UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO FORM SB-2
Registration Statement under the Securities Act of 1933
TRAVELNOW.COM INC.
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(Name of small business issuer in its charter)
Florida 4700 59-339124
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(State or Jurisdiction of Primary Standard (I.R.S.Employer
Incorporation or Industrial Classification Identification No.)
Organization Code Number
318 Park Central East - Suite 306
Springfield, Missouri 65806
(417) 864-3600
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(Address and telephone number of
principal executive offices and principal place of business)
Jeffrey A. Wasson
318 Park Central East - Suite 306
Springfield, Missouri 65806
(417) 864-3600
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(Name, address and telephone number of agent for service)
PLEASE SEND COPIES OF ALL COMMUNICATIONS TO:
Victoria R. Westerhaus
Shook, Hardy & Bacon L.L.P.
1010 Grand Boulevard, 5th Floor
Kansas City, Missouri 64105
(816) 474-6550
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Approximate date of proposed sale to the public: From time to time after
effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number or the earlier effective
registration statement for the same offering. [____]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [____]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [____]
<PAGE>
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [____]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered Offering Price per Unit Aggregate Offering Price(1) Registration Fee
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<S> <C> <C> <C> <C>
Common Stock offered for
sale by selling security
holders 510,000 $10.88 $5,548,800 $1,464.88 (2)
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Common Stock offered for
sale by selling security
holders 17,000 $ 9.50 $ 161,500 $ 42.64 (3)
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Total 527,000 $1,507.52
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</TABLE>
1. Estimated solely for the purpose of calculating the Registration Fee
pursuant to Rule 457(c) under the Securities Act.
2. Pursuant to the average of the bid and asked price for the referenced
common stock per the OTC Bulletin Board on February 2, 2000 which was paid
with the initial filing of this registration statement on February 7, 2000.
3. Pursuant to the average of the bid and asked price for the referenced
additional common stock per The Nasdaq SmallCap Market System on August 2,
2000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED August ___, 2000
<PAGE>
PROSPECTUS
TRAVELNOW.COM INC.
527,000 SHARES OF COMMON STOCK
TravelNow.com Inc. ("TravelNow"), a Florida corporation, is registering 527,000
shares of its common stock for resale in the open-market by two minority
shareholders, Raptor Global Portfolio, Ltd. and ALTAR Rock Fund, L.P., on and
after the effective date of this registration statement and from time to time
thereafter. See "Selling Security Holders." All of such shares to be sold were
acquired directly by Raptor Global Portfolio, Ltd. and ALTAR Rock Fund, L.P.
from us in connection with a private placement offering of our convertible
preferred stock on January 5, 2000. The convertible preferred stock
automatically converts into our common stock on the effective date of this
registration statement, effective on the immediately preceding business day.
Both selling security holders will sell their shares at the then current market
price or in privately negotiated transactions at prices to be negotiated at that
time. We will not receive any proceeds from the sale of the shares covered by
this registration statement.
On May 25, 2000 our stock was approved for listing on The Nasdaq SmallCap Market
System (the ANasdaq SmallCap Market@), where it is currently traded under the
symbol TNOW.
OUR BUSINESS IS SUBJECT TO MANY RISKS AND AN INVESTMENT IN OUR COMMON STOCK WILL
ALSO INVOLVE SIGNIFICANT RISKS. YOU SHOULD CAREFULLY CONSIDER THE VARIOUS "RISK
FACTORS" DESCRIBED BEGINNING ON PAGE 2 BEFORE INVESTING IN OUR COMMON STOCK.
Neither the Securities and Exchange Commission nor any other regulatory body 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 __, 2000.
<PAGE>
TABLE OF CONTENTS
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Page
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PART I
INFORMATION REQUIRED IN PROSPECTUS
PROSPECTUS SUMMARY...........................................................-1-
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS..............................-2-
RISK FACTORS.................................................................-2-
USE OF PROCEEDS..............................................................-7-
DETERMINATION OF OFFERING PRICE..............................................-7-
SELLING SECURITY HOLDERS.....................................................-8-
PLAN OF DISTRIBUTION.........................................................-9-
LEGAL PROCEEDINGS............................................................-9-
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT....-9-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..............-11-
DESCRIPTION OF SECURITIES...................................................-12-
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES.......................-13-
ORGANIZATION WITHIN LAST FIVE YEARS.........................................-14-
DESCRIPTION OF BUSINESS.....................................................-15-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................-20-
DESCRIPTION OF PROPERTY.....................................................-26-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................-26-
MARKET FOR REGISTRANT'SCOMMON EQUITY AND RELATED STOCKHOLDER MATTERS........-26-
EXECUTIVE COMPENSATION......................................................-27-
LEGAL OPINION...............................................................-32-
EXPERTS ...................................................................-33-
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...................-33-
FINANCIAL STATEMENTS.........................................................F-1
<PAGE>
TABLE OF CONTENTS
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Page
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PART II
INFORMATION REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS..........................II-2
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION........................II-2
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES............................II-2
ITEM 27. EXHIBITS...........................................................II-5
ITEM 28. UNDERTAKINGS.......................................................II-7
<PAGE>
PROSPECTUS SUMMARY
This summary highlights Our business methodology,
selected information from this which is to present travel
document and may not contain availability and fare information
all of the information that is without the intervention of a third
important to you. To understand party, requires a user friendly
the terms of our common stock, interface permitting quick and easy
you should carefully read this access to travel information on an
entire prospectus, including individualized basis. This
the financial statements and the methodology reduces labor costs
notes thereto. when contrasted with a traditional
travel service and results in a
We are an Internet-based customer base that enables us to
travel services company which negotiate favorable contracts with
provides online travel information travel suppliers and providers of
and reservations to our customers travel information, resulting in
on a worldwide basis. Our web site reduced travel costs and increased
(www.travelnow.com) gives customers customer traffic.
real-time access to hotel, car and
airline information regarding Our customers are normally not
schedules, availability and rates charged directly by us for booking
and enables the booking of travel accommodations on our web
reservations on an automated basis. site. Our primary source of revenue
In addition to our reservation and is commission income. Travel
ticketing services, we offer suppliers, such as hotel chains and
discounted and promotional fares, car rental companies, pay
travel news and destination commissions to TravelNow when travel
information such as maps and accommodations booked through us are
weather forecasts. utilized by our customers.
We initially offered online
hotel bookings in May 1995 as one
of the first unbiased online
sources of hotel data. We have
grown into a full service travel
system with access to over 40,000
hotel properties, more than 60
national and regional car rental
agencies and more than 300 airline
carriers. Cruise vacations and
European rail passes are also
available. These and other
services, collectively referred to
as "travel services," are all
available to customers on our web
site.
The offering
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Common Stock Offered ......................... 527,000 shares of common stock.
See "Description of Securities."
Shares of Common Stock Outstanding ........... 10,349,304
Use of Proceeds .............................. We will not receive any proceeds
from the sale of the common stock
by the selling security holders.
Common Stock Trading Symbol .................. Nasdaq SmallCap Market:
TNOW
Method of Distribution ....................... To be sold from time to time in
open-market or privately
negotiated transactions.
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<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Unless the context otherwise requires, the term "we," "us," "our,"
"Company," or "TravelNow" when used in this Form SB-2 refers to TravelNow.com
Inc., a Florida corporation. This registration statement contains some
forward-looking statements within the meaning of the federal securities laws.
When used in this registration statement, the words "expects," "plans,"
"believes," "anticipating," "estimates," and similar expressions are intended to
identify forward-looking statements. Actual results and the timing of some
events could differ materially from those projected in or contemplated by the
forward-looking statements due to a number of factors. We undertake no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that may arise after the date hereof.
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before you decide to buy our common
stock. Investing in our common stock involves a high degree of risk. The risks
and uncertainties described below are not the only ones facing us. Additional
risks and uncertainties not presently known to us or that we currently deem
immaterial may also impair our business operations. Any of these presently
unknown or immaterial risks or any of the following risks could materially and
adversely affect our business, operating results and financial condition and
could result in a partial or complete loss of your investment.
Our business and prospects are difficult to evaluate because we have a limited
operating history.
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Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in an early stage of
development, particularly companies engaged in new and rapidly evolving markets
such as online commerce.
There can be no assurance that we will continue to be successful in
addressing such risks, and the failure to do so could have a material adverse
effect on our business, operating results and financial condition. We incurred a
net operating loss during the fiscal year ended March 31, 1998 of $29,079. We
had net operating income during the fiscal year ended March 31, 1999 of $27,484.
During the fiscal year ended March 31, 2000, we had a net operating loss of
$1,798,433, including $1,055,816 of non-cash charges for stock-based
compensation. We had a stockholders' deficit of $115,326 as of March 31, 2000.
We also had redeemable convertible preferred stock of $4,340,694 as of March 31,
2000.
There is no assurance that financial results will show a profit.
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As a result of our limited operating history in online commerce and the
emerging nature of the markets in which we compete, we are unable to accurately
forecast our revenues.
During the two years ended on March 31, 1999, we invested approximately
$195,000 developing, maintaining and operating our first generation proprietary
software. We have subsequently incurred expenses developing second generation
proprietary software to gather data from GDS systems and to present that data to
our customers. To this end, we entered into a consulting agreement with a
consulting firm and hired personnel necessary to complete this endeavor,
including a database administrator. We incurred development expenses through the
time of implementation of this second generation system of approximately
$770,000. To the extent expenses for the development of this software are not
subsequently followed by increased revenues, our operating results will
fluctuate and losses in subsequent quarters could occur. If we are unable to
adjust spending in a timely manner to compensate for any unexpected expenses or
significant revenue shortfalls, there would be an immediate material adverse
effect on our business, operating results and financial condition.
Our income varies depending on the season of the year.
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We expect that we will experience seasonality in our business corresponding
to seasonal fluctuations in the travel industry as well as Internet and
commercial online service usage. Historically, we have experienced increases in
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<PAGE>
our business during the January to March time period related to business travel.
Further increases have occurred from April through August as a result of both
business and leisure travel. A seasonal decline has normally occurred during
months of September through December. Seasonality in the travel industry,
Internet and commercial online service usage is expected to cause future
quarterly fluctuations in our operating results and could have a material
adverse effect on our business, operating results and financial condition.
We expect our quarterly operating results to fluctuate.
-------------------------------------------------------
We expect to experience significant fluctuations in our future quarterly
operating results due to a variety of other factors, many of which are outside
our control. Factors that may adversely affect our quarterly operating results
include, but are not limited to, the following:
(a) the announcement or introduction of new or enhanced web sites,
services and products by our competitors,
(b) general economic conditions and economic conditions specific to the
Internet, online commerce or the travel industry,
(c) the level of use of online services and consumer acceptance of the
Internet and commercial online services for the purchase of consumer
products and services offered by the Company,
(d) our ability to upgrade and develop our systems and infrastructure and
to attract new personnel in a timely and effective manner,
(e) the level of traffic on our online sites,
(f) technical difficulties, system downtime or Internet brownouts,
(g) the amount and timing of operating costs and capital expenditures
relating to expansion of our business, operations and infrastructure,
(h) governmental regulation and
(i) unforeseen events affecting the travel industry.
We operate in an extremely competitive market, and our business will suffer if
we are unable to compete effectively.
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The online travel services market is new, rapidly evolving and intensely
competitive, and we expect such competition to intensify in the future. We
compete primarily with traditional travel agencies and other online travel
reservation services. In the online travel services market, we compete with
other entities that maintain similar commercial web sites, such as Expedia
(operated by Microsoft Corporation), Travelocity (operated by Sabre Holdings
Corporation), TravelWeb (operated by Pegasus Solutions, Inc.) and GetThere.com,
among others.
Several traditional travel agencies, including larger travel agencies such
as American Express Travel Related Services Co. Inc., Uniglobe Travel and
Carlson Wagonlit Travel, have established, or may establish in the future,
commercial web sites offering online travel services. In addition to the
traditional travel agency channel, most travel suppliers also sell their
services directly to customers, typically by telephone. As the market for online
travel services grows, we believe that the range of companies involved in the
online travel services industry, including travel suppliers, traditional travel
agencies and travel industry information providers, will increase their efforts
to develop services that compete with our services.
Many airlines and hotels offer travel services directly through their own
web sites, eliminating the need to pay commissions to third parties such as us.
A consortium of large domestic air carriers has recently announced it is
forming a joint venture to launch a full service travel web site. This site,
recently named Orbitz, is scheduled to launch in the second half of 2000.
Additionally, a consortium of large hotel chains has indicated it is forming a
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<PAGE>
joint venture to launch a full service web site, however, there is no known
reliable information available to management of TravelNow at this time. We are
unable to anticipate which other companies are likely to offer competitive
services in the future. There can be no assurance that our online operations
will compete successfully with any current or future competitors.
The online travel industry is experiencing consolidation. In recent months
Travelocity has acquired Preview Travel, Galileo has acquired Trip.com, and
Expedia has acquired Travelscape and Vacationspot.com. It is unknown how these
acquisitions or other industry consolidation will affect TravelNow=s on-going
business.
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 web site
and systems development. 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 invest heavily in the
area of travel technology and services. Increased competition may result in
reduced operating margins, as well as loss of market share and brand
recognition. There can be no assurance that we will be able to compete
successfully against current or future competitors, and competitive pressures
faced by us could have a material adverse effect on our business, operating
results and financial condition.
Our future revenues and any future profits are substantially dependent upon
the widespread acceptance and use of the Internet and commercial online services
as an effective medium of commerce by consumers. For us to be successful, these
consumers must accept and utilize novel ways of conducting business and
exchanging information. Convincing consumers to purchase travel services online
may be particularly difficult, as such consumers have traditionally relied on
travel agents for advice and recommendations as to destinations and
accommodations as well as bookings, and are accustomed to a high degree of human
interaction in purchasing travel services.
Rapid growth in the use of and interest in the web, the Internet and
commercial online services is a recent phenomenon, and there can be no assurance
that acceptance and use will continue to develop or that a sufficiently broad
base of consumers will adopt, and continue to use, the Internet and commercial
online services as a medium of commerce, particularly for purchases of travel
services. Demand for recently introduced services and products over the Internet
and commercial online services is subject to a high level of uncertainty and
there exist few proven services and products.
The development of the Internet and commercial online services as a viable
commercial marketplace is subject to a number of factors, including continued
growth in the number of users of such services, concerns about transaction
security, continued development of the necessary technological infrastructure
and the development of complementary services and products. If the Internet and
commercial online services do not become a viable commercial marketplace, our
business, operating results and financial condition will be materially adversely
affected.
We must effectively manage rapid growth to be successful.
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We have rapidly and significantly expanded our operations, and anticipate
that further significant expansion will be required to address potential growth
in our customer base and market opportunities. We have also recently added a
number of key managerial and technical employees, and we expect to add
additional key personnel in the future. This expansion has placed, and is
expected to continue to place, a significant strain on our management,
operational and financial resources. To manage the expected growth of our
operations and personnel, we will be required to improve existing and implement
new transaction-processing, operational, customer service and financial systems,
procedures and controls, implement a formal disaster recovery program and
expand, train and manage our growing employee base. We also will be required to
expand our finance, administrative and operations staff.
Further, our management will be required to maintain and expand our
relationships with various travel service suppliers, other web sites and other
web service providers, Internet and commercial online service providers and
other third parties necessary to our business. There can be no assurance that
our current and planned personnel, systems, procedures and controls will be
adequate to support our future operations, that management will be able to hire,
train, retain, motivate and manage required personnel or that Company management
-4-
<PAGE>
will be able to successfully identify, manage and exploit existing and potential
market opportunities. If we are unable to manage growth effectively, our
business, operating results and financial condition could be materially
adversely affected.
The loss of key personnel could have an adverse impact on our future
development.
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Our performance is substantially dependent on the continued services and on
the performance of our senior management and certain other key personnel. The
loss of the services of any of our executive officers or other key employees
could have a material adverse effect on our business, operating results and
financial condition. We have an employment agreement with our Chief Executive
Officer and have a term life insurance policy in the face amount of $5,000,000,
with us as the named beneficiary. We also have employment agreements with our
Chief Information Officer and Chief Financial Officer and have a separate term
life insurance policy for our Chief Information Officer in the face amount of
$2,000,000, with us as the named beneficiary. Our future success also depends on
our ability to identify, attract, hire, train, retain and motivate qualified
software developers, other skilled technical, managerial, marketing and customer
service personnel. Competition for such personnel is intense, and there can be
no assurance that we will be able to successfully attract, assimilate or retain
sufficiently qualified personnel.
The failure to retain and attract necessary software developers, technical,
managerial, and customer service personnel could have a material adverse effect
on our business, operating results and financial condition. Although none of our
employees is represented by a labor union, there can be no assurance that our
employees will not join or form a labor union or that we will not be required to
become a union contract signatory.
We are dependent on our travel suppliers and their willingness to observe
customary trade practices of paying commissions.
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We are dependent upon information from travel suppliers to offer our
customers access to travel services and products. Travel suppliers could elect
to sell exclusively through other sales and distribution channels or to restrict
our access to their inventory, which could significantly decrease the amount or
breadth of our inventory of available travel offerings and would have a material
adverse effect on our business, operating results and financial condition.
Consistent with industry practices, travel suppliers without written contractual
agreements pay customary commission rates for bookings made through our web site
but could unilaterally change this practice at any time with respect to future
bookings. Once in 1994 and twice in 1997, the major airlines reduced commissions
that would be paid to travel agencies and online services for airline
reservations. Accordingly, travel suppliers can reduce current industry
commission rates or eliminate such commissions entirely, which would have a
materially adverse effect on our business, operating results and financial
condition.
We rely on internally developed systems and have experienced periodic system
interruptions.
----------------------------------------------------------------------------
We currently provide reservation services to our customers through our own
proprietary technology. Our proprietary airline software was recently developed
as a strategically important element in serving the needs of our customers and
the requirements of our affiliated web sites, which use TravelNow to provide
travel services to their customers.
We have experienced periodic system interruptions, which we believe will
continue to occur from time to time. Our revenues depend on the number of
customers who use our online travel sites to book their travel reservations.
Accordingly, the satisfactory performance, reliability and availability of our
online sites, transaction-processing systems and network infrastructure are
critical to our operating results, as well as our ability to attract and retain
customers and maintain adequate customer service levels. Any system
interruptions that result in downtime on our web site or reduced performance of
the reservation system reduces the volume of reservations and the attractiveness
of our service offerings, which could have a material adverse effect on our
business, operating results and financial condition.
-5-
<PAGE>
We cannot assure you 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, we cannot assure you 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. Any inability to do so could
have a material effect on our business, operating results and financial
condition.
We are more vulnerable to system failures because our computer systems
are currently located at one site.
----------------------------------------------------------------------
Our success, in particular our ability to successfully receive and fulfill
orders online and provide high-quality customer service, largely depends on the
efficient and uninterrupted operation of our computer and communications
hardware systems. Substantially all of our computer and communications systems
are located at a single facility in Springfield, Missouri. Our systems and
operations are vulnerable to damage or interruption from fire, flood, power
loss, telecommunications failure, break-ins, earthquake and similar events. We
do not carry business interruption insurance to compensate us for losses that
may occur if a failure of telecommunication services or a power failure disables
our operations.
Despite the implementation of network security measures by us, our servers
are vulnerable to computer viruses, physical or electronic break-ins and similar
disruptions, which could lead to interruptions, delays, loss of data or the
inability to accept and confirm customer reservations. The occurrence of any of
the foregoing risks could have a material adverse effect on our business,
operating results and financial conditions.
We have limited protection of proprietary technology and there is a risk of
third party claims.
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We have filed for U.S. Service Mark protection of "TravelNow.com." On
September 22, 1999 the United States Department of Commerce Patent and Trademark
Office notified us that an application filed prior to the date of our
application is a "potentially conflicting pending application" with our
application. The examining attorney representing the Patent and Trademark Office
notes that if the earlier filed application matures into a registration, the
registration of our application may be refused. We filed a response on March 21,
2000, to the Patent and Trademark Office=s action, correcting the formal matters
in the case and requesting the application be suspended, pending disposition of
the potentially conflicting application. If the other application is abandoned,
then our application will go on to publication. If the other application is
allowed, we will file a notice of opposition when that mark is published.
Further, because the phrase "Travel Now" has been used in the travel business in
a context apart from the Internet, prior to our use on the Internet, the scope
of protection which will be afforded any resulting U.S. Service Mark
registration is unclear. We do not believe that our ability or inability to
obtain a Service Mark with respect to the name TravelNow.com will have a
material impact on our business in as much as no other entity appears to have
superior rights to use that URL address. We are in the process of selecting a
trademark for which we intend to seek trademark protection.
We rely on confidentiality and/or license agreements with our employees,
customers, partners and others to protect our proprietary rights. We have not
sought registration of our name or trademark other than in the United States. We
have licensed in the past, and expect that we may license in the future, certain
of our proprietary rights to third parties such as our affiliates. While we
attempt to ensure that the quality of our brand is maintained by such licensees,
there can be no assurance that such licensees will not take actions that might
materially adversely affect the value of our proprietary rights or reputation,
which could have a material adverse effect on our business, operating results
and financial condition.
There can be no assurance that the steps taken by us to protect our
proprietary rights will be adequate or that third parties will not infringe or
misappropriate our copyrights, trademarks, trade secrets, trade dress and
similar proprietary rights. In addition, there can be no assurance that other
parties will not assert infringement claims against us. We may be subject to
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<PAGE>
legal proceedings and claims from time to time in the ordinary course of our
business, including claims of alleged infringement of the trademarks and other
intellectual property rights of third parties by us and our licensees. Such
claims, even if not meritorious, could result in the expenditure of significant
financial and managerial resources.
We also intend to strategically license certain content for our online
sites from third parties, including content which is integrated with internally
developed content and used on our online sites to provide key services. There
can be no assurance that these third party content licenses will be available to
us on commercially reasonable terms or that we will be able to successfully
integrate such third party content.
Changes in federal, state or foreign laws may impact our operations.
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We are subject to regulations applicable to businesses generally. Although
there are currently few laws and regulations directly applicable to the Internet
and commercial online services, it is possible that a number of laws and
regulations may be adopted in the future with respect to the Internet or
commercial online services covering issues such as user privacy, pricing,
content, copyrights, distribution, antitrust and characteristics and quality of
products and services. Furthermore, the growth and development of the market for
online commerce may prompt calls for more stringent consumer protection laws
that may impose additional burdens on those companies conducting business
online. The adoption of any additional laws or regulations may decrease the
growth of the Internet or commercial online services, which could, in turn,
decrease the demand for our products and services and increase our cost of doing
business, or otherwise have a material adverse effect on our business, operating
results and financial condition.
Moreover, the applicability to the Internet and commercial online services
of existing laws in various jurisdictions governing issues such as property
ownership, sales and other taxes, libel and personal privacy is uncertain and
may take years to resolve. For example, tax authorities in a number of states
are currently reviewing the appropriate tax treatment of companies engaged in
online commerce, and new state tax regulations may subject us to additional
state sales and income taxes. Any such new legislation or regulation, the
application of laws and regulations from jurisdictions whose laws do not
currently apply to our business, or the application of existing laws and
regulations to the Internet and commercial online services could have a material
adverse effect on our business, operating results and financial condition.
We may be subject to regulation by a number of states that have "seller of
travel" acts. These acts require us to register as a seller of travel, comply
with certain disclosure requirements, post a bond or escrow funds and/or
participate in state restitution funds. We are in the process of making
applications, as appropriate, in California and Florida. There is a possibility
that we may later become subject to regulation requirements in additional
states, however we do not anticipate that it will have a material impact on us
or our financial condition. All of our services are subject to federal and state
consumer protection laws and regulations prohibiting unfair and deceptive trade
practices. These consumer protection laws could result in substantial costs and
interfere with the conduct of our business.
USE OF PROCEEDS
We will not realize any proceeds from the sale of the shares of common
stock by the selling security holders. See "Selling Security Holders." We have
already received and are utilizing in our business the proceeds received from
the Class A Convertible Preferred Stock sold in private placements.
DETERMINATION OF OFFERING PRICE
All securities to be registered pursuant to this prospectus will be sold by
the selling security holders. See "Selling Security Holders." The shares offered
may be offered and sold from time to time by any selling security holder. The
selling security holders will act independently of us in making decisions with
respect to the timing, manner, and size of each sale. The shares will be sold at
market price or in negotiated transactions.
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SELLING SECURITY HOLDERS
Raptor Global Portfolio, Ltd.
----------------------------
We are registering 524,702 shares of common stock to be sold by Raptor
Global Portfolio, Ltd. ("Raptor"). This amount covers the number of common
shares which are to be converted from 497,820 shares of Class A Convertible
Preferred Stock by the holder, Raptor, upon the effective date of this
registration statement, effective as of the immediately preceding business day
and all accrued and unpaid dividends that Raptor elects to receive in shares of
common stock. Raptor's only relationship to us is as a shareholder. Upon
conversion, if Raptor elects to receive all accrued and unpaid dividends in
shares, Raptor will own a total of 524,702 shares of common stock, which will be
less than five percent (5%) of our issued and outstanding common stock. See
"Plan of Distribution."
ALTAR Rock Fund, L.P.
--------------------
We are registering 2,298 shares of common stock to be sold by ALTAR Rock
Fund, L.P. ("ALTAR"). This amount covers the number of common shares which are
to be converted from 2,180 shares of Class A Convertible Preferred Stock by the
holder, ALTAR, upon the effective date of this registration statement, effective
as of the immediately preceding business day and all accrued and unpaid
dividends that ALTAR elects to receive in shares of common stock. ALTAR's only
relationship to us is as a shareholder. Upon conversion, if ALTAR elects to
receive all accrued and unpaid dividends in shares, ALTAR will own a total of
2,298 shares of common stock, which will be less than one percent (1%) of our
issued and outstanding common stock.
Tudor Entities
--------------
Pursuant to the TravelNow.com Inc. Class A Convertible Preferred Stock
Purchase Agreement, dated January 5, 2000 (the "Stock Purchase Agreement"), by
and among TravelNow and Raptor, on its own behalf and on behalf of each of the
Tudor Entities (as defined below), Raptor and ALTAR have the right to transfer
to the Tudor Entities shares of the Class A Convertible Preferred Stock or
common stock and the Tudor Entities have the right to acquire and hold shares of
the Class A Convertible Preferred Stock or the common stock. Therefore, any or
all of the Tudor Entities may be selling security holders. Tudor Entities means
each of the following:
Tudor Private Equity Fund, L.P., Tudor Arbitrage Partners, L.P., Tudor BVI
Futures, Ltd., Raptor Global Fund, L.P., Raptor Global Fund Ltd., Raptor
Global Portfolio, Ltd., ALTAR Rock Fund, L.P. or any funds or other
investment vehicles or entities of which any of the forgoing entities are
affiliates, or any affiliate or affiliated group of Tudor Investment
Corporation and/or Tudor Global Trading, Inc.
"Affiliate" means any other person directly or indirectly controlling,
controlled by, or under direct or indirect common control with the
referenced person or entity and includes without limitation, (a) any person
who is an officer, director, general partner or direct or indirect
beneficial holder of at least 5% of the then outstanding capital stock of
the referenced person or entity, (b) any person of which the referenced
person or entity and/or its affiliates (as defined in clause (a) above),
directly or indirectly, either beneficially own(s) at least 5% of the then
outstanding equity securities or constitute(s) at least a 5% equity
participant, and (c) any entities for which a Tudor Entity or any of its
affiliates (as defined in clauses (a) or (b) above) serve as general
partner and/or investment advisor or in a similar capacity, and all mutual
funds or other pooled investment vehicles or entities under the control or
management of such Tudor Entity or the general partner or investment
adviser thereof or any person in a similar capacity, or any affiliate (as
defined in clause (a) or (b) above) of any of them, or any affiliates of
any of the foregoing.
"Affiliated Group" has the meaning given to it in Section 1504 of the
Internal Revenue Code of 1986, as amended, and in addition includes any
analogous combined, consolidated, or unitary group, as defined under any
applicable state, local, or foregoing income tax law.
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PLAN OF DISTRIBUTION
All shares to be registered pursuant to this prospectus will be sold by the
selling security holders. See "Selling Security Holders." The selling security
holders will act independently of us in making decisions with respect to the
timing, manner, and size of each sale. Such sale may be made on any market upon
which the common stock may be quoted, at prices and on terms then prevailing or
at prices related to the then market price, or in negotiated transactions. In
effecting sales, the selling security holders may use the services of
broker-dealers. Such broker-dealers engaged by the selling security holders may
arrange for other broker-dealers to participate. Broker-dealers may receive
commissions or discounts from the selling security holders in amounts to be
negotiated.
In offering the shares, the selling security holders and any broker-dealers
who execute sales for the selling security holders may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended, in
connection with such sales, and any profits realized by the selling security
holders and the compensation of such broker-dealers may be deemed to be
underwriting discounts and commissions. Each selling security holder, during the
time they are engaged in distribution of the securities covered by this
Prospectus, must comply with Rule 10b-5 and Regulation M under the Exchange Act
and pursuant thereto: (i) each must not engage in any stabilization activity in
connection with our securities; (ii) each must furnish each broker through which
securities covered by this Prospectus may be offered the number of copies of
this Prospectus which are required by each broker; and (iii) each must not bid
for or purchase any of our securities or attempt to induce any person to
purchase any of our securities other than as permitted under the Exchange Act
Release 34-38067 (December 20, 1996) and must coordinate their sales under this
Prospectus with each other and us for purposes of Regulation M.
The shares will be sold by the selling security holders on a continuous
basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the
"Act"). The sales of securities, pursuant to this prospectus, will terminate on
the earlier of (a) the second anniversary of the Closing Date of the Stock
Purchase Agreement; (b) the date on which all shares offered have been sold by
the selling security holders; or (c) such time as all of the shares held by the
selling security holders can be sold within a given three-month period without
compliance with the registration requirements of the Act pursuant to Rule 144.
There can be no assurance that the selling security holders will sell any or all
of the shares of common stock offered.
In addition, at any time we may refuse to permit the selling security
holders from reselling our common stock pursuant to this registration statement.
We may exercise this right because a sale pursuant to this registration
statement, in its then-current form, could constitute a violation of the federal
securities laws. However, we are only entitled to exercise this right two (2)
times in any twelve (12) month period, and the period during which this
registration statement may be withdrawn shall not exceed thirty (30) days.
LEGAL PROCEEDINGS
There is no litigation currently pending against us.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The following table sets forth certain information with respect to the
executive officers and directors of TravelNow.com Inc., as of the date of this
filing.
Name Age Position with TravelNow.com Inc.
------------------- --- --------------------------------
Jeffrey Alan Wasson 27 Chief Executive Officer & Director
H. Whit Ehrler 59 Vice President, Chief Financial Officer
& Director
Christopher R. Kuhn 33 Vice President & Chief Information Officer
Ross E. Summers 48 Vice President & General Manager
Marvin McDaniel 51 Vice President, Travel Services
Michael Bauer 31 Vice President, Sales & Marketing
Bill Perkin 44 Director
Jerry Rutherford 56 Director
Antoine Toffa 34 Director
Jeffrey Alan Wasson was a founding member of TravelNow in May 1995. Mr.
Wasson was elected to the Board of Directors on August 6, 1999. Currently, Mr.
Wasson serves as our Chief Executive Officer. From August of 1991 until May of
1995, Mr. Wasson was a student at the University of Missouri in Columbia,
Missouri, majoring in Travel and Tourism.
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H. Whit Ehrler joined TravelNow as Vice President & Chief Financial Officer
on August 23, 1999. Mr. Ehrler was elected to the Board of Directors on October
22, 1999. Mr. Ehrler was Vice President, Finance & Administration of Carrollton
Graphics, Inc. in Carrollton, Ohio from June 1997 through August 1999. From 1994
through June 1997, Mr. Ehrler was with Helson Ehrler Investment Partners in
Stamford, Connecticut.
Christopher R. Kuhn joined TravelNow on July 12, 1999, as Vice President &
Chief Information Officer. Prior to joining TravelNow, Mr. Kuhn was Director of
Web Development for Compaq Computer from August 1998 until July 1999, Manager of
Web Service Solutions with Digital Equipment from April 1998 until August 1998
and Manager of Web Engineering for MCI Telecommunications from November 1989
until April 1998.
Ross Summers joined TravelNow as General Manager in September 1999. Mr.
Summers has eighteen (18) years of telecommunications management experience,
most recently as General Manager of TCI and AT&T Cable Services. Mr. Summers was
an original investor in TravelNow. He is a graduate from the University of
Missouri-Columbia.
Marvin McDaniel officially became an employee of TravelNow in February
2000. Mr. McDaniel has over twenty-six (26) years of experience in the travel
industry, as owner of Carlson Wagonlit/McDaniel Travel, one of the largest full
service travel agencies in southern Missouri. Prior to joining TravelNow as an
employee, Mr. McDaniel had been instrumental in our growth, providing travel
expertise and a number of travel related facilities in the early stages of
TravelNow's development. Mr. McDaniel is a graduate of Southwest Missouri State
University with a major in mathematics.
Michael Bauer joined TravelNow as Vice President of Sales & Marketing in
April 2000 and has six years of travel industry experience. Mr. Bauer was an
Account Executive for Ambassadors Performance Group from September 1998 through
April 2000. From 1994 through 1998, Mr. Bauer was with Martiz Travel Company
where he held various positions. From 1993 through 1994, Mr. Bauer was with
Marketsource in Chicago, Illinois. Mr. Bauer held various positions with Walt
Disney World, in Orlando Florida from 1991 through 1993. He attended the
University of Iowa in Iowa City, Iowa, majoring in Leisure Studies.
Bill Perkin was appointed to TravelNow's Board of Directors on October 22,
1999, to fill a newly created seat on the Board. Since February 1, 2000, Mr.
Perkin has been the Chief Executive Officer of Eclectic Enterprises, Inc. d/b/a
Way2Bid.com. From 1988 to January 1999, Mr. Perkin was the sole owner of Perkin
Marketing Services, Inc., an advertising marketing company with principal
offices located in Springfield, Missouri.
Jerry Rutherford was appointed to TravelNow's Board of Directors on October
22, 1999, to fill a newly created seat on the Board. Since March of 1995 Mr.
Rutherford has operated several businesses owned entirely by Mr. Rutherford,
including ERA Rutherford Realtors located in Springfield, Missouri. Mr.
Rutherford was a Vice President and General Manager of TeleCable of Springfield,
Inc. in Springfield, Missouri from April 19, 1979, until March 1995, at the time
of its acquisition by Telecommunications, Inc. in February of 1995.
Antoine Toffa was appointed to TravelNow's Board of Directors on May 3,
2000, to fill a newly vacated seat on the Board. Mr. Toffa holds a Masters
degree in Business Administration from Harvard Business School. He is also a
member of the Board of Directors of 800 Travel Systems, Inc. In June 1996, Mr.
Toffa founded Trip.com, Inc., and acted as President and Chief Executive Officer
of Trip.com, Inc. until September 1999. Prior to June 1996, Mr. Toffa was
General Manager of Product Development for US West Media Group. From 1990 to
1994, Mr. Toffa acted as a consultant for Time Warner Interactive and Mars & Co.
In January 2000, Mr. Toffa was chosen as the Person of the Year in interactive
travel by Interactive Travel Report. Mr. Toffa was also voted one of 100 rising
stars in the travel industry by Travel Agent Magazine in April 1999.
Board of Directors.
------------------
Our Bylaws call for a Board of Directors of not less than one nor more than
seven members. Currently the Board of Directors consists of five (5) members,
Jeff Wasson, our Chief Executive Officer; H. Whit Ehrler, our Vice President &
Chief Financial Officer; and Bill Perkin, Jerry Rutherford, and Antoine Toffa,
our three independent directors. The Bylaws provide that our directors are to be
elected at our annual meeting to serve for one year or until their successors
are duly elected and qualified.
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Involvement in Certain Legal Proceedings.
-----------------------------------------
On August 25, 1997, John Christopher Noble, a 17.7% shareholder of
TravelNow pled guilty to a charge of assault in the third degree, a Class A
misdemeanor, in the Circuit Court of Green County, Missouri. The Circuit Court
ordered Mr. Noble to pay a fine of $10.00, court costs of $249.50, restitution
of $900.00, and to complete 50 hours of community service, and placed Mr. Noble
on probation until August 24, 1999. Mr. Noble has fully complied with the
Circuit Court's order and the probation has been completed.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of our common stock as of June 30, 2000, by the following individuals
or groups: (i) each person or entity who is known by the Company to own
beneficially more than 5% of our outstanding common stock, (ii) each of the
executive officers and directors, (iii) each of our directors and executive
officers as a group giving effect to the exercise of options held by the named
security owner. The persons named in the table below have sole voting and
investment power with respect to all shares of common stock held by them.
Applicable percentage ownership in the following table is based on 10,349,304
shares of our common stock outstanding as of June 30, 2000. To the extent that
subsequent to the date of this filing any shares are issued, there will be
further dilution to our current shareholders.
Shares Beneficially Owned as of June 30, 2000 (1)(2).
----------------------------------------------------
Title of Class Name of Beneficial owner Number Percent
-------------- ------------------------ --------- -------
Common Stock John Christopher Noble (3) 1,832,767 17.5
Common Stock Jeff Wasson (3) 1,895,067 18.2
Common Stock Jerry Rutherford (3) 1,376,569 13.2
Common Stock Ross Summers (4) 450,219 4.3
Common Stock Marvin McDaniel (4) 420,065 4.0
Common Stock H. Whit Ehrler (3) (4) (6) 33,333 0.3
Common Stock Christopher R. Kuhn (3) (4) (7) 33,333 0.3
Common Stock J.D. Bryant (4) - 0 - 0.0
Common Stock Michael Bauer (4) - 0 - 0.0
Common Stock Bill Perkin (3) 106,601 1.0
Common Stock Antoine Toffa (8) 20,000 0.2
Common Stock All directors and executive
officers as a group (5) 4,335,187 41.50
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting and investment
power with respect to securities.
(2) This table does not include 500,000 shares of the Company's Class A
Convertible Preferred Stock currently held by the selling security holders, each
share of which has voting rights equivalent to each share of the Company's
common stock, or 527,000 shares of the Company's common stock, that will be held
by the selling security holders after the conversion of the Class A Convertible
Preferred Stock, upon the effective date of this registration statement.
(3) Mr. Noble's address is: 2431 E. Montclair Court, Springfield, Missouri
65806. Messrs. Wasson, Summers, Ehrler, Kuhn, Bryant, Bauer, McDaniel and Toffa
have elected to use as their address the address of TravelNow, 318 Park Central
East, Suite 306, Springfield, Missouri 65806. Mr. Rutherford's address is: 3222
South Campbell Avenue, Suite MM, Springfield, Missouri 65807. Mr. Perkin's
address is: 1200 East Woodhurst, Bldg. N, Springfield, Missouri 65804.
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(4) On May 3, 2000, the Board of Directors approved the TravelNow.com Inc.
2000 Omnibus Stock Incentive Plan. On June 7, 2000, these individuals were
granted the right to purchase shares equal to their respective annual salary,
divided by the closing sale price of the Company's common stock, par value $0.01
per share, on June 7, 2000. The stock options vest in three (3) equal annual
installments beginning on the first anniversary of the initial grant date, which
was June 7, 2000.
(5) This total excludes the 1,832,767 shares owned by John Christopher
Noble, who resigned as Co-Chief Executive Officer, Secretary and Director of
TravelNow, effective May 3, 2000.
(6) This number represents the number of shares of common stock which Mr.
Ehrler has the right to acquire from stock options, beginning August 23, 2000.
(7) This amount represents the number of shares of common stock which Mr.
Kuhn has the right to acquire from stock options, as of July 12, 2000.
(8) This amount represents the number of shares of common stock which Mr.
Toffa has the right to acquire from stock options, beginning May 3, 2000.
Certain individual holders of TravelNow's capital stock have entered into a
Standstill Agreement with the Company, effective July 17, 2000. The Standstill
Agreement provides that such individual holders shall not transfer or sell their
shares of common stock, except in privately negotiated transactions, for a
period of one year, beginning on the effective date of the Standstill Agreement.
The individual holders, however, may pledge or encumber up to thirty percent
(30%) of their shares of common stock during such one year period. This
Standstill Agreement affects approximately 7,300,000 shares of TravelNow=s
common stock.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 50,000,000 shares of common stock,
par value $0.01 per share, and 25,000,000 shares of preferred stock, par value
$0.01 per share. As of June 30, 2000, we had 10,349,304 shares of common stock
issued and outstanding and 500,000 shares of convertible preferred stock issued
and outstanding.
Common Stock.
-------------
TravelNow is not offering for sale any shares of common stock in this
registration statement. We are registering an aggregate of 527,000 shares of
common stock for sale by the selling security holders at a price to be
determined in the future. The holders of common stock are entitled to one vote
per share on all matters to be voted upon by the stockholders. Subject to
preferences that may be applicable to any outstanding preferred stock, the
holders of common stock are entitled to receive ratably such dividends, if any,
as may be declared from time to time by the Board of Directors out of funds
legally available therefore. See "Dividend Policy."
In the event of a liquidation, dissolution or winding up, the holders of
common stock are entitled to share ratably in all assets remaining after payment
of liabilities, subject to prior rights of preferred stock, if any, then
outstanding. The common stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
available to the common stock. All outstanding shares of common stock are fully
paid and non-assessable.
Preferred Stock.
----------------
The Board of Directors has the authority to issue the preferred stock in
one or more series and to determine the powers, preferences and rights and the
qualifications, limitations or restrictions granted to or imposed upon any
wholly unissued series of preferred stock and to fix the number of shares
constituting any series and the designation of such series, without any further
vote or action by the shareholders. The issuance of preferred stock may have the
effect of delaying, deferring or preventing a change in control of TravelNow
without further action by the shareholders and may adversely affect the voting
and other rights of the holders of common stock.
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<PAGE>
In December 1999, our Board of Directors established a Class A Convertible
Preferred Stock and authorized the issuance of up to 555,000 shares.
The Class A Convertible Preferred Stock ranks senior to all other classes
or series of our common and preferred stock with respect to dividend rights,
redemption and on liquidation, dissolution or winding up. It has a face value
equal to Nine Dollars ($9.00) per share and bears dividends at eight percent
(8%) per annum per share on the face value.
On January 5, 2000, we issued 497,820 shares of our Class A Convertible
Preferred Stock to Raptor Global Portfolio, Ltd. and 2,180 shares of our Class A
Convertible Preferred Stock to ALTAR Rock Fund, L.P., all at a price of $9.00
per share for a total of $4,500,000. The Class A Convertible Preferred Stock
will be automatically converted into shares of TravelNow's common stock on a
share-for-share basis immediately upon the fulfillment of both of the following
conditions: (1) the effectiveness of a registration statement filed by TravelNow
with the Securities and Exchange Commission covering an amount of the common
stock sufficient to allow for the sale of all common stock issuable upon
conversion of all then outstanding shares of Class A Convertible Preferred
Stock; and (2) the listing of the common stock of TravelNow on either the Nasdaq
SmallCap Market or the Nasdaq National Market System. The second condition has
been met.
Regardless of whether or not the Class A Convertible Preferred Stock is
automatically converted pursuant to the fulfillment of the first condition
stated above, the holders of the Class A Convertible Preferred Stock shall have
the right to convert their shares of Class A Convertible Preferred Stock into
shares of common stock.
The number of shares of common stock to which the holder of Class A
Convertible Preferred Stock is entitled upon such conversion is equal to the
product obtained by multiplying (1) the number of shares of Class A Convertible
Preferred Stock being converted by (2) the Applicable Conversion Rate. The
Applicable Conversion Rate in effect at any time for the Class A Convertible
Preferred Stock is equal to the quotient obtained by dividing (1) the sum of
$9.00 plus an amount equal to all accrued but unpaid dividends on a share of
Class A Convertible Preferred Stock by (2) the Applicable Conversion Value,
which is $9.00. Dividends are paid at eight percent (8%) per annum per share on
the face value, which is $9.00. The holders of the Class A Convertible Preferred
Stock are entitled to receive dividends in cash or common stock.
If we fail to fulfill the conditions required for the automatic conversion
of the Class A Convertible Preferred Stock on or prior to December 31, 2000, the
holders of shares of Class A Convertible Preferred Stock have the right to
require us to purchase all of the Class A Convertible Preferred Stock and pay
any accumulated dividends.
As of the effective date of this registration statement, we anticipate that
no preferred stock will remain outstanding.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
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ORGANIZATION WITHIN LAST FIVE YEARS
Merger of TravelNow.com Inc. and Sentry Accounting Inc.
------------------------------------------------------
On July 23, 1999, an Agreement and Plan of Reorganization was consummated
between TravelNow.com Inc., a Missouri corporation ("TravelNow of Missouri"),
and Sentry Accounting, Inc., a Florida corporation ("Old Sentry"), wherein 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. 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
number of shares at that point was 1,966,533. On July 28, 1999, the now combined
entities 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. See "Part II - Shares Eligible for Future Sale."
Although Old Sentry was the surviving corporation of the merger, we changed
our name at the time of the filing of the Articles of Merger to TravelNow.com
Inc.
The transaction consummated between TravelNow of Missouri and Old Sentry is
generally known as a reverse merger. A reverse merger is normally the result of
a merger in which the acquiring corporation has less size and substance than the
acquired company. The acquiring corporation survives as a legal entity, but the
shareholders of the acquired company obtain a majority of the voting rights of
the combined entity. The substantive effect of the transaction is thus reversed
from the legal effect.
At the time of the merger of TravelNow of Missouri into Old Sentry, Old
Sentry had no significant operations and only nominal net assets. 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 for both accounting purposes and for SEC reporting.
History of Sentry Accounting, Inc.
----------------------------------
Prior to the merger, Old Sentry was engaged in providing accounting
services and related financial and administrative services to small businesses.
The accounting and related financial and administrative services business of Old
Sentry prior to the merger is described in Old Sentry's filing on SEC Form 10-SB
filed on February 5, 1999 which filing was amended on SEC Form 10-SB/A1 on May
4, 1999 and further amended on SEC Form 10-SB/A2 filed on May 18,1999. As part
of the terms of the merger, Old Sentry's accounting and financial and
administrative business was transferred to a shareholder of Old Sentry in
exchange for 2,000,000 shares of Old Sentry's common stock and a cash payment of
$2,000. The merger was effective on July 27, 1999. Immediately after the merger,
Messrs. Wasson and Noble, directors of TravelNow of Missouri, were appointed
directors of TravelNow. The Board of Directors adopted a resolution which
provided that effective as of the date of the approval by the shareholders of
the merger, Messrs. Wasson and Noble would serve as Co-Chief Executive Officers.
Effective May 3, 2000, Mr. Noble resigned as our Co-Chief Executive Officer,
Secretary, Director and employee.
Certain of the shareholders of Old Sentry agreed to make a capital
contribution to TravelNow in the amount of approximately $500,000. This capital
contribution was completed in installments on August 6, 1999. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."
Corporate History of TravelNow of Missouri Prior to the Merger.
---------------------------------------------------------------
TravelNow of Missouri was incorporated under the laws of the state of
Missouri as Travel Now Network, Inc. on March 22, 1995. On March 21, 1997,
TravelNow of Missouri merged into Eleven Twelve Corporation, a Missouri company.
Although Eleven Twelve Corporation was the surviving entity, Eleven Twelve
Corporation's name was changed to TravelNow Global Reservation Network, Inc. at
the time of the merger. On April 29, 1999, its name was changed to TravelNow.com
Inc.
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<PAGE>
DESCRIPTION OF BUSINESS
Principal Service and Our Markets.
----------------------------------
We are an Internet-based travel services company which provides online
travel information and reservations to our customers on a worldwide basis. Our
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 our reservation
and ticketing services, we offer discounted and promotional fares, travel news
and destination information such as maps and weather forecasts.
We initially offered online hotel bookings in May 1995 as one of the first
unbiased online sources of hotel data. We have grown into a full service travel
system with access to over 40,000 hotel properties, 60 car rental companies and
300 airlines. European rail passes are also available. Although not part of the
automated reservations system, cruises were added in the fourth quarter of
fiscal year 2000. These and other services, collectively referred to as "travel
accommodations," are all available to customers on our web site.
In May of 1995 we fulfilled, at our web site, a request by a customer in
Hong Kong for a hotel reservation in Chicago, Illinois. Our managers believed
this international booking over the Internet, and the fulfillment activity that
followed during 1995, was evidence of a substantial inefficiency in the
availability of and access to travel information by individual and small
business travelers. Our management further determined that an unbiased web site,
i.e., a web site where availability and fares were presented giving the customer
the maximum number of choices, would address that market inefficiency.
Our business methodology, which is to present travel availability and fare
information without the intervention of a third party, requires a user friendly
interface permitting quick and easy access to travel information on an
individualized basis and reduces labor costs when contrasted with a traditional
travel service. Management believed that a web site which provided this service
would result in a customer base that would enable us to negotiate favorable
contracts with travel suppliers and providers of travel information, resulting
in reduced travel costs and increased customer traffic.
From that initial hotel reservation booked in 1995, we have witnessed hotel
confirmations issued at our web site increase from 20,348 during the fiscal year
ending March 31, 1998 to 53,368 during the fiscal year ending March 31, 1999, to
246,705 during the fiscal year ending March 31, 2000, and increase from 12,889
during the six month period ending May 31, 1998 to 41,358 during the six month
period ending May 31, 1999, to 189,163 during the six month period ending May
31, 2000. Expansion of our customer base has been primarily achieved by
increasing the number of our affiliates, which are independent web sites that
have contractually agreed to use our proprietary reservation systems.
Hotel Confirmations
-------------------
1998 1999 2000
---- ---- ----
Fiscal Years Ended March 31 20,349 53,368 246,705
Six Months Ended May 31 12,889 41,358 189,163
We are currently exploring international opportunities as part of our
revolving strategy to address foreign markets. We have agreed to negotiate with
our Japanese affiliate in an attempt to establish a long term relationship with
the entity; however, as of the date of this registration statement we have not
entered into a definitive agreement. Our forty-nine percent (49%) interest in
Nippon K.K. is now viewed by management as having no value and has been written
off.
We are also investigating the establishment of a wholly-owned operation in
Europe. A small staff has been retained on a contract basis to perform market
research, develop a specific strategy and prepare an initial operating plan for
this region. If a decision is made to enter the European market on this basis,
we will require additional capital resources to fund this start-up operation and
we would plan to raise the capital in the United States.
-15-
<PAGE>
Distribution Method of Our Services.
------------------------------------
The vast majority of travel accommodations are booked and confirmed on our
web site through an automated process. We have developed in house our
proprietary technology for hotels, rental cars and airlines, which interfaces
with multiple sources of travel supplier information. In addition to our
automated systems, we provide online and telephone customer service support 24
hours per day, seven days per week.
Our customers are normally not charged directly by us for booking travel
accommodations on our web site. Our primary source of revenue is commission
income. Travel suppliers, such as hotel chains and car rental companies, pay
commissions to us when travel accommodations booked through us are utilized by
our customers.
Travel Suppliers.
-----------------
Information regarding the availability of hotel rooms, airline flights and
rental cars and other travel services is generated and provided to the travel
industry by "travel suppliers." Examples of well known travel suppliers include
Holiday Inn and Hyatt hotels, Avis and Hertz automobile rental companies, and
American Airlines and United Airlines. We have access to travel suppliers of
over (1) 40,000 hotels consisting of millions of hotel rooms throughout the
world, (2) 300 airlines, which on any given day involves thousands of airline
passenger seats moving between specified destinations around the globe, and (3)
fleets of tens of thousands of automobiles located in cities throughout the
world.
Global Distribution Systems.
----------------------------
Data as to the availability and pricing of hotel rooms, airline seats and
automobiles is constantly gathered from travel suppliers by electronic global
distribution services ("GDS") such as Sabre Holding Corporation's SABRE system
("SABRE"); Pegasus Solutions, Inc.; Worldspan and others. We have direct
contracts with two GDS systems: Sabre and Pegasus. Through our relationship with
McDaniel Travel, Inc. ("McDaniel Travel"), as discussed below, we have an
indirect relationship with a third GDS system, Worldspan. Each of the contracts
with these GDS systems permits us to use our proprietary software to access
information regarding the availability of hotel rooms, rental cars and airlines,
including the fares and rates for these travel accommodations. Because room
availability from the same supplier is typically found on more than one GDS
system, our proprietary reservation system can access more than one GDS system
in searching for availability, which enables us to present to our customers the
lowest room rate then available on these competitive GDS systems.
In 1996 and 1997 we issued 3,200 shares of our common stock, which after
adjustment for the merger and stock dividends referred to elsewhere herein is
426,396 shares, to Marvin McDaniel, owner of McDaniel Travel, in exchange for
our right to use the "ARC" number (the agency tracking number issued by Airline
Reporting Corporation) and the "IATAN" number (the agency tracking number
assigned by the International Airline Travel Agent Network) of McDaniel Travel.
Although a travel agency is unable to issue domestic and international airline
tickets without first obtaining ARC and IATAN numbers, the importance of these
numbers with respect to hotel and automobile reservations is that they are used
in tracking those reservations for commission collection. Although we do not
foresee a disruption in the relationships between McDaniel Travel and the GDS
systems which track the ARC and IATAN numbers for commission collection
purposes, if any disruption occurred there is the possibility that our ability
to track our reservations or obtain payment could be disrupted. Because we
believe the issuance of airline tickets will have a growing and important impact
on revenues, we are in the process of obtaining our own ARC and IATAN numbers.
Provided that bookings through our web site remain at specified contractual
levels, no payments are due to any of these GDS systems. Further, McDaniel
Travel does not charge us fees of any kind as a result of the Worldspan contract
with McDaniel Travel in which Worldspan permits us to have access to its
proprietary information. Currently, we are maintaining these required levels and
-16-
<PAGE>
no payments are due to Pegasus, Sabre or Worldspan. However, there is a dispute
between McDaniel Travel and Worldspan in which Worldspan claims it is owed
$12,600 as a result of our failure to maintain the required booking levels
during an earlier period. Management believes it is improbable that we are
liable for any amount. Any sums owed by McDaniel Travel to Worldspan will be our
obligation. We do not anticipate that this difference of opinion will lead to a
disruption in our ability to access the Worldspan proprietary data base. The
availability of travel accommodations and their respective fares and rates are
then presented to our leisure and business traveler customers at our web site
through our proprietary software interface.
By obtaining hotel, airline and auto rental availability and fares from
multiple GDS systems rather than relying upon only one GDS, we believe that we
are avoiding dependence on any one of these third party providers to continue to
offer and maintain such services. Nevertheless, any discontinuation of these
services by one or more GDS, or any reduction in performance of a GDS that
requires us to replace such services, would be disruptive to our business.
Commission Payments.
--------------------
We earn commissions on travel accommodations either (1) as a percentage of
the gross dollar value of the travel booking, or (2) as a fixed dollar amount
per booking. The specific percentage or fixed dollar amount is dependent upon
whether the booking involves a (1) vacation package, (2) hotel room, (3) car
rental, (4) airline ticket, (5) Eurail ticket, or (6) hotel rooms and/or airline
tickets through consolidators of such travel accommodations. Typically, the
commissions on hotel rooms and rental cars are a higher percentage of the gross
booking value than on airline tickets. Airline ticket commissions can also vary
among airlines.
Company Growth Through Affiliate Program.
-----------------------------------------
A substantial portion of our growth has come from providing our travel
reservation engine to 400 independent operators of web sites with whom we
currently share our commissions. Generally these web sites note that the travel
service at their site is "powered by TravelNow." An independent web site that
has contracted for the use of the TravelNow reservation engine is referred to as
an affiliate.
We established our affiliate program as a cost effective mechanism to
increase our customer base without the expenditure of substantial sums of
capital on direct advertising. The web site of each affiliate is dynamically
connected to the TravelNow reservation engine in exchange for the sharing of
commissions with the affiliates. This program has contributed substantially to
our growth and allowed us to benefit from the advertising, marketing and other
activities of our affiliates to develop traffic for their respective web sites.
The activities used by affiliates to increase traffic to their web sites
are not controlled or influenced by us except in so far as the sharing of the
commission revenue affects the actions of each affiliate. We believe that our
own ability to grow will depend in large part on, among other things, our
ability to continue to generate sales volume by effectively maintaining our
current relationships with our affiliates and to continue the expansion of our
affiliate program.
Set forth in the table below is the cumulative number of visitors that
requested travel reservations through our web site from the inception of our
first booking, through the periods indicated:
Number of TravelNow Visitors
----------------------------
Fiscal Year Ending Fiscal Year Ending Fiscal Year Ending
March 31, 1998 March 31, 1999 March 31, 2000
-------------- -------------- --------------
21,914 76,856 417,791
Through June 30, 2000, the cumulative number of visitors that requested
travel reservations had grown to 650,122.
We offer to customers, who affirmatively elect to do so, the option to
receive travel-related information on a regular basis through email
communications.
As of June 30, 2000, approximately 226,000 leisure and business travelers
who have previously booked travel reservations through the TravelNow web site
were receiving regular emails from us. These emails, in the form of a TravelNow
newsletter, feature various travel highlights, discounted travel vacations and
other TravelNow offerings and information.
-17-
<PAGE>
The following chart shows the number of hotel reservations booked by week
through us by our customers from the week beginning March 16, 1997 through the
week beginning March 26, 2000. During that time period, hotel reservations
booked by us have increased from less than 450 per week in March 1997 to more
than 9,000 per week during March of 2000 and more than 12,000 per week during
July 2000. Weekly hotel reservations during December 1999 were seasonally lower
than October/November 1999 by approximately 12% versus a comparable seasonal
decline in December 1998 of approximately 10%.
[GRAPHIC OMITTED]
Competition.
------------
The online travel services market is new, rapidly evolving and intensely
competitive, and we expect such competition to intensify in the future. We
compete primarily with traditional travel agencies and online travel reservation
services. In the online travel services market, we compete with other entities
that maintain similar commercial web sites, such as Expedia (operated by
Microsoft Corporation), Travelocity (operated by Sabre Holdings Corporation),
TravelWeb (operated by Pegasus Solutions, Inc.) and GetThere.com, among others.
Several traditional travel agencies, including larger travel agencies such
as American Express Travel Related Services Co. Inc., Uniglobe Travel and
Carlson Wagonlit Travel, have established, or may establish in the future,
commercial web sites offering online travel services. In addition to the
traditional travel agency channel, most travel suppliers also sell their
services directly to customers, typically by telephone. As the market for online
travel services grows, we believe that the range of companies involved in the
online travel services industry, including travel suppliers, traditional travel
agencies and travel industry information providers, will increase their efforts
to develop services that compete with our services.
Many airlines and hotels offer travel services directly through their own
web sites, eliminating the need to pay commissions to third parties such as us.
A consortium of large domestic air carriers has recently announced it is
forming a joint venture to launch a full service travel web site. This site,
recently named Orbitz, is scheduled to launch in the second half of 2000.
Additionally, a consortium of large hotel chains has indicated it is forming a
joint venture to launch a full service web site, however, there is no known
reliable information available to management of TravelNow at this time. We are
unable to anticipate which other companies are likely to offer competitive
services in the future.
In addition, new technologies and the expansion of existing technologies
may increase competitive pressures on us. The online travel industry is
experiencing consolidation. In the past four months, Travelocity has acquired
Preview Travel, Galileo has acquired Trip.com, and Expedia has acquired
Travelscape and Vacationspot.com. It is unknown how these acquisitions or other
industry consolidation will affect TravelNow's on-going business.
Intellectual Property, Third Party Licenses.
--------------------------------------------
We have filed for U.S. Service Mark protection of "TravelNow.com." On
September 22, 1999, the United States Department of Commerce Patent and
Trademark Office notified us that an application filed prior to the date of our
application is a "potentially conflicting pending application" with our
application. We filed a response on March 21, 2000, to the Patent and Trademark
Office's action, correcting the formal matters in the case and requesting the
application be suspended, pending disposition of the potentially conflicting
application. If the other application is abandoned, then our application will go
on to publication. If the other application is allowed, we will file a notice of
opposition when that mark is published. We are in the process of selecting a
trademark for which we intend to seek trademark protection.
-18-
<PAGE>
We rely on confidentiality and/or license agreements with our employees,
customers, partners and others to protect our proprietary rights. We also intend
to strategically license certain content for our online sites from third
parties, including content which is integrated with internally developed content
and used on our online sites to provide key services.
Governmental Regulation.
------------------------
We are subject to regulations applicable to businesses generally. Although
there are currently few laws and regulations directly applicable to the Internet
and commercial online services, it is possible that a number of laws and
regulations may be adopted in the future with respect to the Internet or
commercial online services covering issues such as user privacy, pricing,
content, copyrights, distribution, antitrust and characteristics and quality of
products and services. Furthermore, the growth and development of the market for
online commerce may prompt calls for more stringent consumer protection laws
that may impose additional burdens on those companies conducting business
online. The adoption of any additional laws or regulations may decrease the
growth of the Internet or commercial online services, which could, in turn,
decrease the demand for our products and services and increase our cost of doing
business, or otherwise have a material adverse effect on our business, operating
results and financial condition.
Moreover, the applicability to the Internet and commercial online services
of existing laws in various jurisdictions governing issues such as property
ownership, sales and other taxes, libel and personal privacy is uncertain and
may take years to resolve. For example, tax authorities in a number of states
are currently reviewing the appropriate tax treatment of companies engaged in
online commerce, and new state tax regulations may subject us to additional
state sales and income taxes. Any such new legislation or regulation, the
application of laws and regulations from jurisdictions whose laws do not
currently apply to our business, or the application of existing laws and
regulations to the Internet and commercial online services could have a material
adverse effect on our business, operating results and financial condition.
We may be subject to regulation by a number of states that have "seller of
travel" acts. These acts require us to register as a seller of travel, comply
with certain disclosure requirements, post a bond or escrow funds and/or
participate in state restitution funds. We are in the process of making
applications, as appropriate, in California and Florida. There is a possibility
that we may later become subject to regulation requirements in additional
states, however we do not anticipate that it will have a material impact on us
or our financial condition. All of our services are subject to federal and state
consumer protection laws and regulations prohibiting unfair and deceptive trade
practices. These consumer protection laws could result in substantial costs and
interfere with the conduct of our business.
Research and Development.
-------------------------
During the two (2) years ended on March 31, 1999, we invested approximately
$195,000 developing, maintaining and operating our first generation proprietary
software. We have subsequently incurred expenses developing second generation
proprietary software to gather data from GDS systems and to present that data to
our customers. To this end, we entered into a consulting agreement with a
consulting firm and hired personnel necessary to complete this endeavor,
including a database administrator. We incurred development expenses through the
time of implementation of this second generation system of approximately
$770,000. To the extent expenses for the development of this software are not
subsequently followed by increased revenues, our operating results will
fluctuate and may result in losses in subsequent quarters. If we are unable to
adjust spending in a timely manner to compensate for any unexpected expenses or
significant revenue shortfalls, there would be an immediate material adverse
effect on our business, operating results and financial condition.
Environmental Compliance.
-------------------------
The costs and effects of compliance with environmental laws do not have and
are not anticipated to have a material impact on us or our financial condition.
-19-
<PAGE>
Employees.
----------
As of June 30, 2000, we had 92 full time employees and 15 part-time
employees. Of these employees, 16 were involved in sales and marketing, 44 were
involved in customer service, 25 were involved in technology and development and
22 were involved in operations, finance and administration.
Additional information.
-----------------------
Our Company files annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission. Such reports,
proxy statements and other information may be inspected and copied on the
Commission's home page on the World Wide Web at http://www.sec.gov or at the
Commission's public reference room located at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's Regional Offices located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and at 7 World Trade Center, 13th Floor, New York, New York
10048. Information about the Commission's public reference room can be obtained
by calling 800/SEC-0330. Copies of such materials may also be obtained at
prescribed rates from the Pubic Reference Section of the Commission located at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following selected financial data for the years ended March 31, 2000
and 1999 have been derived from our financial statements which are included in
this registration statement. The financial data should be read in conjunction
with the financial statements and the discussion and analysis which follows.
-20-
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data.
------------------------
As a Percent of Revenues
Years Ended March 31 Years Ended March 31
-------------------------- -----------------------
Statements of Operations Data 2000 1999 2000 1999
----------------------------- ----------- ----------- ------- -------
<S> <C> <C> <C> <C>
Total Revenues $ 3,750,942 $ 886,172 100.0% 100.0%
Cost of Revenues 2,516,043 532,050 67.1% 60.0%
----------- ----------- ---------- -------
Gross Profit 1,234,899 354,122 32.9% 40.0%
----------- ----------- ---------- -------
Operating Expenses
Sales and Marketing 254,901 86,258 6.8% 9.8%
General and Administrative 1,735,525 240,380 46.3% 27.1%
Stock-Based Compensation 1,055,816 0 28.1% 0.0%
----------- ----------- ---------- -------
Total Operating Expenses 3,046,242 326,638 81.2% 36.9%
----------- ----------- ---------- -------
Income/(Loss) From Operations (1,811,343) 27,484 (48.3%) 3.1%
Interest Income 55,378 0 1.5% 0.0%
Loss From Unconsolidated Subsidiary (42,468) 0 (1.1%) 0.0%
----------- ----------- ---------- -------
Income/(Loss) Before Taxes (1,798,433) 27,484 (47.9%) 3.1%
Provision for Income Taxes 0 0 0.0% 0.0%
----------- ----------- ---------- -------
Net Income/(Loss) (1,798,433) 27,484 (47.9%) 3.1%
Cumulative Preferred Stock Dividends (85,808) 0 (2.3%) 0.0%
----------- ----------- ---------- -------
Net Income/(Loss) Applicable To
Common Stockholders ($1,884,241) $ 27,484 (50.2%) 3.1%
=========== =========== ========== =======
Average Number of Shares
Of Common Stock Outstanding 9,257,298* 6,009,518
Basic and diluted ($ 0.20) $ 0.00
*Excludes 500,000 shares for conversion of convertible preferred stock. Also,
excludes 530,000 outstanding stock options.
-21-
</TABLE>
<PAGE>
March 31
----------------------------
Balance Sheet Data 2000 1999
------------------------------------- ----------- -----------
Cash and Cash Equivalents $ 3,654,281 $ 6,227
Accounts Receivable 729,467 106,562
Prepaid Assets 128,273 0
----------- -----------
Current Assets 4,512,021 112,789
Property and Equipment - Net 420,970 46,345
Software Under Development 770,255 0
----------- -----------
Total Assets $ 5,703,246 $ 159,134
=========== ===========
Accounts Payable $ 1,098,071 $ 83,066
Accrued Liabilities 293,999 44,596
Cumulative Preferred Stock Dividends 85,808 0
Notes Payable to Stockholders 0 68,538
----------- -----------
Current and Total Liabilities 1,477,878 196,200
Redeemable Convertible Preferred Stock 4,340,694 0
Stockholders' Deficit (115,326) (37,066)
----------- -----------
Total Liabilities and Stockholders' Deficit $ 5,703,246 $ 159,134
=========== ===========
QUARTERLY FINANCIAL DATA (UNAUDITED)
------------------------------------
The Company's interim financial information for the quarterly periods ended
June 30, September 30 and December 31, 1999 have been restated to (1) record
additional cost of revenues for commission payments to affiliates, and (2)
recognize additional compensation expense related to employee stock options. In
addition, certain commission revenues from hotels which are received through a
third party commission processing company were previously recorded net of
charges from the processing company. The financial information has been revised
to present commissions on a gross basis and the related processing charges as an
operating expense. This reclassification had no effect on net income/loss.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Three Months Ended
June 30, 1999 September 30, 1999 December 31, 1999 Three Months Year
------------------------- ----------------------- ------------------------ Ended Ended
Statement of Previously As Previously As Previously As March 31, March 31,
Operations Data Reported Restated Reported Restated Reported Restated 2000 2000
--------------- -------- -------- -------- -------- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $ 381,449 $ 392,900 $1,023,452 $1,052,159 $1,008,161 $1,041,991 $1,263,892 $3,750,942
Cost of Revenues $ 284,214 $ 370,466 $ 511,120 $ 545,798 $ 588,575 $ 664,556 $ 935,223 $2,516,043
Operating Expenses $ 844,386 $ 844,386 $ 465,945 $ 545,199 $ 494,621 $ 645,519 $1,011,138 $3,046,242
Net Income/(Loss) ($ 747,151) ($ 821,952) $ 46,387 ($ 38,838) ($ 117,503) ($ 310,552) ($ 27,091) ($1,798,433)
Average Number of
Shares of
Common Stock
Outstanding 2,580,900 2,580,900 9,465,052 9,465,052 10,336,804 10,336,804 10,349,304 9,257,298
Net Income/(Loss)
Per Share
Basic and diluted ($ 0.29) ($ 0.32) $ 0.005 ($ 0.004) ($ 0.011) ($ 0.030) ($ 0.07) ($ 0.20)
-22-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The following is a summary of selected quarterly financial information for each
of the quarters in the years ended March 31, 2000 and 1999.
Three Months Ended Three Months Ended Three Months Ended Three Months Ended
June 30 September 30 December 31 March 31
------------------------- ------------------------ ------------------------ -------------------------
Statement of
Operations Data 1999 1998 1999 1998 1999 1998 2000 1999
-------------------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $ 392,900 155,701 $1,052,159 252,471 $ 1,041,991 218,791 $ 1,263,892 $ 259,209
Cost of Revenues $ 370,466 50,427 $ 545,798 115,143 $ 664,556 152,223 $ 935,223 $ 214,257
Operating Expenses $ 844,386 49,544 $ 545,199 63,475 $ 645,519 84,233 $ 1,011,138 $ 129,386
Net Income/(Loss) ($ 821,952) 55,730 ($ 38,838) 73,853 ($ 310,552) (17,665) ($ 627,091) ($ 84,434)
Average Number of
Shares Of Common
Stock Outstanding 2,580,900 2,255,000 9,465,052 6,009,518 10,336,804 6,009,518 10,349,304 6,009,518
Net Income/(Loss)
Per Share
Basic and diluted ($ 0.32) 0.02 ($ 0.004) 0.012 ($ 0.030) 0.00 ($ 0.07) ($ 0.01)
</TABLE>
Introduction.
-------------
Our revenues are comprised principally of commissions paid by travel
suppliers related to the online booking of travel reservations for our
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 our web site are
recognized over the period the advertisements are displayed. Cost of revenues
includes the expenses of operating our 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. These affiliated web sites have been the primary
contributors to our revenue growth. Facilities expense, depreciation and other
indirect items related to the generation of revenue are included in general and
administrative expense.
Results of Operations and Comparison of Operating Results.
----------------------------------------------------------
Total revenues for the fiscal year ended March 31, 2000 (FY2000) were
$3,750,942, which was 4.2 times the $886,172 of revenues for the fiscal year
ended March 31, 1999 (FY1999). Net income for fiscal year 2000 was a loss of
$1,798,433, due in substantial part to $1,055,816 of non-cash charges for
stock-based compensation. The stock-based compensation included $650,000 related
to employee stock bonuses and $405,816 related to employee stock option expense.
In the prior fiscal year ended March 31, 1999, net income was $27,484.
Revenues.
---------
Our principal source of revenue is commissions related to hotel bookings.
The level of confirmed hotel bookings has increased from an average of
approximately 1,250 per week during the year ended March 31, 1999, to an average
of approximately 5,150 per week during the year ended March 31, 2000. Confirmed
hotel bookings for the quarter ended March 31, 2000 averaged approximately 7,000
per week. Much of this growth is attributable to the expansion of our affiliate
program through which affiliated web sites are dynamically linked to our
reservation systems.
When a hotel booking is confirmed, we do not automatically receive revenue.
However, hotel bookings are an indicator of the anticipated level of customer
hotel stays which ultimately will result in revenues for the Company.
In January 1999, we implemented our own car reservation system on the
TravelNow web site and began providing links to this system for our affiliates.
Car reservations have grown progressively since January 1999 to an average of
approximately 3,500 confirmed reservations per week during the month of March
2000. Historically, we have outsourced our airline reservations to another
company and commissions from airline bookings have not been a significant
portion of total revenues. In November 1999, we began to introduce our own
airline system on selected web sites. This system is expected to increase our
revenues in the future, but did not contribute significantly to the revenues for
the year ended March 31, 2000.
-23-
<PAGE>
Cost of Revenues.
-----------------
Our cost of revenues as a percent of revenues increased from 60.0% to 67.1%
in the years ended March 31, 1999 and 2000, respectively, even though revenues
in the most recent year were approximately 4.2 times the level of the prior
year. This change in the cost of revenue as a percent of revenue is due
primarily to one factor--commission payments to affiliates. Beginning in the
spring of 1999, commissions to affiliated web sites were generally increased to
50% of collected commissions related to those affiliates. Since that time, the
number of affiliates has expanded rapidly and the proportion of our business
generated by these affiliates has increased substantially.
In addition, our cost of revenue has increased on an absolute basis because
we significantly expanded our 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 to a greater proportion generated by
affiliates and the expansion of our cost structure increased the cost of
revenues to 94.3% of revenues in the quarter ended June 30, 1999. This ratio
declined to 51.9% in the September 1999 quarter and to 63.8% in the December
1999 quarter as the anticipated growth in revenues was realized. During the
fourth quarter ended March 31, 2000, additional staff expansion increased the
cost of revenue percentage again to 74.0%.
Although our existing staff and facilities are generally adequate to
support higher levels of revenues, we plan to further expand our personnel and
facilities to prepare for future growth. As a result, the cost of revenues as a
percent of revenues will fluctuate on a cyclical basis until the anticipated
revenue increases are realized.
Sales and Marketing Expenses.
-----------------------------
Sales and marketing expenses include payroll and other costs associated
with developing and managing our affiliate program as well as direct advertising
expenditures. Sales and marketing expenses were 6.8% and 9.8% of revenues in the
years ended March 31, 2000 and 1999, respectively. We have increased our staff
in this area to generate additional revenue growth and the ratio of sales and
marketing expenses to revenues was 10.6% in the fourth fiscal quarter ended
March 31, 2000. In the year ended March 31, 1999, we traded advertising services
with another Internet-based organization. The value of these advertisements was
recognized in our financial statements as revenues and advertising costs in
equal amounts.
We intend to further increase our sales and marketing activities with the
purpose of generating additional revenue growth. Sales and marketing expenses as
a percent of revenues are expected to fluctuate until such additional revenues
are realized.
General and Administrative Expenses.
------------------------------------
General and administrative costs increased from $240,380 in the year ended
March 31, 1999, to $1,735,525 in the year ended March 31, 2000. As a percent of
revenues, general and administrative expenses increased from 27.1% to 46.3%.
These increases in general and administrative expense, both on an absolute
and a percent of revenue basis, in the year ended March 31, 2000, relative to
the comparable prior year are due to two primary factors: (1) expansion of staff
and other activities (principally travel related) to support our growth, and (2)
professional fees associated with becoming a public company.
Fluctuations in general and administrative expenses as a percent of
revenues can be expected to continue as we expand our staff to generate and
support higher levels of revenues.
Subsequent Events and Commitments.
----------------------------------
On March 15, 2000, we entered into a consulting agreement for certain
public relations services in exchange for consideration totaling $180,000. Half
of such consideration is to be paid with restricted shares of our common stock.
For purposes of determining the number of shares to be issued, the last quoted
sale price of our common shares on March 30, 2000, was used. As of the effective
date of this registration statement, no shares have been issued pursuant to such
agreement.
On March 21, 2000, we entered into a consulting agreement for certain
consulting services in exchange for 2,000 restricted shares of our common stock.
As of the effective date of this registration statement, no shares have been
issued pursuant to such agreement.
-24-
<PAGE>
In 1999, we entered into a consulting agreement for computer programming
services related to software development. This project has been completed at a
cost of $538,059. In addition, we purchased application software related to the
project from the same vendor for $88,698. As of March 31, 2000, the amount
payable to this vendor was $153,375. The total cost of the software development
program was $770,255. This amount includes consulting fees, purchased software
and direct costs of Company personnel.
In April 2000, we provided loans to Mr. Wasson and Mr. Noble in the amounts
of $65,000 and $60,000, respectively, for the purpose of paying personal income
taxes related to the May 18, 1999, stock bonus received by these individuals.
These loans are in the form of Demand Promissory Notes and bear interest at 8.0%
payable annually.
Liquidity and Capital Resources.
--------------------------------
In conjunction with the merger of TravelNow of Missouri and Old Sentry
which was completed in July 1999, we 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.
In November 1999, we sold 25,000 shares of restricted common stock to an
institutional investor for $250,000.
On January 5, 2000, we sold 500,000 new restricted convertible preferred
shares of stock to an institutional investor at $9.00 per share for a total of
$4.5 million. The preferred shares, plus any unpaid and accrued dividends, are
convertible on a share-for-share basis into our common stock subsequent to an
effective registration of such common stock and the listing of our common stock
on the Nasdaq SmallCap Market. TravelNow's common stock was listed on the Nasdaq
SmallCap Market effective May 25, 2000.
We are in the process of registering 527,000 shares of common stock, an
amount we believe is sufficient to convert all outstanding preferred shares and
shares representing any unpaid and accrued dividends the selling security
holders elect to convert into shares of common stock. Therefore, assuming
conversion of the 527,000 shares, our outstanding unrestricted shares will
increase from 2,572,502 to 3,095,502 and total common shares outstanding will
increase from 10,349,304 to 10,872,304. The proceeds from this sale of stock
will continue to be used for working capital and other corporate purposes as we
expand our operations and prepare for the anticipated growth in our web-based
travel services.
The $4.5 million sale of convertible preferred stock has been included in
our financial statements net of $159,306 of expenses related to the sale,
including the registration of common stock, through March 31, 2000. Additional
expenses to complete the registration of the common stock and to issue the
initial prospectus are expected to be approximately $75,000, however, the impact
of such additional expenses is not included in the proforma balance sheet below.
The pro forma balance sheet impact of the conversion of our preferred stock into
our common stock is shown on the following table.
<TABLE>
<CAPTION>
Conversion
3/31/2000 Of Preferred Pro Forma
ASSETS As Reported Stock 3/31/2000
----------- ----------- -----------
<S> <C> <C> <C>
Cash and Cash Equivalents $ 3,654,281 $ 0 $ 3,654,281
Other Assets 2,048,965 0 2,048,965
----------- ----------- -----------
Total Assets 5,703,246 0 5,703,246
=========== =========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY/(DEFICIT)
Total Liabilities $ 1,477,878 $ 0 $ 1,477,878
Redeemable Convertible Preferred Stock 4,340,694 (4,340,694) 0
Stockholders' Equity/(Deficit) (115,326) 4,340,694 4,225,368
----------- ----------- -----------
Total Liabilities and Equity $ 5,703,246 $ 0 $ 5,703,246
=========== =========== ===========
-25-
</TABLE>
<PAGE>
The proforma effect of the conversion of the preferred stock into common
stock increases Stockholders' Equity as of March 31, 2000, from a deficit of
$115,326 to $4,225,368. This conversion is automatic upon the satisfaction of
two conditions: (1) the listing of our common stock on the Nasdaq SmallCap
Market, and (2) the effectiveness of a registration statement covering the
shares of common stock converted from the preferred stock and all unpaid
dividends. The Nasdaq SmallCap Market listing has been completed.
Effective March 27, 2000, our common and preferred stock was changed from
no par value to $0.01 par value per share. This change had no effect on total
Stockholders' Equity. We had a net loss of $1,798,433 for the year ended March
31, 2000. Non-cash charges of $1,055,816 for stock-based compensation and a
$42,468 loss from an unconsolidated subsidiary were included in this loss. Net
cash used in operating activities was $285,619.
Cash used in investing activities during the year ended March 31, 2000, was
$1,088,648. This amount included $616,880 for software development, $429,300 for
the acquisition of property and equipment, and a $42,468 investment in an
unconsolidated subsidiary.
During the year ended March 31, 2000, net cash provided by financing
activities was $5,022,321, primarily from $4,340,694 related to the sale of
convertible preferred stock, $499,985 in capital contributions and $250,180 from
the sale of common stock. A total of $68,538 of cash was used to repay all of
our outstanding notes payable. Cash and cash equivalents increased by $3,648,054
to $3,654,281 during the fiscal year.
We believe that our current cash resources in combination with the
anticipated levels of operating revenues are sufficient to meet our cash
requirements in the foreseeable future. Nevertheless, additional financing will
probably be required to fund our longer-term growth. There is no assurance that
such capital will be available to us at that time in sufficient amounts or on
acceptable terms. We do not have any specific plans to raise additional debt or
equity capital.
The infusion of nearly $5.1 million in capital into TravelNow from the sale
of common and preferred stock and from capital contributions has provided us
with the funds to pursue our strategy of continued technical development,
product line expansion and customer growth. During the fiscal year ending March
31, 2001, we have plans to make additional investments to implement our
strategy. However, the rate of investment spending on software development will
decline because the underlying platform of our new reservation system has been
completed. We are evaluating international market opportunities and will
continue to invest in market growth as well as enhanced capabilities and
capacities. Since many of these expenses will be incurred in advance of the
anticipated revenue growth, management is projecting that we will operate at a
net loss during fiscal year 2001.
DESCRIPTION OF PROPERTY
Our operations are headquartered in Springfield, Missouri where we lease
space to house our principal administrative, sales and marketing, and customer
service organizations as well as our primary computer and communications
systems. In March, 2000 we leased an additional 5,000 square feet of office
space at our Springfield headquarters to accommodate our growing staff,
primarily in the areas of technical development and customer service. We
anticipate that we will require additional space within the next 12 months and
believe that such additional space will be available on commercially reasonable
terms.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no transactions, or series of transactions, during fiscal year
1999 or fiscal year 2000, nor are there any currently proposed transactions, or
series of transactions, to which we are a party, in which the amount exceeds
$60,000, and in which to our knowledge any director, executive officer, nominee,
five percent or greater shareholder, or any member of the immediate family of
any of the foregoing persons, has or will have any direct or indirect material
interest other than that described below.
MARKET FOR REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Price Range of Common Stock.
---------------------------
Old Sentry's stock traded under the symbol SNTY on the OTC Bulletin Board
from February 5, 1999, until August 1, 1999. There were approximately 491,000
shares of Old Sentry's common stock issued and outstanding as of July 23, 1999.
-26-
<PAGE>
We have done a search to determine the availability of high and low bid
information for Old Sentry common stock for the periods indicated below, and
have been unable to locate these historical records if in fact such activities
in the shares occurred prior to the merger of July 27, 1999, referred to
elsewhere in this filing. Our stock was traded under the symbol TNOW on the OTC
Bulletin Board from August 2, 1999, to May 24, 2000. On May 25, 2000, our stock
was approved for listing on the Nasdaq SmallCap Market, where it is currently
traded under the symbol TNOW. There were 10,349,304 shares of the registrant's
common stock issued and outstanding as of June 30, 2000. The following table
shows the high and low bid information for our common stock as reported on the
Nasdaq SmallCap Market.
High Low
---- ---
Second Quarter from August 2 - September 30, 1999 $ 15.125 $ 5.125
Third Quarter from October 1 - December 31, 1999 $ 15,875 $ 10.375
Fourth Quarter from January 1 - March 31, 2000 $ 17.500 $ 10.000
First Quarter from April 1 - June 30, 2000 $ 11.000 $ 7.750
The closing sale price of our common stock as reported on the Nasdaq
SmallCap Market on June 30, 2000 was $8.00 per share. As of March 31, 2000,
there were approximately 1,103 holders of record of our common stock. This
includes the number of persons whose stock is in nominee or "street name"
accounts through brokers.
Dividend Policy.
----------------
We have never declared nor paid any cash dividends on our common stock. We
anticipate that we will retain all of our future earnings for use in the
expansion and operation of our business and do not anticipate paying cash
dividends on the common stock.
EXECUTIVE COMPENSATION
Donald R. Mastropietro served as Chief Executive Officer of Old Sentry from
its inception in June 1996 until September 30, 1998. During the fiscal year
ended March 31, 1999, Mr. Mastropietro received compensation of $10,500. Ms.
Teresa B. Crowley served as Chief Executive Officer of Old Sentry from September
30, 1998, until July 23, 1999. During the fiscal year ending March 31, 1999, Ms.
Crowley received compensation of $3,000.
The following table summarizes the annual compensation we paid during the
fiscal year ended March 31, 2000 to our Co-Chief Executive Officers. Because
none of our executive officers worked their entire term, no individuals at
TravelNow received compensation in excess of $100,000 in that fiscal year. The
following table also includes the actual compensation that we paid during the
fiscal year ended March 31, 2000, to our other executive officers whose salary
and bonus is anticipated to exceed $100,000 annually during the current fiscal
year, for services rendered to us in all capacities.
[REMAINDER OF PAGE LEFT BLANK]
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<PAGE>
<TABLE>
<CAPTION>
Annual Summary Compensation Table
---------------------------------
Other Annual Long-Term
Name and Principal Position Annual Compensation Compensation ($) Compensation Awards
--------------------------- --------------------------- ---------------- --------------------------
Year Securities Restricted
Ended Underlying Stock
March 31 Salary ($) Bonus ($) Options (#) Awards ($)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John Christopher Noble 2000 $90,385.00 (3) $2,969 (2) 792,830 (9)
Jeff Wasson,
Chief Executive Officer 2000 $90,385.00 (4) $4,000 (2) 792,830 (9)
H. Whit Ehrler,
Chief Financial Officer and
Vice President 2000 $73,500.00 (7) (6) (2) 250,000 (8)
Christopher R. Kuhn,
Chief Information Officer
and Vice President 2000 $90,000.00 (7) (5) (2) 250,000 (8)
J.D. Bryant (1)
Vice President 2000 $18,461.52 (2)
Michael Bauer (1)
Vice President 2000 $0.00 (2)
Marvin McDaniel (1)
Vice President 2000 $26,000.00 (2)
Ross Summers (1)
Vice President 2000 $25,769.18 (2)
</TABLE>
(1) J.D. Bryant and Marvin McDaniel, who joined TravelNow after January 1,
2000 and were appointed as executive officers on May 3, 2000, will receive
annual salaries of $120,000 and $104,000 respectively. Ross Summers, who joined
the Company on September 15, 1999, was appointed as an executive officer on May
3, 2000, will receive an annual salary of $104,000. Mr. Michael Bauer, who
joined TravelNow on April 11, 2000 and was also appointed as an executive
officer on May 3, 2000, will receive an annual salary of $104,000.
(2) Represents personal benefits such as car expenses if in excess of 10%
of total annual salary. For the period covered by this registration statement no
other annual income had been paid to these Executive Officers.
(3) John Christopher Noble was a founding member of TravelNow in May 1995.
He acted as Co-Chief Executive Officer, Secretary and served as a Director until
May 3, 2000 when he resigned from all positions at TravelNow. Pursuant to an
unexecuted, but tentatively agreed upon, Mutual Release and Termination
Agreement between Mr. Noble and TravelNow, Mr. Noble will continue to receive
his salary and certain benefits for a period of 18 months. Direct payments,
exclusive of benefits, to Mr. Noble during this period total approximately
$267,000. Effective January 1, 2000, Mr. Noble's Employment Agreement was
amended to reflect an increase in his salary to $150,000 per year, as
recommended by the Compensation Committee, comprised of two of our independent
directors.
(4) Mr. Wasson's Employment Agreement has been amended to reflect an
increase in salary to $150,000 per year, effective January 1, 2000, as
recommended by the Compensation Committee, comprised of two of our independent
directors.
(5) The Employment Agreement with Mr. Kuhn provides that he will receive a
non- interest bearing loan of $80,000 after the completion of the first full
year of employment which is July 12, 2000. Upon completion of a second full year
of employment, the loan of $80,000 will be forgiven and all state and federal
income taxes related to such forgiveness will be grossed up and paid by
TravelNow at that time. If Mr. Kuhn voluntarily leaves TravelNow or is
terminated for cause or if he fails to remain with TravelNow for the full
two-year period, he is obligated to repay the non-interest bearing loan in
thirty-two equal monthly installments.
(6) The Employment Agreement with Mr. Ehrler provides that he will receive
a non-interest bearing loan of $80,000 after the completion of the first full
year of employment which is August 23, 2000. Upon completion of a second full
year of employment, the loan of $80,000 will be forgiven and all state and
federal income taxes related to such forgiveness will be grossed-up and paid by
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<PAGE>
TravelNow at that time. If Mr. Ehrler voluntarily leaves TravelNow or is
terminated for cause or if he fails to remain with TravelNow for the full
two-year period, he is obligated to repay the non-interest bearing loan in
thirty-two equal monthly installments.
(7) Mr. Kuhn joined TravelNow on July 12, 1999 and Mr. Ehrler joined
TravelNow on August 23, 1999.
(8) See the table following the caption "Option Grants as of March 31,
2000."
(9) On May 18, 1999, the date of grant of this stock bonus there was no
established market value for these securities. For details with respect to this
stock bonus see the material following the caption "Shares Issued as a Stock
Bonus."
Option Grants as of March 31, 2000.
-----------------------------------
The following table sets forth information with respect to stock options
granted to each of the named executive officers as of March 31, 2000, including
the potential realizable value over the 5 year term of the options based on
assumed rates of stock appreciation of 5% and 10% compounded annually with
respect to those options. The "Value of Unexercisable In-the-Money-Options" is
based upon a value of $10.25 per share which was the closing price of our shares
on the OTC Bulletin board on March 31, 2000, minus the per share exercise price,
multiplied by the number of shares underlying the option. No executive officer
exercised stock options during the period covered by this registration statement
and none of the stock options granted to the below named executives were
eligible to be exercised prior to June 12, 2000. These assumed rates of
appreciation comply with the rules of the Securities and Exchange Commission and
do not represent our estimate of future stock price. Actual gains, if any, on
stock option exercises will be dependent on the future performance of our common
stock. The options set forth below were granted pursuant to separate stock
option agreements executed in conjunction with the employment agreements between
us and the below named executives.
<TABLE>
<CAPTION>
Option Grants
Individual Grants
-----------------
Number of Shares
Underlying Options Value of Unexercised
Granted Which Were Exercise Price in-the-Money Options at
Name (1) Unexercised On 01/14/00 (2) Exercise Date (3) ($/ Share) March 31, 2000 (4)
-------- --------------------------- ----------------- ---------- ------------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C>
Christopher R. Kuhn (5) 100,000 07/12/2000 $ 1.50 $1,116,746 $1,409,196
50,000 07/12/2002 $15.00
50,000 07/12/2000 $30.00
50,000 07/12/2000 $45.00
H. Whit Ehrler (5) 100,000 08/23/2000 $ 1.50 $1,116,746 $1,409,196
50,000 08/23/2002 $15.00
50,000 08/23/2000 $30.00
50,000 08/23/2000 $45.00
</TABLE>
(1) In addition to the options granted to Messrs Kuhn and Ehrler, set forth
in the table above, we have granted to Mr. Dayberry, our Database Administrator,
five separate options, each for 6,000 shares, to purchase a total of 30,000
shares of our common stock. Each option may be exercised (or will vest) in three
equal annual installments commencing with the initial exercise date. The
exercise date of the first option covering the initial underlying 6,000 shares
is September 22, 2000, with exercise dates of the remaining options being
September 22 in each of the following years, 2001, 2002, 2003 and 2004. The
option price or strike price for each 6,000 share option on each of the exercise
dates is $5.00 in 2000, $20.00 in 2001, $35.00 in 2002, $50.00 in 2003, and
$65.00 in 2004. All unexercised options will expire on September 22, 2004,
except for the option that may be exercised on September 22, 2004. That option
will not expire until December 22, 2004. The initial option, with a strike price
of $5.00 per share, is considered an unexercisable in- the-money option as of
the date of this filing. The value of this unexercisable in-the-money-option is
based upon a value of $10.25 per share which was the closing price of our shares
on the OTC Bulletin Board on March 31, 2000, minus the per share exercise price,
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<PAGE>
multiplied by the number of shares underlying the option. The potential
realizable value of this unexercisable in the money option assuming an annual
rate of appreciation of 5% and 10% is $40,203 and $50,731 respectively.
(2) All options are considered unqualified options under the Internal
Revenue Code, therefore, upon their exercise, the employee will realize taxable
gain equal to the difference between the fair market value as of the exercise
date and the exercise price.
(3) Options are exercisable in three equal installments (i.e., 33% of the
shares may be purchased per installment). The first installment may be exercised
on the exercise date set forth in the table above with the balance of the
options exercisable in two equal installments on the two succeeding anniversary
dates following the exercise date. Certain of the installments are not
exercisable until the end of Messrs. Kuhn's and Ehrler's five year option
agreements. Messrs. Kuhn and Ehrler have an additional ninety days after the end
of the five-year period to exercise the options with respect to those
installments.
(4) The closing price of our shares on the OTC Bulletin Board on March 31,
2000, was $10.25. The first installments of the initial options granted to
Messrs. Kuhn, Ehrler and Dayberry are exercisable on July 23, 2000, August 23,
2000 and September 22, 2000 respectively.
(5) As of the end of our fiscal year 2000, we had issued stock options
covering 530,000 shares of our common stock, par value $0.01 per share. Mr. Kuhn
holds 47% of those options, Mr. Ehrler holds 47% of those options and Mr.
Dayberry holds 6% of those options.
On May 3, 2000, the Board of Directors adopted, subject to shareholder
approval, the TravelNow.com Inc. 2000 Omnibus Stock Incentive Plan (the "Plan").
The Plan is designed to enable employees and non-employee directors of the
Company to acquire or increase their equity interests in the Company on such
reasonable terms as the Committee or the Board determines. The Plan provides for
administration by the Committee, or another committee designated by the Board,
consisting of two "non-employee directors" as defined in Section 16 of the
Exchange Act. The Board created a stock option committee to administer the Plan,
and elected two non-employee directors, Bill Perkin and Jerry Rutherford, to
serve on the stock option committee. Among the powers granted to the Committee
are the powers to interpret the Plan, establish rules and regulations for its
operation, select employees of the Company and its subsidiaries to receive
awards and determine timing, form, amount and other terms and conditions
pertaining to any award.
Awards may be granted under the Plan to any employee, consultant or
independent contractor of the Company or subsidiaries of the Company. Awards may
also be granted to directors who are not employees of the Company or its
subsidiaries, but only to the extent set forth in Section 6.3 or Article XII.
Approximately 1,552,395 shares are available for use in grants under the
Plan. The Board believes that the number of shares of common stock reserved for
issuance under the Plan is reasonable to achieve the goals of the Plan.
The Plan provides for the granting of any or all of the following types of
awards: (i) stock options, including non-qualified stock options and stock
options intended to qualify as "incentive stock options" under Section 422 of
the Internal Revenue Code of 1986, as amended, (ii) performance shares, (iii)
restricted common stock, (iv) common stock, and (v) any other incentive award
of, or based on, the Company's common stock.
On June 7, 2000, the stock option committee awarded stock options to all
TravelNow employees, except the CEO, employed on that date. Each person was
given the right to purchase shares equal to that employee's annual salary
divided by the closing sale price of the Company's common stock, par value $0.01
per share, on June 7, 2000. In addition, the stock option committee determined
that the Company will offer stock options to new employees four times a year on
the last day of each calendar quarter. Each employee will have a waiting period
of ninety days before they become eligible to receive an award. The stock
options vest in three annual installments beginning on the first anniversary
date of the Initial Grant Date or the Quarterly Grant Date.
In accordance with the terms of the Plan, management will submit for
approval to our stock option committee, requests for the issuance of additional
stock options and certain stock grants to our employees, Messrs. J.D. Bryant,
Michael Bauer and Erik Rothchild covering 25,000, 25,000 and 15,000 shares,
respectively. Management will also submit for approval by the stock option
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<PAGE>
committee the issuance of an option covering 20,000 shares to Antoine Toffa, a
member of our Board of Directors. Management will ask for approval of a grant of
shares for services rendered by Keating Communications Inc., our public
relations firm, which also provides certain assistance with regard to investor
relations. Management will ask for the approval of the issuance of 2,000 shares
to Scott Wayne, who serves as a consultant, for services rendered and for the
issuance of 250 shares to Allen Darnell, an employee, for services rendered.
Management will also ask for approval of the issuance, to Becker Communications,
of 6,000 shares in exchange for its services in developing a logo and certain
other intangible property for us.
Adjustments in the Event of Recapitalization, Merger of the Company.
--------------------------------------------------------------------
Under our stock option agreements with the executives named above, in the
event of a corporate reorganization, the executives named above will have the
right to exercise any unexpired option whether currently exercisable or not as
to any installments.
Audit Committee.
----------------
In December 1999, the Board of Directors formed the audit committee for the
purpose of reviewing our internal accounting procedures and consulting with and
reviewing the services provided by our independent public accountants. Our audit
committee consists of our three independent directors, Bill Perkin, Jerry
Rutherford and Antoine Toffa.
Compensation Committee.
-----------------------
In December 1999, the Board of Directors formed the compensation committee.
The compensation committee reviews and recommends to the board the compensation
and benefits of all of our officers and reviews general policy relating to
compensation and benefits of our employees. Our compensation committee consists
of two of our independent directors, Bill Perkin and Jerry Rutherford.
Stock Option Committee.
-----------------------
In May 2000, the Board of Directors formed the stock option committee. The
stock option committee will administer the TravelNow.com Inc. 2000 Omnibus Stock
Incentive Plan and grant stock options pursuant to such plan. Our stock option
committee consists of two of our independent directors, Bill Perkin and Jerry
Rutherford.
Compensation of Directors.
--------------------------
Directors who are also employees are not separately compensated.
Non-employee directors are not currently compensated but may be compensated in
the future.
Employment Agreements/Termination of Employment Agreements.
-----------------------------------------------------------
Employment Agreement with Jeff Wasson, Chief Executive Officer.
Mr. Wasson's Employment Agreement is for a term of five (5) years, from
October 1, 1999, to September 30, 2004 and calls for participation in all
employee benefit programs. Effective January 1, 2000, Mr. Wasson's Employment
Agreement was amended to include a base salary of $150,000 per year for the
remainder of the term. In the event of a termination of executive by us without
cause, we shall make a lump sum payment to Mr. Wasson equal to his base salary
for the remainder of that year. Thereafter, on each remaining anniversary date
for the balance of the term of the Employment Agreement, Mr. Wasson will be paid
a lump sum equal to this base salary. In addition, Mr. Wasson agrees not to
directly or indirectly solicit or have contact with (1) our travel suppliers,
(2) GDS systems or (2) our employees or customers for two years after
termination of employment. However, we cannot give any assurance that these
provisions will be enforceable.
Mutual Release and Termination Agreement with John Christopher Noble.
-31-
<PAGE>
Mr. Noble's Employment Agreement was for a term of five (5) years, from
October 1, 1999 to September 30, 2004 and called for participation in all
employee benefit programs. Effective January 1, 2000, Mr. Noble's Employment
Agreement was amended to include a base salary of $150,000 per year for the
remainder of the term. Mr. Noble resigned on May 3, 2000, from his positions at
TravelNow as Co-Chief Executive Officer, Secretary, Director and employee.
Although a Mutual Release and Termination Agreement has not been executed as of
the date of this registration statement, TravelNow and Mr. Noble have
tentatively agreed that effective as of May 3, 2000, Mr. Noble will continue to
receive his salary and certain benefits for a period of 18 months. Pursuant to a
provision in Mr. Noble's Employment Agreement, which survives termination, Mr.
Noble agrees not to directly or indirectly solicit or have contact with (1) our
travel suppliers, (2) GDS systems or (2) our employees or customers for two
years after termination of employment. However, we cannot give any assurance
that these provisions will be enforceable.
Employment Agreement with Christopher R. Kuhn, Vice President & Chief
Information Officer.
The term of Mr. Kuhn's agreement is for five (5) years, from July 12, 1999,
to July 11, 2004 and calls for participation in all employee benefit programs.
Mr. Kuhn's Employment Agreement calls for a base salary of $130,000 per
year and receipt of a non-interest bearing loan of $80,000 after the completion
of the first full year of continuous full-time employment. Upon completion of a
second full year of continuous full-time employment, the loan of $80,000 will be
forgiven and all state and federal income taxes related to such forgiveness will
be grossed-up and paid by us at that time. If Mr. Kuhn voluntarily leaves, or is
discharged for cause before the completion of the two year period, he is
obligated to repay the non-interest bearing loan in equal monthly installments
over a period of thirty-two (32) months.
In the event of a termination of executive by us without cause, we shall
make a lump sum payment to Mr. Kuhn equal to his base salary for the remainder
of that year. Thereafter, on each remaining anniversary date for the balance of
the term of the Employment Agreement, Mr. Kuhn will be paid a lump sum equal to
his base salary. In addition, Mr. Kuhn agrees not to directly or indirectly
solicit or have contact with (1) our travel suppliers, (2) GDS systems or (2)
our employees or customers for two years after termination of employment. We
cannot give any assurance that these provisions will be enforceable.
Employment Agreement with H. Whit Ehrler, Vice President & Chief Financial
Officer.
The term of Mr. Ehrler's agreement is for five (5) years from August 23,
1999, to August 22, 2004 and calls for participation in all employee benefit
programs.
Mr. Ehrler's Employment Agreement calls for a base salary of $130,000 per
year and receipt of a non-interest bearing loan of $80,000 after the completion
of the first full year of continuous full-time employment. Upon completion of a
second full year of continuous full-time employment, the loan of $80,000 will be
forgiven and all state and federal income taxes related to such forgiveness will
be grossed-up and paid by us at that time. If Mr. Ehrler voluntarily leaves or
is discharged for cause before the completion of the two year period, he is
obligated to repay the non-interest bearing loan in equal monthly installments
over a period of thirty-two months.
In the event of a termination of executive by us without cause, we shall
make a lump sum payment to Mr. Ehrler equal to his base salary for the remainder
of that year. Thereafter, on each remaining anniversary date for the balance of
the term of the Employment Agreement, Mr. Ehrler will be paid a lump sum equal
to his base salary. In addition, Mr. Ehrler agrees not to directly or indirectly
solicit or have contact with (1) our travel suppliers, (2) GDS systems or (2)
our employees or customers for two years after termination of employment.
However, we cannot give any assurance that these provisions will be enforceable.
LEGAL OPINION
-------------
Shook, Hardy & Bacon L.L.P. has given its opinion as attorneys-at-law that
the shares offered for sale herein have been fully paid, validly issued and are
non-assessable.
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<PAGE>
EXPERTS
-------
Our financial statements as of and for the years ended March 31, 2000 and
1999, included in this prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
--------------------------------------------------
During the most recent two fiscal years and any later interim periods, the
principal independent accountant has not resigned, declined to stand for
reelection, or been dismissed as a result of any disagreement on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, and during such periods, the principal accountant's reports
on our financial statements have not contained an adverse opinion or disclaimer
of opinion and have not been modified as to uncertainty, audit scope, or
accounting principles. Upon consummation of the Merger effective as of July 27,
1999 and after approval by the Board of Directors, Deloitte & Touche LLP became
our independent accountants. This change was noted in our Current Report on Form
8-K filed on August 6, 1999.
-33-
<PAGE>
TRAVELNOW.COM INC.
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report...............................................F-2
Statements of Operations for the Years Ended
March 31, 2000 and 1999...........................................F-3
Balance Sheets for March 31, 2000 and 1999.................................F-4
Statements of Stockholders' Deficit for the
Years Ended March 31, 2000 and 1999...............................F-5
Statements of Cash Flows for the Years Ended
March 31, 2000 and 1999...........................................F-6
Notes to Financial Statements for the Years
Ended March 31, 2000 and 1999.....................................F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
TravelNow.com Inc.
We have audited the balance sheets of TravelNow.com Inc. (the "Company") as of
March 31, 2000 and 1999, and the related statements of operations, stockholders'
deficit, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of TravelNow.com Inc. as of March
31, 2000 and 1999, and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
/s/ Deloitte & Touche LLP
-------------------------
Little Rock, Arkansas
June 28, 2000
F-2
<PAGE>
TRAVELNOW.COM INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
--------------------------------------------------------------------------------
2000 1999
---- ----
REVENUES $ 3,750,942 $ 886,172
COST OF REVENUES 2,516,043 532,050
----------- -----------
GROSS PROFIT 1,234,899 354,122
----------- -----------
OPERATING EXPENSES:
General and administrative:
Other 1,735,525 240,380
Stock-based compensation 1,055,816 --
----------- -----------
Total general and administrative 2,791,341 240,380
Sales and marketing 254,901 86,258
----------- -----------
Total operating expenses 3,046,242 326,638
----------- -----------
INCOME (LOSS) FROM OPERATIONS (1,811,343) 27,484
OTHER INCOME (EXPENSE):
Interest income 55,378 --
Loss in unconsolidated subsidiary (42,468) --
----------- -----------
Total other income 12,910 --
----------- -----------
INCOME (LOSS) BEFORE INCOME TAX (1,798,433) 27,484
INCOME TAX EXPENSE (BENEFIT) -- --
----------- -----------
NET INCOME (LOSS) (1,798,433) 27,484
Cumulative preferred stock dividends (85,808) --
----------- -----------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS $(1,884,241) $ 27,484
=========== ===========
NET INCOME (LOSS) PER SHARE -
Basic and diluted $ (0.20) $ 0.00
=========== ===========
See notes to the financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
TRAVELNOW.COM INC.
BALANCE SHEETS
MARCH 31, 2000 AND 1999
-----------------------------------------------------------------------------------------
2000 1999
---- ----
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,654,281 $ 6,227
Accounts receivable:
Trade 719,641 106,562
Employee 9,826 --
----------- -----------
Total accounts receivable 729,467 106,562
Prepaid expenses 128,273 --
----------- -----------
Total current assets 4,512,021 112,789
PROPERTY AND EQUIPMENT, Net 1,191,225 46,345
----------- -----------
TOTAL $ 5,703,246 $ 159,134
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 1,098,071 $ 83,066
Accrued liabilities 279,947 44,596
Cumulative preferred stock dividends 85,808 --
Deferred revenue 14,052 --
Current portion of notes payable -- 58,538
Notes payable to stockholders -- 10,000
----------- -----------
Total liabilities 1,477,878 196,200
COMMITMENTS AND CONTINGENCIES
REDEEMABLE, CONVERTIBLE PREFERRED STOCK,
par value $0.01, authorized 25,000,000 shares, issued and
outstanding, 500,000 shares at $9 per share less issuance
costs of $159,306 as of March 31, 2000 4,340,694 --
STOCKHOLDERS' DEFICIT:
Common stock, par value $0.01, authorized 50,000,000
shares, issued and outstanding, 10,349,304 and
6,009,518 shares at March 31, 2000 and 1999, respectively 103,493 60,095
Additional paid-in capital 1,896,931 220,156
Accumulated deficit (2,115,750) (317,317)
----------- -----------
Total stockholders' deficit (115,326) (37,066)
----------- -----------
TOTAL $ 5,703,246 $ 159,134
=========== ===========
See notes to the financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRAVELNOW.COM INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
-----------------------------------------------------------------------------------------------------------------
Common Stock Additional
------------------------- Paid-In Accumulated Stockholders'
Shares Amount Capital Deficit Deficit
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1998 6,009,518 $ 60,095 $ 220,156 $ (344,801) $ (64,550)
Net income -- -- -- 27,484 27,484
----------- ----------- ----------- ----------- -----------
BALANCE, MARCH 31, 1999 6,009,518 60,095 220,156 (317,317) (37,066)
Net loss -- -- -- (1,798,433) (1,798,433)
Cumulative preferred stock dividends -- -- (85,808) -- (85,808)
Capital contributions -- -- 499,985 -- 499,985
Stock bonus 1,732,233 17,322 632,678 -- 650,000
Sale of common stock 29,797 298 249,882 -- 250,180
Merger into Sentry Accounting, Inc. 2,577,756 25,778 (25,778) -- --
Compensation expense on option grants -- -- 405,816 -- 405,816
----------- ----------- ----------- ----------- -----------
BALANCE, MARCH 31, 2000 10,349,304 $ 103,493 $ 1,896,931 $(2,115,750) $ (115,326)
=========== =========== =========== =========== ===========
See notes to the financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRAVELNOW.COM INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
------------------------------------------------------------------------------------------
2000 1999
---- ----
OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $(1,798,433) $ 27,484
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Stock based compensation 1,055,816 --
Depreciation 54,675 18,120
Loss from unconsolidated subsidiary 42,468 --
Changes in operating assets and liabilities:
Increase in accounts receivable - trade (613,079) (62,870)
Increase in accounts receivable - employee (9,826) --
Increase in prepaid expenses (128,273) --
Increase in accounts payable 861,630 38,350
Increase in accrued liabilities 235,351 17,416
Increase in deferred revenues 14,052 --
---------- ---------
Net cash provided by (used in) operating activities (285,619) 38,500
INVESTING ACTIVITIES:
Acquisition of property and equipment (1,046,180) (26,822)
Investment in unconsolidated subsidiary (42,468) --
---------- ---------
Net cash used in investing activities (1,088,648) (26,822)
FINANCING ACTIVITIES:
Proceeds from capital contribution 499,985 --
Proceeds from sale of common stock 250,180 --
Proceeds from sale of preferred stock, net 4,340,694 --
Proceeds from notes payable to stockholders -- 4,000
Repayments of notes payable to stockholders (10,000) (8,000)
Proceeds from notes payable -- 15,500
Repayments of notes payable (58,538) (20,800)
---------- ---------
Net cash provided by (used in) financing activities 5,022,321 (9,300)
Net increase in cash and cash equivalents 3,648,054 2,378
CASH AND CASH EQUIVALENTS:
Beginning of year 6,227 3,849
---------- ---------
End of year $ 3,654,281 $ 6,227
=========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 3,423 $ 4,609
=========== =========
NONCASH TRANSACTIONS:
Exchange of advertising $ -- $ 43,500
=========== =========
Accounts payable for property and equipment $ 153,375 $ --
=========== =========
Cumulative preferred stock dividends $ 85,808 $ --
=========== =========
See notes to the financial statements.
F-6
</TABLE>
<PAGE>
TRAVELNOW.COM INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
--------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Description of Business - In April 1995,
TravelNow.com Inc. ("TravelNow of Missouri") began operations as an
Internet-based travel company located in Springfield, Missouri. On May 25,
1999, TravelNow of Missouri authorized a 50:1 stock dividend. Retroactive
recognition has been given to the dividend for all periods presented.
On July 23, 1999, TravelNow of Missouri completed a merger with Sentry
Accounting, Inc. ("Sentry"). Under the terms of the merger, the shares of
TravelNow of Missouri were exchanged for shares of Sentry on a 1.97:1.0
ratio. The transaction consummated between TravelNow of Missouri and Sentry
is generally known as a reverse merger. A reverse merger is normally the
result of a merger in which the acquiring corporation has less size and
substance than the acquired company. The acquiring corporation survives as
a legal entity, but the shareholders of the acquired company obtain a
majority of the voting rights of the combined entity. The substantive
effect of the transaction is thus reversed from the legal effect. Since the
shareholders of TravelNow of Missouri received approximately 75% of the
common shares of the combined entity, TravelNow of Missouri is considered
the "acquiring" corporation for accounting purposes. Sentry's assets,
liabilities, revenues and expenses are immaterial. The assets and
liabilities of the combined TravelNow of Missouri and Sentry were recorded
in the merger at historical cost. The merged companies operate under the
name TravelNow.com Inc. (the "Company").
On July 28, 1999, the Company authorized a stock dividend of 4.25 common
shares on each outstanding share. Retroactive recognition has been given to
the dividend for all periods presented.
On March 27, 2000, the Company's common and preferred stock changed from no
par value to $0.01 par value per share. Retroactive recognition has been
given to this change for all periods presented.
The Company's Web site, www.travelnow.com, allows travelers to make hotel,
car and airline reservations electronically using the Internet. The Company
earns commissions for each reservation resulting in the traveler using the
services reserved.
Certain Risks and Concentrations - The Company has experienced cumulative
operating losses, and its operations are subject to certain risks and
uncertainties including, among others, risks and costs associated with
technology and regulatory trends, evolving industry standards, dependence
on its network infrastructure, key employees and suppliers, growth
management, actual and prospective competition by entities with greater
financial and other resources, the development of the Internet market and
need for additional capital. There can be no assurance that the Company
will be successful in sustaining profitability and positive cash flow in
the future.
The Company is potentially subject to a concentration of credit risk from
its accounts receivable. The Company considers the need for allowances for
potential credit losses and records such allowances if necessary.
Historically, such losses have not been significant.
A substantial portion of the Company's revenues comes from commissions paid
by travel suppliers for bookings made through its website. These travel
suppliers are not obligated to pay any specified commission rates for
bookings. The reduction or elimination of commissions paid by these travel
suppliers could have a materially adverse effect on the Company's results
of operations, financial position, and cash flows.
Commissions and related revenues accounted for 98% and 87% of total net
revenues for the years ended March 31, 2000 and 1999, respectively. The
Company relies on unrelated service entities to accumulate, process, and
remit a significant portion of these revenues. Discontinuance of these
services could result in disruption to the Company's business and
accordingly could have a materially adverse effect on the Company's results
of operations, financial position, and cash flows.
Cash and Cash Equivalents - Cash and cash equivalents include all
short-term, highly liquid investments purchased with a maturity date at
acquisition of three months or less. Cash and cash equivalents are stated
at cost, which approximates fair value.
Property and Equipment - Property and equipment are recorded at cost and
depreciated using an accelerated method over their estimated useful lives
ranging from 3-10 years. Expenditures for maintenance and repairs are
expensed when incurred.
F-7
<PAGE>
Long-Lived Assets - The Company periodically evaluates the recoverability
of its long-lived assets and would recognize impairment of long-lived
assets in the event the net book value of such assets exceeds the future
undiscounted cash flows attributable to such assets. No such impairments
have been identified to date. The Company assesses the impairment of
long-lived assets when events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable.
Revenue Recognition - Commissions earned are recognized on the traveler's
planned departure date as to hotels, planned return date as to rental cars,
and reservation date as to airlines, all net of allowances for
cancellations and credit risk. Banner advertising revenues are derived from
other companies advertising on the Company's Web site and are recognized
upon display of the advertising on the Web site, or over the display period
depending on several factors including the term of the display agreement.
Cost of Revenues - Cost of revenues is predominantly comprised of
commission sharing with affiliates, transaction and personnel costs,
software and telecommunications costs associated with operating the
Company's reservation system, traveler support, and outside consultants.
The Company does not allocate the costs of facilities or other indirect
expense items attributable to revenue generation activities to cost of
revenues. Such costs and expenses are included in general and
administrative expenses.
Use of Estimates - Management of the Company has made estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period to prepare these financial statements in
conformity with accounting principles generally accepted in the United
States of America. Actual results could differ from those estimates.
Common Stock-Based Compensation - The Company accounts for stock-based
compensation arrangements in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
Employees, and complies with the disclosure provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based
Compensation, issued by the Financial Accounting Standards Board ("FASB").
Under APB No. 25, compensation cost is recognized over the vesting period
based on the difference, if any, on the date of grant between the fair
value of the Company's stock and the amount an employee must pay to acquire
the stock.
Net Income or Loss Per Share - The Company computes net income or loss per
share in accordance with SFAS No. 128, Earnings Per Share, which requires
dual presentation of basic earnings per share ("EPS") and diluted EPS.
Income Taxes - Income taxes are accounted for using an asset and liability
approach which requires the recognition of taxes payable or refundable for
the current year and deferred tax liabilities and assets for the temporary
differences between financial statement carrying amounts and related tax
bases of assets and liabilities. The measurement of current and deferred
tax liabilities and assets are based on provisions of the enacted tax law;
the effects of future changes in tax laws or rates are not anticipated. The
measurement of deferred tax assets is reduced by a valuation allowance when
it is more likely than not that a tax benefit will not be realized by the
Company.
Recently Adopted Accounting Standards - Effective April 1, 2000, the
Company adopted the provisions of the Accounting Standards Executive
Committee of the American Institute of Certified Public Accountants
Statement of Position ("SOP"), No. 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. The provisions of
SOP 98-1 require that certain direct costs associated with such development
are capitalized and amortized and all remaining costs must be expensed when
incurred. Capitalizable costs consist of (a) certain external direct costs
of materials and services incurred in developing or obtaining internal-use
computer software, (b) payroll and payroll-related costs for employees who
are directly associated with and who devote time to the project and (c)
interest costs incurred, if any. Costs that are considered to be related to
research and development activities, data conversion activities, and
training, maintenance and general and administrative or overhead costs will
continue to be expensed as incurred. Costs that cannot be separated between
maintenance of, and relatively minor upgrades and enhancements to, the
Company's Web sites are also expensed as incurred, if any. The effect of
the adoption of SOP 98-1 was to capitalize $770,255 during the year ended
March 31, 2000. The Company plans to begin amortizing the asset using a
five year estimated useful life, during the year ended March 31, 2001.
Recently Issued Accounting Standards - In June 1998, SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS No.
133") was issued. SFAS No. 133 establishes accounting and reporting
standards requiring that every derivative instrument, including certain
derivative instruments embedded in other contracts, be recorded in the
F-8
<PAGE>
balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria
are met. SFAS No. 133 as amended by SFAS No. 137, is effective for fiscal
years beginning after June 15, 2000. Management is in the process of
evaluating the effect, if any, SFAS No. 133 will have on its financial
position and results of operations.
Reclassification - Certain 1999 amounts have been reclassified to conform
with the 2000 presentation.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
March 31,
--------------------------
2000 1999
---- ----
Computer hardware and software $ 493,305 $ 73,140
Internally-developed computer software 770,255 --
Furniture and office equipment 25,769 16,634
----------- -----------
1,289,329 89,774
Less accumulated depreciation (98,104) (43,429)
----------- -----------
Net property and equipment $ 1,191,225 $ 46,345
=========== ===========
Total depreciation expense for the years ended March 31, 2000 and 1999, was
$54,675 and $18,120, respectively.
3. NOTES PAYABLE
Notes payable consists of the following:
March 31,
-------------------
2000 1999
---- ----
Line of credit bearing interest at 9.5%,
due September 1, 1999, interest due
monthly, collateralized by personal
guaranties of various shareholders $ -- $49,938
Note payable, bearing no interest,
due July 1999 -- 8,600
------- -------
-- 58,538
Less portion due within one year -- 58,538
------- -------
Total notes payable
less current portion $ -- $ --
======= =======
Notes payable to stockholders consists of the following:
March 31,
--------------------
2000 1999
---- ----
Note payable to stockholder, bearing no
interest, due on demand, unsecured $ -- $ 4,000
Note payable to stockholder, bearing
interest at 8.5%, due on demand,
unsecured -- 2,000
Note payable to stockholder, bearing
interest at 8.38%, due on demand,
unsecured -- 2,000
Note payable to stockholder, bearing no
interest, due on demand, unsecured -- 2,000
------- -------
Total notes payable
to stockholders $ -- $10,000
======= =======
The weighted average rate for notes payable at March 31, 1999, was 7.7%.
F-9
<PAGE>
4. COMMITMENTS AND CONTINGENCIES
The Company is obligated under various operating leases for property and
equipment as follows as of March 31, 2000:
Years ending March 31:
----------------------
2001 $ 21,856
2002 21,396
2003 1,836
--------
Total $ 45,088
========
Total rental expense for the years ended March 31, 2000 and 1999, was
approximately $56,465 and $23,550, respectively.
The Company is subject to litigation in its normal course of business. As
of March 31, 2000, the Company has no pending or threatened litigation for
which it expects to be liable for any material amounts. The Company has
entered into employment agreements with employees providing for aggregate
annual compensation of $560,000 for a period of five years through the year
ending March 31, 2005. Also, the Company plans to advance $160,000 during
the year ending March 31, 2001, which will be forgiven if the grantees
remain employees through approximately August of 2001. This cost is being
recognized over the employees' period of service to anticipated
forgiveness. Subsequent to March 31, 2000, the Company entered into another
employment agreement with an employee providing aggregate annual
compensation of $104,000 for a period of five years.
5. INCOME TAXES
Years Ended
March 31,
----------------------
2000 1999
---- ----
Current tax expense $ -- $ 21,409
Deferred tax benefit (512,942) (15,393)
Benefit of net operating loss carryforward -- (21,409)
Change in deferred tax asset valuation allowance 512,942 15,393
--------- ---------
Total $ -- $ --
========= =========
No provision for income taxes has been recorded because the Company has
predominantly incurred net losses since inception and the Company has
received no benefit for such losses. Management believes that, based on a
number of factors, the available objective evidence creates sufficient
uncertainty regarding the realizability of the deferred tax assets such
that a full valuation allowance has been recorded.
F-10
<PAGE>
Net deferred tax assets at March 31, 2000 and 1999, are comprised of the
following:
<TABLE>
<CAPTION>
March 31,
-------------------------------------------------
2000 1999
Current Non-Current Current Non-Current
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Assets:
Net operating loss carryforward $ -- $ 424,623 $ -- $ 103,314
Stock based compensation -- 163,341 -- --
Other 35,823 17,093 10,726 --
--------- --------- --------- ---------
Total deferred tax assets 35,823 605,057 10,726 103,314
Liabilities:
Property and equipment -- 14,907 -- 1,009
--------- --------- --------- ---------
Total deferred tax liabilities -- 14,907 -- 1,009
--------- --------- --------- ---------
Net deferred tax assets 35,823 590,150 10,726 102,305
Deferred tax asset valuation allowance (35,823) (590,150) (10,726) (102,305)
--------- --------- --------- ---------
$ -- $ -- $ -- $ --
========= ========= ========= =========
</TABLE>
The difference between the statutory rate of approximately 38% and the tax
expense (benefit) of zero recorded by the Company is primarily due to the
Company's full valuation allowance against its net deferred tax assets. At
March 31, 2000, the Company had available net operating loss carry forwards
of approximately $1,050,000. These carry forwards expire beginning in the
year ended March 31, 2011.
6. STOCK OPTIONS AND COMMON STOCK-BASED COMPENSATION
Stock Option Agreements - During the year ended March 31, 2000, the Company
entered into three agreements with employees, which granted those employees
options on 530,000 shares of the Company's common stock, which had a
weighted average exercise price per share of $19.53.
The following table summarizes information concerning outstanding options
at March 31, 2000 (no options were exercisable at March 31, 2000):
Average
Remaining Weighted
Contractual Average
Exercise Number Life Exercise
Prices Outstanding (in years) Price
------ ----------- ---------- -----
$ 1.50 200,000 4.3 $ 1.50
$ 5.00 6,000 4.5 $ 5.00
$ 15.00 100,000 4.3 $ 15.00
$ 20.00 6,000 4.5 $ 20.00
$ 30.00 100,000 4.3 $ 30.00
$ 35.00 6,000 4.5 $ 35.00
$ 45.00 100,000 4.3 $ 45.00
$ 50.00 6,000 4.5 $ 50.00
$ 65.00 6,000 4.5 $ 65.00
------- --- -------
530,000 4.4 $ 19.53
======= === =======
Stock-Based Compensation - The Company accounts for stock options on an
intrinsic value basis under the provisions of APB Opinion No. 25. The stock
options had an intrinsic value at the dates of the grants of $1,068,750.
F-11
<PAGE>
Accordingly, for the year ended March 31, 2000, $405,816 in stock-based
compensation cost has been recognized in the Company's financial statements
as the portion of expense related to fiscal year 2000.
Had compensation expense been determined based on the fair value at grant
dates, as prescribed in SFAS No. 123, the Company's stock-based
compensation for the year ended March 31, 2000, would have been $425,812
and the results would have been as follows:
March 31,
------------------------------
2000 1999
---- ----
Net income (loss):
As reported $ (1,798,433) $ 27,484
Pro forma (1,818,429) 27,484
Net income (loss) per share:
As reported - basic (0.20) 0.00
Pro forma - basic (0.21) 0.00
As reported - diluted (0.20) 0.00
Pro forma - diluted (0.21) 0.00
The fair value of option grants is determined using the Black-Scholes
model. The weighted average fair market value of an option granted during
2000 was $6.79. The following range of assumptions was used to perform the
calculations: expected life of 12 to 36 months; risk-free interest rate of
4.75%; expected volatility of 91%; and no expected dividend yield. Because
additional stock options may be granted in the future, the above pro forma
disclosures are not representative of pro forma effects on reported
financial results for future years.
Separately, on May 18, 1999, the stockholders of the Company unanimously
voted to grant stock bonuses to certain key employees of the Company. The
number of shares granted after giving retroactive effect to the subsequent
stock dividend totaled 650,000 shares. The Company has recognized
compensation expense of $650,000 in the statement of operations for the
year ended March 31, 2000, for the stock bonus. The compensation was based
on the stock price in transactions occurring near the date of the stock
grant.
7. COMMON STOCK GRANTED FOR SERVICES PERFORMED
On March 15, 2000, the Company entered into a consulting agreement for
certain public relations services in exchange for consideration totaling
$180,000. Half of such consideration is to be paid with restricted shares
of the Company's common stock. In addition, on March 21, 2000, the Company
entered into a consulting agreement for certain consulting services in
exchange for 2,000 shares of restricted shares of common stock. As of the
report date, no shares have been issued pursuant to either agreement.
8. EARNINGS PER SHARE
A reconciliation of shares used in calculation of basic and diluted net
earnings per share follows:
F-12
<PAGE>
<TABLE>
<CAPTION>
March 31,
--------------------------
2000 1999
<S> <C> <C>
Net income (loss) $(1,798,433) $ 27,484
Less: cumulative preferred stock dividends (85,808) --
----------- ---------
Net income (loss) applicable to common stockholders $(1,884,241) $ 27,484
=========== ==========
Net income (loss) per common share:
Basic and diluted (0.20) 0.00
Reconciliation of weighted average shares:
Shares used in computing basic and
diluted net income (loss) per share 9,257,298 6,009,518
</TABLE>
Basic net income (loss) per share is computed using the weighted average
number of common shares outstanding during the year. Diluted net income
(loss) per share is computed using the weighted average number of common
and, if dilutive, common equivalent shares outstanding during the year.
Common equivalent shares consist of the incremental common shares issuable
upon conversion of the convertible preferred stock (using the if-converted
method) and shares issuable upon the exercise of stock options (using the
treasury stock method). For the year ended March 31, 2000, approximately
500,000 common equivalent shares related to shares issuable upon conversion
of preferred stock and options to purchase 530,000 shares were outstanding
but were not included in the calculation of diluted net income (loss) per
share because they were antidulitive. Net income (loss) for the year ended
March 31, 2000, was adjusted to reflect accumulated dividends related to
the convertible preferred stock in computing basic net income (loss) per
share.
There were no potentially dilutive securities as of March 31, 1999.
9. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
The Company has an ongoing affiliation with a Japanese startup operation
which provides travel reservation services through the Internet to
customers primarily in Japan and Asia. In July 1999, the Company invested
$42,468 in Nippon TravelNow, K.K. for a 49% interest in this operation. The
investment is carried on the equity method. During the year ended March 31,
2000, the Company recognized a loss in the unconsolidated subsidiary equal
to the investment in this company. The operations of Nippon TravelNow, K.K.
and its web site, TravelNowJapan.com, are currently in the process of being
transferred to a new corporate entity. It is intended that the new entity
will be affiliated with the Company.
10. REDEEMABLE, CONVERTIBLE PREFERRED STOCK
On January 5, 2000, the Company issued 500,000 shares of Class A
Convertible Preferred Stock at $9.00 per share. The preferred stock accrues
dividends at 8% per annum until the stock is converted to common stock or
redeemed. As of March 31, 2000, approximately $86,000 was accrued for such
dividends. The preferred stock has similar voting rights to common stock
and senior preference on dividends and liquidating assets compared to
common stock.
The Class A Convertible Preferred Stock will be automatically converted
into shares of the Company's common stock immediately upon the fulfillment
of both of the following conditions: (1) the effectiveness of a report
filed by the Company with the Securities and Exchange Commission covering
an amount of the common stock sufficient to allow for the sale of all
common stock issuable upon conversion of all then outstanding shares of
Class A Convertible Preferred Stock; and (2) the listing of the common
stock of the Company on either the Nasdaq SmallCap Market or the Nasdaq
National Market System.
F-13
<PAGE>
Regardless of whether or not the Class A Convertible Preferred Stock is
automatically converted pursuant to the fulfillment of the conditions
stated above, the holders of the Class A Convertible Preferred Stock shall
have the right to convert their shares of Class A Convertible Preferred
Stock into shares of common stock.
The number of shares of common stock to which the holder of Class A
Convertible Preferred Stock is entitled upon such conversion is equal to
the product obtained by multiplying (1) the number of shares of Class A
Convertible Preferred Stock being converted by (2) the applicable
conversion rate. The applicable conversion rate in effect at any time for
the Class A Convertible Preferred Stock is equal to the quotient obtained
by dividing (1) the sum of $9.00 plus an amount equal to all accrued but
unpaid dividends on a share of Class A Convertible Preferred Stock by (2)
the applicable conversion value, which is $9.00. Dividends are paid at
eight percent (8%) per annum per share on the face value, which is $9.00.
The holders of the Class A Convertible Preferred Stock are entitled to
receive dividends in cash or common stock.
Under the terms of the Class A Convertible Preferred Stock Agreement, if
the Company fails to fulfill the conditions required for the automatic
conversion of the Preferred Stock on or prior to December 31, 2000, the
holders of the shares of preferred stock have the right to require the
Company to redeem all of the preferred stock and pay any accumulated
dividends.
In connection with the sale of preferred stock, the Company incurred
certain professional fees. Services related to the sale have not all been
provided as of March 31, 2000. The Company expects to incur an additional
$75,000 for professional fees related to the sale of preferred stock
subsequent to March 31, 2000.
11. SUBSEQUENT EVENTS
On April 17, 2000, the Company loaned $60,000 and $65,000, respectively, to
the co-CEOs. These notes are demand promissory notes and bear interest at
8% per annum.
In accordance with the terms of the Company's Omnibus Stock Incentive Plan,
management plans to submit for approval to the Company's Stock Option
Committee of the Board of Directors, requests for the issuance of stock
options and stock grants to three employees, a member of the Board of
Directors, the Company's public relations firm, and outside consultants for
services rendered subsequent to March 31, 2000.
Effective May 3, 2000, one of the Company's co-CEOs resigned. Under the
terms of the resignation, the Company will continue to pay the salary and
benefits of the co-CEO for a period of 18 months. In addition,
approximately $26,000 owed by the co-CEO to the Company was forgiven. Also,
the Company will allow the co-CEO to retain assets with a fair market value
of approximately $10,000.
The Company entered into a lease agreement in May 2000 for office space.
That lease was subsequently terminated. On June 15, 2000, the Company paid
$85,000 to the lessor to terminate the lease agreement and relieve itself
from any further commitments under the lease.
On June 7, 2000, the Company granted to all current employees, except the
CEO, stock options equal to the employees' annual salary. Each employee is
required to execute a non-compete agreement with the Company prior to being
awarded these stock options. The number of stock options was determined by
dividing the closing market price of the Company's common stock by the
employees' annual salary. This resulted in stock options for the purchase
of approximately 320,000 shares being granted, which have a contractual
life of three years and 90 days and vest in equal amounts over three years.
* * * * *
F-14
<PAGE>
------------------------------
------------------------------
TRAVELNOW.COM INC.
527,000 SHARES OF COMMON STOCK
TO BE SOLD BY THE HOLDERS THEREOF
----------
PROSPECTUS
----------
__________ , 2000
------------------------------
------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article VIII of the Company's Articles of Incorporation provides that if
the criteria set forth in Section 607.0850 (1) and (2) of the Florida Business
Corporation Act have been met, then the Company shall indemnify any director or
officer in the manner and to the extent contemplated by Section 607.0850.
Section 607.0850 and our Bylaws give TravelNow the power to indemnify its
directors and officers for acts committed in good faith and in a manner they
believed to be in the best interest of the Company and which did not involve a
knowing violation of the law.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs of expenses payable by us in
connection with the issuance and distribution of the securities being registered
hereunder. Selling expenses shall be borne by the selling security holders. All
of the amounts shown are estimates, except for the SEC Registration Fees.
Filing Fee .................................. $ 1,507.52
Legal Fees .................................. $158,000.00
Accounting Fees.............................. $ 55,000.00
Printing Fee................................. $ 20,000.00
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
As of March 31, 1996, there were issued 14,600 shares of authorized but
previously unissued common stock. Five employees received 9,745 shares in
exchange for services, and 4,855 shares were issued to nine shareholders in
exchange for cash in the amount of $241,125.00. Then, on September 2, 1996, we
authorized a three-for-one stock split bringing the total shares of our common
stock outstanding to 43,800 shares. Thereafter on or about February 19, 1997, we
issued 38,400 shares of our authorized but unissued common stock to two
shareholders for $1.00 per share bringing the total shares issued and
outstanding to 82,200.
Effective on March 21, 1997, we merged with Eleven Twelve Corporation, a
Missouri corporation, and underwent a recapitalization. As a result of that
merger, one shareholder holding 8,100 shares of our common stock was forced to
elect either appraisal rights or the stock's valuation of $1.00 per share. That
shareholder did not choose to pursue the statutory right of appraisal but
accepted $1.00 per share for each of the 8,100 shares. As a result of the merger
and recapitalization on March 21, 1997, twelve shareholders held 41,100 shares
of our issued and outstanding common stock, and we received additional cash
capital contributions of $7,000.00, for a total of $248,125.00 of capital
contributions in cash when added to the previous $241,125.00. In addition to the
capital contributions in cash, company promissory notes and trade receivables in
the amount of $47,500.00 were forgiven.
On June 7, 1997, pursuant to an exemption from the registration requirement
of the Securities Act of 1933 found in Section 4(2) we issued four thousand
(4,000) shares of our common stock in exchange for legal services. On June 9,
1997, the number of shares was equal to 532,995, after adjusting for the results
of a stock dividend issued on May 25, 1999, the merger effective July 27, 1999
and a stock dividend issued July 28, 1999. The recipient, our legal counsel, had
adequate access to the information necessary to evaluate the risks attendant to
the issuance of those shares and represented that he was acquiring the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof as reflected by appropriate legends affixed to the
securities issued in such transaction.
On May 18, 1999, we issued 13,000 shares of our authorized but unissued
common stock to five employees as a stock bonus. See "Shares Issued As a Stock
Bonus."
Thus, between August 6, 1995, and May 18, 1999, we issued a total of 58,100
shares to eighteen shareholders. The following table reflects the shares of our
stock issued in the foregoing transactions after giving effect to the stock
II-2
<PAGE>
dividend on May 25, 1999, the merger on July 27, 1999 and the stock dividend on
July 28, 1999. Also included in the table below are 1,800 shares of our common
stock issued to a former employee on June 2, 1999, in exchange for $180.00
pursuant to an agreement previously entered into between us and the employee for
services rendered by that employee which agreement ended on September 30, 1998.
--------------------------------------------------------------------------------
Number of Shares issued by the Company Number of shares issued by the
between August 6, 1995 and May 25, 1999 Company between August 6, 1995 and
May 25, 1999 adjusted for results
of stock dividend issued on May 25,
1999, Merger effective July 27,
1999 and stock dividend issued July
28, 1999
--------------------------------------------------------------------------------
58,100 7,751,802 (1)
--------------------------------------------------------------------------------
(1) See the material following the caption "Shares Eligible for Sale."
These shares were issued pursuant to exemptions from the registration
requirements of the Securities Act of 1933 found in Section 4(2). Each of the
recipients had adequate access to the information necessary to evaluate the
risks attendant to the issuance of those shares and represented that he or she
was acquiring the securities for investment only and not with any intention for
sale in connection with any distribution as reflected by appropriate legends
affixed to the securities issued in each of the foregoing transactions.
On November 17, 1999, pursuant to an exemption from the registration
requirement of the Securities Act of 1933 found in Section 4(2), the registrant
issued 25,000 shares of our common stock at $10.00 per share for a total
purchase price of $250,000. The recipient, Finter Bank Zurich, was an accredited
investor with adequate access to the information necessary to evaluate the risks
attendant to the issuance of those shares and represented that it was acquiring
the securities for investment only and not with a view to or for sale in
connection with any distribution thereof as reflected by appropriate legends
affixed to the securities issued in such transaction.
On January 5, 2000, pursuant to an exemption from the registration
requirement of the Securities Act of 1933 found in Section 4(2), we issued
500,000 shares of Class A Convertible Preferred Stock at a price of $9.00 per
share for a total purchase price of $4.5 million. The recipients Raptor and
ALTAR, affiliates of Tudor Investment Corporation, were accredited investors
with adequate access to the information necessary to evaluate the risks
attendant to the issuance of those shares and represented that they were
acquiring the securities for investment only and not with a view to or for sale
in connection with any distribution thereof, as reflected by appropriate legends
affixed to the securities issued in such transaction.
The Class A Convertible Preferred Stock will be automatically converted
into shares of TravelNow's common stock on a share-for-share basis immediately
upon the effectiveness of this registration statement which covers an amount of
the common stock sufficient to allow for the sale of all common stock issuable
upon conversion of all then outstanding shares of Class A Convertible Preferred
Stock, plus any accrued and unpaid dividends.
Regardless of whether or not the Class A Convertible Preferred Stock is
automatically converted pursuant to the fulfillment of the condition stated
above, the holders of the Class A Convertible Preferred Stock shall have the
right to convert their shares of Class A Convertible Preferred Stock into shares
of common stock.
The number of shares of common stock to which the holder of Class A
Convertible Preferred Stock is entitled upon such conversion is equal to the
product obtained by multiplying (1) the number of shares of Class A Convertible
Preferred Stock being converted by (2) the Applicable Conversion Rate. The
Applicable Conversion Rate in effect at any time for the Class A Convertible
Preferred Stock is equal to the quotient obtained by dividing (1) the sum of
$9.00 plus an amount equal to all accrued but unpaid dividends on a share of
Class A Convertible Preferred Stock by (2) the Applicable Conversion Value,
which is $9.00. Dividends are paid at eight percent (8%) per annum per share on
the face value, which is $9.00. The holders of the Class A Convertible Preferred
Stock are entitled to receive dividends in cash or common stock.
II-3
<PAGE>
If we fail to fulfill the conditions required for the automatic conversion
of the Class A Convertible Preferred Stock on or prior to December 31, 2000, the
holders of shares of Class A Convertible Preferred Stock have the right to
require us to purchase all of the Class A Convertible Preferred Stock and pay
any accumulated dividends.
We have not issued any other equity securities during the period covered by
this registration statement.
Shares Issued as a Stock Bonus.
-------------------------------
At a special meeting of shareholders of TravelNow held on May 18, 1999, in
which all shareholders were present in person or by proxy, the shareholders of
TravelNow unanimously approved the following stock bonuses:
<TABLE>
<CAPTION>
Stock bonuses issued on May 18,
1999 adjusted for results of stock
Number of Shares approved for dividend issued on May 25, 1999,
stock bonuses by Unanimous Vote Merger effective July 27, 1999 and
Employee of Shareholders - May 18, 1999 stock dividend issued July 28, 1999
------------- ------------------------------- -----------------------------------
<S> <C> <C>
Jamie Coppedge 500 66,624
Chris Lynch 500 66,624
Monica Tindal 100 13,325
Jeff Wasson 5,950 792,830
John Christopher Noble 5,950 792,830
------ ---------
Total 13,000 1,732,233
</TABLE>
These bonuses were discretionary on our part and given in recognition of
the dedication of the recipients to their work on our behalf. The recipients
represented their intentions to hold the securities for investment only and not
with a view to or for sale in connection with any distribution thereof as
reflected by appropriate legends affixed to the securities issued in connection
with the foregoing stock bonuses.
Shares Eligible for Future Sale.
--------------------------------
Currently we have authorized, issued and outstanding 10,349,304 shares of
our common stock, par value $0.01 per share. Of these shares, 2,572,502 are
unrestricted and freely tradeable and 7,776,802 are restricted. In addition, we
have authorized, issued and outstanding 500,000 shares of our preferred stock,
that are to be automatically converted into our common stock upon the effective
date of this registration statement, effective as of the immediately preceding
business day. Therefore, upon the effective date of this registration statement
and after payment in shares of common stock of all unpaid dividends, we will
have authorized, issued and outstanding 10,876,304 shares of common stock. Of
those shares, 3,099,502 will be unrestricted and freely tradeable, and 7,776,802
will be restricted. Of the 7,776,802 restricted shares, 7,751,802 and 25,000
will become eligible for sale in the public market beginning on July 26, 2000
and November 17, 2000, respectively, pursuant to Rule 144.
In general, under Rule 144 as currently in effect, a person who has
beneficially owned restricted shares for at least one year is entitled to sell
within any three-month period a number of shares that does not exceed the
greater of: (1) one percent of the number of total shares of common stock then
outstanding (which will equal 103,493 shares based on the shares outstanding as
of the date of this filing); or (2) the average weekly trading volume of the
common stock on the Nasdaq SmallCap Market during the four calendar weeks
II-4
<PAGE>
preceding the filing of a notice on Form 144 with respect to such sale. The
average weekly trading volume on the OTC Bulletin Board for the four week period
ending December 31, 1999, was 101,875. Sales under Rule 144 are also subject to
certain manner of sale provisions and notice requirements and to the
availability of current public information about TravelNow.
ITEM 27. EXHIBITS
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, filed
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 the Articles of Incorporation filed
November 25, 1996.
3.3(b) Articles of Amendment to the Articles of Incorporation filed July
27, 1996.
3.4(f) Articles of Amendment to the Articles of Incorporation filed
January 5, 2000.
3.5(f) Articles of Amendment to the Articles of Incorporation filed
January 11, 2000.
3.6(a) Bylaws of the Company as in effect on August 13, 1999.
3.7(e) Amendment to Bylaws of the Company on October 4, 1999.
3.8(g) Amended and Restated Bylaws of the Company, adopted May 3, 2000.
4.0 Instruments defining the rights of security holders including
indentures.
4.1(e) Form of the Company's common stock certificate.
4.2(f) Articles of Amendment to the Articles of Incorporation filed
January 11, 2000.
5.0 Opinion regarding legality.
*5.1 Opinion of Shook, Hardy & Bacon L.L.P.
10 Material Contracts.
10.1(e) Employment Agreement between the Company and John Christopher
Noble, approved October 4, 1999, effective July 27, 1999.
10.2(g) Amended Employment Agreement between the Company and John
Christopher Noble, approved December 30,1999, effective January
1, 2000.
10.3(e) Employment Agreement between the Company and Jeffery Alan Wasson,
approved October 4, 1999, effective July 27, 1999.
10.4(g) Amended Employment Agreement between the Company and Jeffery Alan
Wasson, approved December 30,1999, effective January 1, 2000.
10.5(e) Employment Agreement between the Company and Christopher R. Kuhn,
approved October 4, 1999, effective July 12, 1999.
10.6(e) Employment Agreement between the Company and H. Whit Ehrler,
approved October 4, 1999, effective August 23, 1999.
10.7(g) TravelNow.com Inc. 2000 Omnibus Stock Incentive Plan, approved
May 3, 2000.
10.8(e) Stock Option Agreement between the Company and Christopher R.
Kuhn, approved October 4, 1999, effective.
10.9(e) Stock Option Agreement between the Company and H. Whit Ehrler,
approved October 4, 1999, effective August 23, 1999.
10.10(e) Stock Option Agreement between the Company and Craig Dayberry,
approved October 4, 1999, effective September 23, 1999.
10.11(e) Employment Agreement between a former employee of the Company and
the Company, approved March 31, 1998, contract ending on
September 30, 1998.
10.12(e) Subscription Agreement between SABRE Inc. and the Company.
10.13(e) Agreement by and between THISCO and the Company.
10.14(e) Telecommunications Service Agreement between MCI/World.com and
the Company.
II-5
<PAGE>
ITEM 27. EXHIBITS CONTINUED
Exhibit
Number Document Name and Location
------ --------------------------
10.15(e) Telecommunications Service Agreement between City Utilities of
Springfield, Springfield, Missouri, and the Company.
10.16(e) Office lease between the Company as Lessee and Warren Davis
Properties II, L.L.C., Lessor, and Addendum thereto dated August
13, 1998.
10.17(g) Office Lease between the Company as Lessee and Warren Davis
Properties II, L.L.C., Lessor, and Addendum thereto dated March
7, 2000.
10.18(f) TravelNow.com Inc. Class A Convertible Preferred Stock Purchase
Agreement.
10.19(g) Letter Agreement between The Company and Keating Communications,
Inc. dated March 15, 2000.
10.20(g) Letter Agreement between the Company and Scott Wayne dated March
15, 2000.
10.21(g) Letter Agreement between the Company and Michael Bauer dated
April 11, 2000.
*10.22 Letter Agreement between the Company and Antoine Toffa dated July
31, 2000.
*10.23 Standstill Agreement between the Company and nineteen holders of
TravelNow.com Inc.'s common stock dated July 13, 2000.
23.0 Consent of experts and counsel.
*23.1 Consent of Shook, Hardy & Bacon L.L.P.
*23.2 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule.
----------
* Designates Exhibits filed with this Amendment No. 1.
(a) Filed as an exhibit to Report on Form 10-SB filed February 5,
1999.
(b) Filed as an exhibit to Report on Form 8-K filed August 11, 1999
(file no. 0-25357).
(c) Filed as an exhibit to Report on Form 10-QSB filed August 16,
1999 (file no. 0-25357).
(d) Filed as an exhibit to Report on Form 8-K-A filed August 13, 1999
(file no. 0-25357).
(e) Filed as an exhibit to Report on Form 10-KSB filed October 12,
1999 (file no. 0-25357).
(f) Filed as an exhibit to Report on Form 8-K filed January 28, 2000
(file no. 0-25357).
(g) Filed as an exhibit to Report on Form 10-KSB filed July 14, 2000
(file no. 0-25357).
II-6
<PAGE>
ITEM 28. UNDERTAKINGS
We undertake to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933, (ii)
to reflect in the prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-effective amendment
thereof) which, individual or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement; notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering set forth
in the "Calculation of Registration Fee" table in the effective Registration
Statement, and (iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
We undertake that, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of these securities at that time shall be deemed to be the initial bona
fide offering thereof.
We undertake to remove from registration by means of a post-effective
amendment any of the securities being registered, which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons, we
have been advised that in the opinion of the Commission this indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by one of our
directors, officers or controlling persons in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, we will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A(b)(1) or (4) or 497(h) under
the Securities Act of 1933 shall be deemed to be part of this Registration
Statement as of the time if was declared effective.
For purposes of determining any liability under the Securities Act of 1933,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered, and the
offering of these securities at that time shall be deemed to be the initial bona
fide offering.
II-7
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Springfield, State of Missouri, on August 4, 2000.
TRAVELNOW.COM INC.
By: /s/ Jeffery Alan Wasson
---------------------------
Jeffery Alan Wasson
Chief Executive Officer, Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
By: /s/ H. Whit Ehrler
----------------------
H. Whit Ehrler
Chief Financial Officer
Date: August 4, 2000
By: /s/ Bill Perkin
-------------------
Bill Perkin
Director
Date: August 4, 2000
By: /s/ Jerry Rutherford
------------------------
Jerry Rutherford
Director
Date: August 4, 2000
By: /s/ Antoine Toffa
------------------------
Antoine Toffa
Director
Date: August 4, 2000
