U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission File No. 0-25357
TRAVELNOW.COM INC.
(Name of Small Business Issuer in Its Charter)
Florida 59-3391244
------- ----------
(State of Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
318 Park Central East, Suite 306, Springfield, MO 65806
-------------------------------------------------------
(Address of Principal Executive Offices)(Zip Code)
(417) 864-3600
--------------
(Issuer's Telephone Number, Including Area Code)
SENTRY ACCOUNTING, INC.
321 N. Kentucky Avenue, Suite 1, Lakeland, FL 33801,
December 31 _________________________________
(Former name, former address and former fiscal year,
if changed since last year.)
Check whether the registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
State the number of shares outstanding of each of the registrant's classes of
common equity, as of the latest practicable date: As of October 31, 1999
TravelNow.com Inc. had 10,324,304 shares of common stock outstanding, no par
value.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TRAVELNOW.COM INC.
STATEMENTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
Three Months Ended Six Months Ended
September 30 September 30
-------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total Revenues $ 1,023,452 $ 252,471 $ 1,404,901 $ 408,172
Cost of Revenues 511,120 115,143 795,334 165,570
----------- ----------- ----------- -----------
Gross Profit 512,332 137,328 609,567 242,602
----------- ----------- ----------- -----------
Operating Expenses
Sales and Marketing 34,647 1,505 64,166 7,740
General and Administrative 431,298 61,970 596,165 105,279
Stock-Based Compensation 0 0 650,000 0
----------- ----------- ----------- -----------
Total Operating Expenses 465,945 63,475 1,310,331 113,019
----------- ----------- ----------- -----------
Income/(Loss) Before Taxes 46,387 73,853 (700,764) 129,583
Provision for Income Taxes 0 0 0 0
----------- ----------- ----------- -----------
Net Income/(Loss) $ 46,387 $ 73,853 ($ 700,764) $ 129,583
=========== =========== =========== ===========
Average Number of Shares
Of Common Stock Outstanding 9,465,052 6,009,518 8,171,543 6,009,518
Net Income/(Loss) Per Share
Basic $ 0.005 $ 0.012 ($ 0.086) $ 0.022
Diluted $ 0.005 $ 0.012 ($ 0.086) $ 0.022
As a Percent of Total Revenues
- ----------------------------------
Total Revenues 100.0% 100.0% 100.0% 100.0%
Cost of Revenues 50.0% 45.6% 56.6% 40.6%
----------- ----------- ----------- -----------
Gross Profit 50.0% 54.4% 43.4% 59.4%
----------- ----------- ----------- -----------
Operating Expenses
Sales and Marketing 3.4% 0.6% 4.6% 1.9%
General and Administrative 42.1% 24.5% 42.4% 25.8%
Stock-Based Compensation 0.0% 0.0% 46.3% 0.0%
----------- ----------- ----------- -----------
Total Operating Expenses 45.5% 25.1% 93.3% 27.7%
----------- ----------- ----------- -----------
Income/(Loss) Before Taxes 4.5% 29.3% (49.9%) 31.7%
Provision for Income Taxes 0.0% 0.0% 0.0% 0.0%
----------- ----------- ----------- -----------
Net Income/(Loss) 4.5% 29.3% (49.9%) 31.7%
=========== =========== =========== ===========
See notes to the financial statements.
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TRAVELNOW.COM INC.
BALANCE SHEETS
SEPTEMBER 30, JUNE 30 AND MARCH 31, 1999
Unaudited
--------------------------
ASSETS 9/30/99 6/30/99 3/31/99
- ---------------------------------- ----------- ----------- -----------
Cash and Cash Equivalents $ 234,473 $ 51,314 $ 6,227
Accounts Receivable 462,522 173,494 106,562
----------- ----------- -----------
Current Assets 696,995 224,808 112,789
Property and Equipment - Net 90,602 54,281 46,345
Construction In Process - Software 164,455 0 0
Investment - Nippon TravelNow, K.K 42,468 0 0
----------- ----------- -----------
Total Assets $ 994,520 $ 279,089 $ 159,134
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY/(DEFICIT)
- ----------------------------------
Accounts Payable $ 468,928 $ 100,151 $ 83,066
Accrued Liabilities 113,257 51,152 44,596
Notes Payable - Current Portion 0 55,838 58,538
Notes Payable to Stockholders 0 6,000 10,000
----------- ----------- -----------
Current Liabilities 582,185 213,141 196,200
Notes Payable Less Current Portion 0 0 0
----------- ----------- -----------
Total Liabilities 582,185 213,141 196,200
----------- ----------- -----------
Common Stock 0 29,068 22,550
Additional Paid-In Capital 1,430,416 1,101,348 257,701
Accumulated Deficit (1,018,081) (1,064,468) (317,317)
----------- ----------- -----------
Stockholders' Equity/(Deficit) 412,335 65,948 (37,066)
----------- ----------- -----------
Total Liabilities and Equity $ 994,520 $ 279,089 $ 159,134
=========== =========== ===========
See notes to the financial statements.
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TRAVELNOW.COM INC.
STATEMENTS OF STOCKHOLDERS' EQUITY/(DEFICIT)
YEARS ENDED MARCH 31, 1998 AND 1999 AND THE
THREE MONTHS ENDED JUNE 30 AND SEPTEMBER 30, 1999
COMMON STOCK ADDITIONAL
------------------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES* AMOUNT CAPITAL DEFICIT EQUITY/(DEFICIT)
----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE - MARCH 31, 1997 5,476,523 $ 20,550 $ 251,591 ($ 315,722) ($ 43,581)
Net Loss 0 0 0 (29,079) (29,079)
Stock Issued For Services 532,995 2,000 6,110 0 8,110
----------- ----------- ----------- ----------- -----------
BALANCE - MARCH 31, 1998 6,009,518 22,550 257,701 (344,801) (64,550)
Net Income 0 0 0 27,484 27,484
----------- ----------- ----------- ----------- -----------
BALANCE - MARCH 31, 1999 6,009,518 22,550 257,701 (317,317) (37,066)
Net Loss 0 0 0 (747,151) (747,151)
Capital Contributions 0 0 199,985 0 199,985
Stock Bonus 1,732,233 6,500 643,500 0 650,000
Stock Issued 4,797 18 162 0 180
----------- ----------- ----------- ----------- -----------
BALANCE - JUNE 30, 1999 7,746,548 29,068 1,101,348 (1,064,468) 65,948
Net Income 0 0 0 46,387 46,387
Capital Contributions 0 0 300,000 0 300,000
Acquisition by Sentry Accounting, Inc. 0 (29,068) 29,068 0 0
Merger Into Sentry Accounting, Inc. 2,577,756 0 0 0 0
----------- ----------- ----------- ----------- -----------
BALANCE - SEPTEMBER 30, 1999 10,324,304 $ 0 $ 1,430,416 ($1,018,081) $ 412,335
=========== =========== =========== =========== ===========
*Restatement of Common Shares Outstanding
- ---------------------------------------------------------------------
All share data restated for (1) a 50:1 stock dividend on May 25, 1999, (2) the acquisition by Sentry Accounting, Inc.,
one share of Sentry for each 1.97 shares of TravelNow stock outstanding, on July 27, 1999, and (3) a 4.25 to 1.0 stock
dividend on July 28, 1999.
See notes to the financial statements.
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TRAVELNOW.COM INC.
STATEMENTS OF CASH FLOWS
SIX MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
SIX MONTH PERIODS ENDED
SEPTEMBER 30
----------------------
1999 1998
--------- ---------
OPERATING ACTIVITIES:
<S> <C> <C>
Net Income/(Loss) ($700,764) $ 129,583
Adjustments to reconcile net income/(loss) to
net cash provided by/(used in) operating activities:
Stock-based compensation 650,000 0
Depreciation and amortization 9,472 9,958
Loss on disposal of property and equipment 0 0
Changes in operating assets and liabilities:
Accounts receivable (355,960) (76,089)
Accounts payable 249,652 (9,565)
Accrued liabilities 68,661 (6,767)
--------- ---------
Net Cash Provided By/(Used In) Operating Activities (78,939) 47,120
--------- ---------
INVESTING ACTIVITIES:
Acquisition of property and equipment (53,729) (4,830)
Software Construction in Process (28,245) 0
Investment in Nippon TravelNow, K.K (42,468) 0
--------- ---------
Net Cash Used In Investing Activities (124,442) (4,830)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from capital contributions 499,985 0
Proceeds from sale of stock 180 0
Proceeds from notes payable to stockholders 0 0
Repayments of notes payable to stockholders (10,000) (8,000)
Proceeds from notes payable 0 10,000
Repayments of notes payable (58,538) (14,500)
--------- ---------
Net Cash Provided By/(Used In) Financing Activities 431,627 (12,500)
--------- ---------
Net Increase In Cash and Cash Equivalents 228,246 29,790
CASH AND CASH EQUIVALENTS:
Beginning of Period 6,227 3,849
--------- ---------
End of Period $ 234,473 $ 33,639
========= =========
NON-CASH TRANSACTIONS:
Acquisition of Software in Accounts Payable $ 136,210 $ 0
========= =========
See notes to the financial statements
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TRAVELNOW.COM INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying condensed financial statements are unaudited, but in the
opinion of management, reflect all adjustments which are necessary for a
fair presentation of the Company's operating results for the periods shown.
These statements should be read in conjunction with the Company's Form
10-KSB filed with the SEC on October 12, 1999.
The Company's revenues are comprised principally of commissions paid by
travel suppliers related to the online booking of travel reservations for
the Company's customers. Commissions earned are recognized for hotel
bookings as of the customer's departure date, for car rentals as of the
return date, and for airline tickets as of the reservation date, all net of
allowances for cancellations and credit risk. Revenues for advertisements
on the Company's Web site are recognized during the period the
advertisements are displayed.
Cost of revenues includes the expenses of operating the Company's travel
reservation systems, Web site and customer service operations. It also
includes commission sharing payments to affiliated Web sites that generate
customer reservations through the use of the TravelNow reservation systems.
Facilities expense and other indirect items related to the generation of
revenue are included in general and administrative expense.
2. Merger with Sentry Accounting, Inc.
Pursuant to an Agreement and Plan of Reorganization consummated on July 23,
1999 between TravelNow.com Inc., a Missouri corporation ("TravelNow of
Missouri"), and Sentry Accounting, Inc., a Florida corporation ("Old
Sentry"), Old Sentry acquired 100% of the issued and outstanding stock of
TravelNow of Missouri for 1,475,533 shares of restricted common stock of
Old Sentry. The stock exchange ratio was one share of Old Sentry stock for
each 1.97 shares of TravelNow of Missouri stock outstanding.
The acquisition became effective as of July 27, 1999 and TravelNow of
Missouri was merged into Old Sentry as of that date. Old Sentry then
changed its name to TravelNow.com Inc.
At the time of the merger, 491,000 shares of Old Sentry common stock were
freely transferable or unrestricted and held by Old Sentry shareholders.
The total shares outstanding at that point were 1,966,533. On July 28,
1999, the Company issued a stock dividend of approximately 4.25 shares for
each share outstanding, increasing the total shares from 1,966,533 to
10,324,304 shares issued and outstanding.
Since the former shareholders of TravelNow of Missouri received
approximately 75% of the common shares of the combined entity, TravelNow of
Missouri is considered the "acquiring" corporation from an accounting
standpoint and for SEC reporting purposes. TravelNow's March 31 fiscal
year-end was adopted for the combined company.
3. Restatement of Common Shares Outstanding
The number of common stock shares outstanding for all periods has been
restated on an equivalent basis. The restatement includes: (1) TravelNow of
Missouri's 50:1 stock dividend on May 25, 1999, (2) the acquisition of
TravelNow of Missouri by Old Sentry with a stock exchange ratio of one Old
Sentry share for each 1.97 TravelNow shares, and (3) the 4.25 to 1.0 stock
dividend on July 28, 1999. The common stock outstanding has no par value.
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4. Capital Contributions
Pursuant to the acquisition of TravelNow of Missouri by Old Sentry, certain
stockholders of Old Sentry agreed to make capital contributions to the
Company of approximately $500,000. During the period from April 1999
through August 1999, such contributions were received in the total amount
of $499,985.
5. Capitalization of Software Development Costs
The American Institute of Certified Public Accountants issued Statement of
Position, or SOP, No. 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use, which requires that certain direct
costs associated with such software be capitalized and amortized over an
appropriate time period. Prior to the effective date of SOP 98-1 and the
beginning of its current fiscal year on April 1, 1999, the Company expensed
all costs of computer software developed or acquired for internal use.
During August 1999, the Company began the development of a second
generation proprietary software platform for its online reservations
systems. The total cost of this new system is expected to be approximately
$500,000, including the direct costs of Company personnel devoted to the
project, outside consulting fees and purchased software. Through September
30, 1999, the Company has incurred and capitalized $164,455 related to the
new system. Of this total, $136,210 represented consulting fees and $28,245
represented internal personnel costs.
6. Investment in Nippon TravelNow, K.K.
TravelNow has an ongoing affiliation with a Japanese company, Nippon
TravelNow, K.K., which provides travel reservation services through the
Internet to customers primarily in Japan and Asia. In September 1999,
TravelNow invested $42,468 in Nippon TravelNow, K.K. for a 49.0% interest
in the company. This investment will be treated on the equity method, but
the company's operations subsequent to the date of the investment were not
significant to TravelNow's financial position for the periods reported
herein.
7. Stock Options and Common Stock-Based Compensation
During the three month period ended September 30, 1999, the Company granted
options on 530,000 shares of TravelNow common stock to employees. The
options have exercise prices ranging from $1.50 per share to $65.00 per
share and exercise dates from July 2000 to August 2004 for 500,000 of the
shares and September 2000 to September 2006 for 30,000 shares.
The Company accounts for stock options on an intrinsic value basis under
the provisions of Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees. Accordingly, no stock-based
compensation costs related to stock options have been recognized in the
Company's financial statements because the stock options had no intrinsic
value at the dates of the grants.
The Company also complies with the disclosure provisions of the Financial
Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation. Under
the fair value based method provisions of SFAS No. 123, the value of the
530,000 stock options is estimated to be $1,134,372, of which $56,984 would
be amortized during the three months ended September 30, 1999. Net income
would be reduced by the same amount and earnings per share for the three
and six months ended September 30, 1999 would be reduced by $0.006 and
$0.007, respectively. The amortized costs associated with each of the two
remaining quarters of fiscal year 2000 ending on March 31, 2000 would be
$170,951 under the provisions of SFAS No. 123.
Separately, on May 18, 1999, the Company granted stock bonuses to certain
employees. Compensation expense of $650,000 was recognized in the Company's
statement of operations for the three month period ended June 30, 1999 and
is included in the statement of operations herein for the six month period
ended September 30, 1999. These bonuses were initially reported in the
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Company's Form 10-KSB filed on October 12, 1999 as 650,000 shares of common
stock, restated for events through June 30, 1999. Subsequent to the merger
with Old Sentry and the 4.25 to 1.0 stock dividend described above, the
bonuses represent 1,732,233 shares of the 10,324,304 TravelNow common
shares currently outstanding.
8. Income Taxes
No provision for income taxes has been recorded in the Company's financial
statements. The Company has predominantly incurred net losses since
inception and has to date not received a tax benefit for such losses. In
the opinion of management, the realizability of the Company's deferred tax
assets is sufficiently uncertain that a full valuation allowance has been
recorded.
9. Derivative Instruments and Hedging Activities
The Company is in the process of evaluating the effect, if any, that
Statement of Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS No. 133"), will have on its
financial position and results of operations.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction with (1) the
Company's financial statements and the notes to the statements contained herein,
and (2) the Company's Form 10-KSB filed with the SEC on October 12, 1999.
Introduction
TravelNow.com Inc. is an Internet-based travel services company which provides
online travel information and reservations to its customers on a worldwide
basis. The Company's Web site (www.travelnow.com) gives customers real-time
access to hotel, car and airline information regarding schedules, availability
and rates and enables the booking of reservations on an automated basis. In
addition to its reservation and ticketing services, the Company offers
discounted and promotional fares, travel news and destination information such
as maps and weather forecasts.
TravelNow customers connect to the Company's Web site either directly or through
links with affiliated Web sites. Commissions generated from reservations booked
by customers that connect to TravelNow through an affiliated Web site are shared
with that affiliate.
Results of Operations and Comparison of Operating Results
TravelNow's total revenues for the three months ended September 30, 1999
exceeded $1.0 million, which is four times the $252,471 of revenues in the
comparable quarter of the prior year and exceeds the $886,172 of revenues
reported for the entire fiscal year ended March 31, 1999. Net income for the
September 1999 quarter was $46,387 versus $73,853 in the same quarter of the
prior year.
During the six months ended September 30, 1999, total revenues were $1.4
million, representing 3.4 times the $408,172 revenues in the comparable period
of 1998. The Company sustained a net loss in the 1999 six month period of
$700,764 due principally to a $650,000 non-cash charge for stock-based
compensation related to employee stock bonuses paid on May 18, 1999. In the
comparable six month period of 1998, net income was $129,583.
Net income for the 1999 six month period exclusive of the $650,000 non-cash
charge was a loss of $50,764, all of which was sustained in the initial three
months of the period. This loss was substantially due to the Company's decision
to structure its operations and staff to accommodate significantly higher levels
of customer activity and travel reservations. Total revenues grew from $381,449
in the quarter ended June 30, 1999 to the $1.0 million level in the following
quarter ended September 30, 1999.
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Revenues. TravelNow's principal source of revenue is commissions related to
hotel bookings. The level of confirmed hotel bookings has increased from an
average of approximately 1,300 per week during the quarter ended September 30,
1998 to an average of approximately 5,300 per week during the quarter ended
September 30, 1999. Much of this revenue growth is attributable to the expansion
of the Company's affiliate program through which affiliated Web sites are
dynamically linked to TravelNow's reservation systems.
In January 1999, the Company implemented its own car reservations system on the
TravelNow Web site and began providing links to this system for its affiliates.
Car reservations have grown progressively during 1999 to an average of
approximately 1,200 confirmed reservations per week during the month of
September. Historically, the Company has outsourced its airline reservations to
another company and commissions from airline bookings have not been a
significant portion of total revenues. The Company has recently introduced its
own airline system on selected Web sites. This system is expected to increase
the Company's revenues in the future, but did not contribute significantly to
the periods reported through September 30, 1999.
Cost of Revenues. The Company's cost of revenues as a percent of revenues
increased from 45.6% to 50.0% in the three months ended September 30, 1998 and
1999, respectively. This percentage was 56.6% for the six months ended September
30, 1999 and 40.6% in the comparable period of the prior year.
These changes in the Company's cost structure are due to two factors. First, the
mix of business has been shifted by the rapid growth of bookings from affiliated
Web sites as the Company's affiliate program expands the number of affiliates. A
higher commission payment structure was instituted as part of this process.
Second, the Company significantly expanded its personnel and other
infrastructure costs to support the requirements of anticipated revenue growth.
In particular, personnel were added to the software development and customer
service staffs. Taken together, the shift in the mix of business and the
expansion of the cost structure increased the cost of revenues to 74.5% of
revenues in the quarter ended June 30, 1999. This ratio declined to the 50.0%
level of the September 1999 quarter as the anticipated growth in revenues was
realized.
Sales and Marketing Expenses. Sales and marketing expenses include personnel and
other costs associated with developing and managing the Company's affiliate
program as well as direct advertising expenditures. The higher level of these
expenses reflects an expansion of activity in support of the affiliate program.
General and Administrative Expenses. The increases in general and administrative
expense, both on an absolute and a percent of revenue basis, in the three and
six months periods ended September 30, 1999 relative to the comparable periods
of the prior year are due to two primary factors: (1) expansion of staff and
other activities to support the Company's growth, and (2) professional fees
associated with becoming a public company. The level of professional fees is
anticipated to be lower in the remaining two quarters of the current fiscal year
ending March 31, 2000.
Liquidity and Capital Resources
In conjunction with the merger of TravelNow of Missouri and Old Sentry which was
completed in July 1999, TravelNow received capital contributions from certain
shareholders of Old Sentry totaling approximately $500,000. Of this amount,
approximately $200,000 was received in the quarter ended June 30, 1999 and the
remaining $300,000 was received in July and August 1999.
As a result of these capital contributions, the Company's stockholders' equity
increased from a deficit of $37,066 on March 31, 1999 to $412,335 as of
September 30, 1999. The Company's working capital position has also strengthened
during this six month time period. Working capital (current assets less current
liabilities) was a negative $83,411 on March 31, 1999 and was a positive
$114,810 on September 30, 1999. All of the Company's notes payable, which
totaled $68,538 at March 31, 1999, have been repaid.
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Even though the Company had a net loss of $700,764 during the six months ended
September 30, 1999, net cash used in operating activities was only $78,939. All
but $50,764 of the loss was due to the $650,000 non-cash charge for stock-based
compensation.
Cash used in investing activities was $124,442, which was applied to the
acquisition of fixed assets, software development and an investment in an
affiliated Japanese company, Nippon TravelNow, K.K., for a 49% interest in that
organization. Net cash provided by financing activities was $431,627, primarily
from $499,985 in proceeds from capital contributions. Cash and cash equivalents
increased by $228,246 to $234,473 during the six month period.
In conjunction with the development of a new software platform for its online
reservations systems, the Company engaged a consulting firm to provide
programming support. As of September 30, 1999, the Company's account payable to
this consulting organization was $136,210. Since this amount had been booked as
a capital item, it was treated as a non-cash transaction on the statement of
cash flow.
Subsequent Events and Commitments
The Company is in the process of selling 25,000 new restricted shares of its
common stock to an institutional investor for $250,000. Completion of the sale
is expected by November 26, 1999.
The Company entered into a consulting agreement for computer programming
services related to software development. Depending on the ultimate scope of the
project, this contract will range in cost from $300,000 to $350,000. As of
September 30, 1999, the Company has incurred a liability for $136,210 of such
services. In addition, outside purchases of application software related to this
project are expected to total $90,000.
A national chain of hotels and motels in the United States reduced the
commissions it will pay to online travel reservation companies from 10% to 5%
effective November 1, 1999. TravelNow has in the past listed the room
availability and rates of this chain on its Web site and has booked reservations
for TravelNow customers at various locations of the chain. As a result, the
chain has been a significant source of revenue for TravelNow. Because of the
chain's reduction in commission rates for online service organizations,
TravelNow has removed the chain's listings from the TravelNow Web site. The
Company believes that its customers will book reservations at other hotels and
motels and, consequently, the commission policy change will not have a
substantial effect on TravelNow's business, operating results or financial
condition.
From a cash flow standpoint, the management of TravelNow believes that actual
and anticipated levels of operating revenues in combination with its current
cash resources are sufficient to meet the Company's near-term cash requirements.
If such levels of operating revenues are not realized, the Company's operating
results and liquidity could be adversely affected. In the future, the Company
could determine that additional financing is required to fund the growth of its
operations. There is no assurance that such capital would be available to the
Company in sufficient amounts or on terms acceptable to the Company. The Company
does not have any specific plans to raise additional capital as of the date of
this filing other than the sale of stock noted above.
Year 2000
The Year 2000, or "Y2K," issue relates to computer systems which read and
process calendar dates as part of their functionality and might not properly
interpret the year "2000." This problem can occur because historically many
computer programs were designed to use two-digit fields to store and recognize
years. As a result, the date 01/01/00 would be read by such programs as January
1, 1900 instead of January 1, 2000.
TravelNow has undertaken a thorough process to identify, correct and test
potential Y2K problems in the software systems used within the company. The
Company believes that potential Y2K problems in its mission critical systems
which support Web-based travel reservation services have been identified,
corrected and tested. Additional testing and ongoing compliance monitoring is in
progress. Reservations for travel services in the year 2000 are currently being
handled by the Company's systems.
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The status of the Company's Y2K process by its principal phases is as follows:
(1) Identification - Complete; (2) Inventory - Complete, (3) Readiness Projects:
(a) Majority of Mission Critical Projects - Complete, (b) Non-Mission Critical
Projects - Complete, and (4) Testing and Monitoring - In Progress.
TravelNow's Year 2000 program costs have not and are not expected to have a
material effect on the Company's operating results or financial condition. The
Company has maintained normal operating conditions of its systems and no
critical software development programs have been deferred due to Year 2000
projects.
The Company's development of a new software platform for its reservation systems
is scheduled for completion by year-end 1999. An independent third party
consulting organization will be involved to test this new platform and verify
Y2K compliance throughout the development process. The implementation of the new
platform will provide the Company with two separate reservation systems as a
contingency plan for Y2K issues.
The Company's internal computer systems interface with the external computer
systems of various travel suppliers and global distribution services. Several
interoperability tests with these external systems have been successfully
conducted. However, all such systems have not been tested for potential Y2K
interface problems with TravelNow's software systems. The Company does not have
the resources to assess all potential problems associated with the risk of
failure by third party suppliers. The Company' contingency plan is to use as
many third party suppliers as possible to limit the risk of one supplier not
being Year 2000 compliant. The failure of any of TravelNow's computer systems or
of the systems with which TravelNow interfaces to properly handle Year 2000 and
related issues could have a materially adverse effect on the Company's business,
its operating results and financial condition.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Registrant is not a party to any legal action.
Item 2. Changes in Securities and Use of Proceeds
The material set forth in Registrant's 10-QSB for the quarter ended June
30, 1999 is responsive to this Item No. 2 and is incorporated herein by
this reference.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of Security Holders of Registrant
during the period covered by this report.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) On August 11, 1999 the Registrant filed Form 8-K
(b) On August 11, 1999 the Registrant filed Form 8-KA(1)
(c) On August 13, 1999 the Registrant filed Form 8-KA(2)
(d) On October 12, 1999 the Registrant filed Form 8-KA(3) which
incorporated by reference the Registrant's Form 10-KSB filed on
October 12, 1999
(f) On November 5, 1999 the Registrant filed Form 8-K
Exhibit Index
Exhibit
Number Document Name and Location
------ --------------------------
2.0 Plan of acquisition, reorganization, arrangement,
liquidation or succession
2.1(b) Agreement and Plan of Reorganization by and between Sentry
Accounting, Inc., and TravelNow.com Inc. dated July 23, 1999
incorporated by reference to Exhibit 2.01 to Form 8-K dated
August 11, 1999
3.0 Articles and Bylaws
3.1(a) Articles of Incorporation filed June 27, 1996.
3.2(a) Articles of Amendment to Articles of Incorporation filed
November 25, 1996.
3.3(b) Articles of Amendment to Articles of Incorporation filed
July 27, 1996.
3.4(a) Bylaws of Registrant as in effect on August 13, 1999.
12
<PAGE>
3.5(e) Amendment to Bylaws of Registrant.
4 Instruments defining the rights of security holders
including indentures
4.1(e) Form of the Company's common stock certificate
10 Material Contracts
10.1(e) Employment Agreement between the Company and John
Christopher Noble.
10.2(e) Employment Agreement between the Company and Jeffery Alan
Wasson.
10.3(e) Employment Agreement between the Company and Christopher
Kuhn.
10.4(e) Employment Agreement between the Company and Whit Ehrler.
10.5(e) Stock Option Agreement between the Company and Christopher
Kuhn.
10.6(e) Stock Option Agreement between the Company and Whit Ehrler.
10.7(e) Stock Option Agreement between the Company and Craig
Dayberry.
10.8(e) Employment Agreement between a former employee of the
Company and the Company effective March 31, 1998, contract
ending on September 30, 1998.
10.9(e) Subscription Agreement between SABRE Inc. and the Company.
10.10(e) ULTRADIRECT Interface Agreement with the Company.
10.11(e) MCI/Worldcom Flex TI Internet Agreement with the Company.
10.12(e) Telecommunications Service Agreement between City Utilities
of Springfield, Springfield, Missouri and the Company.
10.13(e) The McDaniel Building Lease Agreement between the Company as
Lessee and Warren Davis Properties II, L.L.C., Lessor and
Addendum thereto.
16 Letter on Change in Certifying Accountants.
16.1(d) Letter regarding change in Certifying Accountant.
- ----------
(a) Filed as an exhibit to Report on Form 10-SBA dated May 18, 1999.
(b) Filed as an exhibit to Report on Form 8-K dated August 6, 1999.
(c) Filed as an exhibit to Report on Form 10-QSB dated August 16, 1999.
(d) Filed as an exhibit to Report on Form 8-KA dated August 13, 1999.
(e) Filed as an exhibit to Report on Form 10-KSB dated October 12, 1999.
13
<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 12, 1999
TRAVELNOW.COM INC.
By: /s/ Jeff Wasson
-------------------------------
Jeff Wasson
Co-Chief Executive Officer
By: /s/ John Christopher Noble
-------------------------------
John Christopher Noble
Co-Chief Executive Officer
By: /s/ H. Whit Ehrler
-------------------------------
H. Whit Ehrler
Chief Financial Officer
14
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