<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
Registration No. 333-28237
PROSPECTUS
800 TRAVEL SYSTEMS, INC.
3,319,800 shares of common stock issuable under 3,319,800 redeemable
common stock purchase warrants
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 July 31, 2000, the
closing bid prices of the common stock and warrants were $1.50 and $0.50,
respectively.
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 4 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 August 1, 2000
1
<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 December 1, 1999.
3. The Company's Definitive Proxy Statement relating to the
Annual Meeting of Shareholders to be held on July 10, 2000.
4. The Company's quarterly Report on Form 10-Q for the
quarter ended March 31, 2000.
5. 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 and
the Company's Form 8-K dated July 5, 2000, relating to the issuance by
the Company of press releases announcing a marketing alliance, the
appointment of certain officers and the appointment of two new
directors.
6. 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.
2
<PAGE> 3
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.]
3
<PAGE> 4
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; and (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, 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 expect to initiate 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:
4
<PAGE> 5
- attract additional travel suppliers and consumers to our
service
- maintain and enhance our brand
- expand our service offerings
- operate, expand and develop our operations and systems
efficiently
- maintain adequate control of our expenses
- raise additional capital
- attract and retain qualified personnel
- respond to technological changes
- respond to competitive market conditions
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 travel agents from approximately 8% to 5% and subject
to a cap of $50.00 for domestic round trip ticket sales. In addition, at least
one airline has 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.
RISKS RELATING TO THE AIRLINE INDUSTRY
Developments in the airline industry may result in a decrease in the
price or number of tickets we sell. 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
5
<PAGE> 6
expected, or if our services do not achieve widespread market acceptance, our
business will 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
(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.
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.
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. 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.
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 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 not subject to noncompetition
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 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
6
<PAGE> 7
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.
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 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.
Any reduction in performance, disruption in the Internet access or
discontinuation of services provided by our Internet service provider, GTE 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.
7
<PAGE> 8
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; (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 (vii) 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:
- price escalation in the airline industry or other
travel-related industries
- increased occurrence of travel-related accidents
- airline or other travel-related strikes
- political instability
- regional hostilities and terrorism
- bad weather
8
<PAGE> 9
RISKS RELATED TO THE INTERNET INDUSTRY
OUR BUSINESS WILL SUFFER IF WE FAIL TO ADAPT TO EVOLVING STANDARDS AND
TECHNOLOGIES.
The standards and technologies that make up the Internet will evolve
and change over time. We must adapt our services to maintain compatibility in
the future to assure that we can continue to deliver high quality services on
the Web. We may expend significant amounts of our capital to maintain and adapt
our Web services without achieving any benefit in return. Our inability to
deliver high quality services would lead to a decline in the demand for our
services.
THIRD PARTY BREACHES OF DATABASE SECURITY COULD DISRUPT OUR OPERATIONS AND
INCREASE OUR CAPITAL EXPENDITURES.
A party who is able to circumvent our security measures could
misappropriate proprietary database information or cause interruptions in our
operations. As a result we may be required to expend significant capital and
other resources to protect against such security breaches or to alleviate
problems caused by such breaches, which could harm our business.
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 person 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. 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.
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. We cannot assure you that the number of
Internet users will continue to grow 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 (vi) uncertainty
regarding intellectual property ownership.
We cannot assure you that the Internet will support increasing use or
will prove to be a viable commercial marketplace.
9
<PAGE> 10
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 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 other web sites.
Defending against any such claims could be costly and divert 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
incur losses and negative cash flow. In such event it is likely that we would
require additional capital. 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, 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 to a large
extent fixed. 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
fund increased sales and marketing or to develop our technology and transaction
processing systems, and such expenses are not subsequently followed by increased
revenues, our operating results may deteriorate.
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 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 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
10
<PAGE> 11
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:
- actual or anticipated variations in our quarterly operating
results
- announcements of technological innovations or new services by
us or our competitors
- changes in financial estimates by securities analysts
- conditions or trends in the Internet or online commerce
industries
- changes in the economic performance or market valuations of
other Internet, online commerce or travel companies
- announcements by us or our competitors of significant
acquisitions, strategic partnerships, joint ventures or
capital commitments
- additions or departures of key personnel
- release of lock-up or other transfer restrictions on our
outstanding shares of common stock or sales of additional
shares of common stock
- 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.
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.
11
<PAGE> 12
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, and First London Securities
Corporation solicits the exercise of all such warrants, 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.
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 together with notification of exercise. 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.
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. and
Subsidiaries 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.
12
<PAGE> 13
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF
COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information ..................................................... 2
Incorporation of Certain Documents by Reference ........................... 2
Risk Factors .............................................................. 4
The Company ............................................................... 11
Use of Proceeds ........................................................... 12
Plan of Distribution ...................................................... 12
Legal Matters ............................................................. 12
Experts ................................................................... 12
</TABLE>
3,319,800 Shares
800 TRAVEL SYSTEMS, INC.
Common Stock
---------------
PROSPECTUS
---------------
August 1, 2000
