As filed with the Securities and Exchange Commission on July 13, 2000
SEC Registration No. 333-78443
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
POST-EFFECTIVE AMENDMENT NO. ONE
TO
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
TRAVELNSTORE, INC.
(Name of Small Business Issuer in its Charter)
California 77-0507163
(State or Other Jurisdiction of (IRS Employer
Incorporation) Identification Number)
7399
(Primary Standard Industrial
Classification Identification Code
1100 Paseo Camarillo
Camarillo, California 93012
(805) 388-9004
(Address and Telephone Number of Principal Executive
Offices and Principal Place of Business)
Jim B. Tyner, Chief Executive Officer
1100 Paseo Camarillo
Camarillo, California 93012
(805) 388-9004
(Name, Address and Telephone Number of Agent for Service)
Copies to:
Bruce W. McRoy, Esq.
Reicker, Clough, Pfau, Pyle, McRoy & Herman, LLP
1421 State Street, Suite B
Santa Barbara, California 93101
(805) 966-2440 - TEL
(805) 966-3320 - FAX
Approximate date of proposed sale to the public: As soon as practicable
after the effective date of this Registration Statement.
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 of 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. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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<TABLE>
CALCULATION OF REGISTRATION FEE
====================================== =========================== ========================== ================== ===================
<CAPTION>
PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO REGISTERED OFFERING PRICE OFFERING REGISTRATION FEE
BE REGISTERED PER SHARE
-------------------------------------- --------------------------- -------------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
common stock, no par value 1,500,000 shares $9.50 $14,250,000 $3,962*
====================================== =========================== ========================== ================== ===================
common stock, no par value 105,264 shares** $0.001 $100 $ 1*
====================================== =========================== ========================== ================== ===================
<FN>
* Estimated solely for the purpose of calculating the registration fee.
** Shares issuable upon exercise of stock option (See, "CERTAIN TRANSACTIONS -
Option Sweepstakes".)
</FN>
</TABLE>
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 of 1933 or until the Registration Statement shall become
effective on such date as the Securities & Exchange Commission, acting pursuant
to said Section 8(a), may determine.
PROSPECTUS SUBJECT TO COMPLETION; DATED ______________
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PROSPECTUS
INITIAL PUBLIC OFFERING PROSPECTUS
TRAVELNSTORE, INC.
1,500,000 shares of common stock
$9.50 per share
The Offering
Offering Proceeds
Per Share Minimum Maximum
--------- ------- -------
Public offering price $9.50 $3,000,000 $14,250,000
Underwriting discounts $0.00 $0.00 $0.00
and commissions
Proceeds to us $9.50 $3,000,000 $14,250,000
This is our initial public offering. We will offer and sell the shares
covered by this offering directly to the investors. Our officers and directors
who will participate in the offer and sale of the shares of common stock on
behalf of the Company are Jim B. Tyner, Chairman and Chief Executive Officer,
John R. Toal, President and Chief Operating Officer, and Peggy Murray, Director
of Investors Relations. We have not retained any underwriter or broker/dealer to
assist in the offer and sale of the shares. However, we reserve the right to
engage one or more broker/dealer(s) to assist in the offer and sale of the
shares.
This Prospectus also covers 105,264 shares of common stock issuable upon
exercise of a stock option granted by us in a Sweepstakes conducted on our Web
site.
There is no public market for the shares covered by this offering.
----------------
INVESTING IN COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE _______
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
We have registered the shares of common stock covered by this offering for
sale only in the following states: California, Colorado, Connecticut, Georgia,
Hawaii Illinois, Nevada, New Jersey, New York and Washington D.C. In addition,
we are authorized to sell shares in the District of Columbia and Hawaii pursuant
to exemptions from registration under the laws of such jurisdictions.
A person who is interested in purchasing shares of common stock but who is
not resident of one of the foregoing states may request that we register shares
in his/her state of residence. However, we are not obligated to register shares
in any states other than those listed above. We will amend this prospectus to
disclose any additional states in which we may register shares.
The date of this prospectus is July __, 2000.
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TRAVELNSTORE, INC.
LOGO
REPLICATION OF SELECTED SCREENS FROM TRAVELNSTORE.COM WEB SITE
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TABLE OF CONTENTS
PROSPECTUS SUMMARY 7
RISK FACTORS 11
DIVIDENDS 18
USE OF PROCEEDS 18
DILUTION 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 21
BUSINESS 26
MANAGEMENT 45
PRINCIPAL STOCKHOLDERS 51
CERTAIN TRANSACTIONS 53
DESCRIPTION OF CAPITAL STOCK 57
PLAN OF DISTRIBUTION 61
SHARES ELIGIBLE FOR FUTURE SALE 65
LEGAL MATTERS 66
EXPERTS 66
ADDITIONAL INFORMATION 66
INDEX TO FINANCIAL STATEMENTS F-1
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PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company, the common stock being sold in this offering
and our financial statements and related noted appearing elsewhere in this
prospectus.
Our Business.
We operate a Web site on the Internet through which users of travel services
access travel services providers, such as cruise lines, tour companies, car
rental firms, destination resorts, and retail travel agencies. Unlike other
Internet travel companies, we do not directly sell travel services to the
consumer. We use the Internet to facilitate the wholesale distribution of travel
services to our proprietary network of retail travel agencies. This type of
Internet implementation has come to be known as a "business-to-business" model.
We provide our services online through the TravelnStore.com Website. We are
creating the "World Key Agency Group", an off-line group of branded retail
travel agencies which will be identified as World Key offices. We receive from
the travel service providers commissions and override fees with respect to
services purchased through these online and off-line facilities. Our goal is to
integrate the presentation of travel services on the Internet and in other media
with the transactional capabilities of our network of brick and mortar agencies.
We were initially organized as a limited liability company on August 18, 1998.
Effective as of April 15, 1999, the limited liability company was merged into
TravelnStore, Inc., a California corporation, incorporated March 4, 1999.
Effective May 30, 2000, we changed our corporate name to TravelnStore, Inc. Our
principal executive offices are located at 1100 Paseo Camarillo, Camarillo,
California 93012 and our telephone number is (805) 388-9004.
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Our Offering
Type of Securities Common stock
Minimum Shares to be Offered 315,790
Maximum Shares to be Offered 1,500,000
Maximum Shares Outstanding after 11,215,784* shares of common stock and
This offering 8,154 shares of Series A Preferred Stock
Minimum Subscription The investor must purchase at least 210
shares of common stock for a minimum
investment of $1,995
Suitability Standards Each individual investor must have a net
worth of at least $250,000 or a net worth
of at least $150,000 and gross income for
each of the last two years of at least
$50,000, and must anticipate having at
least that level of gross income for the
current tax year. For an investor who is
not an individual, either the entity must
have total assets of at least $250,000 or
the amount of the investment must not
exceed 5% of the entity's total assets.
In addition, the amount of the investment
by any investor may not exceed 10% of the
net worth of the investor.
Interim Closing We will not close on any subscriptions
until we have received subscriptions for
at least 315,790 shares, which will
generate gross proceeds of approximately
$3,000,000. If we do not receive such
subscriptions by ______, 2000, we will
promptly refund all monies, without
interest, and terminate this offering.
After accepting subscriptions for a
minimum of 315,790 shares, we may accept
subscriptions for additional shares as
they are received. We will not accept any
subscriptions after _______, 2000. There
can be no assurance that we will be able
to sell more than the minimum number of
shares covered by this offering
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* Based upon shares outstanding and subscribed for as of March 31, 2000, after
giving effect to a 2-for-1 stock split that was effective as of August 25, 1999.
Includes:
o 215,784 shares of common stock reserved for issuance upon conversion of
$430,000 in principal amount of convertible promissory notes currently
outstanding and with respect to which the holders have advised us that
they will convert the notes as of the effective date of this offering,
and
o 100,000 shares of common stock reserved for issuance under the bridge
loan promissory notes.
Excludes:
o 1,000,000 shares of common stock reserved for issuance under our 1999
Equity Incentive Plan; o up to 105,264 shares of common stock issuable
upon exercise of one outstanding stock option; o 24,462 shares of common
stock reserved for issuance upon conversion of 8,154 shares of Series A
Preferred Stock currently outstanding;
o 42,104 shares of common stock reserved for issuance upon conversion of
$120,000 in principal amount of convertible promissory notes currently
outstanding; and
o up to 175,000 shares of common stock issuable upon conversion of one
Promissory Note in the principal amount of $350,000.
Use of Proceeds The proceeds of this offering will be
used for the following purposes:
o enhancement and marketing of the
TravelnStore.com Web site;
o recruitment of co-host travel
agencies,
o expansion of facilities;
o addition of staff and management;
o acquisition of computer-related
equipment;
o establishment of strategic
relationships;
o payment of trade payables, retirement
of debt;
o general and administrative purposes;
and
o working capital.
No Current Trading Market There is no public market for the shares
covered by this offering. After the
offering, the shares initially will not
be listed on any exchange or through
Nasdaq or any other quotation source.
After the closing of the offering, we
will seek to list our common stock on the
Philadelphia Stock Exchange or on the OTC
Electronic Bulletin Board.
Post-Effective Amendment The registration statement covering this
offering was declared effective by the
Securities and Exchange Commission on
June 30, 2000. We filed a post-effective
amendment to the registration statement
to reflect the resignation on July 9,
2000, of Graeme Clarke as our Chief
Executive Officer. We have not sold any
shares of stock in this offering or
distributed any copies of the prospectus
from June 30, 2000, through the date of
the prospectus.
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SUMMARY FINANCIAL DATA
The selected financial data presented below are derived from the financial
statements at the end of this prospectus. The selected financial data reflect
the operations of TravelnStore.com, LLC a California limited liability company,
for the period August 18, 1998 to April 15, 1999, and the operations of
TravelnStore, Inc., from April 15 through December 31, 1999. Effective as of
April 15, 1999, the limited liability company was merged into TravelnStore.com,
Inc., a California corporation and the registrant. Effective May 30, 2000, we
changed our corporate name to TravelnStore, Inc. The corporation had no
operations prior to its acquisition of the limited liability company.
At December 31, At April 30,
1999 2000
----------- -----------
Balance Sheet Data
Total Assets $ 451,661 $ 660,706
Current Liabilities $ 1,557,834 $ 2,248,770
Working Capital (Deficit) $(1,106,173) $(1,666,601)
Long-Term Debt $ 40,942 $ 38,002
Stockholders' Equity (Deficit) $(1,147,115) $(1,626,066)
For The Period For The Four-
August 18, 1998 Month Period
through Ended
At December 31, At April 30,
1999 2000
----------- -----------
Statement of Operations Data
Revenues $ 59,385 $ 9,333
Operating Expenses $ 997,134 $ 460,083
Other Income (Expense) $(2,503,183) $(1,024,451)
Net Income (Loss) $(3,441,732) $(1,475,201)
Net Income (Loss)
Per common share* $ (0.37) $ (0.16)
* Based on 9,400,000 shares of common stock issued and outstanding as of
December 31, 1999, and April 30, 2000. The per share number reflect a 2-for-1
stock split that was effective as of August 25, 1999.
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RISK FACTORS
Investing in common stock is risky. You should carefully consider the following
risk factors and all other information contained in this prospectus before
purchasing our common stock. Additional risks and uncertainties that are not yet
identified or that we currently think are immaterial may also materially
adversely affect our business and financial condition in the future. Any of the
following risks could materially adversely affect our business, operating
results and financial condition and could result in a complete loss of your
investment.
RISKS ASSOCIATED WITH OUR COMPANY
We were organized in August 1998, have a limited operating history and we
may not be able to support a public market for our stock.
We are subject to all the risks inherent in the establishment and expansion
of a new business enterprise. In general, startup businesses are subject to
risks and/or levels of risk that are often greater than those encountered by
companies with established operations and relationships. Our business plan is
unproven and we must be able to adapt as we grow. Companies at this point in
their business life seldom seek to register and offer stock in a public
offering. Consequently, you are being asked to invest at an earlier stage in our
growth than is typically the case in an initial public offering. This offering
carries a higher degree of risk than a typical initial public offering of stock.
We expect that our operating losses will continue and that we must use the
proceeds of this offering to support our operations.
There is no assurance that revenue generated by our sales will be sufficient
to fund operations. We expect to incur losses for the foreseeable future due to
the significant costs associated with the development and marketing of our
services. We expect our operating losses to continue until such time as our
sales generate sufficient revenues to generate a profit.
If we do not raise our minimum goal of $3,000,000 in this offering and we
are unable to arrange alternative financing, there will most likely be
substantial doubt as to our ability to continue as a going concern. Consequently
our independent auditors have qualified their report on our financial condition
because there is substantial doubt as to our ability to continue as a going
concern.
Our accumulated deficit was $3,764,702, as of December 31,1999, and
$5,239,903 as of April 30 2000.
We must hire and retain additional reliable personnel, including a Chief
Financial Officer, in order to be able to achieve our plan.
We are dependent on the efforts and relationships of Jim Tyner, John Toal,
and our other executive officers for our business operations. We must hire
additional management personnel who are experienced in the travel industry to
support and expand our relationships with travel service providers. There can be
no assurance that Mr. Tyner, Mr. Toal, or any of our other executive officers
will remain with us or that we will be able to identify and retain the
additional personnel. If we are not able to hire and retain these personnel, it
will be more difficult to establish and maintain our relationship with travel
service providers and retail travel agencies. In turn, this could limit our
ability to realize income from our Certificates of Value.
We may require capital in addition to the minimum proceeds of this offering
to fund our operations.
We anticipate that the minimum proceeds of the offering will be sufficient
to meet our cash requirements for a period of 12 months following the closing of
the offering. If we need additional capital to establish our desired market
position or for other reasons, there can be no assurance that such capital will
be available or will be available on terms that are acceptable to us. We
anticipate that we will not be able to obtain such additional capital from banks
or similar financial institutions.
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If we pursue any potential future acquisition and do not realize the
anticipated benefits of such acquisition, our business could be seriously
harmed and our stock price could fall.
We regularly evaluate, in the ordinary course of business, potential
acquisitions of, or investments in, complementary businesses, products and
technologies. If we are presented with appropriate opportunities, we intend to
actively pursue these acquisitions and/or investments. We may not, however,
realize the anticipated benefits of any acquisition or investment. If we buy a
company, we could have difficulty in assimilating that company's other
personnel, technology, operations or products into our operations. In addition,
the key personnel of the acquired company may decide not to work for us. These
difficulties could disrupt our ongoing business, distract our management and
employees and increase our expenses. Acquisitions or business combinations could
also cause us to issue equity securities that would dilute your percentage
ownership in us, incur debt or assume contingent liabilities and take large
immediate or future write-offs or charges, including amortization of goodwill or
compensation expense. Each of these results could materially and adversely
affect our business and adversely affect the price of our common stock.
Should we elect to undertake acquisitions, part or all of the funds utilized
for those acquisition(s) may come from a portion of the funds generated by this
offering. This amount is projected not to exceed $50,000 at our minimum
subscription, and $250,000 at our maximum subscription. We may elect to use
other consideration for acquisitions such as stock and/or other securities. If
we issue additional stock or securities to make an acquisition, your share
position likely will be diluted.
Our business model is based on the current procedures for the sale of travel
services by travel providers, and our business and revenues could be severely
effected if the travel service providers change their procedures for selling
travel services to the public.
If there were a substantial change in the marketing methodology of one or
more travel service providers, we may not be able to offer their services
through our Web site. For example travel service providers (such as airline
companies) may limit the commissions and over-rides that will be paid to travel
agencies or may change their procedures to rely more on in-house or captive
travel agencies. If this were to happen, it could severely restrict the scope of
the travel services which could be accessed through our TravelnStore.com Web
site. This could reduce the volume of our business and adversely effect our
revenues.
We may be subject to system disruptions which could reduce our revenue.
We rely on third parties for our Web site operations. If our Web site or
information systems fail, they could disrupt or delay user traffic, which could
impair our business. Fire, floods, earthquakes, power loss, telecommunications
failures, break-ins and similar events could damage these systems and cause
interruptions in our services. Computer viruses, electronic break-ins or other
similar disruptive problems could result in the reduction or termination of our
services by our customers or otherwise adversely affect our Web site. Our
business could be adversely affected if our systems were affected by any of
these occurrences. We currently do not maintain insurance to cover these
business risks. We do not have a formal disaster recovery plan.
Our users depend on Internet service providers, online service providers and
other Web site operators for access to our Web site. Many of them have
experienced, and could experience in the future outages, delays and other
difficulties due to system failures unrelated to our systems. Moreover, the
Internet network infrastructure may not be able to support continued growth. Any
of these problems could adversely affect our business.
RISKS ASSOCIATED WITH THIS OFFERING
We are offering and selling the shares covered by this offering ourselves
and there can be no assurance that we will be able to raise more than the
minimum offering proceeds.
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We are making this offering without the benefit of an underwriter.
Underwriters typically review a company in great detail as part of their due
diligence process. No underwriter has reviewed our operations, management,
business plan, operations, financials or competitiveness in our marketplace.
Consequently, you must rely solely on your own due diligence and review of such
matters and judge the likelihood of our success in our marketplace and
opportunity for profitable operation.
After this offering, our executive officers, directors and principal
stockholders will beneficially own approximately 97% (if we sell only the
minimum number of shares) and 84% (if we sell only the maximum number of
shares) of our outstanding common stock and consequently will be able to
exercise significant control over TravelnStore.
After this offering, our executive officers, directors and holders of 5% or
more of our outstanding common stock together will beneficially own
approximately 97% (if we sell only the minimum number of shares) and 84% (if we
sell only the maximum number of shares) of our outstanding common stock. These
stockholders will be able to significantly influence all matters requiring
approval by our stockholders, including the election of directors and the
approval of significant corporate transactions. This concentration of ownership
may also have the effect of delaying, deterring or preventing a change in
control of TravelnStore and may make some transactions more difficult or
impossible to complete without the support of these stockholders.
We may closed this offering at such time as we receive gross proceeds of
$3,000,000, which amount may not be sufficient for us to achieve profitable
operations.
We are making this offering on a minimum/best efforts basis. If we sell only
the minimum number of shares, this offering will raise sufficient capital for us
to operate for twelve (12) months. There can be no assurance that, regardless of
the amount of the proceeds raised in the offering, we will be able to achieve
profitable operations.
We have set a minimum of $3,000,000 of stock to be sold in this offering.
Until acceptable subscriptions for such minimum amount have been received, all
subscriptions will be held in an escrow account. Once deposited, these funds
will only be returned to the investor if the minimum amount of $3,000,000 is not
subscribed in the 90 day offering period.
We are not presently aware that any of our officers, directors or principal
stockholders, or any of their affiliates, intend to purchase any shares in the
offering or that any of them intend to purchase any shares in the offering in
order for us to be able to reach the minimum investment of $3,000,000 required
to closing the offering. It is possible that one or more of such persons may
purchase shares in the offering and that such purchases may facilitate our
reaching the minimum required investment to close the offering. Any purchases by
any such persons will be subject to the same terms and conditions as those
applicable to other investors.
There will be no public market for resale of our shares until our shares are
listed on an exchange or quoted through NASDAQ.
The shares of common stock covered by this offering will not be listed on a
stock exchange or quoted through any quotation service. Immediately following
the closing of this offering, any resale of your shares of common stock will
have to be privately arranged. The lack of a public market for the common stock
likely will have an adverse effect on both the liquidity and the value of the
common stock.
Provided we reach a subscription amount sufficient to achieve a minimum
tangible net worth of $2,000,000 we will apply for listing on the Philadelphia
Stock Exchange. However, there are many requirements which we may or may not be
able to meet at the time we wish to apply for listing. While the Company
anticipates that it will meet the requirements for listing on the Philadelphia
Stock Exchange if it receives subscription amounts sufficient to achieve a
minimum tangible net worth of $2,000,000, we still may not be able to satisfy or
satisfy quickly all of the requirements for listing on the Philadelphia Stock
Exchange. If our application for listing on the Philadelphia Stock Exchange is
rejected, the only alternative likely will be listing our shares for trading of
the shares on the OTCBB.
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Trading activity on the OTCBB will not provide the liquidity for the shares that
would be available through listing on the Philadelphia Stock Exchange or another
regional or national exchange.
We do not anticipate applying to list our common stock on any exchange or on
the OTCBB system until we have received acceptable subscriptions for at least
$3,500,000. If we not receive such amount until the end of the 90-day offering
period, such listing may not be effective until 30 days after we file the
application. Therefore, it is possible that even if we are able to list our
common stock such listing would not be effective until four (4) months after the
effective date of this registration statement.
Internet related stocks have been very volatile. Our shares will be
considered an Internet related stock and will be subject to this volatility.
Recent stock market activity shows that shares of businesses marketing
products or services through the online commerce industry can be subject to
greater volatility than those of businesses in more established fields such as
manufacturing or traditional forms of sales or services. Stock investments
within the online commerce industry, should be considered highly speculative and
are appropriate only for investors who can bear significant risks.
A substantial number of shares of our common stock could be sold into the
public market after this offering, which sales could depress our stock
price.
Of the 9,400,000 shares of common stock presently outstanding, all of the
shares are "restricted securities" and under certain circumstances may be sold
in compliance with Rule 144 adopted under the Securities Act of 1933, as
amended. Future sales of such shares will in all likelihood depress the market
price of our common stock.
It may be difficult for a third party to acquire our company, and this could
prevent changes in our management.
Our Articles of Incorporation authorize the issuance of up to 1,000,000
shares of preferred stock, the terms, preferences, rights and restrictions of
which may be established by its Board of Directors. We could issue shares of
preferred stock in a manner that would discourage other persons from attempting
to acquire control of TravelnStore and thereby insulate our management from the
risk of change. Our issuance of the preferred stock for such purposes could
adversely effect the market value of our common stock.
FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements," which may include the
following:
o our business strategy;
o timing of and plans for the introduction or phase-out of products,
services, enhancements;
o plans for hiring additional personnel;
o entering into strategic alliances; and
o the adequacy of anticipated sources of funds, including the proceeds from
this offering, to fund our operations for at least the 12 months following
the date of this prospectus.
Other statements about our plans, objectives, expectations and intentions
contained in this prospectus that are not historical facts may also be
forward-looking statements. When used in this prospectus, the words "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar
expressions are generally intended to identify forward-looking statements.
Because these forward-looking statements involve risks and uncertainties,
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actual results could differ materially from those expressed or implied by these
forward-looking statements for a number of reasons, including those discussed
under "Risk Factors" and elsewhere in this prospectus. We assume no obligation
to update any forward-looking statements.
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DIVIDENDS
Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors. No dividends have been paid on the common
stock and no dividends are anticipated to be paid in the foreseeable future. We
intend to retain all earnings to finance the development and expansion of our
operations.
We are authorized to issue shares of preferred stock. Any shares of
preferred stock that we issue may preclude the payment of any dividends on the
common stock until dividends in a certain amount have been paid on the preferred
stock. We do not have any present plans to issue any additional shares of
preferred stock.
USE OF PROCEEDS
<TABLE>
We estimate the net proceeds to us from this offering, after deducting the
expenses of the offering, will be $2,680,000 if we raise only the minimum
amount, and $13,930,000, if we raise the maximum amount. Such proceeds will be
applied substantially as follows.
<CAPTION>
Application of Proceeds Approximate Dollar Amount
Minimum Maximum
Amount Amount
<S> <C> <C>
Marketing $801,580 $10,761,580
Officer Salaries (1) 276,000 276,000
Co-host Agency Recruitment 125,000 250,000
Additional Staff & Management 80,000 300,000
Strategic Relationships (2) 50,000 250,000
Trademark License Fee 25,000 25,000
Payments to Principal Stockholders (3) 50,000 50,000
Additional Equipment 20,000 45,000
Facilities Rent 72,420 72,420
Retirement of Trade Debt 75,000 75,000
Payment of Convertible Notes(4) 120,000 120,000
Payment of Bridge Loans 460,000 460,000
Payment of Promissory Note(5) 350,000 350,000
Working Capital Reserves(6) 200,000 895,000
TOTALS $2,680,000 $13,930,000
<FN>
(1) Officer Salaries include the salaries of Jim B. Tyner, Chairman and Chief
Executive Officer, John R. Toal, President, and Yula Greco, Vice President
and Secretary who are also principal stockholders
(2) Strategic Relationships may include establishing joint ventures, long-term
marketing relationships, web site links, and acquisition of companies or
assets in both the Internet and travel industries. It is typical for
companies engaged in e-commerce business on the Internet, a new and fast
growing business medium, to expand and solidify their market position
through strategic alliances, mergers and consolidations. We anticipate that
we also might facilitate achieving our business plan through strategic
alliances or consolidation with other companies operating in the travel
industry or over the Internet. Accordingly, we have targeted a portion of
the proceeds of this offering for such purposes. While we anticipate that we
may use a portion of the proceeds of this offering in connection with our
establishing one or more strategic relationships, we are not presently
negotiating or discussing a strategic relationship with any particular
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person and we anticipate that the total amount of the proceeds of this
offering that might be used for such purposes would not exceed $50,000, if
we raise only the minimum proceeds, and $250,000, if we raise the maximum
proceeds.
(3) payments to principal stockholders refers to compensation due two principal
stockholders under consulting agreements.
(4) This assumes that the holders of the notes do not convert the notes into
shares of common stock. The total principal amount of the outstanding notes
is $550,000. We have received from holders of $430,000 of the notes. We are
in the process of reconfirming that these noteholders continue to intend to
convert their notes. We have no reason to believe that any of these
noteholders will elect not to convert their notes.
(5) This note is held by one person and is convertible into shares of common
stock. This assumes that the holder of the note does not convert the note
into shares of common stock.
(6) Working capital reserves are held against operating losses, non-budgeted,
extraordinary expenses and capital expenditures.
</FN>
</TABLE>
The amounts actually expended for any of the foregoing purposes may vary
significantly from those listed above, and will depend on a number of factors,
including the amount of our future revenues and other factors described under
"Risk Factors". We will retain broad discretion in the allocation and
application of the net proceeds of this offering and may apply the proceeds to
purposes other than those described above. A portion of the net proceeds may
also be used to acquire or invest in complementary businesses, technologies,
product lines or products. We currently have no agreements or commitments with
respect to any such acquisitions. Pending such uses, we intend to invest the net
proceeds of the offering in investment-grade, interest-bearing securities.
If we are able to raise only the minimum amount set forth above, our ability
to grow and expand our business may be significantly limited. A significant
portion of the proceeds of the offering will be used to enhance and market our
Web site, to hire additional staff and management personnel and to develop
strategic relationships with other Internet and travel service companies. Our
ability to accomplish these activities will contribute significantly to our
ability to achieve our business plan and to the overall growth and success of
the company.
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DILUTION
At April 30, 2000, the pro forma net tangible book deficit of TravelnStore,
Inc. was ($1,196,066), or approximately ($0.12) per share of common stock based
on 9,715,784 shares of common stock outstanding. The net pro-forma tangible book
deficit per share represents the amount of our total assets less the amount of
its intangible assets and liabilities, divided by the number of shares of common
stock outstanding (including the conversions of $430,000 of Promissory Notes
into 215,784 shares of common stock and issuance of 100,000 shares due under the
Bridge Loan Notes at April 30,2000). After giving effect to the receipt of the
maximum net proceeds (estimated to be approximately $13,930,000 from the sale of
the shares offered hereby, our pro forma net tangible book value at April 30,
2000, would be $12,733,934 or approximately $1.14 per share of common stock.
This would result in dilution to the public investors (i.e., the difference
between the estimated public offering price per share and the net tangible book
value per share after giving effect to this offering) of approximately $8.36 per
share, approximately 88% of the offering price. If we receive only the minimum
subscription our pro forma net tangible book value would be $1,483,934 or
approximately $0.15 per share, and the public investors would have dilution of
$9.35 per share, approximately 98% of the offering price. The following table
illustrates the per share dilution:
Assumed public offering price $9.50
Pro forma net tangible book deficit per share
at April 30, 2000 $(.12)
Increase in pro forma net tangible book value $1.26
per share attributable to new investors
Pro forma net tangible book value per share $1.14
after this offering
Dilution of net tangible book value per shares $8.36
to new investors
For purposes of the foregoing discussion we have assumed that the offering
price will be $9.50 per share.
The shares of common stock that we have considered outstanding at April 30,
2000, for purposes of this table included:
o 9,000,000 shares issued to our principal stockholders on the merger of
TravelnStore LLC into TravelnStore, Inc.,
o 400,000 shares issued to two of our principal stockholders in connection
with their loan of funds to us,
o 215,784 shares reserved for issuance on conversion of $430,000 of our
Convertible Promissory Notes, and
o 100,000 shares reserved for issuance under the Bridge Loan Promissory
Notes outstanding at April 30, 2000.
The total consideration paid by our principal stockholders for their equity
interests in TravelnStore LLC was $200.00.
In addition to the foregoing, we may offer stock incentives to individual
travel agencies in order to recruit them to our Co-host Agency and our World Key
Agency Group programs. We anticipate that we may offer, on average, 2,000 shares
per agency over a four year period and that we may offer the shares to a maximum
of 2,500 agencies. This would require that we issue up to 1,250,000 additional
shares per year for each of the four years.
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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 related notes included elsewhere in this prospectus.
This discussion contains certain forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
discussed below. We do not intend to update these forward-looking statements.
Overview
We were founded in August of 1998 as a limited liability company. In April
of 1999 the limited liability company was acquired by TravelnStore.Com, Inc., a
California corporation. Effective May 30, 2000, we changed our corporate name to
TravelnStore, Inc. We created, maintain and promote the TravelnStore.com Web
site 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. Our business is to provide a
vehicle through 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 we are creating
the "World Key Agency Group" to provide this connection through branded retail
travel agencies.
Visitors to the TravelnStore.com Web site can print out certificates of
value for various travel services to which our site provides links. These
certificates may be redeemed for discounts, upgrades or other premiums designed
to encourage the visitor to book a particular travel service. Certificates may
be redeemed at any of the 29,000 retail travel agencies through-out the United
States. We receive a commission or override from the travel service provider for
each certificate that is redeemed.
We also recruit individual travel agencies to co-host our Web site within
their market areas. Agencies subscribe for ZIP codes within their market. When a
visitor to our Web site logs in from a subscribed ZIP code, that agency is
graphically presented as the local TravelnStore co-host agency. While
certificates may be redeemed at any agency, a local co-host agency is presented
as a preferred redemption location.
Results of Operations
The financial statements contained in this prospectus represent our
operations from August 18, 1998 through December 31, 1998, January 1, 1999,
through December 31, 1999, and January 1, 2000 through April 30, 2000. As a new
company, a significant portion of our operations pertained to physically
constructing our work environment, installing our information systems, designing
and testing our Web site and recruiting and training employees. We also designed
and structured our marketing program to recruit our co-host agencies and
designed and structured a development program to negotiate agreements with
various travel service providers to participate in the TravelnStore.com Web
site. These activities required the expenditure of $326,356 through December 31,
1998, an additional $997,134 from January 1, 1999 through December 31, 1999, and
an additional $460,083 from January 1, 2000, through April 30, 2000. Our
accumulated deficit as of April 30, 2000, was $5,239,903.
Because the TravelnStore.com Web site is a navigational site to the
proprietary sites of various travel service providers, its structure is
relatively simple. Consequently, we were able to have the first version
operational by November 1, 1998. The launch of the site coincided with the
appearance of our first advertisements in the in-flight magazines of United
Airlines, American Airlines, Delta Airlines, Southwest Airlines, U.S. Airways,
Continental Airlines, America West Airlines and TWA. We also promoted the launch
of the TravelnStore.com Web site by participating in two prestigious trade
shows, the ASTA World Congress in Los Angeles and the United States Tour
Operators Association show in Las Vegas.
In September of 1998, in advance of the launch of our Web site, we were able
to initiate recruitment of co-host agencies. Because of the simplicity and
compelling concept of the TravelnStore.com Web site, we were able to
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recruit approximately 100 agencies prior to the launch of the Web site. Travel
agencies pay a minimum $60.00 registration fee and $36.00 quarterly fee to
participate as co-host agencies. Pricing for the co-host fees is designed to
primarily offset the direct costs of operating the TravelnStore.com Web site. We
were pleased that income from co-host agency fees generated $8,272 through
December 31, 1998, $59,385 from January 1, 1999 through December 31, 1999 and
$9,333 from January 1, 2000 through April 30, 2000. This reduced our operating
loss to $318,084 through December 31, 1998, to $937,749 for the period January
1, 1999 through December 31, 1999 and to $450,750 for the period January 1, 2000
through April 30, 2000.
During 1999, we continued to expand our co-host agency network on a
selective basis, initiated our World Key Agency Group recruitment program and
further developed our relationships with travel service providers. This has
resulted in our being able to post a broader spectrum of certificates of value.
We have also invested in refining the database tracking methodologies of the
TravelnStore.com Web site to better implement targeted marketing opportunities
with individual travel service providers. We have also initiated a limited
online advertising program to test the efficiencies of various online
advertising opportunities.
Our primary anticipated revenue model is reliant upon the receipt of
overrides and commissions through the use of our certificates of value and the
distribution of travel services through our World Key Agency Group members. We
will receive commissions and overrides from travel service providers for both
travel services with respect to which certificates of value are redeemed and
travel services that are booked through our World Key Agency Group members.
However, we do not anticipate any significant income from the certificates of
value or sales by Group members prior to fourth-quarter, 2000. This is because
the overrides and commissions do not become payable until after the related
travel service is used by the purchaser and we will not be able to build
significant traffic through our Website or the Group members until the
successful completion of this offering. Leisure travel purchases are often made
2 - 6 months in advance. Our overrides generally range from 1% to 5% of the
total travel purchase and our commissions generally range from 5% to 10% of the
total travel purchase.
Source of Funds
We were fortunate to initially maintain the integrity of our equity
structure by funding our operations through a combination of straight debt and
convertible debt. Between September 1, 1998 and April 30, 2000 we have borrowed
a total of $1,525,000 of which $550,000 was borrowed through the issuance of 37
convertible promissory notes; $140,000 was borrowed from two of our
stockholders; $485,000 was borrowed through the issuance of 18 bridge loan
promissory notes; and $350,000 was borrowed through the issuance of one
promissory note. However, through April 30, 2000, holders of 29 of the 37
convertible notes have elected to convert $430,000 in principal of such notes to
common shares effective as of the effective date of this offering. We also have
converted the original $140,000 of stockholder loans to preferred stock. This
will have the effect of transferring $570,000 from debt to equity on our Balance
Sheet. We undertook these conversions to improve our financial position and to
facilitate our efforts to list our common stock on the Philadelphia Stock
Exchange or another regional stock exchange. We anticipate that the remaining
noteholders will also convert their Notes into shares of common stock. However,
we have made contingent allowances in both stock and cash as may be required
under terms of the remaining convertible notes.
Liquidity and Capital Resources
Since our inception, we have primarily financed our operations through the
issuance of debt instruments, including straight notes and convertible notes. In
connection with this offering, the holders of a total of $430,000 of the
convertible promissory notes payable by us have agreed to convert such notes as
of the closing of this offering into an aggregate of 215,784 shares of common
stock. Holders of $140,000 of the notes issued to our two stockholders have
already converted such notes into 8,154 shares of Series A Preferred Stock. As a
result, as of December 31, 1999, our total liability for borrowed money was
$885,000 in principal amount; and as of April 30, 2000, our total liability for
borrowed money was $1,385,000. In addition, after giving effect to the
conversion as of the effective date of this offering of 29 convertible
promissory notes in the aggregate principal amount of $430,000, our total
liability for borrowed money would be $455,000 as of December 31, 1999, and
$955,000, as of April 30, 2000.
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Since our initial organization, we have occupied offices for which World
Key, Inc., a related party, was the master lessee. We have been and continue to
be obligated to reimburse World Key, Inc., for a portion of the leasehold rent,
officers' salaries and other facilities expenses. As of April 30, 2000, we were
current in our obligations to World Key, Inc., and World Key, Inc. owed us a
total of $251,658 for cash advances made by us to World Key, Inc.
At the conclusion of this offering, assuming we sell the minimum amount of
stock to close the offering, we will have approximately $2,680,000 of capital to
execute our business plan. If we sell the maximum amount of stock in this
offering, we will have approximately $13,930,000 of capital to execute our
business plan. The minimum amount is sufficient, in our opinion, to finance our
operations over the next 12 months. The majority of capital which we raise over
the minimum amount of the offering will be used to further promote the
TravelnStore.com Web site. The accelerated promotion of the Web site should
accelerate the growth of our business requiring us to more rapidly expand our
physical work environment and add personnel. It is our goal to reach 300,000
visitors to the TravelnStore.com Web site each month and recruit a minimum of
2000 affiliated travel agencies. At our minimum funding, we believe we can reach
that goal within 12 months. At our maximum funding, we believe we can reach our
goal more quickly.
Should we reach our minimum funding prior to the expiration of 90 days after
our effective date, and if we perceive that there is continuing demand, we
intend to keep our offering open for a period of time to fill that demand.
However, we will give serious consideration to the effort required to continue
marketing the offering compared to the benefits of closing the offering and
redirecting the time and resources invested in continuing the offering to
executing the business plan.
We anticipate that our receipt of the minimum funding will provide
sufficient liquidity for our cash needs for the next 12 months regardless of
cash flow and income generation from operations. We also anticipate that our
receipt of funding in excess of the minimum, up to and including the maximum
funding, will also provide sufficient liquidity for a minimum of 12 months
allowing for the increased investment in promotion and the resultant increased
operating expenses incurred to support the increased business activity which
should result from accelerated promotion.
Need for Additional Capital
In the event that the proceeds from this offering are insufficient to grow
our business to the point of profitability, it would be doubtful that we would
be able to obtain substantial conventional loan financing to provide additional
liquidity. Should we require additional funding, it is more probable that we
would seek those funds in the form of additional equity investment from public
and/or private offerings of equity or convertible securities. The ability to
obtain additional equity investment is dependent upon many factors ranging from
the condition of the general economy to specific considerations about our
company, and its prospects, at the point in time which funding is sought. Many
of the factors are beyond our control. Consequently, there are substantial and
numerous uncertainties in satisfying future liquidity requirements through the
issuance of additional equity instruments. Further, the issuance of those
instruments would have the effect of diluting the positions of the existing
stockholders.
Going Concern Qualification In Auditors Report
Our plans are dependent upon our closing of this offering for no less than
$3,000,000 in gross proceeds to us. We believe that this will be sufficient to
meet our capital requirements for a minimum of twelve months. However, as an
early stage company we have yet to generate sufficient operating revenue to
offset our operating losses. To date, we have funded our start-up costs and our
operating losses from capital obtained primarily through the issuance of
straight and convertible debt instruments. Because we have not raised sufficient
capital, prior to this offering, to provide for our capital needs for a minimum
of twelve months, our independent auditors have qualified their report with
inclusion of a "going concern" statement. The purpose of this offering is to
raise sufficient capital to
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continue our operations and execute our business plan. To assure that this
offering raises the minimum capital which we believe is necessary to continue
operations and execute our business plan we set a minimum of $3,000,000. If we
do not reach this goal within 90 days from the effective date of this offering,
all investor funds will be promptly returned without deduction.
Year 2000 Compliance
Compliance. Many currently installed computer systems and software products
are coded to accept or recognize only two digit entries in the date code field.
These systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and/or software used by many companies and governmental agencies may
need to be upgraded to comply with such Year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.
State of Readiness. We have not experienced any significant operational or
system problem as a result of the millennium date change. We are continuing our
assessment of the Year 2000 readiness of our operating financial and
administrative systems, including the hardware and software that support our
systems. Our assessment plan includes the following:
o quality assurance testing of our internal software;
o contacting third-party vendors and licensors of material hardware,
software and services that are related to the delivery of our services;
o assessing repair or replacement requirements; and
o implementing repair or replacement.
Costs. To date, we have not incurred any material expenditures in connection
with identifying, evaluating or addressing Year 2000 compliance issues. Most of
our expenses have related to, and are expected to continue to relate to, the
operating costs associated with time spent by employees in the evaluation
process and Year 2000 compliance matters generally. At this time, we do not
possess the information necessary to estimate the potential costs of revisions
to our systems should such revisions be required or of the replacement of
third-party software, hardware or services that are determined not to be Year
2000 compliant.
Risks. We are not currently aware of any Year 2000 compliance problems
relating to our systems that would have a material adverse effect on our
business, results of operations and financial condition, without taking into
account our efforts to avoid or fix such problems. There can be no assurance
that we will not discover Year 2000 compliance problems in our systems that will
require substantial revision. In addition, there can be no assurance that
third-party software, hardware or services incorporated into our material
systems will not need to be revised or replaced, all of which could be
time-consuming and expensive. Our failure to fix or replace our internally
developed systems or third-party software, hardware or services on a timely
basis could result in lost revenues, increased operating costs, the loss of
customers and other business interruptions, any of which could have a material
adverse effect on our business, results of operations and financial condition.
In addition, there can be no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside of our control will be Year 2000 compliant. The failure by such entities
to be Year 2000 compliant could result in a systemic failure beyond our control,
such as a prolonged Internet, telecommunications or electrical failure, which
could also prevent us from providing our services, decrease the use of the
Internet or prevent users from accessing our Web site, which could have a
material adverse effect on our business, results of operations and financial
condition.
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Recent Accounting Pronouncements
The Financial Accounting Standard Board recently issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." SFAS
No. 130 establishes standards for reporting and displaying comprehensive income
and its components in financial statements. Comprehensive income, as defined,
includes all changes to equity (net assets) during a period from non-owner
sources. SFAS No. 130 is effective for financial statements for fiscal years
beginning after December 15, 1997. To date, TravelnStore.com has not had any
transactions that are required to be reported in comprehensive income.
The FASB recently issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for the
way public business enterprises are to report information about operating
segments in annual financial statements and requires those enterprises to report
selected information about operating segments in interim financial reports. SFAS
No. 131 is effective for financial statements for fiscal years beginning after
December 15, 1997. TravelnStore.com has determined that it does not have any
separately reportable business segments.
The American Institute of Certified Public Accountants issued Statement of
Position No. 98-1, "Software for Internal Use," which provides guidance on
accounting for the cost of computer software developed or obtained for internal
use. SOP No. 98-1 is effective for financial statements for fiscal years
beginning after December 15, 1998. TravelnStore.com does not expect that the
adoption of SOP No. 98-1 will have a material impact on its financial
statements.
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BUSINESS
The following discussion contains forward-looking statements that involve
risks and uncertainties. These forward-looking statements are usually
accompanied by words such as "believes," "anticipates," "plans," "expects" and
similar expressions. Our actual results may differ materially from the results
discussed in the forward-looking statements because of factors such as the risks
described in "Risk Factors" beginning on page .
Our Business
In August, 1998, we commenced operations through TravelnStore.com, LLC, a
California limited liability company. We launched the TravelnStore.com Web site
on November 1, 1998. In April, 1999 we completed a merger transaction in which
our new California corporation, TravelnStore.com, Inc acquired all of the
business, assets and liabilities of TravelnStore.com, LLC. Effective May 30,
2000, we changed our corporate name to TravelnStore, Inc.
Introduction
Our founders backgrounds include experience in the retail travel agency
industry both at the individual agency level and at the national, multi-agency
and consortium level. We believed that if we linked the graphical presentation
of travel services on the Internet with the personalized service available from
professional, experienced travel agents working in the 29,000 retail travel
agencies in the U.S., consumers would receive maximum value in their travel
arrangements.
Studies conducted by national research firms such as Forrester Research and
Jupiter Communications have shown that only a relatively small percentage of
Internet users actually book travel online. The majority use the Internet to
research their planned trips and comparison shop the various travel service
providers who offer travel services that meet their needs. Having completed
their research and shopping, the majority tend to book with a local travel
agent. The more complex or expensive their itinerary, the more likely they are
to use the services of a professional travel agent.
We designed the TravelnStore.com Web Site as a database driven site. This
means that the information that we present graphically on the site is generated
out of a database of information. This flexibility allows us to add, change and
delete information quickly and economically. While we developed the site, we
began recruiting travel agencies into our co-host agency program and negotiating
with travel service providers to enter into contracts that would pay us
commissions and/or overrides for sales of their services generated through our
Web Site. We also negotiated with the travel service providers for discounts,
gifts or upgrades to be used as incentives for consumers to use a local, retail
travel agency to complete their travel service purchase transaction.
We have initiated our World Key Group of retail travel agencies. These
"bricks" and "mortars" agencies are intended to complement our Website and to
complete our network for the Internet distribution of travel services from the
travel service provider to the ultimate customer.
Our Concept
We created, maintain and promote the TravelnStore.com Web site as a
navigational site to the Web sites owned by a wide array of travel service
providers, such as cruise lines, tour companies, car rental firms, airlines,
destination resorts and hotel groups. Visitors to our Web site can print
certificates of value for travel services of the providers that are linked to
our Web site. These certificates may be redeemed at the local retail travel
agency, whether or not a member of our World Key Agency Group, for discounts,
upgrades or other premiums designed to encourage the visitor to book a
particular travel service. We receive a commission or override from the travel
service provider for each certificate that is redeemed.
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We recruit individual travel agencies to co-host the TravelnStore.com Web
site within their own market areas. Agencies subscribe for their local market
ZIP codes so that when a visitor to our Web site logs in from a subscribed ZIP
code, that agency is graphically presented as the local co-host agency. While
certificates may be redeemed at any agency, a local co-host agency is presented
as a preferred redemption location.
We have initiated the recruitment of retail travel agencies to our World Key
Agency Group. These bricks and mortar agencies are intended to provide the
hands-on, knowledgeable services normally required by travel customers who have
selected complex or expensive travel itineraries.
We plan on addressing the full range of travel customers needs through this
organization of Internet and traditional travel service resources.
Using these methodologies, we are able to link the graphic presentation of
travel services on the Internet with the existing, retail distribution
infrastructure represented by the 29,000 retail travel agencies in the United
States.
Our Competition
We do not directly sell travel. However, our revenue is derived from travel
sales in connection with which Internet users print and redeem our certificates
of value at local, retail travel agencies or which are booked through World Key
Group members. Consequently, we compete, directly or indirectly, with every
other travel services distributor. Because we bridge the online presentation of
travel services on the Internet with the brick and mortar physical locations of
retail travel agencies, we are competing with both online and offline
distribution channels. These channels include not only travel agencies but also
direct sales from travel service providers to the public.
While in the broadest sense, we compete with other travel sales distribution
channels, we have not been able to identify a direct competitor for our online
services. There is no proprietary nature to our methodologies. We must rely on
our first-to-market position and our ability to maintain our first-to-market
position as imitators launch competing Web sites.
Online Agencies
Several companies, such as Preview Travel, Microsoft Expedia, and
Travelocity, have been established in the last three years to act as online
travel agencies. They primarily generate revenue by consumers making their own
bookings online by selecting the travel service, creating a record and
presenting payment. Through the investment of hundreds of millions of dollars to
generate consumer traffic to their Web sites, they sold on average, $250 million
in bookings of travel services in 1998.
To this point in time, none of the online travel agencies have achieved
profitability. A major reason for this is that over 80% of the sales which they
have generated have been airline tickets averaging about $350 per ticket.
Airlines have placed a limit of only $10.00 of commission for each ticket sold.
This amount is insufficient to cover their fully loaded transaction costs.
Consequently, we do not sell airline tickets. The balance of their bookings have
been hotel reservations and car rentals. These usually generate commissions
between 5% and 10% of the amount of the bookings which average about $200 for
hotel bookings and $150 for car rentals. Less than 3% of their bookings can be
classified as higher value and higher commission leisure travel bookings.
Online travel agencies have had to invest significant capital in creating
content for their Web sites. They have also had to design software and hardware
to process online bookings and integrate those with the reservation systems used
by various travel service providers. In addition they have had to hire, train,
equip and manage staff to become travel agents to interact with consumers over
the telephone.
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Our Difference
We do not sell travel services directly to customers and therefore have not
incurred capital expenditures to set up an online travel agency. Because
TravelnStore.com is a navigation site that directs consumers to the proprietary
Web sites of various travel service providers, the travel service providers make
all of the investment in Web site content. Because TravelnStore.com is a
database driven site, we can add, change or delete a travel service provider in
a matter of minutes without requiring the skills of a graphic artist or
programmer.
All sales of products or services consist of two major components. The first
part is the presentation and consideration of the various attributes of the
product or service and the determination by the buyer that the product or
service meets their needs. The second is the transactional part of the purchase
where money is exchanged for the product or service. In effect, look in the
barrel, pick out the apple that is most appealing, take it to the counter, pay
for it, have it put in a bag. This presentation/decision, transaction/completion
is often bridged by specific questions that the purchaser has for the seller.
The more complex the product or service, the more likely the need for questions
and answers. This is true of Internet travel sales as well.
In the our system, the first part of the purchase is accomplished primarily
by the Web sites of the travel service providers. The second part, which
includes answering specific questions and the paperwork, is performed by the
experienced travel agents in the local, retail travel agencies. Through our
certificates of value, we participate in travel sales to customers who first
look at our Website and then book through any retail travel agency. We will have
an enhanced participation in travel sales to customers who first look at our
Website and then book through members of our World Key Agency Group.
We think the Internet can be used effectively to graphically present a lot
of information on which the user can make a decision about travel. We know that
once a person has used the Internet to research their trip, they prefer to use a
travel agent to complete their purchase. Our goal is to tie the two together in
creative and productive ways.
Our Market Constituencies.
To execute our business plan, we must continually expand and strengthen our
relationships with our three market constituencies. The three constituencies are
as follows.
o Travel Service Providers. Travel service providers include major hotel
chains, car rental agencies, cruise ship operators and tour companies. We
contract with these travel service providers to receive commissions and/or
overrides for travel sales resulting from consumers accessing their proprietary
Web sites through our TravelnStore.com Web site. Overrides typically range from
1% to 5% of the total sale. Commissions typically range from 5% to 15% of the
total sale. We anticipate that the overrides will average about 2% and the
commissions will average about 10%.
These commissions and override contracts are a standard part of the travel
industry. They first came into being approximately 20 years ago as groups of
retail travel agencies were assembled into consortiums. These consortiums
negotiate with travel service providers for higher commission levels for their
member agencies and overrides for themselves based upon the volume of business
that is directed by the member agencies to that particular travel service
provider. Consortiums range from a few hundred agencies up to a few thousand.
Because our certificates of value can be redeemed at any of the 29,000 domestic
travel agencies, TravelnStore.com is like a cyber consortium with 29,000
physical locations.
We also negotiate with the travel service providers to underwrite our
certificates of value. Certificates can be printed directly from our Web site by
the consumer. They may represent a discount, an upgrade, or a premium on the
services purchased from the travel service providers. Travel service providers
provide the value of the certificate to incentivize the consumer to purchase
their services. For example, a consumer might print a certificate which they may
redeem for a two cabin upgrade at the retail agency of their choice. When the
consumer uses a certificate, it
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places that sale into our consortium contract. In so doing, we receive our
negotiated override from that travel service provider.
A simple example demonstrates the mechanics of this process.
A consumer accesses several competing travel service providers' Web sites,
navigating to those sites using our Web site. After comparison shopping, the
consumer selects a two-week stay at a resort hotel and prints out the
certificate for the hotel. The consumer then takes the certificate to a travel
agency. The agency books the hotel stay with the travel service provider. The
travel service provider flags its accounting system to pay us the override at
the conclusion of the trip. The agency receives the booking or confirmation
number from the travel service provider. The agency enters on the certificate
the booking number and the agency identification information. The certificate is
then faxed to us where it is entered into our accounting and tracking system.
Because the travel agency has used our certificate procedure, it is entitled to
an enhanced commission from the service provider. When the consumer takes the
trip and the commission becomes due, we receive our override.
One of the reasons that travel service providers have accepted our concept
is that they have invested millions of dollars educating, cultivating and
motivating retail travel agencies to sell their services. Particularly in the
leisure segment of the industry, where products tend to be more complex and more
expensive, travel service providers realize that, while the Internet is very
good at graphically presenting their services to an unlimited number of
consumers, they are sensitive to their competing with their travel agency
distribution network by taking bookings directly over the Internet.
Our concept of bridging the distribution of information using the Internet
with the existing transactional infrastructure of the retail agency industry
allows travel service providers to enjoy the advantages of the Internet while
maintaining and protecting their substantial investments in their retail travel
agency distribution networks.
o Travel Agencies. Our second constituency is the 29,000 domestic, retail
travel agencies. It has been speculated that the advent of the Internet
purchases of travel services online directly by consumers would have a profound
negative effect on retail travel agencies. This does not appear to be the case.
It is estimated that in 1998 approximately $2 billion of travel services were
booked online. This compares with approximately $135 billion of travel services
booked by retail travel agencies. It has been projected that in the year 2000 as
much as $7 billion of travel services may be booked online. However, sales by
retail agencies should surpass $145 billion in the year 2000. Clearly, retail
travel agencies will retain a vast majority of travel sales.
Our business plan includes retail travel agencies in three important ways.
First, retail agencies represent the redemption site for our certificates of
value. As agencies come to recognize the certificates and become familiar with
our program, we believe that agencies will also use our Web site to generate
certificates for their clients who do not use the Internet. This will expand the
scope of our business beyond just those consumers who use our Web site. It is in
our best interest to continue to educate a broad section of the retail travel
industry to our program through the use of trade publications, trade shows and
other marketing initiatives.
Secondly, the agencies can participate in our Co-host Agency Program. Our
Web site is what is called a framed site. This means that as a visitor navigates
from one travel service provider site to another, a thin band of information
containing the TravelnStore.com logo always remains at the top of the computer
screen. This information band contains buttons that allow the visitor to
navigate back through our Web site to other travel service provider sites. This
band also presents the names, addresses and telephone numbers of our co-host
agencies. As a consumer visits the various proprietary sites of travel service
providers, the co-host agency is continuously being presented as an immediate
contact to purchase whatever travel service the consumer is reviewing.
Travel agencies join our Co-host Program by subscribing for their local
market Zip codes. We usually limit an agency to three Zip codes. When a visitor
logs into our Web site, they are asked for a Zip code. If an agency has
subscribed that Zip code, then that agency is presented in the navigation band
as our local Co-host Agency. This
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gives an individual travel agency all the market power of TravelnStore.com but
is presented only to those consumers who live or work in a physical proximity to
that individual travel agency.
The third way is by agencies participating in the World Key Agency Group. By
branding their existing retail identities with the World Key brand, agencies
will be able to take advantage of our general advertising of the availability of
travel services at World Key affiliated offices. Member agencies will also be
able to access specially priced travel services distributed through a
proprietary intranet to match up the customers generated by specific advertising
programs.
Our certificate of value redemption program, our Co-host Agency Program and
our World Key Agency Group allow us to achieve both a cyber presence on the
Internet and a physical presence on Main Street. We believe that, as the use of
the Internet as a commerce tool matures, this dual presence will give us
additional business opportunities that companies with just an Internet presence
will not enjoy.
o Consumers. Our third constituency is the consumers who use the Internet to
shop and purchase travel services. With annual Internet travel sales estimated
at $2 billion, travel became the number one consumer product purchased on the
Internet in 1998. While this is a fraction of the $135 billion annually sold by
retail travel agencies, it is a significant amount. By example, a 2% override on
$2 billion is $40 million. This $2 billion is expected to reach $7 billion in
2000. Clearly, our market is growing at a compound rate. We intend to continue
to position TravelnStore.com to take advantage of this growing market.
Because of the rapid growth of travel sales on the Internet, there have been
numerous studies conducted by major research organizations to define the trends
in this emerging business. The majority of this research has focused on
statistical analyses of what consumers are buying, how they are buying and from
whom they are buying. Not surprising, the statistical evidence relating to
Internet travel sales reflects the statistical profile of e-commerce in general.
Even in the relatively short period of time (three years) that travel sales have
been heavily promoted online, some very clear trends have been established.
In formulating the TravelnStore.com concept of using the Internet for the
presentation of travel services and connecting that presentation to the
transactional infrastructure of the retail agency industry, we have been able to
use these trends to structure our business plan. Following are some of the
trends which we believe to be very significant.
o Looks But Does Not Book. E-commerce sites that have tracked their
productivity have found that, on average, 2.7% of their site visits
actually result in a sale. Further, the more complex or higher valued the
product, the lower the purchase percentage. In keeping with these
statistical trends, online travel services experience purchase percentages
of 1% to 2%. This reflects that a consumer may visit a site multiple times
prior to actually completing a transaction.
o Most Do Not Purchase Online. In the context of the online travel industry,
current statistics show that only 18% of travel site visitors have ever
made an online booking. Again, this reflects general e-commerce findings.
Reasons given for not booking online are transactional security, which
includes credit card fraud, and concern that the product purchased will
not be received, the lack of personal attention and advice in relationship
to a complex product such as travel, and insecurity on the part of the
consumer that they will make a mistake in the selection process or the
transaction process.
o Most Purchase From Travel Agents. Of the remaining 82% of the visitors
that looked but failed to book online, 27% made no bookings, 28% contacted
the supplier directly to make a booking and 39% took their business to a
travel agency. In general, this indicates that the online looker/off-line
booker market is 3.7 times larger than the online booker market. It also
indicates that travel agencies continue to get the lion's share of this
market.
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o Online Bookings Are Heavily Weighted To Commodity Type Travel. Major
online travel sites such as Preview Travel, Travelocity and Expedia,
report that over 80% of their bookings are for airline tickets with simple
itineraries. These tickets average only $350.00 per ticket. Only 3% of
their bookings can be classified as leisure travel services, such as
cruises and tours. The balance are for short-term car rentals and hotel
stays.
o Leisure Sales Weighted Heavily To Travel Agencies. If only 3% of online
bookings represent leisure sales, then the 39% of online lookers who book
off-line are more likely booking the higher value and higher commission
rate leisure sales with their local travel agent. This follows the general
e-commerce profile of higher value, more complex products being researched
online but actually purchased off-line.
While the volume of on-line travel bookings has grown rapidly, the
statistics reflect that this growth has been primarily in low value, commodity
type bookings and that the retail travel agencies have retained substantially
all of the high value, complex leisure bookings.
Our conclusions are that consumers will increasingly use the Internet to
research their travel plans and comparison shop for travel services but that
their preference will be to complete their transactions off-line, enjoying the
transactional security of dealing with a local business and receiving the advice
and expertise of a professional travel agent.
OUR INDUSTRY
General Overview
o The Internet. Initially, the Internet consisted of a linkage of computers
utilized by the U.S. government and certain academic institutions to publish and
exchange information and communicate via what is today known as e-mail. Today,
the Internet is a collection of computer networks linking millions of public and
private computers around the world.
o The Worldwide Web (www). While the term Internet refers to the linkage of
computers enabling the free flow of information electronically, it is the
concept known as the Web which gives the Internet its content. A Web site refers
to a program of information developed, maintained and updated by its creator to
provide information to others who are able to access the site through the
Internet. The term "Internet" has become the inclusive term for both the
Worldwide Web and the Internet.
o General Internet Usage Trends. Morgan Stanley Research estimates that the
number of Internet users will surpass 150 million worldwide by the year 2000.
The United States accounts for a significant majority of the users. The growth
of the Internet has been facilitated by its ability to offer a more appealing,
efficient and less costly means of engaging in and performing a myriad of
functions traditionally the province of the telephone, television and postal and
courier services. However, the major, driving force behind the explosive growth
of the Internet has been the ability of the worldwide computer industry to
produce personal computers at a price point that allowed one out of every three
U.S. households in 1997 to own a personal computer. It is projected that this
will increase to 50% of all U.S. households by the year 2000, 98% of all U.S.
households within the next 10 to 20 years.
o E-Commerce. Our business is to bridge the presentation of travel services
on the Internet with the established, physical infrastructure of the traditional
retail travel industry. This opportunity has arisen due to the rapid growth of
the Internet as a vehicle for commerce in general and travel sales specifically.
Commonly called e-commerce, the selling of goods over the Internet is creating
new retailing and wholesaling business models in numerous fields. In 1998 the
sale of travel services via the Internet became the largest segment of
e-commerce, surpassing computers and software.
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o Online Travel Sales. The travel segment of the e-commerce industry has
encountered many of the same challenges faced by other categories of products
sold online. We believe that the continued growth and eventual success of
e-commerce, inclusive of travel sales, is dependent upon Internet users
adjusting to the limitations of e-commerce and the ability of e-commerce
companies to realistically assess how they can use the Internet to meet the
needs of consumers. There is perhaps no more graphic example of the inherent
limitations of e-commerce as a retail tool than in the travel sector wherein
consumers use the Internet to gather travel information but choose to book their
travel with an agency salesperson knowledgeable in the complexities of travel
services.
We believe that the ability to consummate a transaction for the purchase of
many kinds of goods and services is compromised because of the inability of the
Internet to provide the advantages of an interactive medium. Consequently, we
recognize that the Internet is an excellent medium for the graphic presentation
of travel services and that its interactive limitations can be overcome by
connecting the online marketing of travel services with the transactional
abilities of local, retail travel agents.
E-Commerce, The Online Commerce Industry
o Retail Sales Comparisons. The sale of goods and services online in the
U.S. during 1998 totaled approximately $13 billion. This figure must be
considered in light of the fact that overall personal consumption in the U.S.
during just the second quarter of 1998 reached an annual rate of $5.13 trillion.
While 25% of North American adults are "wired" or technologically capable of
purchasing online, only one-fifth of these adults did so in 1997. Most online
commerce is actually business to business, which accounted for $8 billion
(approximately 62%) of the 1998 sales and is projected to grow to $327 billion
in 2002, whereas retail or business to consumer sales totaled $4.8 billion in
1998 (approximately 37%) and is projected to grow more modestly to $17.4 billion
in 2002. Breaking down retail sectors, it is estimated that 43% of online sales
will be travel related by 2002 with all other sectors accounting for the
remaining 57%. This would place the dollar amount of online sales of consumer
travel services in the year 2002 in the range of $7.5 billion.
o Wired Consumers and Look to Book Ratios. There are particularly troubling
issues facing the retail sector of the online commerce industry. These issues
involve what are known as "wired" customers or travelers and "look to buy or
book" ratios.
Wired customers are those who have Internet access, and, in the case of the
travel industry, and who are likely to travel.
To evaluate the Internet as a retail sales tool, a distinction must be made
between customers who purchase online ("buy") or, in the case of travel
purchases ("book"), and those who merely visit the Internet ("look") to seek
information or comparison shop after which they either make no purchase or book
off line. Online retailers who track both lookers and buyers report they average
a conversion rate of looker to buyers of only 2.7%. This means that, of 100
shoppers who visit an e-commerce site, less than three actually make a purchase.
The reasons given for such a low percentage of buyers are credit card
security, transactional security, unfamiliarity with anonymous Internet
companies, lack of personal attention, inefficiencies in delivery, and
inefficiencies in getting questions answered.
Industry recommendations to increase patronage of e-commerce sites include
making Web sites more user friendly, offering discounts as incentives to
purchase and, following the lead of the travel industry, rewarding repeat
customers for their patronage, such as, in the case of the airlines, frequent
flyer miles. As e-commerce develops, the industry must shift its focus from
customer acquisition to customer retention.
The TravelnStore.com concept of presenting information on the Internet, but
completing the transaction at a local travel agency directly answers many of the
reasons given for not buying online and implements many of the recommendations
to incentivize and retain online customers.
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THE TRAVEL INDUSTRY
Retail Travel Industry
o Retail Travel Agencies. Historically, individual travel agencies have been
classified as commercial travel agencies or leisure travel agencies. Commercial
agencies tend to be larger and focus on commercial accounts whose primary travel
is for business purposes. Leisure agencies primarily deal with the general
public for personal travel needs.
o Retail Agency Industry Profile. The latest U.S. Travel Agency survey
reported that the number of retail agencies had declined between 1995 and 1997.
However, the survey also showed a 25% annual increase in travel agencies' gross
sales from 1995-1997. This dramatic increase in sales has occurred despite the
competitive threat posed by emerging online travel companies and a host of other
factors including reductions in commissions paid by airlines and many
initiatives undertaken by travel service providers to do business directly with
the travel consumer. Moreover, the number of travel agencies reported as
profitable has steadily increased from 71% in 1995 to 73% in 1996 to 76% in
1997.
The attrition rate for travel agencies is influenced primarily by sales
volume. In 1997, for example, 9 out of every 10 agencies with gross sales in
excess of $5 million were profitable; a number which fell to eight out of 10 for
agencies doing between $2 to $5 million and seven out of 10 for agencies in the
$1 to $2 million range. Only six out of 10 agencies selling less than $1 million
were profitable.
Not surprisingly, the greatest attrition has been with the smaller travel
agencies. In 1995, for example, 30% of the travel agencies had less than $1
million in sales. While these agencies constituted the largest single category
of agencies, they only accounted for 6% of the total retail agency sales. In
contrast, in 1997, 19% of the travel agencies had less than $1,000,000 in sales
and these agencies accounted for only 3% of the total retail agency sales.
These figures reflect a strong consolidation trend in the retail travel
agency industry. Smaller agencies are disappearing to the benefit of larger
agencies. Larger agencies are enjoying increased profitability as their volumes
increase. We expect this consolidation to continue and view it as a positive
trend.
o Transition to Leisure Travel. The travel agencies have responded to these
challenges by increasing their attention to the sale of the more lucrative
leisure and vacation travel. This has been particularly evident in the
commercial agency sector as agencies have expanded their leisure travel
offerings and targeted their corporate client bases. For example, air travel
sales by agencies have dropped as a percentage of gross sales from 61% in 1995
to 56% in 1997, while income from leisure travel sales increased from 49% in
1995 to 51% in 1997.
In 1997, for the first time since 1974, income from leisure travel sales by
agencies exceeded 50% of gross revenues. Agencies typically receive 12% to 20%
commission on leisure sales. TravelnStore.com is specifically designed to
address the leisure travel market which continues to grow as the baby boom
generation matures and uses its discretionary income for travel purchases.
o Consortiums and Franchises. A recent survey by Travel Weekly showed that
in 1997, 54% of all agency locations were affiliated with a leisure oriented
consortium. Ten years earlier, in 1987, only 36% of agency locations had such
affiliations. In addition, 14% of agencies were affiliated with franchises such
as Uniglobe, Carlson Wagonlit Travel and American Express. Consortiums are able
to negotiate for travel service providers to pay higher commission levels to
their travel agency members.
In addition to the higher commission levels for the member agencies, the
consortium typically receives an override commission based upon the total sales
of its member agencies. These overrides typically range between 1% and 5% of
gross sales.
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o Brick and Mortar Agency Sales vs. Online Travel Sales. Just as online
retail sales compose only a small percentage of overall consumer spending,
online travel sales represent only a small portion of overall travel industry
gross receipts. For example, travel agents accounted for $126 billion in sales
in 1997 whereas online travel sales amounted to only $654 million (approximately
0.5% of total receipts). Just the annual growth in agency sales of 5% or $6.3
billion between 1997 and 1998, is more than three times 1998 total online travel
sales gross revenue. Many analysts have pointed out that rumors about the demise
of travel agencies in the face of online sales competition are greatly
exaggerated.
Wholesale Travel Industry
o Travel Service Providers. Travel service providers include cruise lines,
package tour companies, car rental companies, hotel groups, destination resorts
and airlines. The retail travel agency industry has traditionally supplied the
major distribution infrastructure for travel service providers. Consequently,
travel service providers have invested heavily in cultivating, educating and
motivating travel agents to sell their products.
o Agency Competitors. In most cases, travel service providers also
distribute their products directly to consumers. Traditionally this has been
accomplished through consumer direct advertising and the use of in-house
reservation centers or employees to field in-coming 800# telephone calls. This
direct competition has always been a point of contention between travel agencies
and travel service providers. Consequently, travel service providers have been
judicious in their use of direct consumer marketing, oftentimes referring
inquiries first to travel agencies and then to their own reservations staff.
o Internet Marketing Initiatives. Virtually all types of travel service
providers are using online commerce to offer their services. The travel industry
has embraced the Internet because it is a perfect medium for the inexpensive
distribution of large amounts of information. Because the presentation of travel
services has always employed photographs and maps, the graphical nature of the
Internet is a perfect fit for the distribution of travel information.
However, the Internet is not a conversive medium. What is presented is what
is presented. To make an inquiry requires the use of email which usually has a
long response cycle or the consumer must make a direct telephone call to the
travel service provider. Consequently, only very simple travel services can
easily be sold online. For this reason, the more complex and expensive leisure
travel services continue to be sold by retail travel agencies on a person to
person basis.
o Internet Competition Sensitivity. Internet market initiatives by travel
service providers have also been burdened by their desire to not appear overly
competitive with their existing retail travel agency distribution networks. This
is particularly true of leisure travel service providers.
The Emerging Online Travel Industry
o Major Players. The online commerce sector of the travel industry is
dominated by three companies, Preview Travel, Travelocity and Expedia.com. Each
of these recorded sales of approximately $250 million in 1998. Each of them also
lost tens of millions of dollars. Together they share 40% of a market projected
to grow to $7 billion in the year 2000. These three companies have rapidly
solidified their position of dominance by obtaining so-called "portal"
agreements to be the travel service providers for many of the major access sites
to the Internet. For example, Preview Travel has portal agreements with AOL.com,
Excite.com, Lycos.com and Webcrawler.com, Expedia is paired with Microsoft.com,
Infoseek.com and MSN.com and Travelocity links with Yahoo.com and Netscape.com.
All told, Web site portals garner over 150 million visits per month by
prospective consumers, any of whom, depending upon which site they have
accessed, can click directly into Preview, Expedia or Travelocity to make a
travel purchase or obtain travel related information.
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o Online Losses. The reasons online travel agencies have incurred
substantial losses is that they have substantial expenses. Multi-million dollar
costs associated with acquiring and maintaining portal agreements and other
advertising and promotional expenses to generate traffic volume to their sites
have insured that these large online agencies will not turn a profit in the
foreseeable future. In addition, they have incurred the expenses of setting up
the online agency, acquiring and training travel agents and other significant
operating expenses.
o Online Competition. Online travel companies must bear the burden of both
the competitive factors they share with brick and mortar travel agencies and
also the competitive factors unique to the Internet. For example, airlines are
encouraging consumers to purchase their tickets from their own Web sites by
offering increased frequent flyer miles for online purchases. Further, because
over 80% of online travel sales are airline tickets, continued erosion in this
segment of the online agency business is magnified as consumers purchase
directly from the airlines' Web sites.
o Online Consumer Profiles. To gauge the effectiveness of the Internet for
travel sales, the industry has measured the patronage of "wired travelers"; U.S.
adults with Internet access who have traveled by air in the last year and
visited a Web site in the past month. In a recent survey of 500 wired travelers,
an independent research firm found that 80% of wired travelers visited at least
one Internet travel site, 58% went so far as to check prices and 18% actually
booked travel online. Of the 58% who looked but did not book online, 67% bought
services later from another source such as a travel agency or from the supplier.
What is significant is that 75% of these motivated lookers said they were
unlikely to use the Internet to actually purchase travel in the near future.
They cited concerns over credit card security (82%), personal privacy (79%) or
said they would rather speak with a knowledgeable salesperson (77%).
Summary
Today's travel industry, can be summarized as follows.
o Sales of all categories of goods and services online represent only a
fraction of the total dollar volume of U.S. personal consumption.
o While over 40% of online retail sales consist of travel products, gross
travel sales over the Internet currently represent less than 2% of the
sales recorded by travel agents.
o The vast majority of those who shop on the Internet look but do not buy.
o Traditional travel agency business is generally strong. Travel agents sold
$132 billion of travel services in 1998, up over 30% from 1995.
o Both traditional travel agencies and online agencies face increasing
competition directly from travel service providers.
o Travel agencies have moved away from lower commission travel services and
have focused increased attention on leisure travel.
Our goal is to structure the TravelnStore concept to take aggressive
advantage both of the strengths of the Internet and the traditional travel
industry. Our concept answers specific needs of both our retail agency and
travel service provider constituencies. We believe that by pursuing these
advantages we are avoiding the weaknesses exhibited by the online travel agency
business of low look to book ratios and reduced commissions.
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OUR COMPANY
Our Strategy
For us to maintain and expand our unique position of linking Internet travel
shoppers to local travel agencies, we must continue to grow at an increasing
rate. Consequently, the major component of our business plan is our growth
strategy. We anticipate that we should be able to grow proportionately to the
compound growth rate of Internet usage. Our goal is to exceed that rate by
increasing traffic to our Web site by established Internet users.
Growth Strategy
As outlined above, our business addresses three constituencies; travel
service providers, retail travel agencies and consumers. To grow, we must grow
our relationships with these three constituencies. Each of these requires
specific marketing strategies. Because these constituencies are interactive,
success with each begets additional success with the others. Our Web site
provides both a contact point and an interface mechanism for these three
constituencies. As the volume of site participants from these three
constituencies increases, so will the use of our Certificates of Value. This
will result in increased revenues to TravelnStore.
o Travel Services Providers. Our smallest constituency is the travel service
providers. We have already established contractual and working relationships
with many of the major travel service providers. Consequently, continued growth
within this constituency will consist primarily of adding the more specialized
types of travel service providers or destination specific travel service
providers such as all-inclusive resorts.
Even though we will not be adding a significant number of additional travel
service providers, it is important that we continue to mature and expand our
relationships with our current travel service providers. This includes our
demonstration that our Web site is an increasingly important factor in their
overall Internet marketing programs and that our World Key Agency Group can
effectively complement our Internet marketing program. As our Web site adds
value to their online presence, we should be able to negotiate enhanced
overrides and certificates of value.
Because travel service providers provide the content for the
TravelnStore.com Web site and also the incentive of the Certificates of Value,
they are a key element in our success.
o Retail Travel Agencies. Continued growth within the retail travel agency
constituency will come in the form of additional direct contractual
relationships with individual retail agencies to participate as co-host agencies
and as members of our World Key Agency Group. Presently, over 300 travel
agencies have joined as co-host agencies. These agencies receive a guaranteed
geographical territory based upon their subscription for their local market Zip
codes. We estimate that we may eventually have as many as 2,500 agencies in our
co-host program.
Our certificates of value can be redeemed at any of the 29,000 travel
agencies in the United States. As certificates are redeemed, more agencies will
become cognizant of our business. Even if an agency does not elect to join our
co-host program, that agency can still participate by proactively printing out
certificates of value for its clients as sales opportunities present themselves.
We believe that many agencies will take advantage of the availability of the
certificates of value to provide additional value to their existing and walk-in
clientele. We intend to encourage agencies to use the certificates of value for
their clients. In so doing, they will be generating income for us that is not
dependent upon consumers who are shopping for travel on the Internet.
In addition to the recruitment of co-host agencies for the TravelnStore.com
Web site we are also seeking to undertake the recruitment of retail travel
agencies to operate as World Key branded agencies. As a World Key agency, a
travel agency would be able to participate in both online and off-line marketing
initiatives to drive additional leisure travel business to the participating,
branded agencies. This additional business would also increase our advertising
and commission override revenues.
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We have selected the World Key name as an appropriate brand name for
off-line marketing initiatives in that brick and mortar travel agencies would be
at a disadvantage adding a Web address type of name, such as TravelnStore.com,
to their established, existing retail identification. The name "Smith World Key
Travel" is a more becoming name for a retail travel agency than "Smith
TravelnStore.com Travel". For example, by having a brand name affiliation, it
allows us to advertise a particular cruise departure or special travel offer as
being exclusively available at "your local World Key affiliated travel agency".
To recruit agencies into adopting the World Key brand, we have determined to
offer each agency 2,000 shares of our common stock to be vested over a four-year
period of time at 500 shares per year. By having an ownership interest in
TravelnStore, we believe that agencies will be significantly more motivated to
participate in our branding and marketing initiatives. We believe that, as
agencies are motivated to generate more revenue from our branded marketing
initiatives, they will direct a greater percentage of their sales to the
TravelnStore.com, Web site thereby increasing our revenues. Further, to
compensate these agencies for the direct expense of re-branding, such as signage
and stationery, we will offer to reimburse them $1,000.
It should be noted that any shares issued in conjunction with this program
will dilute the then outstanding shares as we do not anticipate requiring that
the agencies pay a cash purchase price for the shares.
We began recruiting these agencies in October of 1999, through a series of
trade advertisements, direct contact and seminars in most major cities. Our
branding initiative will require that we provide protected geographic
territories for the participating agencies, and that we select professional,
established and market aggressive agencies. We have not yet enrolled any
agencies in our World Key Agency Group.
This branded program also has required us to arrange for the licensing of
the World Key trademark from World Key, Inc. We have entered into a Trademark
License Agreement with World Key, Inc. under which we have the right to
sublicense of the World Key trademark to the participating agencies. We do not
have to pay World Key, Inc. any royalty or other consideration until we grant
our first sublicense. At that time we will pay World Key, Inc. $25,000 in cash.
Thereafter, we will pay World Key, Inc. an annual royalty of $250 for each
sublicense that we have granted. We have an option to purchase the World Key
trademark and brand name at a price equal to $2,500 for each agency sublicense
granted, or to be granted through September 30, 2004, up to a maximum of 2,500
sublicenses. We must exercise this option, if at all, within the first 36 months
of the Trademark License Agreement, that is by September 30, 2002.
Our growth strategy, as it pertains to retail travel agencies, is focused on
expanding our co-host agency network and encouraging all agencies to use the
certificates of value for their existing clientele. Because the retail agency
industry is well-established in physical locations with readily available
telephone and fax numbers, marketing to travel agencies can be focused as to
geography and demographic profile of targeted agencies.
o Consumers. The major growth we seek to generate is with the consumer
constituency. Regardless of the number of agencies or travel service providers
who participate with us, ultimately it is the use of the TravelnStore.com Web
site by consumers which will generate our revenue growth. Growth in this
constituency will be directly related to the amount of traffic that we can
generate to our Web site and how well those visitors accept the opportunities to
utilize the certificates of value. Advertising online includes using banner ads,
sponsorships and direct links and establishing strategic relationships with
non-competing, high traffic volume sites.
The most immediate methodology to generate traffic to the TravelnStore.com
Web site is to employ a comprehensive offline and online advertising program.
Funding of this advertising program is the primary use of proceeds of this
offering. Advertising offline in various media, such as in-flight magazines and
publications, is designed to communicate to travelers who use the Internet.
Online advertising is more directed to Internet users who travel. Both are
important segments of the consumer constituency.
Our goal is to generate 300,000 unique visitors, per month, to our Web site
by the end of 2000. Success of our business plan is dependent on consumers using
the certificates of value as part of their travel purchases.
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Whatever percentage of visitors to our Web site use the certificates, the actual
number of certificates used is directly related to the total traffic to the
site. Consequently, the main growth challenge that the we face is to generate as
much growth in our visitor counts as possible. Fortunately, it has been the
experience of most Web sites that given sufficient promotional funds, visitor
counts increase proportionately to the amount of money invested in advertising
and promoting the site.
Marketing Strategy
Our marketing strategy can also be defined within the parameters of our
three constituencies. We have already successfully implemented marketing
strategies for the solicitation and acquisition of retail agencies to
participate in the co-host agency program. We have had a good response to our
invitations to agencies to co-host the TravelnStore.com Web site because most
agents realize that the Internet presents a good marketing opportunity. Further,
travel service providers are investing in the quality and quantity of their
proprietary Web sites. Because of this, we have enjoyed a good reception by
travel service providers. We are also confident that once consumers become
accustomed to using the TravelnStore.com Web site to navigate travel sites on
the Internet, they will return whenever they have need to purchase travel
services.
o Retail Travel Agencies. Central to our strategy is the operation of our
co-host agency sales team. Leads for the sales team are generated by a variety
of promotional activities, including of the use of broadcast faxes, online
advertising on selected Internet travel agency sites, traditional advertising in
trade publications, press releases, referrals from affiliated organizations, and
direct telephone solicitation. Part of the proceeds from this offering will be
directed to expanding the sales team and increasing these promotional
activities.
We will also undertake a major trade publication and broadcast fax marketing
program designed to make all agencies aware of the opportunity for agencies to
use our certificates of value for their non-Internet clientele. This program
should increase the awareness of the retail travel industry as to how our
certificate program works and that agencies will receive enhanced commissions on
travel sales generated by the TravelnStore.com Web site.
o Travel Service Providers. Our marketing to the travel service providers is
designed to expand the scope of services and destinations represented on our Web
site. We have already participated as an exhibitor in major trade shows to raise
the awareness of the travel industry of the TravelnStore concept. We will
continue to develop new travel service provider relationships as an ongoing
strategy to broaden the appeal of our Web site. However, unlike many other
travel sites that seek to link to an endless chain of informational sites of
both a general and destination specific nature, we will retain our philosophy of
only linking to the proprietary sites of travel service providers.
o Consumers. The majority of the proceeds from this offering are earmarked
for the promotion of our Web site to Internet users. While we will use proven
advertising strategies both in off-line publications and in the online
communities, we also have some unique strategies to generate new traffic to our
Web site and to build site loyalty. A key component of our non-advertising
strategies is our Affinity Program. Because our Web site is structured as a
database driven site, we are able to identify and track all registered visitors
to our Web site. This tracking extends to the eventual travel sales in which a
certificate of value is used. If the travel service purchaser has been
identified as part of a particular group or porting to our Web site from another
Web site, we have the capability to pay the group or the Web site a portion of
our commission or override.
Recently we launched THE TRAVELNSTORE AFFINITY PROGRAM. The goal of TAP is
to substantially increase awareness of our Web site and provide incentives for
using the site by TAP members. TAP's initial focus is alumni associations of
major colleges and universities throughout the United States. Under the TAP
alumni program, an academic institution enters into a standard agreement with us
wherein our Web site is promoted by the institution in a variety of ways. This
includes being featured on the institution's Web site and in campus and alumni
publications to encourage those affiliated with the institution to use our Web
site for their travel needs. Under
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our agreement with a specific institution, we remit to the institution a
percentage of each commission or override earned by TravelnStore.com as the
result of the use of a certificate of value by the institution's alumni or
supporters.
While there are almost unlimited opportunities to expand TAP beyond the
alumni associations of colleges and universities, we selected such associations
for the initial launch of TAP for a number of significant reasons.
o Alumni associations have one of the highest percentages of Internet users
with a high demographic travel profile.
o Colleges and universities spend a great deal of time and money keeping
current with the whereabouts of their alumni. Therefore, their
publications have a high probability of reaching those who previously
attended the institution.
o By contracting with academic institutions, TAP facilitates the exposure of
our Web site to a substantial number of individuals.
o We are able to publicize the TravelnStore.com Web site to an institution's
alumni and resident population efficiently and inexpensively by tagging
onto existing programs the institution uses to communicate with its
affinity population; e.g. the institution's Web site and campus and alumni
newsletters, newspapers and magazines, all of which are targeted to
various sectors of the institution's overall current and former
population.
We believe that by the end of 2000 we can have agreements in place promoting
our Web site to several million TAP members. We also intend to use a modified
model of this program to enter into associate relationships with a wide variety
of Internet sites whereby users of those sites porting to our Web site will
generate revenue back to the originating Web site through the use of our
certificates of value.
Overall, our growth is clearly defined by the requirements of marketing to
our three constituencies. Fortunately, each of our constituencies is easily
identified and has well-established conduits of contact. With the funding from
this offering, we will be able to implement our marketing strategies targeted at
each of our constituencies. Provided our efforts are effective, we should
experience the growth necessary for our company to be increasingly valuable to
its customers, employees and stockholders.
Operations
Our current operations are reasonably simple. They involve promoting our Web
site, providing our Web site and certificate of value services to our travel
agency and travel service provider constituencies, and accounting for our
revenues and expenses. As we do not provide travel services directly to
consumers, we avoid the most labor-intensive component of the travel service
business. As we establish the World Key Agency Group, our operations will expand
to include the administration of an association of retail travel agencies.
However, as we will not operate any of the Agency Group members, we expect that
our operations will remain reasonably simple and will be neither labor nor
capital intensive.
Our revenues will come primarily from the commissions and overrides from the
travel service providers who honor our certificates of value. We anticipate
having profitable operations by limiting the labor intensive services that we
provide and automating the processing and accounting for our certificates of
value. While we anticipate high volume use of our certificates, the dollar
amount of each commission and override will be low (the overrides likely will be
between 2% and 5% of the cost of the travel service) and we must control the
cost of processing each certificate. As we do not sell travel services directly
to consumers, we will avoid the high-cost, labor-intensive services of most
existing online travel service companies.
Our operational costs consist primarily of the following items:
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o The cost of equipping our Web site and providing the bandwidth needed for
efficient and user friendly access to our Web site information;
o The cost of the staff to deal with our customers, the retail travel
agencies and the travel service providers;
o The cost of processing and accounting for our certificates of value; and
o The cost of promoting our Web site and increasing site traffic.
Our business model should let us control and minimize these cost components
and maximize our profit potential.
Our equipment costs include primarily the costs of obtaining and maintaining
the computer servers and telecommunications equipment required to maintain our
Web site. As our Web site is a navigational site through which consumers can
access the database Web sites of the travel service providers, we avoid the high
equipment costs often associated with Internet e-commerce companies. We have an
extremely low cost of content, as the participating travel service providers
provide all content. Similarly, as we deliver only our "frame", the bandwidth
required for the consumer's efficient review of the available travel services is
provided primarily by the Web sites of the participating travel service
providers. This means that we can handle significant site traffic with a minimum
investment of Webmaster time and a minimum investment in hardware and software.
The major function of our Web site is one of client database acquisition and
management.
Similarly, as we do not provide reservation or similar service to the travel
consumer, we do not have to invest in the order-processing and confirmation
computer hardware and software and other ticketing equipment that is required
with these operations.
Our labor costs will consist primarily of the cost of the staff to perform
the following functions:
o Processing and accounting for our certificates of value;
o Developing and maintaining our relationships with our travel agency and
travel service provider constituencies; and
o Promoting our Web site and increasing site traffic.
As we do not sell travel services directly with consumers, our staff can be
compact and focused and we do not have to invest in training our staff on the
intricacies of travel services.
Because of the complexities of travel, companies that sell travel services
directly to consumers must have a highly trained, knowledgeable and experienced
staff who can efficiently explain the services to the consumer. Companies that
sell travel services online, such as Preview Travel, Travelocity and Expedia,
must have the same highly trained, knowledgeable and experienced staff. These
online companies have had to invest significant capital to equip their
operations and to acquire and train a workforce.
The processing and accounting for our certificates of value is primarily a
tracking function. We must properly record each certificate that is sent to us
by a travel agent, must monitor our receipt of the commissions and overrides
from the travel service providers and must account to the travel agent for any
monies due to the agent from the travel service provider. These functions can be
automated with existing, off-the-shelf computer software. We do not anticipate
having to invest in proprietary hardware or software to handle these functions.
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Through the automation of the processing and accounting for our certificates
of value, we anticipate that we can profitably operate a high-volume, low-cost
service business.
The costs of developing and maintaining our relationships with the travel
agencies and travel service providers and of organizing and operating the World
Key Agency Group can not be accurately predicted. However, we anticipate that
these costs can be managed so that they can be covered through the net
commissions and overrides realized from our certificates of value and on sales
by World Key Agency Group members. We will be facilitating the services provided
by both the agencies and the providers and will not be competing with either. As
a result, we anticipate that both constituencies will be receptive to our
services and that we will not have to invest significant sums in developing
proprietary products or services for either constituency.
Our principal labor cost will be the cost of promoting our Web site and
increasing site traffic. This cost is, in a sense, a discretionary cost and is
not directly tied to the cost of generating revenues from any particular
certificate of value. However, our revenues will be directly proportional to the
volume of certificates that are used and such volume should also be proportional
to the amount of traffic to our site. We intend to devote substantial resources
to this function and anticipate that it will be our primary cost of operations.
Studies of e-commerce have shown that site traffic is directly related to
the amount of promotion of the site. The more potential users who are aware of
the site, the greater the site traffic. So long as the site traffic generates
profitable operations, the cost of promoting the site can be managed within an
overall profitable operation. We anticipate that our processing of each
certificate of value can be done profitably through automation. Our challenge
then becomes one of sufficiently promoting our site to generate increased
traffic while keeping the promotional costs within the net profit realized from
processing the certificates.
Example Of Potential Operational Performance
The following example illustrates how our business model operates. This is
only an example and, because of the changing e-commerce market and the vagaries
of travel service in general, likely will not reflect actual operations. The
assumptions underlying our example are based on information from various
Internet travel industry research and financial reports of other Internet travel
sites. There can be no assurance that our actual results of operations will not
vary significantly from the example or that the assumption underlying this
example will apply to our operations.
Research indicates that approximately 67% of on-line travel shoppers
eventually book travel offline and that the type of travel that is booked
offline is significantly weighted towards more complex leisure travel, such as
cruises and tours. For this example we have made the following assumptions.
This example illustrates the total revenue that might be generated from
traffic to our Web site. As the example revenue would be generated from the
visitor eventually booking the travel services offline, the example can not be
used to illustrate our likely revenue for any particular month. Also, we are
developing traffic to our Web site and currently we have several thousand
visitors to our Web site each month. We do not anticipate averaging 100,000
visitors per month until at least the fourth quarter of 2000.
o Amount Of Revenue From Travel Services Booked Offline
o 67% of the visitors to our Web site will eventually book travel services
offline;
o 10% of the on-line looker/off-line booker visitors to our web site will
use a certificate of value;
o The eventual offline bookings will be for the following types of
services;
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o 65% for leisure travel at an average value of $2,500;
o 20% for hotel accommodations at an average value of $200;
o 15% for car rentals at an average value of $150;
o 1.75% is the average net override payable to us from use of a
certificate of value; and
o Our revenues will be proportional regardless of the actual amount of
site traffic.
o Direct Costs Of Processing Certificates Of Value
o 10 minutes of processing time for each certificate;
o $30 per hour as the cost of clerical labor to process certificates; and
o $5 per Certificate as the labor for processing each certificate.
Example:
o Of 100,000 visitors to our Web site, 67,000 will book travel services
offline;
o Of the 67,000 visitors who book services offline, 6,700 will use a
certificate of value;
o Of the 6,700 visitors who use a certificate of value, 4,355 (or 65%) will
book leisure travel services;
o Total bookings for leisure travel in which a certificate is used is
$10,887,500 (i.e., 4,355 trips x $2,500 per trip);
o Total bookings for hotel accommodations in which a certificate is used is
$268,000 (i.e., 1,340 bookings x $200 per booking);
o Total bookings for car rentals in which a Certificate is used is $150,750
(i.e., 1,005 bookings x $150 per booking);
o Total revenues from offline bookings is $11,306,250;
o Overrides paid to TravelnStore from offline bookings is $197,860 (i.e.,
$11,306,250 x 1.75%); and
o Override per visitor is $1.97.
Governmental Regulations
Laws and regulations directly applicable to Internet communications,
commerce and advertising are becoming more prevalent. The United States Congress
has enacted Internet laws regarding children's privacy, copyrights and taxation.
Such legislation could dampen the growth in use of the Internet generally and
decrease the acceptance of the Internet as a communications, commercial and
advertising medium. Although our transmissions originate in California, the
governments of other states or foreign countries might attempt to regulate our
transmissions or levy sales or other taxes relating to our activities. The
European Union recently enacted its own privacy regulations that may result in
limits on the collection and use of certain user information. The laws governing
the Internet, however, remain largely unsettled, even in areas where there has
been some legislative action. It may
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take years to determine whether and how existing laws such as those governing
intellectual property, privacy, libel and taxation apply to the Internet and
Internet advertising.
The growth and development of the market for Internet commerce may prompt
calls for more stringent consumer protection laws, both in the United States and
abroad, that may impose additional burdens on companies conducting business over
the Internet. Furthermore, the Federal Trade Commission has recently
investigated the disclosure of personal identifying information obtained from
individuals by Internet companies. In the event the Federal Trade Commission or
other governmental authorities adopt or modify laws or regulations relating to
the Internet, our business, results of operations and financial condition could
be adversely affected. See "Risk Factors -- Governmental Regulation of the Web."
Intellectual Property Rights
We have filed for registration of the service mark "TravelnStore.com" with
the United States Trademark Office. We are the registered owner of the
"TravelnStore.com" Internet domain name.
We have not filed for patent protection of any of our technology or business
systems with the United States Patent Office or any foreign patent office. We
believe that our success will be dependent on our operation of a user-friendly
Web site that offers superior services and information. We do not believe that
such user-friendly site or superior services and information are dependent on
our obtaining and enforcing patent protection for our technology and business
systems.
We have determined that we wish to utilize the World Key trademark held by
World Key, Inc. as part of agency recruitment efforts and as the brand-name for
a World Key Branded Agency program. In addition to our Co-host Agency Program,
under which local retail travel agencies sponsors our Web site and is given
priority for up to three Zip codes, we intend to pursue establishing under a
common brand name a network of local retail travel agencies with whom our Web
site customers can deal for purposes of booking travel identified through our
Web site. We intend to use the "WORLD KEY" trademark as the brand name under
which this network will be organized.
Under a Trademark License Agreement with World Key, Inc. dated September 24,
1999, we acquired the exclusive right to use the "WORLD KEY" trademark and
service mark in the United States. The principal terms of the Trademark License
Agreement are as follows.
o The term of the license is perpetual, subject to the right of either party
to terminate the license for cause.
o The licensed territory is the Untied States.
o We have the right to sublicense the Trademark for use by retail travel
agencies participating in our network of agencies.
o The royalties that we have to pay are as follows:
o We do not have to pay any royalties until we grant our first sublicense.
o When we grant our first sublicense, we will pay a royalty of $25,000;
and
o Thereafter, we have to pay an annual royalty of $250 per retail travel
agency who is participating in our network and to whom we have
sublicensed the Trademark.
o We have the option to acquire the Trademark from World Key on the
following terms:
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o We must exercise the option within 36 months after the date of the
Trademark License Agreement, that is by September 30, 2002;
o We must pay World Key a purchase price equal to the sum of:
o The product obtained by multiplying $2,500, by the number of sublicenses
that are outstanding as of the date of the exercise of the option; and
o The product obtained by multiplying $2,500, by the number of sublicenses
that are granted after the date of the exercise of the option and prior
to September 30, 2004; or
o We can pay the purchase price either in cash or, so long as the trading
price of our common stock is at least $5.00 per share, in shares of
common stock which have an aggregate value equal to the purchase price.
We believe that the "WORLD KEY" trademark has significant value and will
facilitate our establishment of the retail travel agency network. At the same
time, we have attempted to structure the Trademark License Agreement so that our
obligations are manageable and are proportionate to our use of the Trademark and
the benefit we realize from the agency network.
Jim Tyner, Yula Greco, John Toal, Donald G. Scanlin and Stevan Saylor are
principal stockholders of TravelnStore, Inc. and are principal stockholders of
World Key, Inc.. Of a total of 6.0 million shares of World Key, Inc., Jim Tyner
is the beneficial owner of 1.8 million shares; Yula Greco is the beneficial
owner of 1.4 million shares; John Toal is the beneficial owner of 120,000
shares; Donald G. Scanlin is the beneficial owner of 1.4 million shares; and
Stevan Saylor is the beneficial owner of 225,000 shares. Jim Tyner and Yula
Greco are also officers of World Key, Inc.
Employees
As of April 30, 2000, we had 10 employees consisting of 4 executive
officers, and 6 administrative support personnel. We anticipate that by December
31, 2000, we will have a total of approximately 50 employees consisting of 6
executive officers and 44 administrative and support personnel.
Facilities/Properties
Our principal offices are located at 1100 Paseo Camarillo, Camarillo,
California 93012. Our offices consist of a free standing office building that
consists of 5,100 square feet of office space. We have leased these offices
under a five year standard industrial/commercial lease. The initial term of the
lease expires November 30, 2004. We have the right to extend the term of the
lease for two additional 5-year periods. The base rent payable under the lease
is $5,335 per month, or $64,020 per year. We have the right of first refusal to
purchase the building in which our offices are located if the Landlord proposes
to sell the building.
We also lease office space at 900 Avenida Acaso, Suite J, Camarillo,
California 93012. This office consists of approximately 650 square feet. We rent
this office space on a month to month basis for $700 per month from World Key,
Inc., an affiliated company.
Legal Proceedings
We are not a party to any pending legal proceedings.
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MANAGEMENT
Executive Officers And Directors
<TABLE>
Our officers and directors and their ages are as follows:
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jim B. Tyner 51 Chief Executive Officer, Chairman and Director
John R. Toal 60 President, Chief Operating Officer and Director
Yula Greco 53 Vice President, Secretary, Controller and Director
Richard A. Bush 42 Vice President, Chief Financial Officer and
Director
E. Heinz Niederhoff 60 Independent Director
James Kingzett 55 Independent Director
</TABLE>
JIM B. TYNER is a co-founder of TravelnStore, Inc. From 1969 to 1976, he was
involved in the brokerage and sale of homes and agricultural investment
properties. In 1976, he founded a California licensed, independent escrow
company, which he built into a multi-location firm. He sold the escrow company
in 1989, having completed over 20,000 real estate transactions. Mr. Tyner
purchased two general travel agencies in 1981, which he grew from $600,000
annual sales to $3.5 million in four years. Mr. Tyner sold these agencies in
1985. From 1990 to 1995, Mr. Tyner was involved in real estate development and
brokerage, and served as the Managing Partner of 250,000 square feet of office,
industrial and commercial buildings. Mr. Tyner founded World Key, Inc. in 1994
as a specialized travel agency for travel to Great Britain. He continues as
Chairman of World Key, Inc. Mr. Tyner has been active in community affairs,
serving on the Board of Regents of California Lutheran University, as President
of the Camarillo Chamber of Commerce, as President of the Ventura County Escrow
Association and the Independent Escrow Association and on the Executive Board of
the California Escrow Association. Mr. Tyner is a graduate of California
Lutheran University.
JOHN R. TOAL is a co-founder of TravelnStore. Inc., and has served as President
and Chief Operating Officer of TravelnStore since its inception. Prior to
joining TravelnStore, Mr. Toal was a Director and President of Impactor
Environmental Products, Inc., a publicly held company and the parent company of
Environmental Glass, Inc. Prior to his involvement with Impactor Environmental
Products, Inc. he served as President of Toal and Associates, a media
advertising and design consulting firm, which he founded in 1960. He has
lectured at UCLA and other venues on the topics of Advertising and Marketing. He
is a graduate of the American Academy of Art in Chicago.
YULA GRECO is a co-founder of TravelnStore, Inc., and has served as Vice
President, Controller and Secretary since its inception. She is a co-founder of
World Key, Inc. and has served as Controller and Secretary since its founding in
1994. From 1981 to 1989 she served as Controller of Coronado Escrow Inc. and
World Key Travel, Inc.
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From 1989 to 1996 she served as Controller for several real estate partnerships
controlled by Jim B. Tyner. She holds a degree in accounting from Ventura
Community College.
RICHARD A. BUSH graduated with honors from Indiana University in 1980. He
qualified as a Certified Public Accountant in 1980. He spent 10 years with
Arthur Andersen & Co. He held the position of Manager, Audit Financial
Consulting Practice in its Chicago office. Mr. Bush joined the Aerospace
Division of Abex, Inc. as Controller in 1990. He also served as a Co-General
Partner, with Mr. Tyner, in several, large commercial real estate syndications.
He currently serves as Vice President and Chief Financial Officer of Fairfield
Manufacturing Company Inc., a manufacturing company with revenues in excess of
$200 million annually located in Lafayette, Indiana. He will serve as the
interim CFO on a consulting basis until such time as we require a full-time CFO.
E. HEINZ NIEDERHOFF served as a Vice President for Sitmar Cruises from
1976-1979. From 1980 through 1982 he held the position of Vice President,
Western U.S., for Kuoni Tours. From 1982 to 1996 he served as President of DER
Travel Service, Inc., Los Angeles. DER is a major European tour operator with
annual sales in excess of $75 million. At present, he serves as Vice President,
Sales and Marketing for Kemwel Holiday Autos, LLC, one of the largest rental car
marketing firms with offices worldwide. He is past Chairman and CEO of the
United States Tour Operators Association in 1994/1995.
JAMES M. KINGZETT is a graduate of Carroll College and the University of Montana
School of Law. He has over 25 years experience in real estate acquisition,
development, management and disposition with specialized experience in the
coordination of design, planning and permitting functions of real estate
development. He has founded and directed successful businesses, both on the U.S.
mainland and in the Pacific Basin. From 1992 to present, he is served as
President of Pro-United Inc., a Texas Corporation, involved in real estate
investment, development and brokerage in Texas and South Eastern United States.
From 1981 to present, he has also served as an officer and director of Pacific
Endeavors, Ltd. which is engaged in the export and brokerage of food and
building materials throughout the South Pacific. He is a resident of
Gardnerville, NV.
We have not established separate Audit, Compensation or other Committees of
the Board of Directors. The functions of these Committees presently are being
performed by the full Board of Directors. We anticipate appointing such
Committees during calendar 2000.
Executive Compensation
Summary Compensation Table
Our only compensation obligation to any of our executive officers is to pay
them the salary compensation described below. We have not established any
employee benefit or insurance plans or other forms of long-term benefits for any
of our executive officers or other employees. Accordingly, we have not included
a Summary Compensation Table, which would include only the listed salary, and
instead have separately described the compensation payable to our executive
officers. We anticipate that, after the completion of this offer, we may
establish one or more employee benefit or insurance plans of the type that would
be disclosed in the Summary Compensation Table.
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Cash Compensation
Neither our Chief Executive Officer, President nor any other executive
officer received or is entitled to receive for either fiscal year 1998 or fiscal
year 1999 compensation of $100,000 or more. The compensation payable during
fiscal 1999 and fiscal 2000 to our executive officers is as follows:
COMPENSATION
NAME & POSITION FISCAL 1999 and 2000
--------------- --------------------
Jim B. Tyner, Chairman $84,000
and Chief Executive Officer
John R. Toal, President $72,000
Yula Greco Sr. V.P., Secretary $72,000
and Controller
Richard Bush, CFO $48,000
All of the foregoing compensation is payable as salary. We have no
obligation to pay any cash bonuses in fiscal 1999 or fiscal 2000, although we
may pay cash bonuses in fiscal 2000 if our performance and the executive
officer's performance warrant a bonus.
Stock Options
We have not granted any stock options, stock appreciation rights or
other stock incentives to any of the executive officers. In the future we may
grant stock options, stock appreciation rights and other stock rights to any or
all of the executive officers
Employment Agreements
We have entered into written Employment Agreements with the executive
officers. Each of the Employment Agreements has the following principal terms:
o The term is one year beginning July 1, 1999 and ending June 30,
2000, and neither party is obligated to renew the Agreement for any
period after June 30, 2000;
o The annual salary is payable semi-monthly;
o We will annually review the employee's salary and determine whether
it should be increased or decreased for the following year;
o We shall annually review the employee's performance and determine
whether or not the Employee is entitled to receive a cash bonus;
o The employee is entitled to participate in our stock option Plans
and other fringe benefits, although we are not obligated to grant
the employee any option or an option covering any particular number
of shares of common stock; and
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o We may terminate the Agreement only for cause.
The annual salary payable to each of Messrs. Tyner and Toal and Ms. Greco is
as follows:
o Mr. Tyner - $84,000 per year;
o Mr. Toal - $72,000 per year; and
o Ms. Greco - $72,000 per year.
As of April 30, 2000, we were obligated to pay the foregoing executive
officers a total of $199,000 in salary accrued and unpaid for the period January
1, 1999, to April 30, 2000.
Directors' Compensation
We do not pay any of the directors any compensation, whether in cash or
other property, for their attendance at any meetings of the Board of Directors.
We provide cash reimbursements for each of the directors for expenses incurred
in attending any such meetings. We anticipate that, after the closing of this
offering and depending on our results of operations, we may compensate the
non-management directors for their attendance at such meetings.
Stock Option Plans
1999 Equity Incentive Plan
In April 1999, we adopted the 1999 Equity Incentive Plan. The purposes
of the Plan are to provide an additional incentive for directors, employees and
consultants to further our growth, development and financial success by
personally benefiting through the ownership of our securities, and to enable us
to obtain and retain the services of directors, employees and consultants
considered essential to our long-term success.
We have reserved a total of 1,000,000 shares of common stock for
issuance under the Plan (after giving effect to the 2-for-1 stock split effected
August 25, 1999) either upon the exercise of options or as shares of restricted
stock. The Plan provides for adjustment in the number of shares of common stock
covered by the Plan in the event of, among other things, any stock splits or
stock dividends and any combinations or reclassifications of our common stock.
Currently the Plan is administered by the Board of Directors, although
the Board may appoint a Committee to administer the Plan. The administrator has
authority to construe and implement the Plan, to select the individuals eligible
for the grant of options and the award of stock, to determine the amount and
exercise price of options and other shares to be granted, to impose restrictions
on the transferability of the options and shares and to prescribe all other
terms and conditions of each option granted under the Plan.
The administrator may grant options and award shares to our employees,
officers, directors, non-employee directors and consultants. As of the date
hereof, no employees, directors or consultants have been granted any options or
issued any shares under the Plan nor are they entitled to receive the grant of
an option or the award of any shares under the Plan.
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Stock Options
Options granted under the Plan may be incentive stock options or
non-statutory stock options for federal and state income tax purposes. Options
granted under the Plan are not transferable, except in the event of the
optionee's death, and options may be exercised only within the period prescribed
by the administrator. The maximum term of any option is ten (10) years.
The administrator of the Plan has the discretion to establish the
vesting schedule for any options. Generally options will vest at the rate of 20%
after each year of employment but, in the event of our merger or reorganization,
the administrator may accelerate the vesting of the options. The administrator
may provide that the option will become fully vested on the occurrence of a
change in control, which would generally include (a) a person's acquisition of
25% or more of our outstanding voting securities; (b) the stockholders' approval
of our merger or consolidation with or into another corporation in which our
existing stockholders do not own at least 65% of the voting securities of the
surviving entity; or (c) over any two (2) year period, a change in the majority
of our Board of Directors that is not approved by at least two-thirds (2/3) of
the directors then in office.
The expiration of any option is accelerated if the optionee's
employment, status as a director or consultant terminates for any reason. The
option must be exercised within thirty (30) days following such termination,
unless the termination is as a result of the optionee's death or disability, in
which case the option must be exercised within one (1) year after the date of
termination.
The exercise price of an option is set by the administrator at the time
of grant. The option price may not be less than 100% of the fair market value of
common stock on the date of grant. Payment of the exercise price of an option
may be made in whole or in part in the form of cash or our stock (valued at its
then fair market value).
Restricted Stock
The administrator may award shares under the Plan on such terms and
conditions as it deems appropriate. The shares may be awarded either as a stock
bonus for which the recipient shall not be obligated to pay a purchase price or
as a stock purchase in which case the recipient shall be obligated to pay a
purchase price established by the administrator, which price may be less than
the then fair market value of the common stock.
The recipient will be entitled to vote all of the shares immediately
upon the award of the shares. The Administrator may provide that the recipient's
economic interest in the shares will vest over a period of time; provided that
such period shall not be longer than 20% per year over five years.
In the event of the termination of the stockholder's employment or
status as a director or consultant, we shall have the right to repurchase any
unvested shares at a price equal to the purchase price paid by the stockholder.
The administrator also may provide that, on the occurrence of any such
termination, we will have the right to repurchase, at its then fair market
value, any vested shares.
Anti-Takeover Impact of Change of Control Provision
The Plan permits the administrator to accelerate the vesting of any
option and any shares on the occurrence of a change in control. Such
acceleration of vesting could have an anti-takeover effect and could make it
more difficult for a third party to acquire TravelnStore.com. We are not
currently discussing or negotiating with any other person regarding the
acquisition of TravelnStore.com or any similar transaction that would result in
a change in control.
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Amendment and Termination
We may amend or terminate the Plan at any time, provided that no
outstanding option or shares may be adversely affected without the optionee's or
the stockholder's consent. The approval of our stockholders is required only for
amendments that increase the number of shares available for issuance under the
Plan other than as a result of stock split, recapitalization or other change in
our capital structure. The Plan will automatically terminate on December 31,
2009, unless it has previously been terminated; but options and shares then
outstanding may be exercised and will remain outstanding until they expire or
are terminated in accordance with their terms.
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Benefit Plans
We have not established any pension, profit-sharing, 401(k) or similar
benefit plans for our employees. We anticipate that we will establish one or
more of such plans after the completion of this offering. Our provision of such
plans may be important in attracting and retaining the employees that we will
need to achieve our business plan.
Limitation Of Liability And Indemnification
Our Articles of Incorporation limits the liability of directors to the
maximum extent permitted by California law. California law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except liability for:
o any breach of their duty of loyalty to the corporation or its
stockholders,
o acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
o unlawful payments of dividends or unlawful stock repurchases or
redemption's or
o any transaction from which the director derived an improper personal
benefit.
Such limitation of liability does not apply to liabilities arising under the
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
Our Articles of Incorporation and Bylaws provide that we will indemnify
our directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. We believe
that indemnification under our Bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our Bylaws also permit us to
secure insurance on behalf of any officer, director, employee or other agent for
any liability arising out of his or her actions in such capacity, regardless of
whether or not California law would permit indemnification.
We have entered into agreements to indemnify our directors and
executive officers, in addition to indemnification provided for in our Bylaws.
These agreements, among other things, provide for indemnification of our
directors and executive officers for certain expenses, including attorneys fees,
judgments, fines and settlement amounts incurred by any such person in any
action or proceeding, including any action by or in the right of
TravelnStore.com, arising out of such person's services as an director or
executive officer of TravelnStore.com, any of our subsidiaries or any other
company or enterprise to which the person provides services at our request. We
believe that these provisions and agreements are necessary to attract and retain
qualified persons as directors and executive officers.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
TravelnStore.com pursuant to the provisions of our charter documents, California
law or the agreements described above, we have been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
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PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of our common stock
as of April 30, 2000 and as adjusted to reflect the sale of the shares of common
stock offered hereby by:
o each person or entity who is known by us to beneficially own more
than 5% of our outstanding common stock;
o the CEO, each of the named executive officers and each of our
directors; and
o all executive officers and directors as a group.
Unless otherwise indicated, the address for each of the named individuals is
c/o TravelnStore, Inc., 1100 Paseo Camarillo, Camarillo, California 93012.
Except as otherwise indicated, and subject to applicable community property
laws, the persons named in the table have sole voting and investment power with
respect to all shares of common stock held by them.
Applicable percentage ownership in the table is based on 9,715,784 shares of
common stock and 8,154 shares of Series A Preferred Stock outstanding as of
April 30, 2000 and 11,215,784 shares of common stock and 8,154 shares of Series
A Preferred Stock outstanding immediately following the completion of this
offering. (All of the share figures reflect the 2-for-1 stock split that we
effected August 25, 1999.) For purposes of calculating beneficial ownership:
o we have included in the outstanding shares:
o 215,784 shares of common stock reserved for issuance upon
conversion of $430,000 in principal amount of convertible
promissory notes currently outstanding and with respect to which
the holders have advised us that they will convert the notes as of
the effective date of this offering; and
o 100,000 shares issuable upon payment of $485,000 in bridge loans;
and
o we have excluded from the outstanding shares
o up to 105,264 shares issuable upon exercise of one outstanding
stock option;
o 42,104 shares of common stock reserved for issuance upon conversion
of $120,000 in principal amount of convertible promissory notes;
o 175,000 shares of common stock issuable upon conversion of one
Promissory note in the principal amount of $350,000; and
o 1,000,000 shares of common stock reserved for issuance under our
1999 Equity Incentive Plan.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. None of the persons listed below hold any
options or other rights to acquire any additional shares of our common stock. To
the extent that any shares are issued upon exercise of options, warrants or
other rights to acquire our capital stock that are presently outstanding or
granted in the future or reserved for future issuance under our stock plans,
there will be further dilution to new public investors.
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<TABLE>
<CAPTION>
Shares Beneficially Owned Shares Beneficially Owned
Executive Officers, Directors Prior to offering After the offering
and 5% Stockholders ----------------- ------------------
-------------------
Number Percentage Number Percentage
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Jim B. Tyner* 3,602,632 37.08% 3,602,632 32.12%
Scanlin 1989 Trust** 2,136,107 21.99% 2,136,107 19.05%
Stevan Saylor*** 1,910,987 19.67% 1,910,987 17.04%
John R. Toal 900,000 9.26% 900,000 8.02%
Yula Greco 900,000 9.26% 900,000 8.02%
Richard Bush -0- 0.0% -0- 0.0%
E. Heinz Niederhoff -0- 0.0% -0- 0.0%
James Kingzett -0- 0.00% -0- 0.00%
All Executive Officers and Directors
as a group (6 persons) 9,449,726 97.26% 9,449,726 84.25%
<FN>
* Includes 2,632 shares of common stock issuable to Mr. Tyner upon conversion of
a convertible promissory note jointly held by Mr. Tyner and Mr. Saylor.
** Includes (a) 16,107 shares of common stock issuable to the Scanlin 1989 Trust
upon conversion of the shares of Series A Preferred Stock held by him and (b)
20,000 shares of common stock issuable in connection with the payment of the
bridge loans.
*** Includes (a) 2,632 shares of common stock issuable to Mr. Saylor upon
conversion of a convertible promissory note jointly held by Mr. Saylor and Mr.
Tyner and (b) 8,355 shares of common stock issuable to Mr. Saylor upon
conversion of the shares of Series A Preferred Stock held by him.
</FN>
</TABLE>
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CERTAIN TRANSACTIONS
TravelnStore.com, LLC, a California limited liability company, was organized
on August 18, 1998, and is our predecessor. By a merger of TravelnStore.com, LLC
into us effective as of April 15, 1999, we acquired all of its business, assets
and liabilities. Effective May 30, 2000, we changed our corporate name to
TravelnStore, Inc. In connection with the merger, we issued to the members of
the LLC a total of 4,500,000 shares of common stock. The members of the LLC had
made an aggregate cash contribution to the LLC of $200 in exchange for their
membership interests in the LLC. The persons who were the members of the LLC
currently hold a majority of our outstanding common stock.
Convertible Note Transactions
In separate private placements commenced in September 1998, January 1999,
June 1999 and September 1999, we issued a total of 37 convertible promissory
notes in the aggregate principal amount of $550,000. Each note has a face value
of $15,000, $85,000 of the notes have a coupon rate of 8% per annum, $465,000 of
the notes have a coupon rate of 6% per annum and all of the notes are all due
and payable on December 31, 2000. One note was only partially funded through
cash payment to the extent of $7,500. We are treating the portion of the note
that was not funded through cash payments as compensation expense paid to an
officer. We used the proceeds of these notes to cover our initial operating
expenses and for general working capital purposes, including the payment of
officers salaries. No significant portion of the proceeds of the notes was used
to fund the acquisition of capital equipment. Each of the notes was issued in
exchange for cash, the forgiveness of debt or a combination thereof in an amount
equal to the principal amount of the note. Under each of the placements, the
amount payable at December 31, 2000 on maturity of the notes will depend on
whether or not we have affected a registered public offering of our common
stock. If we have not affected a registered public offering of our common stock
on or before December 31, 2000, we will be obligated to pay an amount equal to
the sum of the entire unpaid principal balance of the notes, all accrued
interest thereon, and a premium equal to $15,000. If we have affected a
registered public offering of our common stock on or before December 31, 2000,
and have raised at least $2,000,000 in such offering, we will be obligated to
pay an amount equal to the sum of the entire unpaid principal balance of the
Notes, all accrued interest thereon, and a premium equal to $7,500.
The notes issued under each of the placements may be converted into shares
of common stock following the date on which a registered public offering of our
common stock is declared effective. For the notes issued under the placement
commenced in September, 1998, the holder may convert the note into that number
of shares of common stock determined by dividing the sum of $150,000 by the
price at which we issue the shares of common stock in the registered offering;
provided that the number of shares that are issuable upon such conversion shall
be appropriately pro-rated to reflect any partial payments on the note prior to
the date of conversion. For the notes issued under the placements commenced in
January, 1999, June 1999 and September 1999, the holder may convert the note
into that number of shares of common stock determined by dividing the sum of
$50,000 by the price at which we issue the shares of common stock in the
registered offering; provided that the number of shares that are issuable upon
such conversion shall be appropriately pro-rated to reflect any partial payments
on the note prior to the date of conversion. In anticipation that the offering
price for any shares issued in a registered offering would be $9.50 per share,
we had reserved for issuance on conversion of the notes a total of 257,888
shares of common stock. We will appropriately adjust the number of shares
reserved to reflect the actual offering price and the then aggregate amount
payable under the notes.
Holders of 29 notes, in the aggregate principal amount of $430,000, have
committed to convert, as of the effective date of this offering, their notes
into an aggregate of 215,784 shares of common stock. Such conversion will be
effected in order to improve our financial position and to facilitate this
offering. One of the notes which will be converted is jointly held by Jim Tyner,
our Chairman and Chief Executive Officer, and Stevan Saylor, one of our
principal stockholders. On the conversion of such note, each of Mr. Tyner and
Mr. Saylor will receive 2,632 shares of common stock. As of April 30, 2000, and
after giving effect to the foregoing conversions, there remained outstanding 8
notes in the aggregate principal amount of $120,000 and with respect to which we
have reserved for issuance a total of 42,104 shares of common stock.
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Option Sweepstakes
In connection with the commencement of our Web site, we conducted a
sweepstakes under which we solicited entries from visitors to our Web site. We
granted to one visitor whose name we drew at random from the list of all
participating visitors an option to purchase that number of shares of our common
stock as is determined by dividing $1,000,000 by the price at which the shares
of common stock covered by this offering are issued to the public. We have
reserved for issuance under the option 105,264 shares of common stock. The
aggregate exercise price of the option is $100.00.
The person to whom the option was granted has agreed that:
o without our prior consent she will not transfer all or any portion of her
interest in the option other than by will or the laws of descent and
distribution; and
o in connection with this offering, without our prior written consent, she
will not publicly offer or sell any shares of common stock acquired on
exercise of the option for a period of 180 days after the registration
statement is declared effective.
If we do not effect a public offering of our common stock by December 31,
2000, the option will expire on December 31, 2000 and we will pay the holder of
the option $25,000 in cash.
We commenced the sweepstakes on November 1, 1998 and made the drawing on
January 31, 1999. Entrant's were required merely to register at our Web site by
leaving their email address and were not obligated, then or thereafter, to
provide any other particular information to us, purchase any goods or services,
pay us any amount or otherwise provide us any particular consideration. We do
not intend to conduct any other sweepstakes in which we will grant any options
or issue any other securities to any participant It is possible that our grant
of the option did not comply with the registration requirements of the
Securities Act of 1933. Because we granted only one option, did not receive, and
will not receive, any tangible property on the grant or exercise of the option,
we do not intend to offer the holder of the option the right to rescind the
grant of the option.
Stockholder Loans
In connection with our borrowing a total of $140,000 from two of our
principal stockholders, we issued to such stockholders, as additional
consideration for the loans, a total of 400,000 shares of common stock. Notes
issued for a total of $100,000 were due and payable on June 30, 1999, and
bearing interest at the rate of 10% per annum. One of the notes issued for
$40,000 was due and payable on December 31, 1999, bearing interest at the rate
of 10% per annum and was convertible at the holder's option into convertible
notes issued in the September 6, 1998 private placement (which is described
above) in the aggregate principal amount of $75,000. Effective as of August 25,
1999, all of these notes were converted into an aggregate of 8,154 shares of
Series A Preferred Stock. The shares of Series A Preferred Stock are convertible
into 24,462 shares of common stock. Such conversion was effected in order to
improve our financial position and to facilitate this offering.
Bridge Loan
Between September 1999 and April 2000, we borrowed a total of $485,000 and
in exchange therefor issued a total of 18 promissory notes. These notes bear
interest at the rate of 8% per annum, do not require monthly or periodic
payments of principal or interest, and are all due and payable on the date that
is 30 days after final closing of this offering. Upon payment of the notes, we
will issue to the note holders, in addition to the principal amount of the notes
and accrued interest, 5,000 shares of common stock for each $25,000 principal
amount of the notes in the principal amount of $400,000 and 20,000 shares for
one note in the principal amount of $85,000, for a total of 100,000 shares of
common stock. One note was only partially funded to the extent of $10,000. We
are treating the
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portion of the note that was not funded through cash payments as a $5,000
general and administrative expense for services performed by a supplier.
Promissory Note
Between December 1999 and April 2000, we borrowed a total of $350,000 from
one lender and in exchange therefor issued one promissory note. This note bears
interest at the rate of 8% per annum, does not require monthly or periodic
payments of principal or interest, and is all due and payable on September 30,
2000. The note is convertible into shares of common stock at the price of $2.00
per share. We have reserved a total of 175,000 shares of common stock for
issuance upon conversion of this note. The shares of common stock issuable upon
conversion of this note will be issued without registration under the Securities
Act of 1933 and will constitute "restricted securities" within the meaning of
Rule 144 promulgated under such Act.
Consultancy Agreements
TravelnStore, LLC, our predecessor, entered into Independent Contractor
Agreements with Stevan M. Saylor and Donald G. Scanlin. Both Mr. Scanlin and Mr.
Saylor were founders of TravelnStore LLC and are principal stockholders of
TravelnStore. Under these agreements, Mr. Scanlin and Mr. Saylor provided
consultancy services to TravelnStore, LLC during its formation and through the
period ended June 30, 1999. Each of the agreements has terminated and we are not
obligated to continue to retain or to employ either or both of Messrs. Scanlin
and Saylor. Both Mr. Scanlin and Mr. Saylor have significant business experience
from which TravelnStore, LLC, and subsequently TravelnStore, have benefited.
Their duties under the agreements, were to provide general business and
marketing advice at the request and direction of our officers. For their
services, each is to receive $25,000 payable on the successful completion of
this offering. We do not anticipate renewing or negotiating any further
consultancy agreements with either Mr. Scanlin or Mr. Saylor in that the
services which they have provided have or will be assumed by our full-time
employees.
Trademark License Agreement
We entered into a Trademark License Agreement with World Key, Inc. dated
September 24 1999. Under the License Agreement we have the exclusive right to
use the "WORLD KEY" trademark. The principal terms of the License Agreement are
as follows.
o The term of the license is perpetual, subject to the right of either party
to terminate the license for cause.
o The licensed territory is the Untied States.
o We have the right to sublicense the trademark for use by retail travel
agencies participating in our network of agencies.
o The royalties that we have to pay are as follows:
o When we grant our first sublicense, we will pay a royalty of $25,000;
and
o Thereafter, we will pay an annual royalty of $250 per sublicensee.
o We have the option to acquire the trademark from World Key on the
following terms:
o We must exercise the option by September 30, 2002;
o We must pay a purchase price equal to the sum of:
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o The product obtained by multiplying $2,500, by the number of sublicenses
that are outstanding as of the date of the exercise of the option; and
o The product obtained by multiplying $2,500, by the number of sublicenses
that are granted after the date of the exercise of the option and prior
to September 30, 2004; and
o We can pay the purchase price either in cash or, so long as the trading
price of our common stock is at least $5.00 per share, in shares of common
stock which have an aggregate value equal to the purchase price.
Jim Tyner, Yula Greco, John Toal, Donald G. Scanlin and Stevan Saylor are
principal stockholders of TravelnStore, Inc. and are principal stockholders of
World Key, Inc.. Of a total of 6.0 million shares of common stock of World Key,
Inc., that are outstanding, Jim Tyner is the beneficial owner of 1.8 million
shares; Yula Greco is the beneficial owner of 1.4 million shares; John Toal is
the beneficial owner of 120,000 shares; Donald G. Scanlin is the beneficial
owner of 1.4 million shares; and Stevan Saylor is the beneficial owner of
225,000 shares. Jim Tyner and Yula Greco are also officers of World Key, Inc.
Separation Agreement
Effective as of July 9, 2000, Graeme R. Clarke resigned as our Chief
Executive Officer. In connection with his resignation, the company agreed to pay
him severance compensation in an aggregate amount of $77,500. We will pay
$52,500 of the severance compensation on September 1, 2000, and the remaining
$25,000 on January 5, 2001.
Approval of Transactions
Our Board of Directors presently consists of five directors, three of who
are officers of TravelnStore and two of whom are independent directors. All of
the transactions described above were approved by the Board of Directors. None
of our directors had a material financial interest in any of the transactions
described above, except that Jim Tyner, our chief executive officer, is a joint
owner of one convertible promissory note in the amount of $15,000 issued in June
1999, and, through their stock interests in World Key, Inc., the stockholders
identified above have an indirect interest in the Trademark License Agreement
with World Key, Inc. The Trademark License Agreement with World Key, Inc., was
approved by a majority of the disinterested directors. The merger of
TravelnStore.com, LLC into TravelnStore, Inc., effected only a change in the
form of the entity and did not change any person's percentage equity interest in
the equity. Any future transactions in which any director has a material
financial interest must be approved, after full disclosure of all relevant
information, by both a majority of the entire Board of Directors and a majority
of the disinterested directors. In addition, any future transactions and loans
will be made or entered into on terms that are no less favorable to us than
those that we could obtain from unaffiliated third parties. We will not forgive
any of our loans or obligations unless such forgiveness is approved by a
majority of our independent directors.
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DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, our authorized capital stock will consist
of 20,000,000 shares of common stock, no par value, and 1,000,000 shares of
preferred stock, no par value. As of April 30, 2000, there were outstanding:
o 9,400,000 shares of common stock held of record by 5 stockholders of
record and
o 8,154 shares of Series A Preferred Stock held of record by 2 stockholders.
Of the 20,000,000 shares of common stock authorized:
o 9,400,000 shares are outstanding;
o 1,500,000 shares are being offered herein;
o 1,000,000 shares are reserved for issuance pursuant to the 1999 Equity
Incentive Plan;
o 105,264 shares are reserved for issuance on the outstanding stock option;
o 257,888 shares are reserved for issuance upon conversion of the
convertible promissory notes;
o 24,462 shares are reserved for issuance on conversion of the Series A
Preferred Stock;
o 100,000 shares are reserved for issuance as a stock dividend for the
bridge loans; and
o 175,000 shares are reserved for issuance upon conversion of one promissory
note in the principal amount of $350,000.
The foregoing number of shares reflect the 2-for-1 stock split on the common
stock that was effected August 25, 1999.
Common stock
The holders of our common stock are entitled to one vote for each share held
of record on all matters submitted to a vote of our stockholders. Subject to
preferences applicable to any outstanding shares of preferred stock, the holders
of common stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of any funds legally available. In the
event of our liquidation, dissolution or winding up, holders of common stock are
entitled to share ratably in all assets remaining after payment of liabilities
and the liquidation preferences of any outstanding shares of preferred stock.
Holders of common stock have no preemptive rights and no right to convert their
common stock into any other securities. There are no redemption or sinking fund
provisions applicable to our common stock. All outstanding shares of common
stock are, and all shares of common stock to be outstanding upon the closing of
this offering will be, fully paid and nonassessable. The rights, preferences and
privileges of holders of our common stock are subject to the rights of holders
of shares of any series of our preferred stock which we may designate and issue
in the future.
Preferred Stock
Pursuant to our Articles of Incorporation, the Board of Directors has the
authority, without further action by the stockholders, to issue up to 1,000,000
shares of preferred stock in one or more series and to fix the rights,
preferences and privileges of such stock, including dividend rights, conversion
rights, voting rights, terms of
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redemption and liquidation preferences, any or all of which may be greater than
the rights of the common stock. Without stockholder approval, we may issue
preferred stock with voting, conversion or other rights that could adversely
affect the voting power and other rights of the holders of common stock.
preferred stock could thus be issued quickly with terms which could delay or
prevent a change in control of TravelnStore or make removal of management more
difficult. Additionally, the issuance of preferred stock may have the effect of
decreasing the market price of the common stock and may adversely affect the
voting and other rights of the holders of common stock. Upon the closing of this
offering, there will be 8,154 shares of Series A Preferred Stock outstanding,
and we do not currently have plans to issue any of our preferred stock.
A total of 8,154 shares of preferred stock have been designated as Series A
Preferred Stock. There are no other shares of preferred stock outstanding and
there are no current plans to issue any shares of Preferred Stock other than the
shares offered hereby.
Holders of Series A Preferred Stock will have the following rights,
preferences and privileges:
o they will be entitled to receive non-cumulative dividends prior and in
preference to any payment of dividends (except dividends payable in shares
of common stock) on common stock, when, as, and if declared by the Board
of Directors;
o on liquidation of TravelnStore, they will be entitle to receive before any
distribution to holders of common stock, an amount equal to $20 per share
of Series A Preferred Stock. After provisions for payment of the
preferential amounts to the holders of Series A Preferred Stock, all
remaining assets shall then be distributed to the holders of common stock;
o each share of Series A Preferred Stock is convertible into three (3)
shares of common stock. The conversion rate is subject to adjustment in
certain events, including the issuance of common stock as a stock dividend
or combinations or subdivisions of common stock; and
o in addition to voting rights given by law to the holders of preferred
stock, the holders of Series A Preferred Stock will be entitled to the
voting rights described below.
Voting Rights
Except as otherwise required by law or as set forth in our Articles of
Incorporation, the holders of shares of common stock and the holders of shares
of Series A Preferred Stock will vote together as a single class on all matters
submitted for approval by the stockholders. The holders of common stock will be
entitled to our vote per share. The holders of the Series A Preferred Stock will
be entitled to that number of votes per share as equals the number of shares of
common stock into which the Series A Preferred Stock is then convertible.
Initially each share of Series A Preferred Stock is convertible into three
shares of common stock.
Prior to the election of directors, any stockholder may cumulate votes for
any nominees, if, prior to the voting, a stockholder has given notice that he
intends to cumulate his votes. In cumulative voting, each stockholder is
entitled in the election of directors to one vote for each voting share held by
him multiplied by the number of directors to be elected and may cast all such
votes for a single nominee for director or may distribute them among any two or
more nominees as he sees fit. Those receiving the highest number of votes up to
the number of directors to be elected are elected as directors.
Stockholder approval of most actions, other than election of directors,
requires the approval of a majority of the shares present, whether in person or
by proxy, assuming a quorum was present. A quorum is the representation at a
meeting of holders of more that 50% of the outstanding shares. California law
requires the approval of at least the holders of more than 50% of the
outstanding shares for certain matters, including certain reorganizations and
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<PAGE>
sales of all or substantially all of the company's assets, the dissolution of
the company and amendments to the Articles of Incorporation, certain amendments
to the Bylaws, and in certain cases, certain class votes.
In addition to the foregoing, so long as any shares of Series A Preferred
Stock shall be outstanding, we shall not take any of the following actions
without first obtaining the approval (by vote or written consent, as provided by
law) of the holders of at least fifty percent (50%) of the outstanding shares of
Series A Preferred Stock:
o Alter or change the rights, preferences, or privileges of the Series A
Preferred Stock so as materially and adversely to affect the Series A
Preferred Stock; or
o Increase the authorized number of shares of Series A Preferred Stock; or
o Create any new class or series of shares having preferences over, or being
on a parity with, Series A Preferred Stock then outstanding; or
o Do any act or thing which would result in taxation of the holders of
shares of Series A Preferred Stock under Section 305 of the Internal
Revenue Code of 1986.
Stockholder Proposals
Our Bylaws set forth specific procedures for a stockholder's submission of
any matter to be acted upon at any meeting of stockholders.
o If the stockholder wishes to nominate a person for election as a director,
the stockholder must deliver to us notice of the nomination generally not
less than thirty (30) days nor more than sixty (60) days prior to the date
of the meeting at which directors are to be elected. The stockholder must
include with the notice certain information about the nominee and his or
her prior experience.
o If the stockholder wishes to present any other matter for action at the
stockholder meeting, the stockholder must deliver to us notice of such
matter generally not less than thirty (30) days nor more than sixty (60)
days prior to the date of the meeting. The stockholder must include with
the notice certain information about the matter to be acted upon and his
or her interest in such matter.
Convertible Notes
We have issued in four private placements a total of 37 convertible
promissory notes in the aggregate principal amount of $550,000. Effective as of
August 15, 1999, the holders of $430,000 in principal amount of such notes have
agreed to convert such Notes into a total of 215,784 shares of common stock as
of the effective date of the offering. We have reserved for issuance on
conversion of the 8 remaining notes a total of 42,104 shares of common stock,
although we have not received from the holders of such Notes notice of their
intention to convert such notes at the effective date of this offering or
otherwise.
In connection with our borrowing of a total of $140,000 from two of our
principal stockholders, we issued to such stockholders, as additional
consideration for the loans, a total of 400,000 shares of common stock.
Effective as of August 25, 1999, the promissory notes evidencing the foregoing
loans were paid in full through the issuance of 8,154 shares of Series A
Preferred Stock. The shares of Series A Preferred Stock are convertible into a
total of 24,462 shares of common stock.
We issued one promissory note in the principal amount of $350,000. This note
is convertible into 175,000 shares of common stock at the conversion price of
$2.00 per share.
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<PAGE>
We issued a total of 18 promissory notes in the aggregate principal amount
of $485,000. Upon payment of these notes, we will pay to the note holders the
principal amount of the notes plus accrued interest thereon and will issue a
total of 100,000 shares of common stock: (a) with respect to 17 of the notes
5,000 shares of common stock for each $25,000 principal amount of the notes and
(b) 20,000 shares for one note in the principal amount of $85,000.
Transfer Agent And Registrar
We will not list the shares of common stock issued in this offering on any
exchange or in the Nasdaq quotation service including after the offering. Until
such time as we list our shares of common stock on an exchange or in the Nasdaq
quotation service, we will act as the transfer agent and registrar for our
common stock.
Stockholder Communications
Following the completion of this offering, we will provide to our
stockholders the periodic reports required under the Securities Exchange Act of
1934, including quarterly and annual reports. We also intend to provide to our
stockholders prior to our merger with or acquisition of another business entity
complete disclosure documentation regarding such business entity, including
audited financial statements.
Potential Acquisition Transactions
We anticipate that we may pursue one or more acquisitions or business
combinations for the purposes of facilitating our growth and our achievement of
our business plan. As is common in the e-commerce industry, the most effective
means for us to expand into particular industry segments may be for us to
combine with another company which is already operating in that segment. There
are no preliminary agreements, understandings or negotiations between
TravelnStore.com and any of our officers, directors or principal stockholders,
any of their affiliates or any other persons regarding our possible merger with
or acquisition of any other business or company.
While we anticipate that we will pursue one or more acquisitions and that we
may use a portion of the proceeds of this offering in connection with such
acquisitions, we are not presently negotiating or discussing a strategic
relationship with any particular person and we anticipate that the total amount
of the proceeds of this offering that might be used for such purposes would not
exceed $50,000, if we raise only the minimum proceeds, and $250,000, if we raise
the maximum proceeds.
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PLAN OF DISTRIBUTION
The shares of common stock covered by this offering are being offered
directly by us. Our officers and directors who will act on our behalf in
connection will be Jim B. Tyner, Chairman and Chief Executive Officer, John R.
Toal, President and Chief Operating Officer, and Peggy Murray, Director of
Investor Relations. We have not employed the services of an underwriter to
market the shares, although we have reserved the right to employ one or more
underwriters and brokers. If we employ any broker/dealers to assist in the offer
and sale of the shares, we will employ only broker/dealers who are licensed with
the Securities and Exchange Commission and all applicable state securities
agencies all are in good standing with the NASD. Prior to agreeing to pay
compensation to a broker/dealer, we will obtain from the NASD confirmation that
they have no obligation to the terms of such compensation. If and when we employ
any broker/dealer, we will file a post-effective amendment to the registration
statement covering this offering to identify the broker/dealer and to disclose
the compensation payable to him. It is the position of the Commission's Division
of Corporation Finance that broker/dealers who we retain to assist in the offer
and sale of the shares will be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act of 1933.
We have established the following procedures for directly offering and
selling the shares covered by this offering.
o Investor Relations Department. Our Investor Relations Department consists
of a Director of Investor Relations and an Investor Relations Associate.
The Director and Associate have a comprehensive understanding of
TravelnStore, our operations, market strategies, and the market in which
we compete. The Director and Associate have received specific training
about this offering and the rules under which we are making this offering.
o Marketing. We intend to use the Internet, direct-mail and traditional
media to solicit investors using the following strategies.
o The Internet. We have established a procedure on our Web site through
which a prospective investor may download a copy of this prospectus and
subscribe for shares by following the instructions posted on the Web site.
Our Investor Relations Department will follow-up with each person who
contacts the Web site to pursue such person's investment in this offering.
o Direct-Mail. We will use traditional surface mail and email to contact
retail travel agencies and travel service providers. We believe that the
owners, management and staff of travel agencies and travel service
providers are in a position to easily understand our objectives and
opportunities. We intend to contact both agencies and providers with whom
we have existing relationships and those with whom we do not have
relationships.
We will also use traditional surface mail and email to contact other
potential investors. We intend to limit such mail and email contacts to
potential investors and groups of investors who we have pre-qualified as
knowledgeable about the travel industry and/or the conduct of the
e-commerce on the Internet.
o Traditional Media. We intend to use traditional media both in the form of
paid advertisements and press releases to promote the availability of this
offering to potential investors.
o Up-Dated Information. We will post on our Web site copies of all
amendments and supplements to this Prospectus contemporaneously with our
filing of such amendments and supplements with the Commission. In
addition, and in order to insure that all prospective investors timely
receive a copy of each such amendment and supplement, we will highlight on
our Web site notice of such filing and will send to each prospective
investor notice of such filing by mail or email, in accordance with our
prior means of communication with the investor. If we previously have
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<PAGE>
delivered to the investor only printed copies of the prospectus, we will
send to the investor with the written notice of the filing a printed copy
of the amendment or supplement.
o Escrow Account. To reduce the risk to early investors, we have set a
minimum offering amount of $3,000,000. We anticipate that amount will be
sufficient to fund our operations for twelve (12) months. Until the
minimum subscriptions are received, all funds received from investors will
be placed in an escrow account with Santa Barbara Bank & Trust, an FDIC
insured commercial bank with more than $50,000,000 in assets. The
subscription funds will not be released to us until we have received
acceptable subscriptions for at least $3,000,000. We will deliver the
investor funds to the escrow agent no later than 12:00 noon, California
time, on the business day following the date on which we receive the
funds. If we have not received acceptable subscriptions for at least
$3,000,000 by ________, 2000 (i.e., 90 days after the effective date of
the offering), the funds will be promptly returned to the investors,
without interest. We will not be deemed to have accepted any subscription
until we have accepted the subscription in writing and, if appropriate,
delivered instructions to the escrow agent to release the funds from
escrow. The escrow agreement provides that once the account balance
reaches $3,000,000, all funds will be released to us and the escrow
account closed. All charges and fees associated with the escrowing of the
funds will be paid by us with no deductions or offsets available against
the deposited funds.
Once the minimum amount of $3,000,000 is met all further subscriptions will
be directly deposited for use by us.
Limited State Registration
We have registered the shares of common stock covered by this offering for
sale only in the following states: California, Colorado, Connecticut, Georgia,
Illinois, Nevada, New Jersey and New York. In addition, we are authorized to
sell shares in the District of Columbia and Hawaii pursuant to exemptions from
registration under the laws of such jurisdictions. We may sell shares in the
foregoing states only after the Registration Statement has been declared
effective by the Securities and Exchange Commission.
A person who is interested in purchasing shares of common stock in the
offering but is not a resident of one of the foregoing states may request that
we register shares in his/her state of residence. However, we are not obligated
to register shares in any states other than those listed above. We will amend
this prospectus to disclose any additional states in which we may register
shares.
Minimum Investment
Each investor must subscribe for at least two hundred ten (210) shares of
common stock, for a minimum investment of $1,995.00
Interim Closings
We will not close on any subscriptions until we have received subscriptions
for at least 315,790 shares. If we do not receive such subscriptions by
__________, 2000, we will promptly refund all monies, without interest, and
terminate this offering. After accepting subscriptions for a minimum of 315,790
shares, we may accept subscriptions for additional shares as they are received.
We will not accept any subscriptions after ________, 2000.
We are not presently aware that any of our officers, directors or principal
stockholders, or any of their affiliates, intend to purchase any shares in the
offering or that any of them intend to purchase any shares in the offering in
order for us to be able to reach the minimum investment of $3,000,000 required
to closing the offering. It is possible that one or more of such persons may
purchase shares in the offering and that such purchases may
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facilitate our reaching the minimum required investment to close the offering.
Any purchases by any such persons will be subject to the same terms and
conditions as those applicable to other investors.
There can be no assurance that we will be able to sell more than the minimum
number of shares covered by this offering.
Secondary Market
This is the initial public offering of our common stock. Currently our
common stock is neither traded or any national or regional stock exchange nor
listed Nasdaq or any other stock quotation service. We have not undertaken any
obligation to list our common stock or any national or regional stock exchange
or on Nasdaq or any other quotation service.
At such time as we have a minimum tangible net worth of at least $3,000,000
and otherwise appear to satisfy the other listing requirements, we will seek to
list our common stock on the Philadelphia Stock Exchange. The Exchange's
acceptance of our application for listing will depend on our satisfaction of all
of the Exchange's listing criteria, rules and regulations and the Exchange's
discretion. If our application for listing on the Philadelphia Stock Exchange is
denied, we will seek to trade our stock on the OTC Electronic Bulletin Board.
We do not intend to list on our Web site a list of potential buyers and
sellers of our common stock or to implement on our Web site a system for
matching potential buyers and sellers of our common stock.
Suitability Standards
We have determined that investment in the shares of common stock covered by
this offering is suitable only for persons of adequate financial means who have
no need for liquidity with respect to this investment and who can bear the
economic risk of loss of their investment. The shares will be sold only to
investors who are or whom we reasonably believe satisfy one or more of the
standards described below. These suitability standards represent minimum
suitability standards for prospective investors. The satisfaction of such
standards by a prospective investor does not necessarily mean that the shares
are a suitable investment for such prospective investor and does not obligate us
to accept any subscription. We may reject subscriptions, in whole or in part, in
our absolute discretion.
We will require each investor to represent in writing, among other things,
that:
o either alone or with investor's professional advisors, the investor is
capable of evaluating the merits and risks of an investment in the shares
and of protecting his or her own interests in connection with the
transaction;
o the investor is acquiring the shares for his or its own account, for
investment only and not with a view toward the resale or distribution
thereof; and
o the investor meets the suitability standards set forth below.
Each investor must represent in writing that such investor satisfies one or
more of the following:
o Individual Investor: if the investor is an individual, either alone or
jointly with his or her spouse, one or more of the following and the total
investment does not represent more than 10% of the investor's net worth:
o The investor has a net worth of at least $250,000.00 exclusive of
personal residence, home furnishings and automobiles; or
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o The investor has a net worth of at least $150,000.00 and had gross
income for each of the 1997 and 1998 tax years of at least $50,000.00
and the investor anticipates having at least that level of gross income
for the 1999 tax year; or
o Entity Investor: if investor is not an individual, that either the
entity's total assets exceed ---------------- $250,000 or that the amount
of the investment does not exceed 5% of the entity's total assets; and
o Percentage of Net Worth: the amount of the investment by any investor may
not exceed 10% of such ------------------------- investor's net worth. We
reserve the right, in our sole discretion, to approve or disapprove each
investor and to reject subscriptions in whole or in part for any reason.
Subscription Procedure
An investor who desires to purchase any of the shares offered hereby should
do all of the following.
o Complete, date, execute, and deliver to us two copies of the Subscription
Agreement.
o Deposit to the "TravelnStore.com Investor Account" the full amount of the
offering price of the shares which the investor proposes to purchase.
Subscriptions will be accepted or rejected in our sole discretion. We
reserve the right to reject any subscription in whole or in part. All funds
received from investors will be held in an escrow account pending acceptance by
us of subscriptions in the amount of at least $3,000,000. Promptly after our
acceptance of any subscription, we will issue and deliver to the investor,
certificates for the shares.
Post-Effective Amendment
The registration statement covering this offering was declared effective by
the Securities and Exchange Commission on June 30, 2000. We filed a
post-effective amendment to the registration statement to reflect the
resignation on July 9, 2000, of Graeme Clarke as our Chief Executive Officer. We
have not sold any shares of stock in this offering or distributed any copies of
the prospectus from June 30, 2000, through the date of the prospectus.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, we will have outstanding a total of
10,900,00 shares of common stock and 8,154 shares of Series A Preferred Stock,
assuming the sale of all of the shares covered by this offering. Of these
shares, the 1,500,000 shares offered hereby will be freely tradable without
restriction or further registration under the Securities Act 1933, unless held
by "affiliates" of TravelnStore, as that term is defined in Rule 144 under the
Act. The remaining 9,400,00 shares of common stock and the 8,154 shares of
Series A Preferred Stock outstanding upon completion of the offering are
"restricted securities" as that term is defined in Rule 144.
In additions, we have reserved a total of:
o 257,888 shares of common stock for issuance upon conversion of the
outstanding Convertible Promissory Notes;
o 105,264 shares for issuance upon exercise of one outstanding stock option;
o 100,000 shares for issuance as a stock dividend upon payment of the
$485,000 of Bridge Loan Promissory Notes;
o 24,462 shares for issuance upon conversion of the outstanding shares of
Series A Preferred Stock;
o 175,000 shares for issuance upon conversion of one Promissory Note; and
o 1,000,000 shares available for issuance under our 1999 Equity Incentive
Plan.
The shares of common stock issuable upon such conversions and exercise will be
"restricted securities", and may be resold upon compliance with the holding
period, volume limitations, manner of sale and other provisions of Rule 144.
Generally, the holding period for the shares issuable on such conversions or
exercise will not begin until the effective date of such conversions or
exercise.
The principal stockholders of TravelnStore have entered into a Lock-up
Agreement in regards to the shares they hold in TravelnStore. In addition to the
provisions of Rule 144, the Agreement provides that, during the term of their
employment, principal stockholders who are also officers of TravelnStore may not
sell more than 2.5% of the shares which they beneficially own, as of the close
of this offering, in any calendar quarter during the first two years following
the close of this offering. Subsequently, they may not sell more than 5% of such
shares in any calendar quarter. Should a principal stockholder who is an officer
resign as an officer and terminate his employment, then from that point forward,
that principal stockholder shall be governed by the provisions of the Lock-up
Agreement which pertain to principal stockholders who are not officers of the
Corporation.
Principal stockholders who are not officers may not sell more than 2.5% of
shares which they beneficially own as of the close of this offering, in any
calendar quarter during the first two years following the close of this
offering. Subsequently, they may not sell more than 10% of such shares in any
calendar quarter.
The Lock-up Agreement provides that shares which are registered in a
subsequent public offering may be excluded from the lock-up provisions. However,
no principal stockholder may offer for sale, as a selling stockholder, in a
registered public offering, more than 15% of the shares which they own either
directly or beneficially at the time of the registration. The provisions of the
Lock-up Agreement encumber all shares beneficially owned by the principal
stockholders, as of the close of this offering and any shares which they
transfer to an immediate family member or trust in which the principal
stockholder or immediate family members are the beneficiaries.
The Lock-up Agreement provides that should TravelnStore be acquired by
another Corporation, either through purchase or merger, in which the principal
stockholders are not principal stockholders in the acquiring Corporation, then
all lock-up provisions are terminated.
The Lock-up Agreements permit the stockholder to donate to charity during
any calendar quarter up to a total of 2.5% of the shares which they beneficially
own as of the close of this offering.
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In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person or persons whose shares are aggregated and
who did not acquire the shares through this offering, may sell shares of our
common stock in the public market so long as such person satisfies all of the
following conditions:
o they have beneficially owned such shares for at least one year, including
the holding period of any prior owner except an affiliate of the company;
o during any three-month period they may not sell a number of shares that
exceeds the greater of;
o 1% of the number of shares of common stock then outstanding, which
immediately after this offering will equal either approximately 100,315
shares, if we sell only the minimum number of shares, and approximately
112,158 shares, if we sell the maximum number of shares or;
o the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such
sale;
o they comply with the manner of sale provisions and notice requirements of
Rule 144; and
o there is available the current public information about us.
Under Rule 144(k), a person who is not deemed to have been an affiliate of
the company at any time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner except an affiliate, is entitled
to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
Prior to the offering, there has not been any public market for the common
stock. Future sales of substantial amounts of common stock in the public market
could adversely affect the prevailing market prices and impair our ability to
raise capital through the sale of equity securities.
LEGAL MATTERS
The legality of our securities offered will be passed on for TravelnStore by
Reicker, Clough, Pfau, Pyle, McRoy & Herman, LLP, 1421 State Street, Suite B,
Santa Barbara, California 93102.
EXPERTS
The audited financial statements of TravelnStore included in this Prospectus
and elsewhere in the Registration Statement have been audited by Farber & Hass,
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form SB-2 relating to the shares covered by this offering. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules filed therewith. For further information with respect to
TravelnStore.com and the shares offered hereby, reference is made to such
Registration Statement and such exhibits and schedules. Statements contained in
this Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. For
further information with respect to
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TravelnStore and the shares, reference is made to the Registration Statement and
the exhibits and schedules thereto. You may read any document we file with the
Commission at its public reference rooms in Washington, D.C., New York, New York
and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for further
information about the public reference rooms. Our filings with the Commission
also are available to the public from the Commission's Web site at
http://www.sec.gov.
After the completion of this offering, we will be subject to the information
and periodic reporting requirements of the Securities Exchange Act of 1934, and
in accordance therewith will file periodic reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected or copied at the Commission's public reference
rooms and through the Commission's Web site (http.//www.sec.gov).
65
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<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT F-1
FINANCIAL STATEMENTS:
Balance Sheet, December 31, 1999 F-2 to F-3
Statements of Operations
For the Year Ended December 31, 1999 and the Period August 18, 1998 (Date
of Inception) to December 31, 1998 F-4
Statements of Stockholders' Deficit F-5 to F-6 For the Year Ended December 31,
1999 and the Period August 18, 1998 (Date of Inception) to December 31,
1998
Statements of Cash Flows F-7 to F-8 For the Year Ended December 31, 1999 and the
Period August 18, 1998 (Date of Inception) to December 31, 1998
Notes to Financial Statements F-9 to F-18
UNAUDITED INTERNAL
FINANCIAL STATEMENTS
Balance Sheet, April 30, 2000 F-19 to F-20
Statement of Operations
for the Period January 1, 2000
to April 30, 2000 F-21
Statement of Stockholders' Deficit
for the Period January 1, 2000
to April 30, 2000 F-22
Statements of Cash Flows
for the Period January 1, 2000
to April 30, 2000 F-23
Notes to Financial Statements F-24 to F-30
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
TravelnStore.com, Inc.:
We have audited the accompanying balance sheet of TravelnStore.com, Inc. (the
"Company") as of December 31, 1999 and the related statements of operations,
stockholders' deficit and cash flows for the year ended December 31, 1999 and
for the period August 18, 1998 (date of inception) to December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material
respects, the financial position of TravelnStore.com, Inc. as of December 31,
1999 and the results of its operations and its cash flows for the year ended
December 31, 1999 and for the period August 18, 1998 (date of inception) to
December 31, 1998 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred losses from operations since
inception, has a working capital deficit of $1,172,116 and has stockholders'
deficit of $1,147,115. These conditions raise substantial doubt about its
ability to continue as a going concern. Management's plans regarding those
matters also are described in Note 11. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Farber & Hass LLP
April 7, 2000
Oxnard, California
F-1
<PAGE>
TRAVELNSTORE.COM, INC.
BALANCE SHEET
DECEMBER 31, 1999
-----------------
ASSETS
CURRENT ASSETS:
Accounts receivable $ 185
Due from related parties 179,006
Prepaid expenses and other current assets 206,527
-----------
Total current assets 385,718
-----------
PROPERTY AND EQUIPMENT 68,001
Less accumulated depreciation (5,004)
-----------
Property and equipment, net 62,997
-----------
OTHER ASSETS 2,946
-----------
TOTAL ASSETS $ 451,661
===========
(Continued)
F-2
<PAGE>
TRAVELNSTORE.COM, INC.
BALANCE SHEET - Continued
DECEMBER 31, 1999
-----------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Cash overdraft $ 10,383
Accounts payable and accrued expenses 538,051
Interest payable 29,678
Notes payable 8,673
Convertible notes payable 600,000
Bridge notes payable 285,000
Loans due to related parties 76,650
Deferred income 9,399
-----------
Total current liabilities 1,557,834
-----------
NOTES PAYABLE, LONG-TERM 40,942
-----------
STOCKHOLDERS' DEFICIT:
Preferred stock class A, no par value; 8,154
shares authorized; 8,154 shares issued and
outstanding 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 shares
authorized; 9,400,000 shares issued and
outstanding; 1,633,152 shares reserved for
future issuance 2,076,700
Common stock subscribed, 60,000 shares 390,000
Accumulated deficit (3,764,702)
-----------
Total stockholders' deficit (1,147,115)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 451,661
===========
See accompanying notes to the financial statements.
F-3
<PAGE>
TRAVELNSTORE.COM, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
AND FOR THE PERIOD AUGUST 18, 1998
(DATE OF INCEPTION) TO DECEMBER 31, 1998
----------------------------------------
1999 1998
---- ----
REVENUES $ 59,385 $ 8,272
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 997,134 326,356
----------- ---------
LOSS FROM OPERATIONS (937,749) (318,084)
----------- ---------
OTHER EXPENSE:
Interest expense:
Convertible debentures - beneficial
conversion feature (2,466,500)
Other (36,683) (4,086)
----------- ---------
Total other expense (2,503,183) (4,086)
----------- ---------
LOSS BEFORE PROVISION FOR INCOME TAXES (3,440,932) (322,170)
PROVISION FOR INCOME TAXES 800 800
----------- ---------
NET LOSS $(3,441,732) $(322,970)
=========== =========
BASIC AND DILUTED LOSS PER COMMON SHARE $ (.37) $ (.04)
=========== =========
WEIGHTED AVERAGE SHARES OUTSTANDING 9,400,000 9,000,000
=========== =========
See accompanying notes to the financial statements.
F-4
<PAGE>
TRAVELNSTORE.COM, INC.
<TABLE>
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1999
AND FOR THE PERIOD AUGUST 18, 1998
(DATE OF INCEPTION) TO DECEMBER 31, 1998
----------------------------------------
<CAPTION>
Common Stock
Preferred Class A ------------
------------------- Shares Accumulated
Shares Outstanding/
Outstanding Amount Subscribed Amount (Deficit) Total
----------- ------ ---------- ------ --------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT AUGUST 18, 1998
(DATE OF INCEPTION) $ -0- $ -0-
CAPITAL CONTRIBUTION $ 200 200
NEW LOSS FOR THE PERIOD
AUGUST 18, 1998 (DATE OF
INCEPTION) TO
DECEMBER 31, 1998 (322,970) (322,970)
---------- -----------
BALANCE AT
DECEMBER 31, 1998 $ 200 $ (322,970) $ (322,770)
(Continued)
</TABLE>
F-5
<PAGE>
TRAVELNSTORE.COM, INC.
<TABLE>
STATEMENTS OF STOCKHOLDERS' DEFICIT - Continued
FOR THE YEAR ENDED DECEMBER 31, 1999
AND FOR THE PERIOD AUGUST 18, 1998
(DATE OF INCEPTION) TO DECEMBER 31, 1998
----------------------------------------
<CAPTION>
Common Stock
Preferred Class A --------------
------------------- Shares
Shares Outstanding/ Accumulated
Outstanding Amount Subscribed Amount (Deficit) Total
----------- ------ ---------- ------ --------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1998 $ 200 $ (322,970) $ (322,770)
PREFERRED CLASS A
NOTE CONVERSION 8,154 $150,887 150,887
COMMON STOCK ISSUED TO
ACQUIRE TRAVELNSTORE LLC 9,000,000
FAIR VALUE OF BENEFICIAL
CONVERSION FEATURE ON
CONVERTIBLE DEBENTURES:
Series One 815,000 815,000
Series Two 525,000 525,000
Series Three 420,000 420,000
Series Four 200,000 200,000
FAIR VALUE OF BENEFICIAL
CONVERSION FEATURE ON
FUNDING AGREEMENT 112,500 112,500
STOCK DIVIDEND TO CONVERTIBLE
NOTE HOLDERS 400,000 4,000 4,000
BRIDGE LOAN SHARES SUBSCRIBED 60,000 390,000 390,000
NET LOSS (3,441,732) (3,441,732)
------------ -----------
BALANCE AT
DECEMBER 31, 1999 8,154 $150,887 9,460,000 $2,466,700 $(3,764,702) $(1,147,115)
===== ======== ========= ========== =========== ============
<FN>
See accompanying notes to the financial statements.
</FN>
</TABLE>
F-6
<PAGE>
TRAVELNSTORE.COM, INC.
<TABLE>
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
AND FOR THE PERIOD AUGUST 18, 1998
(DATE OF INCEPTION) TO DECEMBER 31, 1998
----------------------------------------
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,441,732) $(322,970)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 3,332 1,672
Interest expense:
Common stock 4,000
Convertible debentures and notes 2,462,500
Other 10,887
Changes in operating assets and liabilities:
Bank overdraft 10,383
Accounts receivable (185)
Prepaid expenses and other assets (206,527) (2,946)
Accounts payable and accrued expenses 503,105 136,494
Interest payable 25,681
Income taxes payable (889) 889
Deferred income (24,921) 34,320
Other liabilities (8,037) 8,037
------ ------
Net cash used by operating activities (662,218) (144,689)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES -
Capital expenditures (18,387)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Note payable borrowings 800,000 85,000
Net borrowings from related parties 96,736
Accrued expenses, related party 25,600
Net loans to related parties (182,242)
Capital contribution 200
---------- ---------
Net cash provided by financing activities 643,358 181,936
----------- ---------
NET INCREASE (DECREASE) IN CASH (18,860) 18,860
CASH, BEGINNING OF PERIOD 18,860 -0-
----------- -------
CASH, END OF PERIOD $ -0- $ 18,860
=========== =========
(Continued)
</TABLE>
F-7
<PAGE>
TRAVELNSTORE.COM, INC.
STATEMENTS OF CASH FLOWS - Continued
FOR THE YEAR ENDED DECEMBER 31, 1999
AND FOR THE PERIOD AUGUST 18, 1998
(DATE OF INCEPTION) TO DECEMBER 31, 1998
----------------------------------------
1999 1998
---- ----
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ -0- $ 4,086
Income taxes $ 1,600 $ 800
NON-CASH FINANCING ACTIVITY
In July 1999, two shareholders exercised options to convert $150,887 of
convertible debt and interest into Series A Preferred Stock.
In January 1999, the Company issued 400,000 shares (after giving effect to the
Company's August 1999 two-for-one split) of common stock as a dividend to two
noteholders.
In December 1999, the Company acquired furniture and fixtures in the amount of
$49,614 in exchange for a note to a private party.
F-8
<PAGE>
TRAVELNSTORE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business - TravelnStore.Com, Inc. (the "Company") is a
provider of a specialized internet website, which acts as a
navigational site to other websites owned by an array of travel service
providers and agencies.
In March 1999, the Company acquired 100% of the members' interest in
Travelnstore LLC in exchange for 9,000,000 shares (adjusted for the
stock split on August 25, 1999) of the Company's common stock. The
Company's shareholders owned 100% of the members' interest in
Travelnstore LLC.
Because Travelnstore LLC was acquired from related parties, the
acquisition was reflected using the recorded assets and liabilities of
Travelnstore LLC and accounted for in a manner similar to a pooling of
interest. The Company had no operations prior to the acquisition of
Travelnstore LLC. The financial statements include the operational
results of Travelnstore LLC since inception (August 18, 1998).
The Company has incurred net operating losses since inception and
expects to continue to incur such losses unless and until its website
successfully achieves commercial viability. In addition, a significant
portion of its contributed capital was advanced to a related party (see
Note 2). These and other factors have caused a liquidity problem at the
Company. As discussed in Note 11, management of the Company plans to
make a Direct Public Offering ("DPO") of the Company's common stock to
raise between $3.0 million and $14.25 million.
The accompanying financial statements were prepared assuming the
Company will continue to operate on a going-concern basis and do not
include any adjustments to the recorded amounts of assets or to the
recorded amounts or classification of liabilities which would be
required if the Company were unable to realize its assets and satisfy
its liabilities and obligations in the normal course of business.
Concentration of Credit Risk - Financial instruments which potentially
subject the Company to concentrations of credit risk consist
principally of advances which are due from a related party (see Note
2).
F-9
<PAGE>
Pervasiveness of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and 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.
Actual results could differ from those estimates.
Fair Value of Financial Instruments - Based on borrowing rates
currently available to the Company, the carrying value of all financial
instruments potentially subject to valuation risk (principally
consisting of due from related party, accounts payable, accrued
expenses and notes payable) approximates fair value.
Net Loss Per Share - The Company adopted the provisions of Statement of
Financial Accounting Standards ("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 income
statement for entities with complex capital structures. Basic EPS is
based on the weighted average number of common shares outstanding
during the period, which totaled 9,400,000 for 1999. The Company did
not present Diluted EPS, since the result was anti-dilutive.
Operating Segment Information - The Company predominantly operates in
one industry segment, travel industry websites. Substantially all of
the Company's assets and employees are located at the Company's
headquarters in Camarillo, California.
Accounting for Convertible Debt Securities - The Company has issued
convertible debt securities with a non-detachable conversion feature
that was "in the money" at the date of issue. The Company accounts for
such securities in accordance with Emerging Issues Task Force Topic
D-60. The Company has recorded the fair value of the beneficial
conversion feature as interest expense and an increase to common stock.
Accounting for Stock Based Compensation - Stock option grants are set
by the Company's Board of Directors based upon their fair market
valuation of the Company's common stock on the day prior to the date of
grant. Therefore, under the principles of APB Opinion No. 25, the
Company does not recognize compensation expense associated with the
grant of stock options. SFAS No. 123, "Accounting for Stock-Based
Compensation," requires the use of option valuation models to provide
supplemental information regarding options granted after 1994.
The fair value of the options was estimated at the date of grant using
a Black-Scholes option pricing model with the following weighted
average assumptions: risk-free interest rates of 6.0%; dividend yields
of 0%; volatility factors of the expected market price of the Company's
common stock of 50%; and expected life of the options of two years.
These assumptions resulted in a weighted average fair value of $1.45
per share. Therefore, the Company's pro-forma information regarding net
loss and loss per share are as follows:
Pro-forma net loss $(3,594,000)
Basic and diluted loss per share $ (0.38)
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options. The Company's stock
options have characteristics significantly different from those of
traded options such as vesting restrictions and extremely limited
transferability.
F-10
<PAGE>
<TABLE>
Information regarding stock options outstanding as of December 31, 1999
is as follows:
<CAPTION>
Options Outstanding
Weighted Weighted Average
Average Remaining
Price Range Shares Exercise Price Contractual Life
----------- ------ -------------- ----------------
<S> <C> <C> <C>
$9.50 105,264 $9.50 6 months
Options Exercisable
-------------------
Weighted
Price Range Shares Average
----------- ------ Exercise Price
--------------
N/A -0- N/A
</TABLE>
Property and Equipment - Property and equipment are stated at cost with
depreciation provided over the estimated useful life of 5 years using
the straight-line method.
Revenue Recognition - The Company sells a monthly subscription to
participating travel agencies. The fee is billed in advance in
quarterly installments that allows online bookings through the
Travelnstore.com website. Monthly subscription revenues, along with
initial registration fees, are deferred and recognized on a
straight-line basis over the remaining lives of the advanced fee
subscriptions.
Advertising - Costs incurred for producing and communicating
advertising are expensed when incurred and included in selling expense.
Advertising expense amounted to $10,107 in 1999.
Income Taxes - The Company accounts for its income taxes under the
provisions of Statement of Financial Accounting Standards 109 ("SFAS
109"). The method of accounting for income taxes under SFAS 109 is an
asset and liability method. The asset and liability method requires the
recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between tax bases and
financial reporting bases of other assets and liabilities. The
provision for income taxes represents the California corporate minimum
franchise tax.
New Accounting Pronouncements - 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 had no
elements of comprehensive income since 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.
SERIES A PREFERRED STOCK
In August 1999, the Company created a new class of preferred stock
entitled "Series A Preferred". The Company may issue up to 8,154 shares
of this new class. This class has a $20 per share liquidation
preference, receives dividends at the same rate as common shareholders,
has preferential voting rights on
F-11
<PAGE>
certain shareholder issues and may be converted into 3 shares of common
stock at the preferred shareholders' option.
STOCK SPLIT
On August 25, 1999, the Company declared a 2 for 1 stock split for all
common shareholders of record at that date. The effect of the stock
split has been reflected retroactively in the financial statements.
F-12
<PAGE>
2. DUE FROM RELATED PARTY
The Company makes periodic working capital advances to World Key, Inc.,
a related party. The advances are repaid when funds are available and
are payable upon demand.
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1999 consists of the following:
Furniture and fixtures $ 52,378
Office equipment 15,623
---------
Total property and equipment 68,001
Less accumulated depreciation (5,004)
--------
Property and equipment, net $ 62,997
========
4. CONVERTIBLE NOTES PAYABLE
SEPTEMBER 1998 PRIVATE PLACEMENT (SERIES ONE)
In September 1998, the Company issued six notes
payable to individuals of various amounts ranging
from $7,500 to $15,000 issued in connection with
the Company's September 1998 Private Placement
Offering; unsecured; payable in full, with interest
accruing at 8%, upon the earlier of 1) public sale
of registered shares of the Company, or 2) December
31, 2000. The face value of each note may be
converted into ten times the dollar amount of the
note of the Company's common stock at the time of a
successful public stock offering. The number of
shares issued is based on the converted dollar
amount divided by the same offering price in the
public stock offering. $ 85,000
JANUARY 1999 PRIVATE PLACEMENT (SERIES TWO)
In January 1999, the Company issued fifteen notes
payable to individuals with an individual face
value of $15,000 issued in connection with the
Company's January 1999 Private Placement Offering;
unsecured; payable in full, with interest accruing
at 6%, upon the earlier of 1) public sale of
registered shares of the Company, or 2) December
31, 2000. Each note may be converted into $50,000
of the Company's common stock at the time of a
successful public stock offering at the same per
share price as the offering price. 225,000
JUNE 1999 PRIVATE PLACEMENT (SERIES THREE)
On June 15, 1999, the Company initiated the sale of
a third series of private placement convertible
notes. Each note has a face value of $15,000 and
F-13
<PAGE>
a coupon rate of 6%. Each $15,000 note may be
converted, at the noteholder's option, at any time
prior to maturity, into $50,000 of the Company's
common stock at the time of a successful public
stock offering at the same per share price as the
offering price. A total of 12 notes were sold
during the offering which expired July 31, 1999.
Half of one note has been sold to an officer of the
Company in lieu of $7,500 of the officer's salary. 180,000
SEPTEMBER 1999 PRIVATE PLACEMENT (SERIES FOUR)
In September 1999, the Company initiated the sale
of a fourth series of private placement convertible
notes. Each note has a face value of $15,000 and a
coupon rate of 6%. Each $15,000 note may be
converted, at the note- holder's option, at any
time prior to maturity, into $50,000 of the
Company's common stock at the time of a successful
public stock offering at the same per share price
as the offering price. A total of 4 notes were sold
through December 31, 1999. 60,000
FUNDING AGREEMENT
At December 1999, the Company entered into a
Funding Agreement. The Agreement provides for up to
$350,000 in advances in multiples of $50,000 with a
borrowing rate of 8%. All advances on the loan are
payable on May 30, 2000. As of December 31, 1999,
$50,000 was advanced. The loan carries a unilateral
option by the noteholder to convert all outstanding
amounts to common stock at $2.00 per share. 50,000
--------
Total $600,000
========
F-14
<PAGE>
5. NOTES PAYABLE - BRIDGE LOAN NOTES
At September 1999, the Company initiated a series of Bridge Loan Notes.
The notes have various face values ranging from $25,000 to $85,000 and
a coupon rate of 8%. Each note carries a stock dividend wherein the
noteholder will be issued 5,000 shares of common stock for each $25,000
of note value at the latter of a) 90 days from the date of issuance, or
b) 30 days from the closing date of a successful initial public
offering. At December 31, 1999, eight notes had been issued with a
cumulative stock dividend due of 60,000 shares.
6. INCOME TAXES
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at December 31, 1999 are
substantially composed of the Company's net operating loss
carryforward, for which the Company has made a full valuation
allowance.
The valuation allowance increased approximately $360,000 since the
Company's inception, representing primarily net taxable loss. In
assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled
reversal of deferred tax assets, projected future taxable income and
tax planning strategies in making this assessment.
At December 31, 1999, the Company had a net operating loss carryforward
for Federal income tax purposes of approximately $1,200,000, which is
available to offset future taxable income, if any, through 2019.
7. RELATED PARTY TRANSACTIONS
For the period August 18, 1998 (date of inception) to December 31,
1999, the Company accrued a management fee of $84,500 payable on demand
to World Key, Inc., a related party (see Note 2) for common overhead
expenses such as rent, utilities and payroll. Rent and utilities are
allocated based upon square foot utilization.
Payroll expense for certain officers was paid by World Key, Inc., and
charged to the Company for reimbursement. Management believes that the
allocation method is appropriate based on time and resources used.
F-15
<PAGE>
For the period August 18, 1998 (date of inception) to December 31,
1999, the Company made periodic working capital advances to World Key
Inc., a related party (Note 2).
In 1998 and 1999, officers of the Company made unsecured working
capital loans to the Company in the amount of $48,450. The loans
($26,650 at December 31, 1999) are payable upon demand and bear no
interest.
In 1999, the Company accrued $50,000 in fees to Donald Scanlin and
Stevan Saylor ($25,000 each) for marketing advisory services.
Jim Tyner is Chief Executive Officer of TravelnStore, Inc. and is also
Chairman and President of World Key, Inc. Mr. Tyner owns 38.3% and 30%,
respectively, of the outstanding common stock of TravelnStore, Inc. and
World Key, Inc.
Yula Greco is Vice President, Secretary and Controller of TravelnStore,
Inc. and is also Vice President and Secretary of World Key, Inc. Ms.
Greco owns 9.6% and 23.3%, respectively, of the outstanding common
stock of TravelnStore, Inc. and World Key, Inc.
Donald Scanlin is a trustee of the Scanlin 1989 Trust that beneficially
owns 22.45% of the outstanding common stock of TravelnStore, Inc. Mr.
Scanlin also owns 23.33% of World Key, Inc.
Stevan Saylor beneficially owns 20.25% and 3.75%, respectively, of the
outstanding common stock of TravelnStore, Inc. and World Key, Inc.
8. STOCK OPTIONS
In April 1999, the Board of Directors approved an Incentive Stock
Option Plan (the "Plan") under which options to purchase up to
1,000,000 shares of the Company's common stock may be granted to
employees, directors and consultants at not less than the fair market
value on the date of grant. Options granted under the Plan are
generally exercisable five to ten years after the date of grant and
expire December 31, 2009. Options are granted at the discretion of the
Board of Directors or Committee. No options have been issued since the
Plan's inception.
On January 15, 1999, the Company initiated an Internet Stock Option
Sweepstakes. The winner of the sweepstakes was given the option to
purchase up to $1,000,000 of Company stock at the public issuing price.
Should the Company not make a public offering prior to December 31,
2000, the option may be redeemed for $25,000.
F-16
<PAGE>
9. CONTINGENT LIABILITIES
Through March 2000, the Company did not carry general liability or
workers' compensation coverage, 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. As of December 31,
1999, there were no known liability claims. During April 2000, the
Company obtained general liability and workers' compensation coverage.
Future costs associated with absent insurance coverages could have a
material effect on the Company's future results of operations and
financial condition or liquidity.
10. YEAR 2000 COMPLIANCE (UNAUDITED)
The Company utilizes computer hardware and software in its operations.
Any of the Company's programs that recognize a date using "00" as the
year 1900 rather than the year 2000 could result in errors or system
failures.
The Company has completed an evaluation of its computer hardware and
software and believes that its mission critical systems are Year 2000
compliant.
11. MANAGEMENT PLANS
Management has evaluated the Company's current financial position and
its available resources and plans to make a DPO of the Company's stock
during the first quarter of 2000. The Company plans to raise between
$3.0 million and $14.25 million in the offering by selling between
315,790 and 1.5 million shares of its common stock. Should the Company
be unsuccessful in raising the minimum offering of $3.0 million, it is
unlikely that the Company will continue operations beyond December 31,
2000 without additional borrowings from related or unrelated parties
and the extension of the due dates on its current debt.
12. SUBSEQUENT EVENTS (UNAUDITED)
During January and February 2000, the Company completed its Funding
Agreement and received $300,000 under the same terms as indicated in
Note 4. The Company will record a charge to interest expense of
$675,000 in the first quarter of fiscal 2000 for the beneficial
conversion feature.
Through April 10, 2000, the Company has borrowed an additional $175,000
in Bridge Loan Notes under the same terms as indicated in Note 5. The
Company will record a charge to interest expense of $257,500 for the
period through April 10, 2000 for the commitment to issue shares with
the notes.
F-17
<PAGE>
The Company entered into a lease agreement for its facility, starting
January 1, 2000. The agreement expires on December 31, 2004. Minimum
lease payments due under the non-cancelable operating lease are as
follows:
2000 $ 64,260
2001 64,260
2002 64,260
2003 64,260
2004 64,260
--------
Total $321,300
========
The Company changed its name from TravelnStore.Com, Inc. to TravelnStore, Inc.
on May 30, 2000.
F-18
<PAGE>
TRAVELNSTORE, INC. (formerly TravelnStore.com, Inc.)
BALANCE SHEET (Unaudited)
APRIL 30, 2000
--------------
ASSETS
CURRENT ASSETS:
Cash $ 23,396
Accounts receivable 185
Due from related parties 251,658
Prepaid and other current assets 306,930
-----------
Total current assets 582,169
-----------
PROPERTY AND EQUIPMENT 74,770
Less accumulated depreciation (9,988)
-----------
Property and equipment, net 64,782
-----------
OTHER ASSETS 13,755
-----------
TOTAL ASSETS $ 660,706
===========
(Continued)
F-19
<PAGE>
TRAVELNSTORE, INC. (formerly TravelnStore.com, Inc.)
BALANCE SHEET (Unaudited) - Continued
APRIL 30, 2000
--------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 636,754
Interest payable 58,313
Notes payable, current portion 8,572
Convertible notes payable 900,000
Bridge note payable 485,000
Loans payable, related party 80,480
Accrued expense, related party 76,650
Deferred income 3,001
-----------
Total current liabilities 2,248,770
-----------
NOTES PAYABLE, Long-term 38,002
-----------
STOCKHOLDERS' DEFICIT:
Preferred stock class A, no par value; 8,154
shares authorized; 8,154 shares issued and
outstanding 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 shares
authorized; 9,400,000 shares issued and
outstanding; 1,730,224 shares reserved for
future issuance 2,751,700
Common stock subscribed, 102,500 shares 711,250
Accumulated deficit (5,239,903)
-----------
Total stockholders' deficit (1,626,066)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 660,706
===========
F-20
<PAGE>
TRAVELNSTORE, INC. (formerly TravelnStore.com, Inc.)
STATEMENT OF OPERATIONS (unaudited)
FOR THE PERIOD JANUARY 1, 2000 TO APRIL 30, 2000
------------------------------------------------
SALES $ 9,333
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 460,083
-----------
LOSS FROM OPERATIONS (450,750)
-----------
OTHER INCOME (EXPENSE):
Other income 1,428
Interest expense:
Convertible debentures - beneficial
conversion feature (996,250)
Other (29,629)
-----------
Other expense, net (1,024,451)
-----------
NET LOSS $(1,475,201)
===========
BASIC LOSS PER COMMON SHARE $ (.16)
===========
WEIGHTED AVERAGE SHARES OUTSTANDING 9,400,000
===========
F-21
<PAGE>
TRAVELNSTORE, INC. (formerly TravelnStore.com, Inc.)
<TABLE>
<CAPTION>
STATEMENT OF STOCKHOLDERS' DEFICIT (Unaudited)
FOR THE PERIOD JANUARY 1, 2000 TO APRIL 30, 2000
------------------------------------------------------------------------------------------------------------------------------------
Preferred Class A Common Stock
Shares Shares Accumulated
Outstanding Amount Outstanding Amount (Deficit) Total
----------- ------ ----------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 2000 8,154 $150,887 9,460,000 $2,466,700 $(3,764,702) $(1,147,115)
BRIDGE LOAN SHARES
SUBSCRIBED 42,500 321,250 321,250
FAIR VALUE OF BENEFICIAL
CONVERSION FEATURE ON
FUNDING AGREEMENT 675,000 675,000
NET LOSS (1,475,201) (1,475,201)
----- -------- --------- ---------- ----------- -----------
BALANCE AT
APRIL 30,2000 8,154 $150,887 9,502,500 $3,462,950 $(5,239,903) $(1,626,066)
===== ======== ========= ========== ============ ===========-
</TABLE>
F-22
<PAGE>
TRAVELNSTORE, INC. (formerly TravelnStore.com, Inc.)
STATEMENT OF CASH FLOWS (Unaudited)
FOR THE PERIOD JANUARY 1, 2000 TO APRIL 30, 2000
------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,475,201)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 4,984
Interest expense:
Convertible debentures 996,250
Changes in operating assets and liabilities:
Prepaid and other assets (111,212)
Accounts payable and accrued expenses 98,703
Interest payable 28,635
Deferred income (6,398)
Other liabilities (3,041)
-----------
Net cash used by operating activities (467,280)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES - Acquisition
of property and equipment (6,769)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from related parties (72,652)
Note payable borrowings 500,000
Bank overdraft (10,383)
Net loans to related parties 80,480
-----------
Net cash provided by financing activities 497,445
-----------
NET INCREASE IN CASH 23,396
CASH, BEGINNING OF PERIOD -0-
------------
CASH, END OF PERIOD $ 23,396
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 1,741
Income taxes $ -0-
F-23
<PAGE>
TRAVELNSTORE, INC. (formerly TravelnStore.com, Inc.)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business - TravelnStore, Inc., formerly
TravelnStore.com, Inc. (the "Company") is a provider of a specialized
internet website, which acts as a navigational site to other websites
owned by an array of travel service providers and agencies. The
Company's fiscal year-end is December 31. The information furnished
reflects all adjustments (all of which were of a normal recurring
nature) which, in the opinion of management, are necessary to fairly
present the financial position, results of operations, and cash flows
on a consistent basis. Operating results for the four months ended
April 30, 2000, are not necessarily indicative of the results that may
be expected for the year ended December 31, 2000.
In March 1999, the Company acquired 100% of the members' interest in
TravelnStore LLC in exchange for 9,000,000 shares (adjusted for the
stock split on August 25, 1999) of the Company's common stock. The
Company's shareholders owned 100% of the members' interest in
TravelnStore LLC.
Because TravelnStore LLC was acquired from related parties, the
acquisition was reflected using the recorded assets and liabilities of
TravelnStore LLC and accounted for in a manner similar to a pooling of
interest. The Company had no operations prior to the acquisition of
TravelnStore LLC. The financial statements include the operational
results of TravelnStore LLC since inception (August 18, 1998).
The Company has incurred net operating losses since inception and
expects to continue to incur such losses unless and until its website
successfully achieves commercial viability. In addition, a significant
portion of its contributed capital was advanced to a related party (see
Note 2). These and other factors have caused a liquidity problem at the
Company. As discussed in Note 11, management of the Company plans to
make a Direct Public Offering ("DPO") of the Company's common stock to
raise between $3.0 million and $14.3 million.
The accompanying financial statements were prepared assuming the
Company will continue to operate on a going concern basis and do not
include any adjustments to the recorded amounts of assets or to the
recorded amounts or classification of liabilities which would be
required if the Company were unable to realize its assets and satisfy
its liabilities and obligations in the normal course of business.
Concentration of Credit Risk - Financial instruments which potentially
subject the Company to concentrations of credit risk consist
principally of advances which are due from a related party (see Note
2).
Pervasiveness of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and 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.
Actual results could differ from those estimates.
Fair Value of Financial Instruments - Based on borrowing rates
currently available to the Company, the carrying value of all financial
instruments potentially subject to valuation risk (principally
consisting of accounts receivable, accounts payable, accrued expenses
and convertible notes payable) approximates fair value.
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Net Loss Per Share - The Company adopted the provisions of Statement of
Financial Accounting Standards ("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 income
statement for entities with complex capital structures. Basic EPS is
based on the weighted average number of common shares outstanding
during the period, which totaled 9,400,000. The Company did not present
Diluted EPS, since the result was anti-dilutive.
Operating Segment Information - The Company predominantly operates in
one industry segment, travel industry websites. Substantially all of
the Company's assets and employees are located at the Company's
headquarters in Camarillo, California.
Accounting for Convertible Debt Securities - The Company has issued
convertible debt securities with a non-detachable conversion feature
that was "in the money" at the date of issue. The Company accounts for
such securities in accordance with Emerging Issues Task Force Topic
D-60. The Company has recorded the fair value of the beneficial
conversion feature as interest expense and an increase to common stock.
Accounting for Stock Based Compensation - Stock option grants are set
by the Company's Board of Directors based upon their fair market
valuation of the Company's common stock on the day prior to the date of
grant. Therefore, under the principles of APB Opinion No. 25, the
Company does not recognize compensation expense associated with the
grant of stock options. SFAS No. 123, "Accounting for Stock-Based
Compensation," requires the use of option valuation models to provide
supplemental information regarding options granted after 1994.
The fair value of the options was estimated at the date of grant using
a Black-Scholes option pricing model with the following weighted
average assumptions: risk-free interest rates of 6.0%; dividend yields
of 0%; volatility factors of the expected market price of the Company's
common stock of 50%; and expected life of the options of two years.
These assumptions resulted in weighted average fair values of $1.45 per
share. The Company has not presented pro-forma information regarding
fiscal 2000 net income and earnings per share because the options were
granted in 1999.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options. The Company's stock
options have characteristics significantly different from those of
traded options such as vesting restrictions and extremely limited
transferability.
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Information regarding stock options outstanding as of April 30, 2000 is
as follows:
Options Outstanding
-------------------
Weighted Weighted Average
Average Remaining
Price Range Shares Exercise Price Contractual Life
----------- ------ -------------- ----------------
$9.50 105,264 $9.50 2 months
Options Exercisable
-------------------
Weighted
Price Range Shares Average
----------- ------ Exercise Price
--------------
N/A -0- N/A
Property and Equipment - Property and equipment are stated at cost with
depreciation provided over the estimated useful life of 5 years using
the straight-line method.
Income Taxes - The Company accounts for its income taxes under the
provisions of Statement of Financial Accounting Standards 109 ("SFAS
109"). The method of accounting for income taxes under SFAS 109 is an
asset and liability method. The asset and liability method requires the
recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between tax bases and
financial reporting bases of other assets and liabilities.
Revenue Recognition - The Company sells a monthly subscription to
participating travel agencies. The fee is billed in advance in
quarterly installments that allows online bookings through the
Travelnstore.com website. Monthly subscription revenues, along with
initial registration fees, are deferred and recognized on a
straight-line basis over the remaining lives of the advanced fee
subscriptions.
New Accounting Pronouncements - 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 had no
elements of comprehensive income since 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.
SERIES A PREFERRED STOCK
In August 1999, the Company created a new class of preferred stock
entitled "Series A Preferred". The Company may issue up to 8,154 shares
of this new class. This class has a $20 per share liquidation
preference, receives dividends at the same rate as common shareholders,
has preferential voting rights on certain shareholder issues and may be
converted into 3 shares of common stock at the preferred shareholders'
option.
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STOCK SPLIT
On August 25, 1999, the Company declared a 2 for 1 stock split for all
common shareholders of record at that date. The effect of the stock
split has been reflected retroactively in the financial statements.
2. DUE FROM RELATED PARTY
The Company makes periodic working capital advances to World Key, Inc.,
a related party. The advances are repaid when funds are available and
are payable upon demand.
3. PROPERTY AND EQUIPMENT
Property and equipment at April 30, 2000 consists of the following:
Furniture and fixtures $ 53,129
Office equipment 21,641
--------
Total property and equipment 74,770
Less accumulated depreciation (9,988)
--------
Property and equipment, net $ 64,782
========
4. CONVERTIBLE NOTES PAYABLE
SEPTEMBER 1998 PRIVATE PLACEMENT (SERIES ONE)
In September 1998, the Company issued six notes
payable to individuals of various amounts ranging
from $7,500 to $15,000 issued in connection with
the Company's September 1998 Private Placement
Offering; unsecured; payable in full, with interest
accruing at 8%, upon the earlier of 1) public sale
of registered shares of the Company, or 2) December
31, 2000. The face value of each note may be
converted into ten times the dollar amount of the
note of the Company's common stock at the time of a
successful public stock offering. The number of
shares issued is based on the converted dollar
amount divided by the same offering price in the
public stock offering. $ 85,000
JANUARY 1999 PRIVATE PLACEMENT (SERIES TWO)
In January 1999, the Company issued fifteen notes
payable to individuals with an individual face
value of $15,000 issued in connection with the
Company's January 1999 Private Placement Offering;
unsecured; payable in full, with interest accruing
at 6%, upon the earlier of 1) public sale of
registered shares of the Company, or 2) December
31, 2000. Each note may be converted into $50,000
of the Company's common stock at the time of a
successful public stock offering at the same per
share price as the offering price. 225,000
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JUNE 1999 PRIVATE PLACEMENT (SERIES THREE)
On June 15, 1999, the Company initiated the sale of
a third series of private placement convertible
notes. Each note has a face value of $15,000 and a
coupon rate of 6%. Each $15,000 note may be
converted, at the noteholder's option, at any time
prior to maturity, into $50,000 of the Company's
common stock at the time of a successful public
stock offering at the same per share price as the
offering price. A total of 12 notes were sold
during the offering which expired July 31, 1999.
Half of one note has been sold to an officer of the
Company in lieu of $7,500 of the officer's salary. 180,000
SEPTEMBER 1999 PRIVATE PLACEMENT (SERIES FOUR)
In September 1999, the Company initiated the sale
of a fourth series of private placement convertible
notes. Each note has a face value of $15,000 and a
coupon rate of 6%. Each $15,000 note may be
converted, at the noteholder's option, at any time
prior to maturity, into $50,000 of the Company's
common stock at the time of a successful public
stock offering at the same per share price as the
offering price. A total of four notes were sold
through December 31, 1999. 60,000
FUNDING AGREEMENT
At December 1999, the Company entered into a
Funding Agreement. The Agreement provides for up to
$350,000 in advances in multiples of $50,000 with a
borrowing rate of 8%. All advances on the loan are
payable on September 30, The loan carries a
unilateral option by the noteholder to convert all
outstanding amounts to common stock at $2.00 per
share. 350,000
--------
Total $900,000
========
5. NOTE PAYABLE - BRIDGE LOAN NOTES
In September 1999, the Company initiated a series of Bridge Loan Notes.
The Notes have various face values ranging from $12,500 to $85,000 and
a coupon rate of 8%. Each Note carries a stock dividend wherein the
noteholder will be issued 5,000 shares of common stock for each $25,000
of Note value at the latter of (a) 90 days from the date of issuance or
(b) 30 days from the closing date of a successful initial public
offering. At April 30, 2000, eighteen Notes had been issued with a
cumulative stock dividend of 100,000 shares.
6. INCOME TAXES
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at April 30, 2000 are substantially
composed of the Company's net operating loss carryforward, for
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which the Company has made a full valuation allowance.
The valuation allowance increased approximately $470,000 since the
Company's inception, representing primarily net taxable loss. In
assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled
reversal of deferred tax assets, projected future taxable income and
tax planning strategies in making this assessment.
At April 30, 2000, the Company had a net operating loss carryforward
for Federal and state income tax purposes of approximately $1.7
million, which is available to offset future taxable income, if any,
through 2017.
7. RELATED PARTY TRANSACTIONS
For the period August 18, 1998 (date of inception) to April 30, 2000,
the Company accrued a management fee of $96,100 payable on demand to
World Key, Inc., a related party (see Note 2) for common overhead
expenses such as rent, utilities and payroll. Rent and utilities are
allocated based upon square foot utilization.
Payroll expense for certain officers was paid by World Key, Inc., and
charged to the Company for reimbursement. Management believes that the
allocation method is appropriate based on time and resources used.
For the period August 18, 1998 (date of inception) to April 30, 2000,
the Company made periodic working capital advances to World Key Inc., a
related party (Note 2).
In 1998, 1999, and 2000, officers of the Company made unsecured working
capital loans to the Company in the amount of $128,930. The loans are
payable upon demand and bear no interest.
In 1999, the Company accrued $50,000 in fees to Donald Scanlin and
Stevan Saylor ($25,000 each) for marketing advisory services.
Jim Tyner is Chief Executive Officer of TravelnStore, Inc. and is also
Chairman and President of World Key, Inc. Mr. Tyner owns 38.3% and 30%,
respectively, of the outstanding common stock of TravelnStore, Inc. and
World Key, Inc.
Yula Greco is Vice President, Secretary and Controller of TravelnStore,
Inc. and is also Vice President and Secretary of World Key, Inc. Ms.
Greco owns 9.6% and 23.3%, respectively, of the outstanding common
stock of TravelnStore, Inc. and World Key, Inc.
Donald Scanlin is a trustee of the Scanlin 1989 Trust that beneficially
owns 22.45% of the outstanding common stock of TravelnStore, Inc. Mr.
Scanlin also owns 23.33% of World Key, Inc.
Stevan Saylor beneficially owns 20.25% and 3.75%, respectively, of the
outstanding common stock of TravelnStore, Inc. and World Key, Inc.
8. STOCK OPTIONS
In April 1999, the Board of Directors approved an Incentive Stock
Option Plan (the "Plan") under which options to purchase up to
1,000,000 shares of the Company's common stock may be granted to
employees, directors and consultants at not less than the fair market
value on the date of grant. Options granted under the Plan are
generally exercisable five to ten years after the date of grant and
expire
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December 31, 2009. Options are granted at the discretion of the Board
of Directors or Committee. No options have been issued since the Plan's
inception.
On January 15, 1999, the Company initiated an Internet Stock Option
Sweepstakes. The winner of the sweepstakes was given the option to
purchase up to $1,000,000 of Company stock at the public issuing price.
Should the Company not make a public offering prior to December 31,
2000, the option may be redeemed for $25,000.
9. 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. As of April 30,
2000, there were no known liability claims. During April, 2000, the
Company obtained general liability and workers' compensation insurance
coverage. Future costs associated with absent insurance coverages could
have a material effect on the Company's future results of operations
and financial condition or liquidity.
The Company entered into a lease agreement for its facility, starting
January 1, 2000. The agreement expires on December 31, 2004. Minimum
lease payments due under the non-cancelable operating lease are as
follows:
2000 $ 64,260
2001 64,260
2002 64,260
2003 64,260
2004 64,260
--------
Total $321,300
========
10. YEAR 2000 COMPLIANCE (UNAUDITED)
The Company utilizes computer hardware and software in its operations.
Any of the Company's programs that recognize a date using "00" as the
year 1900 rather than the year 2000 could result in errors or system
failures.
The Company has completed an evaluation of its computer hardware and
software and believes that its mission critical systems are Year 2000
compliant.
11. MANAGEMENT PLANS
Management has evaluated the Company's current financial position and
its available resources and plans to make a DPO of the Company's stock
during the first quarter of 2000. The Company plans to raise between
$3.0 million and $14.25 million in the offering by selling between
315,790 and 1.5 million shares of its common stock. Should the Company
be unsuccessful in raising the minimum offering of $3.0 million, it is
unlikely that the Company will continue operations beyond April 30,
2001 without additional borrowings from related or unrelated parties
and the extension of the due dates on its current debt.
-------------------------------------------
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 204(a)(10) of the California General Corporation Law (the "GCL")
permits corporations to eliminate the liability of a Director to the corporation
or its stockholders for monetary damages for breach of the Director's fiduciary
duty of care. Our Articles of Incorporation include such a provision eliminating
the liability of Directors to the fullest extent permissible under California
law. Under the GCL directors will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except liability for (a) any
breach of their duty of loyalty to the corporation or its stockholders, (b) acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) unlawful payments of dividends or unlawful stock
repurchases or redemptions or (d) any transaction from which the director
derived an improper personal benefit. Such limitation of liability does not
apply to liabilities arising under the federal securities laws and does not
affect the availability of equitable remedies such as injunctive relief or
rescission.
Our Articles of Incorporation and Bylaws provide that we will indemnify our
directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. We believe
that indemnification under our Bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our Bylaws also permit us to
secure insurance on behalf of any officer, director, employee or other agent for
any liability arising out of his or her actions in such capacity, regardless of
whether or not California law would permit indemnification.
We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our Bylaws. These
agreements, among other things, provide for indemnification of our directors and
executive officers for certain expenses, including attorneys fees, judgments,
fines and settlement amounts incurred by any such person in any action or
proceeding, including any action by or in the right of TravelnStore.com, arising
out of such person's services as an director or executive officer of
TravelnStore.com, any of our subsidiaries or any other company or enterprise to
which the person provides services at our request. We believe that these
provisions and agreements are necessary to attract and retain qualified persons
as directors and executive officers.
We are not obligated to indemnify the indemnity with respect to (a) acts,
omissions or transactions from which the indemnity may not be relieved of
liability under applicable law, (b) claims initiated or brought voluntarily by
the indemnity and not by way of defense, except in certain situations, (c)
proceedings instituted by the indemnity to enforce the Indemnification
Agreements which are not made in good faith or are frivolous, or (d) violations
of Section 16(b) of the Securities Exchange Act of 1934 or any similar statute.
While not requiring the maintenance of directors' and officers' liability
insurance, if there is such insurance, the indemnity must be provided with the
maximum coverage afforded to Directors, officers, key employees, agents or
fiduciaries if indemnity is a Director, officer, key employee, agent or
fiduciary, respectively. Any award of indemnification to an agent would come
directly from our assets, thereby affecting a stockholder's investment.
These indemnification provisions and the Indemnification Agreements may be
broad enough to permit indemnification of our officers and Directors for
liabilities (including reimbursement of expenses) arising under the Securities
Act.
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ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering, all of which are to be borne by the
Registrant, are as follows:
SEC Filing Fee $ 3,962
Nasdaq Listing Fee 7,500
NASD Filing Fee 0
Underwriters' Expense Allowance 0
Printing Expenses 60,000
Accounting Fees and Expenses 75,000
Legal Fees and Expenses 150,000
Blue Sky fees and Expenses 15,000
Registrar and Transfer Agent Fees 0
Miscellaneous 8,538
Total 320,000
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Loan Transaction
In separate private placements commenced in September 1998, January 1999,
June 1999 and September 1999, we issued 37 Convertible Promissory Notes (the
"Notes") in the aggregate principal amount of $550,000. Each Note has a face
value of $15,000, $85,000 of the Notes have a coupon rate of 8% per annum,
$465,000 of the Notes have a coupon rate of 6% per annum and all of the Notes
are all due and payable on December 31, 2000. One Note was only partially funded
through cash payment to the extent of $7,500. We are treating the portion of the
Note that were not funded through cash payments as compensation expense paid to
an officer. We used the proceeds of these Notes to cover our initial operating
expenses and for general working capital purposes, including the payment of
officers salaries. No significant portion of the proceeds of these Notes was
used to fund the acquisition of capital equipment. Each of the Notes was issued
in exchange for cash, the forgiveness of debt or a combination thereof in an
amount equal to the principal amount of the Note. Under each of the placements,
the amount payable at December 31, 2000 on maturity of the Notes will depend on
whether or not we have affected a registered public offering of our common
stock. If we have not affected a registered public offering of our common stock
on or before December 31, 2000, we will be obligated to pay an amount equal to
the sum of the entire unpaid principal balance of the Notes, all accrued
interest thereon, and a premium equal to $15,000. If we have affected a
registered public offering of our common stock on or before December 31, 2000,
and have raised at least $2,000,000 in such offering, we will be obligated to
pay an amount equal to the sum of the entire unpaid principal balance of the
Notes, all accrued interest thereon, and a premium equal to $7,500.
The Notes issued under each of the placements may be converted into shares
of common stock following the date on which a registered public offering of our
common stock is declared effective. For the Notes issued under the placement
commenced in September, 1998, the holder may convert the Note into that number
of shares of common stock determined by dividing the sum of $150,000 by the
price at which we issue the shares of common stock in the registered offering;
provided that the number of shares that are issuable upon such conversion shall
be appropriately pro-rated to reflect any partial payments on the Note prior to
the date of conversion. For the Notes issued under the placements commenced in
January, 1999, June 1999 and September 1999, the holder may convert the Note
into that number of shares of common stock determined by dividing the sum of
$50,000 by the price at which we issue the shares of common stock in the
registered offering; provided that the number of shares that are issuable upon
such conversion shall be appropriately pro-rated to reflect any partial payments
on the Note prior to the date of conversion. In anticipation that the offering
price for any shares issued in a registered offering would be $9.50 per share,
we had reserved for issuance on conversion of the Notes a total of 257,888
shares of common stock. We will appropriately adjust the number of shares
reserved to reflect the actual offering price and the then aggregate amount
payable under the Notes.
Holders of 29 Notes, in the aggregate principal amount of $430,000, have
committed to convert, as of the
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effective date of this offering, their Notes into an aggregate of 215,784shares
of common stock. Such conversion will be effected in order to improve our
financial position and to facilitate this offering. One of the Notes which will
be converted is jointly held by Jim Tyner, our Chairman, and Stevan Saylor, one
of our principal stockholders. On the conversion of such Note, each of Mr. Tyner
and Mr. Saylor will receive 2,632 shares of common stock. As of April 30, 2000,
and after giving effect to the foregoing conversions, there remained outstanding
8 Notes in the aggregate principal amount of $120,000 and with respect to which
we have reserved for issuance a total of 42,104 shares of common stock.
Option Sweepstakes
In connection with the commencement of our Web site, we conducted a
Sweepstakes under which we solicited entries from visitors to our Web site. We
granted to a visitor whose name we drew at random from the list of all
participating visitors an Option to purchase that number of shares of our common
stock as is determined by dividing $1,000,000 by the price at which the shares
of common stock covered by this offering are issued to the public. We have
reserved for issuance under the Option 105,264 shares of common stock. The
aggregate exercise price of the Option is $100.00. The person to whom the Option
was granted has agreed that:
o without our prior consent she will not transfer all or any portion of her
interest in the Option other than by will or the laws of descent and
distribution; and
o in connection with this offering, without our prior consent she will not
publicly offer or sell any shares of Common Stock acquired on exercise of
the Option for a period of 180 days after the effective date of the
registration statement is declared effective.
If we do not effect a public offering of our common stock by December 31, 2000,
the Option will expire on December 31, 2000 and we shall pay the holder of the
Option $25,000 in cash.
We commenced the sweepstakes on November 1, 1998 and made the drawing on
January 31, 1999. Entrants were required merely to register at our Web site by
leaving their email address and were not obligated, then or thereafter, to
provide any other particular information to us, purchase any goods or services,
pay us any amount or otherwise provide us any particular consideration. We do
not intend to conduct any other sweepstakes in which we will grant any options
or issue any other securities to any participant It is possible that our grant
of the Option did not comply with the registration requirements of the
Securities Act of 1933. Because we granted only one Option, did not receive, and
will not receive, any tangible property on the grant or exercise of the Option,
we do not intend to offer the holder of the Option the right to rescind the
grant of the Option.
Stockholder Loans
In connection with our borrowing a total of $140,000 from two of our
principal stockholders, we issued to such stockholders, as additional
consideration for the loans, a total of 400,000 shares of common stock. Notes
issued for a total of $100,000 were due and payable on June 30, 1999, and
bearing interest at the rate of 10% per annum. One of the Notes issued for
$40,000 was due and payable on December 31, 1999, bearing interest at the rate
of 10% per annum and is convertible at the holder's option into Convertible
Notes issued in the September 6, 1998 private placement (which is described
above) in the aggregate principal amount of $75,000. Effective as of August 25,
1999, all of these Notes were converted into an aggregate of 8,154 shares of
Series A Preferred Stock. The shares of Series A Preferred Stock are convertible
into 24,462 shares of common stock. Such conversion was effected in order to
improve our financial position and to facilitate this offering.
Bridge Loan
Between September 1999 and April 2000, we borrowed a total of $485,000 and
in exchange therefore issued a total of 18 promissory notes. These notes bear
interest at the rate of 8% per annum, do not require monthly or periodic
payments of principal or interest, and are all die and payable on the date that
is 30 days after the final closing of this offering. Upon payment of the notes,
we will issue to the note holders, in addition to the principal amount of the
notes and accrued interest, 5,000 shares of common stock for each $25,000
principal amount of the
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notes, in the principal amount of $400,000 and 20,000 shares for one Note in the
principal amount of $85,000, for a total of 100,000 shares of common stock. One
Note was only partially funded to the extent of $10,000. We are treating the
Note that was not funded through cash payments as a $5,000 general and
administrative expense for services performed by a supplier.
Promissory Note
Between December 1999 and April 2000, we borrowed a total of $350,000 from
one lender and in exchange therefor issued one Promissory Note. This Note bears
interest at the rate of 8% per annum, does not require monthly or periodic
payments of principal or interest, and is all due and payable on September 30,
2000. The Note is convertible into shares of common stock at the price of $2.00
per share. We have reserved a total of 175,000 shares of common stock for
issuance upon conversion of this Note.
Shares of Common Stock
Effective as of April 15, 1999, we acquired by merger all of the business,
assets and liabilities of TravelnStore, LLC, a California limited liability
company. In such merger we issued a total of 9,000,000 shares of common stock to
the Members of the LLC. The foregoing number of shares of common stock reflects
the 2-for-1 stock split on the common stock effected August 25, 1999.
TravelnStore's issuance of all of the foregoing securities were effected in
transactions exempt from registration under Section 4(2) of the Securities Act
of 1993 and Regulation D promulgated thereunder.
o The Convertible Promissory Notes were issued to a total of 44 persons, all
of whom we reasonably believed to be accredited investors within the
meaning of Rule 501. In connection with the conversion of the Notes, we
provided to the Noteholders a copy of the Registration Statement and other
information about TravelnStore.
o Both of the stockholders to whom Notes were issued in connection with our
borrowing of $140,000 are "accredited investors" within the meaning of
Rule 501. In connection with the conversion of the Notes, we provided to
the stockholders a copy of the Registration Statement and other
information about TravelnStore.
o The bridge loan promissory notes were issued to a total of six person,
each of whom was an "accredited investor" within the meaning of Rule 501.
We also agreed to issue to the lenders upon our payment of the notes 5,000
shares of common stock for each $25,000 principal amount of the notes. In
connection with the issuance of the notes, we provided the noteholders a
copy of this Registration Statement and other information about
TravelnStore.
o The promissory note in the principal amount of $350,000 was issued to a
corporation which was an "accredited investor" within the meaning of Rule
501. In connection with the issuance of the note, we provided to the
noteholder a copy of this Registration Statement and other information
about TravelnStore. The shares of common stock issuable upon conversion of
this note will be issued without registration under the Securities Act of
1933 and will constitute "restricted securities" within the meaning of
Rule 144 promulgated under such Act.
o We issued shares of common stock to a total of 5 persons in connection
with our merger with TravelnStore, LLC. All of such persons were either
actively involved in the conduct of the LLC's business and continue to be
actively involved in our business or are "accredited investors" within the
meaning of Rule 501.
o We neither engaged in any general advertisement or solicitation nor
retained any broker dealers with respect to any of the foregoing
issuances.
o The sweepstakes option was granted pursuant to the exemption in Rule 504
of Regulation D. The
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<PAGE>
sweepstakes did not require the entrant to pay any cash or other property.
We initially concluded that the grant of the Option was not a "sale"
within the meaning of the Securities Act. We subsequently became aware of
certain "no-action" letters in which the Securities and Exchange
Commission took a contrary position. If the grant of the Option is a
"sale", it is an exempt transaction under Rule 504. This registration
statement covers the issuance of the shares of common stock on exercise of
the Option.
o We have not timely filed a Notice of transaction under Rule 503. We have
concluded that our failure to file such Notices does not pertain to
requirement that is directly intended to protect the issuees and that such
failure is insignificant with respect to the issuances.
ITEM 27. EXHIBITS.
The following Exhibits are filed as part of this Registration Statement pursuant
to Item 601 of Regulation S-B:
Exhibit No. Description
2 Merger Agreement dated April 15, 1999, between
TravelnStore.com, LLC, a California limited liability
company, and TravelnStore, Inc., a California corporation**
3 Charter Documents
3.1 Articles of Incorporation as filed March 4, 1999**
3.2 Certificate of Amendment and Restatement of Articles of
Incorporation as filed August 25, 1999**
3.3 Bylaws**
3.4 Certificate of Amendment of Articles of Incorporation as
filed May 30, 2000**
4 Instruments defining rights of holders
4.1 Form of Convertible Promissory Note issued September
1998**
4.2 Form of Convertible Promissory Note issued January
1999**
4.3 Subscription Agreement for this Offering**
4.4 Form of Certificate for common stock**
4.5 Form of Convertible Promissory Note issued June 1999**
4.6 Form of Notice of Conversion regarding Convertible
Promissory Notes**
4.7 Promissory Notes issued to Scanlin 1989 Trust**
4.8 Promissory Notes issued to Stevan Saylor**
4.9 Form of Notice of Conversion regarding Promissory Notes
issued to Scanlin 1989 Trust and Stevan Saylor**
4.10 Form of Convertible Promissory Note issued September
1999**
4.11 Form of Bridge Loan Promissory Note**
5 Opinion of Reicker, Clough, Pfau, Pyle, McRoy & Herman LLP**
10 Material Contracts
10.1 Escrow Agreement with Santa Barbara Bank & Trust
applicable to this Offering**
10.2 Form of Agency Co-Host Agreement**
10.3 1999 Equity Inventive Plan**
10.4 Form of Officer and Director Indemnification Agreement**
10.5 Independent Contractor Agreement with Donald Scanlin**
10.6 Independent Contractor Agreement with Stevan Saylor**
10.7 Stock Option Granted to Stoltenberg**
10.8 Operating Agreement between TravelnStore, Inc. and World
Key, Inc. dated September 8, 1998**
10.9 Form of Lock-Up Agreement between TravelnStore, Inc. and
the following principal stockholders: Jim B. Tyner, John
R. Toal, Yula Greco, Scanlin 1989 Trust and Stevan
Saylor**
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<PAGE>
10.10 Employment Agreement with Jim Tyner dated August 1,
1999**
10.11 Employment Agreement with John Toal dated August 1,
1999**
10.12 Employment Agreement with Yula Greco dated August 1,
1999**
10.13 Form of Lock-Up Agreement (Employee) between
TravelnStore, Inc. and the following officers: Jim
B. Tyner, John R. Toal and Yula Greco**
10.14 Trademark License Agreement between World Key, Inc.
and TravelnStore, Inc. dated September 25, 1999**
10.15 Amendment to form of Lock-Up Agreement between
TravelnStore, Inc., and the following principal
stockholders: Jim B. Tyner, john R. Toal, Yula
Greco, Scanlin 1989 Trust and Stevan Saylor**
10.16 Amendment to form of Lock-Up Agreement (Employee)
between TravelnStore, Inc., and the following
officers: Jim B. Tyner, John R. Toal, Yula Greco**
10.17 Memorandum of Lease dated November 8, 1999, between
Diane Hedrick Bovee, Trustee of the Bovee/Hedrick
Family Trust dated 5/2/90, as Lessor, and
TravelnStore, Inc., as Lessee**
10.18 Loan Agreement dated December 21, 1999**
10.19 Modification of Loan Agreement dated May 11, 2000,
relating to Loan Agreement dated December 21,
1999.**
10.20 Amendment to form of Lock-Up Agreement between
TravelnStore, Inc., and the following principal
stockholders: Jim B. Tyner, John R. Toal, Yula
Greco, Scanlin 1989 Trust and Stevan Saylor**
10.21 Amendment to form of Lock-Up Agreement (Employee)
between TravelnStore, Inc., and the following
officers: Jim B. Tyner, John R. Toal and Yula
Greco**
23 Consents of Experts and Counsel
23.1 Consent of Reicker, Clough. Pfau, Pyle, McRoy &
Herman, LLP (Included in opinion in Exhibit 5)**
23.2 Consent of Farber & Hass LLP*
* Filed herewith
** Previously filed with this registration statement
ITEM 28. UNDERTAKINGS.
We undertake to provide at the initial closing and each subsequent interim
closing of this offering stock certificates in such denominations and registered
in such names so as to permit our prompt delivery of the certificates to the
investors participating in such closing.
We will file, during any period in which we offer or sell securities, a
post-effective amendment to this registration statement to:
(i) include any prospectus required by section 10(a)(3) of the Securities
Act;
(ii) reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information 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 exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range 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%n change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
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<PAGE>
(iii)include any additional or changed material information on the plan of
distribution.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
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. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant 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, the Registrant 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 whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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<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 for filing on Form SB-2 and authorized this Post-Effective
Amendment No. One to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Camarillo, State of
California, on July 13, 2000.
TRAVELNSTORE, INC.
By: /s/ Jim B. Tyner
-----------------
Jim B. Tyner, Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. One to Registration Statement has been signed by
the following persons in the capacities and on the dates indicated.
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jim B. Tyner, Yula Greco, John Toal and each of
them, such person's true and lawful attorneys-in-fact and agents, each with full
power of substitution and resubstitution for such person and in such person's
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments, exhibits thereto, and other documents in
connection therewith to this Registration Statement and any subsequent
registration statement filed by the Registrant pursuant to Rule 462(b) of the
Securities Act, which relates to this Registration Statement) and to file the
same with exhibits thereto and other documents in connection therewith with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as such person might or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact and agents, or any of them,
or their substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
NAME TITLE DATE
---- ----- ----
/s/ Jim B. Tyner Chairman of the Board, Chief Executive July 13, 2000
---------------- Officer and Director
Jim B. Tyner
/s/ John R. Toal President, Chief Operating Officer and July 13, 2000
---------------- Director
John R. Toal
/s/ Yula Greco Vice President, Secretary, Controller July 13, 2000
-------------- and Director
Yula Greco (Principal Accounting Officer)
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<PAGE>
/s/ Richard Bush Vice President, Chief Financial Officer July 13, 2000
---------------- and Director (Principal Financial Officer)
Richard Bush
/s/Heinz Niederhoff Director July 13, 2000
----------------
Heinz Niederhoff
/s/ James Kingzett Director July 13, 2000
------------------
James Kingzett
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<PAGE>
EXHIBIT INDEX
Exhibit Number Description
2 Merger Agreement dated April 15, 1999, between
TravelnStore.com, LLC, a California limited liability
company, and TravelnStore, Inc., a California corporation**
3 Charter Documents
3.1 Articles of Incorporation as filed March 4, 1999**
3.2 Certificate of Amendment and Restatement of Articles of
Incorporation as filed August 25, 1999**
3.3 Bylaws**
3.4 Certificate of Amendment of Articles of Incorporation as
filed May 30, 2000** 4 Instruments defining rights of
holders
4.1 Form of Convertible Promissory Note issued September
1998**
4.2 Form of Convertible Promissory Note issued January
1999**
4.3 Subscription Agreement for this Offering**
4.4 Form of Certificate for common stock**
4.5 Form of Convertible Promissory Note issued June 1999**
4.6 Form of Notice of Conversion regarding Convertible
Promissory Notes**
4.7 Promissory Notes issued to Scanlin 1989 Trust**
4.8 Promissory Notes issued to Stevan Saylor**
4.9 Form of Notice of Conversion regarding Promissory Notes
issued to Scanlin 1989 Trust and Stevan Saylor**
4.10 Form of Convertible Promissory Note issued September
1999**
4.11 Form of Bridge Loan Promissory Note**
5 Opinion of Reicker, Clough, Pfau, Pyle, McRoy, & Herman,
LLP**
10 Material Contracts
10.1 Escrow Agreement with Santa Barbara Bank & Trust
applicable to this Offering**
10.2 Form of Agency Co-Host Agreement**
10.3 1999 Equity Inventive Plan**
10.4 Form of Officer and Director Indemnification
Agreement**
10.5 Independent Contractor Agreement with Donald
Scanlin**
10.6 Independent Contractor Agreement with Stevan
Saylor**
10.7 Stock Option Granted to Stoltenberg**
10.8 Operating Agreement between TravelnStore, Inc. and
World Key, Inc. dated September 8, 1998**
10.9 Form of Lock-Up Agreement between TravelnStore, Inc.
and the following principal stockholders: Jim B.
Tyner, John R. Toal, Yula Greco, Scanlin 1989 Trust
and Stevan Saylor**
10.10 Employment Agreement with Jim Tyner dated August 1,
1999**
10.11 Employment Agreement with John Toal dated August 1,
1999**
10.12 Employment Agreement with Yula Greco dated August 1,
1999**
10.13 Form of Lock-Up Agreement (Employee) between
TravelnStore, Inc. and the following officers: Jim
B. Tyner, John R. Toal and Yula Greco**
10.14 Trademark License Agreement between World Key, Inc.
and TravelnStore, Inc. dated September 25, 1999**
10.15 Amendment to form of Lock-Up Agreement between
TravelnStore, Inc., and the following principal
stockholders: Jim B. Tyner, John R. Toal, Yula
Greco, Scanlin 1989 Trust and Stevan Saylor**
10.16 Amendment to form of Lock-Up Agreement (Employee)
between TravelnStore, Inc., and the following
officers: Jim B. Tyner, John R.
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<PAGE>
Toal, Yula Greco**
10.17 Memorandum of Lease dated November 8, 1999, between
Diane Hedrick Bovee, Trustee of the Bovee/Hedrick
Family Trust dated 5/2/90, as Lessor, and
TravelnStore, Inc., as Lessee**
10.18 Loan Agreement dated December 21, 1999.**
10.19 Modification of Loan Agreement dated May 11, 2000,
relating to Loan Agreement dated December 21,
1999.**
10.20 Amendment to form of Lock-Up Agreement between
TravelnStore, Inc., and the following principal
stockholders: Jim B. Tyner, John R. Toal, Yula
Greco, Scanlin 1989 Trust and Stevan Saylor**
10.21 Amendment to form of Lock-Up Agreement (Employee)
between TravelnStore, Inc., and the following
officers: Jim B. Tyner, John R. Toal and Yula
Greco**
23 Consents of Experts and Counsel
23.1 Consent of Reicker, Clough, Pfau, Pyle, McRoy &
Herman, LLP* (included in opinion in Exhibit 5).**
23.2 Consent of Farber & Hass LLP*
* Filed herewith
** Previously filed with this registration statement
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