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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Three Months Ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number: 333-78443
TRAVELNSTORE, INC.
(Exact name of registrant as specified in its charter)
California 77-0507163
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation)
1100 Paseo Camarillo, Camarillo, California 93010
(Address of principal executive offices and zip code)
Registrant's telephone number (805) 388-9004
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares of the registrant's common stock outstanding as of
November 10, 2000 was 9,400,000.
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TRAVELNSTORE, INC.
FORM 10-QSB
THREE MONTHS ENDED SEPTEMBER 30, 2000
INDEX
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
--------
<S> <C>
Item 1. Financial Statements:
Balance Sheets as of September 30, 2000 (Unaudited) and............................... 2
December 31, 1999.................................................................
Statements of Operations for the Three Months and Nine Months Ended
September 30, 2000 and September 30, 1999 (Unaudited)............................. 3
Statement of Changes in Shareholders' Deficit for the Nine Months Ended
September 30, 2000 (Unaudited).................................................... 4
Statements of Cash Flows for the Nine Months Ended September 30, 2000
and September 30, 1999 (Unaudited)................................................ 5
Notes to Financial Statements......................................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................................... 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................................... 8
Item 4. Submission of Matters to a Vote of Security Holders................................... 8
Item 6. Exhibits and Reports on Form 8-K...................................................... 8
Signatures ...................................................................................... 9
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PART I
Item 1. Financial Statements
<TABLE>
TRAVELNSTORE, INC.
Balance Sheets
September 30, 2000 and December 31, 1999
<CAPTION>
September 30, December 31,
2000 1999
----------- -----------
Assets (Unaudited)
<S> <C> <C>
Current Assets:
Cash in Banks $ 27,521 $
Accounts Receivable 25,385 185
Due from Related Parties 349,158 179,006
Prepaid Expenses and Other Current Assets 389,023 206,527
----------- -----------
Total Current Assets 791,087 385,718
Property & Equipment 74,770 68,001
Less: Accumulated Depreciation (15,914) (5,004)
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Property & Equipment, Net 58,856 62,997
Other Assets 13,555 2,946
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Total Assets $ 863,498 $ 451,661
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Liabilities and Shareholders' Deficit
Current Liabilities:
Accounts Payable $ 870,683 $ 372,967
Accrued Liabilities 431,221 175,467
Interest Payable 108,077 29,678
Current Portion, Long-Term Debt 8,572 8,673
Notes Payable 209,000
Convertible Notes Payable 900,000 600,000
Bridge Notes Payable 985,000 285,000
Notes Payable, Related Parties 325,123 26,650
Accrued Expenses, Related Parties 50,000 50,000
Deferred Income 3,001 9,399
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Total Current Liabilities 3,890,677 1,557,834
Long-Term Debt 38,002 40,942
Total Liabilities 3,928,679 1,598,776
Commitments and Contingencies (Note 2) -- --
Shareholders' Deficit:
Preferred Stock, Class A, No Par Value; 8,154 Shares Authorized;
8,154 Shares Issued and Outstanding at September 30, 2000 and
December 31, 1999 150,887 150,887
Preferred Stock, No Par Value; 1,000,000 Shares Authorized; No Shares
Issued or Outstanding
Common Stock, No Par Value; 20,000,000 Authorized; 9,400,000 Issued and
Outstanding at September 30, 2000 and December 31, 1999; 1,949,734 Shares
Reserved for Future Issuance at September 30,
2000 and 1,633,152 at December 31, 1999 3,591,700 2,076,700
Common Stock Subscribed, 219,500 Shares at September 30, 2000 and
60,000 Shares at December 31, 1999 1,426,750 390,000
Accumulated Deficit (8,234,518) (3,764,702)
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Total Shareholders' Deficit (3,065,181) (1,147,115)
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Total Liabilities and Shareholders' Deficit $ 863,498 $ 451,661
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<FN>
See accompanying notes to financial statements.
</FN>
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TRAVELNSTORE, INC.
Statements of Operations
For the Three Months and Nine Months Ended September 30, 2000 and September 30, 1999
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- -------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 750 $ 74,028 $ 10,247 $ 102,170
Selling, General and Administrative
Expenses 930,596 165,103 1,853,089 472,913
----------- ----------- ----------- -----------
Loss from Operations (929,846) (91,075) (1,842,842) (370,743)
Other Income (Expense):
Interest Expense, Net (37,764) (1,085,575) (2,629,402) (2,043,067)
Other 300 2,428 305
----------- ----------- ----------- -----------
Total Other (Expense) (37,764) (1,085,275) (2,626,974) (2,042,762)
----------- ----------- ----------- -----------
Net Loss $ (967,610) $(1,176,350) $(4,469,816) $(2,413,505)
=========== =========== =========== ===========
Basic Net Loss per Common Share $ (0.10) $ (0.13) $ (0.48) $ (0.26)
=========== =========== =========== ===========
Weighted-Average Common Shares
Outstanding 9,400,000 9,400,000 9,400,000 9,400,000
=========== =========== =========== ===========
<FN>
See accompanying notes to financial statements.
</FN>
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TRAVELNSTORE, INC.
Statement of Changes in Shareholders' Deficit
For the Nine Months Ended September 30, 2000
(Unaudited)
<CAPTION>
Preferred Class A Common and Subscribed Stock
------------------ ---------------------------- Accumulated
Shares Amount Shares Amount Deficit Total
----- -------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000 8,154 $150,887 9,460,000 $2,466,700 $(3,764,702) $(1,147,115)
Bridge Loan Shares Subscribed 159,500 1,036,750 1,036,750
Fair Value of Beneficial Conversion
Feature on Funding Agreement 1,515,000 1,515,000
Net Loss (4,469,816) (4,469,816)
----- -------- --------- ---------- ----------- -----------
Balance, September 30, 2000 8,154 $150,887 9,619,500 $5,018,450 $(8,234,518) $(3,065,181)
===== ======== ========= ========== =========== ===========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
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TRAVELNSTORE, INC.
Statements of Cash Flows
For the Nine Months Ended September 30, 2000 and September 30, 1999
(Unaudited)
September 30, September 30,
2000 1999
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Cash Flows from Operating Activities:
Net Loss $(4,469,816) $(2,413,505)
Adjustments to Reconcile Net Loss to Net Cash
Used by Operating Activities:
Depreciation 10,910 3,332
Interest Expense:
Convertible Notes 2,551,750 2,025,000
Changes in Assets and Liabilities:
(Increase) in Accounts Receivable (25,200) (200)
(Increase) in Prepaid Expenses and
Other Current Assets (182,496) (103,049)
Increase in Accounts Payable 497,716 129,518
Increase in Accrued Liabilities 255,754 26,634
Increase in Interest Payable 78,399 8,481
(Decrease) in Deferred Income (6,398) (17,076)
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Net Cash Used by Operating Activities (1,289,381) (340,865)
Cash Flows from Investing Activities:
Purchase of Property and Equipment (6,769)
Other (10,609) (16,885)
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Net Cash Used in Investing Activities (17,378) (16,885)
Cash Flows from Financing Activities:
Net Borrowings from Related Parties 298,473 12,409
Proceeds from Notes Payable 1,209,000 464,406
Net Loans to Related Parties (170,152) (131,457)
Repayments of Long-Term Debt (3,041)
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Net Cash Provided by Financing Activities 1,334,280 345,358
Increase (Decrease) in Cash 27,521 (12,392)
Cash at Beginning of Period 0 18,860
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Cash at End of Period $ 27,521 $ 6,468
=========== ===========
Supplementary Disclosure:
Interest Paid $-0- $-0-
=========== ===========
Income Taxes Paid $-0- $-0-
=========== ===========
See accompanying notes to financial statements.
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TRAVELNSTORE, INC.
Notes to Financial Statements
1. Basis of Presentation
The financial statements of TravelnStore, Inc. (the "Company") for the
three months and nine months ended September 30, 2000 are unaudited and
reflect all adjustments (consisting of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of the
financial statements for the interim periods. The financial statements should
be read in conjunction with the notes to financial statements included
herein, together with management's discussion and analysis of financial
condition and results of operations, contained in the Company's
Post-Effective Amendment No. Two to Form SB-2 Registration Statement dated
October 11, 2000 for the 12 months ended December 31, 1999 ("calendar year
1999").
The results of operations for the three months and nine months ended
September 30, 2000 are not necessarily indicative of the results for the
entire calendar year ending December 31, 2000 ("calendar year 2000").
The Company operates on a calendar year. Each quarter consists of three
months with the first quarter ending March 31, the second quarter ending June
30, the third quarter ending September 30 and the fourth quarter ending
December 31.
Certain prior year balances have been reclassified to conform to the
current year presentation.
2. Commitments and Contingencies
Through March 2000 the Company did not carry general liability or workers'
compensation insurance, nor was it self-insured. The Company accrues
liabilities when it is probable that future costs will be incurred and such
costs can be reasonably estimated. During April 2000 the Company obtained
general liability and workers' compensation insurance coverage. Future costs
associated with absent insurance coverage could have a material effect on the
Company's future results of operations and financial condition or liquidity.
As of September 30, 2000 there were no known liability claims.
3. Adoption of New Accounting Standards
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income", establishes standards for reporting and displaying
comprehensive income and its components in financial statements. The Company
adopted the provisions of SFAS No. 130 in 1998, but has not had any elements
of comprehensive income since its inception.
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information", establishes a new model for segment reporting, called the
"management approach" and requires certain disclosures for each segment. The
management approach is based on the way the chief operating decision-maker
organizes segments within a company for making operating decisions and
assessing performance. The Company adopted the provisions of SFAS No. 131 in
1998, but currently operates in only one industry segment.
4. Leases
The Company entered into a five-year non-cancelable operating lease for its
office facility. The lease term began January 1, 2000 and ends December 31,
2004. The office facility is located at 1100 Paseo Camarillo, Camarillo,
California. The Company believes that the facility, approximately 5,000
square feet in size, will be adequate for its needs for the foreseeable
future.
5. Net Loss per Common Share
The Company adopted the provisions of SFAS No. 128, "Earnings Per Share"
("EPS"), that established standards for the computation, presentation and
disclosure of earnings per share, replacing the presentation of Primary EPS
with a presentation of Basic EPS. It also requires dual presentation of Basic
EPS and Diluted EPS on the face of the statement of operations for entities
with complex capital structures. Basic EPS is based on the weighted average
number of common shares of stock outstanding during the three months and nine
months ended September 30, 2000, which totaled 9,400,000. The Company did not
present Diluted EPS, since the result was anti-dilutive.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto, included elsewhere in this Form
10-QSB.
Certain statements in this Form 10-QSB are forward-looking statements that
are made pursuant to the Safe Harbor provisions of the Private Securities
Litigation Reform Act of 1995. When used in this Form 10-QSB, the words
"believes", `anticipates", "expects", and similar words often are intended to
identify certain forward-looking statements. This Form 10-QSB includes
forward-looking statements based largely on the Company's expectations which
are subject to a number of risks and uncertainties, including, but not
limited to, economic, competitive and other factors affecting the Company's
operations, markets, products and services, risks associated with growth,
risks associated with media campaigns, the ability to obtain financing, the
successful training and retention of personnel and other factors discussed
elsewhere in this Form 10-QSB and the documents filed by the Company with the
Securities and Exchange Commission. Many of these factors are beyond the
Company's control. Actual results could differ materially from these
forward-looking statements. In light of these risks and uncertainties, there
can be no assurance that the forward-looking information contained in this
Form 10-QSB will, in fact, occur. The Company does not undertake any
obligation to revise these forward-looking statements to reflect future
events or circumstances.
Overview
The Company was founded in August 1998 as a limited liability company. In
April 1999 TravelnStore.Com, Inc., a California corporation, acquired the
limited liability company and effective May 30, 2000 the Company changed its
corporate name to TravelnStore, Inc.
The Company created, maintains and promotes the TravelnStore.com Website
which acts as a navigational site to the Web sites created by a wide array of
travel service providers, such as cruise lines, tour companies, car rental
firms, destination resorts and hotel groups. The Company's business is to
provide a vehicle though which customers can identify and contact travel
service providers and retail travel agents to purchase travel services.
Online this connection is provided by the TravelnStore.com Website. Off-line,
and an integral part of the Company's operating strategy, the Company through
it's affiliate, World Key Agency Group ("World Key"), provides this
connection through branded retail travel agencies.
The Company is currently recruiting retail travel agencies nation-wide to
join the World Key consortium. As part of the consortium, each agency will
receive protected territories so as not to compete with other agencies in
World Key. In addition, each agency will receive funds from the Company to
help offset agency costs of collateral materials such as letterhead, business
cards and other promotional materials that will carry the World Key brand.
As of November 10, 2000 World Key has approximately 110 retail travel
agencies in its consortium.
The Company also expects to issue a certain number of its shares of common
stock to each retail travel agency that joins the consortium. In addition the
Company expects to advertise World Key in order to increase revenues of its
consortium members.
The agreement between World Key and the retail travel agencies that join
World Key is not a franchisor/franchisee relationship. World Key does not
receive either franchise fees or royalties from any member agency in the
consortium. While World Key will provide management and marketing support to
its member agency group, it does not require member agencies to follow any
type of pre-set policies and procedures in the operation of their individual
travel agency business.
TravelnStore, Inc. has also entered into a number of contracts with travel
service providers such as cruise lines, tour companies, car rental firms,
destination resorts and hotel groups for the benefit of its members in the
World Key consortium. The Company expects that as the consortium grows in the
number of member retail travel agencies, it will be able to provide the
member agencies with greater commission income than they currently receive
from travel service providers as an independent retail travel agency or, in
some cases, as a part of another travel agency consortium.
The Company's primary anticipated revenue model is reliant upon the receipt
of overrides and commissions through the World Key members. The Company
expects to receive commissions and overrides from travel service providers
for travel that is booked by customers through the consortium members.
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Results of Operations
The Company is still in the early stages of its strategic business plan and
is expected to incur substantial future losses. The Company has not, to date,
generated any significant revenues from its operations. The ability of the
Company to generate significant revenues and positive cash flows will depend
on several factors, including the recruitment of a substantial number of
retail travel agencies into World Key and entering into favorable override
and commission contracts with significant travel service providers.
No assurances can be given, however, that the Company can successfully
execute its strategic business plans, including recruitment of a significant
number of retail travel agencies into World Key and executing favorable
commission and override contracts with significant travel service providers.
From its inception in August 1998 through September 30, 2000 the Company
has incurred substantial operating losses. As of September 30, 2000 the
Company has accumulated a deficit of $8,234,518. For the nine months ended
September 30, 2000 the Company incurred a net loss of $4,469,816.
Liquidity and Capital Resources
Since its inception, TravelnStore, Inc. has funded its operations and
capital expenditures primarily through private placement of debt and equity
securities. The Company will require additional capital to continue
operations. However, there can be no assurance that capital will be available
on terms acceptable to the Company, if at all. The ability to obtain
additional capital is dependent upon many factors, including the condition of
the general economy and specific considerations about the Company and its
prospects at the point in time when funding is sought.
Recent Developments
On October 13, 2000 the Company was declared effective by the Securities
and Exchange Commission to proceed with a Direct Public Offering ("DPO"). On
October 11, 2000 the Company filed a post-effective amendment to its SB-2
Registration Statement to offer for sale a minimum of 461,539 shares and a
maximum of 1,500,000 shares of its common stock at a price per share of
$6.50. The anticipated offering proceeds to the Company from the DPO, before
deducting expenses of the offering, is a minimum of $3 million and a maximum
of $9.75 million.
Year 2000
The principal Year 2000 issue was whether previously written software
applications and operating programs would properly recognize dates beginning
in the Year 2000. As of September 30, 2000, the Company has not experienced
any significant information technology systems issues or any material adverse
impact on the Company's results of operations, financial condition or cash
flows as a result of the Year 2000.
PART II
Item 1. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27.1: Financial Data Table
(b) The Company did not file any reports on Form 8-K during the period covered
by this Form 10-QSB.
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<TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf on November 13, 2000, by the undersigned, thereunto duly authorized.
<CAPTION>
TRAVELNSTORE, INC.
(Registrant)
<S> <C> <C>
/s/ Jim B. Tyner President, Chief Executive Officer November 13, 2000
--------------------------- and Director
Jim B. Tyner (Principal Executive Officer)
/s/ Glenn E. Glasshagel Chief Financial Officer November 13, 2000
--------------------------- (Principal Financial Officer
Glenn E. Glasshagel and Principal Accounting Officer)
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