7,895,536 shares of common stock outstanding as of September
5, 2000.
(3) Represents the shares acquired by Mr. Mastrini as of January 2000 in
connection with the second anniversary of his continued employment with
the Company.
(4) Assuming all of the shares offered pursuant to this Registration
Statement and the Prospectus related thereto are sold by Mr. Mastrini.

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<PAGE> 18

PLAN OF DISTRIBUTION

The common stock offered hereby may be sold from time to time directly
by us to warrant holders that exercise their warrants and deliver such warrants
to us. Alternatively, the Company may from time to time offer the common stock
to or through First London and pay the Solicitation Fee. The common stock
offered hereby to the warrant holder may be sold from time to time in one or
more transactions at $6.25 per share pursuant to the terms of the warrants.

The Selling Security Holders, including donees and pledgees selling
shares received from any named Selling Security Holder after the date of this
Prospectus, may sell shares of common stock from time to time by means of this
Prospectus after exercise of their Common Stock Representatives' Warrants or
Warrant Representatives' Warrants and delivery of same to us. We will not
receive any proceeds from the sale of common stock pursuant to this Prospectus
by Mr. Mastrini or the Selling Security Holders (although the Company will
receive the warrant exercise price that the Selling Security Holders shall pay
to the Company in order to receive common stock to be sold pursuant to this
Prospectus). We have agreed to register the resale of 263,250 shares of our
common stock that the Selling Security Holders may obtain after exercise of
their Common Stock Representatives' Warrants or Warrant Representatives'
Warrants and delivery of same to us.

Mr. Mastrini may sell the common stock offered hereby by him from time
to time and the Selling Security Holders may offer the shares of common stock
from time to time after exercise of their Common Stock Representatives' Warrants
or Warrant Representatives' Warrants in one or more types of transactions (which
may include block transactions) in the open market, on the Nasdaq National
market, in privately negotiated transactions, through put or call options
transactions relating to the shares, through short sales of shares or in a
combination of these methods, at market prices that prevail at the time of sale
or at privately negotiated prices. Mr. Mastrini and the Selling Security Holders
may sell these shares through one or more brokers or dealers or directly to
purchasers. These broker-dealers may receive compensation in the form of
commissions, discounts or concessions from Mr. Mastrini and the Selling Security
Holders and/or purchasers of the shares for whom those broker-dealers may act as
agent, or to whom they may sell as principal, or both. Compensation as to a
particular broker-dealer may exceed customary commissions. Mr. Mastrini and the
Selling Security Holders and any broker-dealers who act in connection with the
sale of the shares under this Prospectus may be deemed to be "underwriters"
within the meaning of the Securities Act. Any commissions they receive and
proceeds of any sale of shares may be deemed to be underwriting discounts and
commissions under the Securities Act. Under Exchange Act rules and regulations,
no distribution participant or its affiliated purchasers (as defined in
Regulation M adopted under the Exchange Act) may simultaneously engage in market
making activities with respect to the shares for a restricted period beginning
on the day proxy solicitation or offering materials are first disseminated to
security holders and ending upon the completion of the distribution, except
under limited circumstances. Mr. Mastrini and the Selling Security Holders,
their affiliated purchasers and any other person participating in the
distribution will be subject to certain provisions of the Exchange Act and
related rules and regulations. These provisions prohibit, except under limited
circumstances, the purchase and sale of any of the shares by Mr. Mastrini or the
Selling Security Holders, their affiliated purchasers and any other person
participating in the distribution during the restricted period described above.
These restrictions may affect the marketability of the shares and the ability of
any person or entity to engage in market making activities with respect to the
shares.

From time to time, Mr. Mastrini or the Selling Security Holders may
pledge, hypothecate or grant a security interest in some or all of the shares of
our common stock they own. In the event of a foreclosure or event of default in
connection with those pledges, the shares may be transferred to the persons to
whom the shares were pledged. If such a transfer occurs, the transferees will be
deemed to have the rights of Mr. Mastrini or the Selling Security Holders under
this plan of distribution. At the same time, Mr. Mastrini or the Selling
Security Holders will beneficially own fewer shares. The plan of distribution
for Mr. Mastrini and the Selling Security Holders' shares will otherwise remain
unchanged.

We have agreed to pay all of the costs, expenses and fees incident to
the registration, offering and sale of the shares to the public other than
commissions or discounts of underwriters, broker-dealers or agents. We have
agreed to indemnify Mr. Mastrini and each Selling Security Holder against
certain liabilities, including certain liabilities under the Securities Act. Mr.
Mastrini and the Selling Security Holders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of the
shares against certain liabilities, including liabilities arising under the
Securities Act.

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In the event that we file a registration statement under the Securities
Act of an underwritten offering of our common stock, we may restrict the ability
of Mr. Mastrini or the Selling Security Holders to effect a public sale of the
shares of common stock being offered by means of this Prospectus during the ten
business days before, and the 45-day period beginning on the effective date of
the registration statement, so long as Mr. Mastrini and the Selling Security
Holders are given an opportunity to participate in the underwritten offering.

The Selling Security Holders also may resell all or a portion of the
shares in open market transactions in reliance upon Rule 144 under the
Securities Act, provided they meet the criteria and conform to the requirements
of such Rule. Mr. Mastrini shall no longer be entitled to sell Registered Shares
under this Prospectus once the sale of any such shares may be made by him under
Rule 144.

LEGAL MATTERS

Certain legal matters in connection with the sale of the shares of
common stock offered hereby will be passed upon by Shumaker, Loop & Kendrick,
LLP, Tampa Florida.

EXPERTS

The consolidated financial statements of 800 Travel Systems, Inc. at
December 31, 1998 and 1999 and for each of the two years in the period ended
December 31, 1999, appearing in the Company's Form 10-KSB dated March 30, 2000,
have been audited by Grant Thornton LLP, independent certified public
accountants, as set forth in their report thereon included therein and
incorporated herein by reference.

Such financial statements have been incorporated herein by reference in
reliance upon such reports given upon the authority of such firms as experts in
accounting and auditing.

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WE HAVE NOT AUTHORIZED ANY DEALER, SALES REPRESENTATIVE OR
OTHER PERSON TO TELL YOU ANYTHING ABOUT US THAT IS NOT
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. IF
ANYBODY PRETENDS TO GIVE YOU ANY OTHER INFORMATION ABOUT US, 3,633,050 Shares
YOU SHOULD NOT RELY ON IT. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER OF ANY SECURITIES OTHER THAN THOSE DESCRIBED IN IT.
IT ALSO DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITY TO ANY PERSON IN
ANY PLACE WHERE SUCH OFFER OR SOLICITATION WOULD BE ILLEGAL.
YOU SHOULD BE AWARE THAT EVEN IF A COPY OF THIS PROSPECTUS IS
DELIVERED TO YOU OR YOU BUY SECURITIES THAT IT OFFERS, YOU 800 TRAVEL SYSTEMS, INC.
CAN'T BE SURE THAT ALL OF THE INFORMATION IN THIS PROSPECTUS
IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE, EXCEPT TO
THE EXTENT OF INFORMATION CONTAINED IN LATER REPORTS FILED BY
US THAT ARE INCORPORATED IN THIS PROSPECTUS BY REFERENCE.

Common Stock

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PROSPECTUS

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TABLE OF CONTENTS
PAGE
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Available Information..............................2
Incorporation of Certain Documents by Reference....2
Prospectus Summary.................................4
Risk Factors.......................................5
The Company.......................................15
Use of Proceeds...................................16
Plan of Distribution..............................18
Legal Matters.....................................19
Experts...........................................19

September 15, 2000

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