UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO
______________
COMMISSION FILE NUMBER: 0-18412
ETRAVNET.COM, INC.
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of incorporation or organization)
11-2602120
(IRS Employer Identification Number)
560 SYLVAN AVENUE, ENGLEWOOD CLIFFS, NEW JERSEY 07632
(Address of principal executive offices)
(201) 567-8500
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
NUMBER OF SHARES OUTSTANDING OF COMMON STOCK,
$.001 PAR VALUE, MARCH 31, 2000 5,525,042
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90days. Yes[X]No[ ].
<PAGE>
ETRAVNET.COM, INC.
MARCH 31, 2000
INDEX
PAGE
PART I FINANCIAL INFORMATION (Unaudited)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet 1
Statements of Operations 2
Statements of Cash Flows 3
Notes to Financial Statements 4
Management's Discussion and Analysis of Results
of Operations and Financial Condition 6
PART II OTHER INFORMATION 11
SIGNATURE PAGE 12
<PAGE>
ETRAVNET.COM, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
(UNAUDITED)
<PAGE>
ETRAVNET.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<S> <C> <C>
March 31,2000 December 31,1999
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 76,054 $ 19,813
Short-term investments 886,000 1,009,956
Accounts receivable, less allowance for doubtful
accounts of $74,955 361,531 418,461
Prepaid expenses and other current assets 171,497 171,497
------------- -------------
Total Current Assets 1,495,082 1,619,727
------------- -------------
PROPERTY AND EQUIPMENT, at cost, less accumulated
depreciation 65,585 73,085
------------- -------------
OTHER ASSETS
Goodwill, less accumulated amortization 216,368 227,848
Prepaid advertising 2,021,000 -
Deferred software license and related development costs 927,882 888,800
Notes receivable, less current portion 680,910 703,397
Security deposits and other 90,442 90,439
------------- -------------
Total Other Assets 3,936,602 1,910,484
------------- -------------
TOTAL ASSETS $ 5,497,269 $ 3,603,296
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 498,517 $ 270,986
Deferred revenue 74,640 74,640
------------- -------------
Total Current Liabilities 573,157 345,626
------------- -------------
OTHER LIABILITIES
Deferred revenue 681,397 703,397
Security deposits 139,357 139,358
------------- -------------
Total Other Liabilities 820,754 842,755
------------- -------------
Total Liabilities 1,393,911 1,188,381
------------- -------------
SHAREHOLDERS' EQUITY
Preferred stock; $.001 par value; 5,000,000 shares
authorized; no shares issued and outstanding - -
Common stock, $.001 par value; 20,000,000 shares
authorized; 5,525,042 and 5,317,753 shares issued and
outstanding at March 31, 2000 and December 31, 1999,
respectively 5,525 5,318
Additional paid-in capital 4,952,252 2,897,459
Retained earnings (deficit) (823,762) (454,602)
Accumulated other comprehensive loss (30,657) (33,260)
------------- -------------
Total Shareholders' Equity 4,103,358 2,414,915
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,497,269 $ 3,603,296
============= =============
</TABLE>
<PAGE>
See accompanying notes to condensed consolidated financial statements
3
ETRAVNET.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<S> <C> <C>
2000 1999
--------------- ---------------
Revenues
Franchise fees $ 40,900 $ 294,322
Franchisee service fees and other 262,185 207,471
Travel services and products 934,106 927,082
Other 57,471 20,788
------------- -------------
Total Revenues 1,294,662 1,449,663
------------- -------------
Operating Expenses
Cost of travel services and products 848,955 883,378
Marketing and selling 233,099 210,214
General and administrative 595,917 352,624
------------- -------------
Total operating expenses 1,677,971 1,446,216
------------- -------------
Income (loss) from operations (383,309) 3,447
Interest income 14,149 15,224
------------- -------------
Income (loss) before income taxes (369,160) 18,671
Provision for income taxes - 2,312
------------- -------------
Net income (loss) (369,160) 16,359
Other Comprehensive income 2,603 -
------------- -------------
Comprehensive income (loss) $ (366,557) $ 16,359
============= =============
Pro forma Information
Historical income (loss) before income taxes $ 18,671
Provision for Income Taxes
Adjustment to recognize income taxes as if company
had been a "C" corporation 4,700
Pro forma net income $ 13,971
=============
Earnings (loss) Per Share:
Weighted average common
shares outstanding 5,421,398 4,413,417
============= =============
Basic and diluted earnings (loss) per share $ (.07) $ -
============= =============
</TABLE>
<PAGE>
ETRAVNET.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<S> <C> <C>
2000 1999
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (369,160) $ 16,359
------------- -------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Stock-based compensation 34,000 -
Depreciation and amortization 19,000 7,500
Changes in assets and liabilities:
Accounts receivable 56,930 (84,356)
Prepaid expenses and other current assets - 3,259
Other assets - 5,531
Accounts payable and accrued expenses 227,531 115,643
Deferred revenue (22,000) -
Other liabilities - 2,854
------------- -------------
Total adjustments 315,461 50,431
------------- -------------
Net cash provided (used) by operating activities (53,699) 66,790
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale (acquisition) of short-term investments 126,535 (370,560)
Payments for software development costs (39,082) -
------------- -------------
Net cash provided (used) by investing activities 87,453 (370,560)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from private placements - 210,000
Collection of notes receivable 22,487 17,600
------------- -------------
Net cash provided by financing activities 22,487 227,600
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 56,241 (76,170)
-
CASH AND CASH EQUIVALENTS - beginning 19,813 109,557
------------- -------------
CASH AND CASH EQUIVALENTS - end $ 76,054 $ 33,387
============= =============
</TABLE>
<PAGE>
ETRAVNET.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the Company's financial
position as of March 31, 2000 and the results of its operations and cash flows
for each of the three month periods ended March 31, 2000 and 1999. These
statements are condensed and therefore do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The statements should be read in conjunction with
financial statements and footnotes included in the Company's financial
statements and footnotes as of December 31, 1999 and for the year then ended
previously filed with the Securities and Exchange Commission. The results of
operations for the three months ended March 31, 2000 and 1999 are not
necessarily indicative of the results to be expected for the full year.
2. PREPAID ADVERTISING
In February 2000, the Company purchased approximately $2,021,000 of
advertising time in various markets located through the United States through
the issuance of 207,289 shares of its Common Stock. These media placement costs
for each specific market are expensed when the advertisement first appears in
that market. Management expects to utilize approximately 25% of such advertising
during the year ending December 31, 2000 and the balance during 2001.
3. CONTINGENCIES
Legal Proceedings
In a lawsuit filed in Indiana, on June 21, 1999, JCB Enterprises ("JCB"), a
franchisee of the Company, is seeking money damages in excess of $80,000 for
alleged violations of the Indiana Franchise Act and Indiana Deceptive Franchise
Practices Act, for common law fraud, rescission of the Franchise Agreement
between the Company and JCB, as well as a declaratory judgment on whether a
partnership existed between JCB and the Company. JCB recently filed personal and
corporate bankruptcy and JCB's interest in the lawsuit has been transferred to
JCB's bankruptcy trustee who has given an indication of interest in settling the
lawsuit out-of-court. The Company made an offer to settle this lawsuit for
$15,000. This offer was rejected by JCB's bankruptcy trustee. Nevertheless, the
Company intends to vigorously defend the matter. In addition, the Company is
involved in other legal proceedings incurred in the normal course of business.
At March 31, 2000, in the opinion of management, there are no proceedings that
would have a material effect on the financial position of the Company if
adversely decided.
Merger Related Items
In connection with the Company's merger with Playorena on September 17,
1999, Playorena's recorded liabilities amounted to $332,218. The details are as
set forth below:
<TABLE>
<S> <C>
Notes payable $ 35,000
Due to shareholder 41,300
Liabilities of discontinued operations 66,226
Accrued expenses 189,692
-------------
Total liabilities $ 332,218
=============
</TABLE>
In connection with the merger, certain Playorena shareholders agreed to
indemnify the Company with respect to "losses" incurred with regard to any of
these "payables" (as the term is used in the Indemnification Agreement dated
September 1999) which are "Reflected on the Playorena financial statements as of
May 31, 1999 or incurred subsequently prior to the date of closing."
<PAGE>
ETRAVNET.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
3. CONTINGENCIES (CONTINUED)
Merger Related Items (continued)
The indemnification relates to any claims or other legal actions commenced
to collect any amounts included in the balances set forth above, to the extent
that claim is made by the potential creditor within three years from the date of
the Agreement.
For the reasons set forth above, the Company has given no accounting
recognition to these items in its financial statements.
Letter of Credit
The Company is contingently liable under a letter of credit in the amount
of $25,000, which expires in September 2000. The letter of credit was obtained
to facilitate processing airfare reservations via customers' credit cards.
4. INCOME TAXES
As a result of the Company's operating loss during the three months ended
March 31, 2000, no current income taxes are provided. Deferred tax assets and
the related valuation allowance were both increased by approximately $140,000
during the three months ended March 31, 2000. The Company has net operating loss
carryforwards of approximately $397,000 at December 31, 1999.
5. SEGMENT INFORMATION
Summarized financial information concerning the Company's reportable
segments is shown in the following table. The "other" column includes the merger
related charge for issuance of common stock and other corporate items not
specifically allocated to the segments.
<TABLE>
Travel &
Related Internet
Three Months Ended Management Technology
March 31, 2000 Services Programs Other Total
<S> <C> <C> <C> <C>
Revenues $ 1,294,662 $ - $ - $ 1,294,662
Segment profit (loss) $ (383,329) $ - $ 14,169 $ (369,160)
Total assets $ 1,662,387 $ 2,948,882 $ 886,000 $ 5,497,269
Capital expenditures $ - $ 39,082 $ - $ 39,082
Depreciation and amortization $ 19,000 $ - $ - $ 19,000
Interest income $ - $ - $ 14,149 $ 14,149
</TABLE>
During the three months ended March 31, 2000, the Company operated in the
travel and related management services segment only.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Etravnet.com, Inc. (the "Company") is a leading franchisor of traditional
"brick and mortar" travel agencies as well as Internet-based travel-related
services. We are also a full-service provider of discount travel products and
services to the leisure and small business traveler. We operate business under
our trade names "Travel Network," "Global Travel Network" and Travel Network
Vacation Central" as well as web sites Etravnet.com," "HaggleWithUs.com," and
"Rezconnect.com." We offer our customers a reliable source of travel products
and services through our agreements with selected travel providers, including
major airlines, cruise lines, hotels and car rental agencies, as well as
wholesale travel providers. In addition, we offer our customers the ability to
make reservations on over 424 airlines, at more than 35,000 hotels and with most
major car rental companies, cruise lines and tour package operators.
OVERVIEW
Our revenues are predominately comprised of franchise fees and franchise
service fees, commissions paid by travel providers and the retail value of
travel agency related sales. In addition, certain travel suppliers pay
performance-based compensation known as "override commissions" or "overrides."
Commission revenues and gross retail sales net of allowances, for cancellations,
are recognized generally when the related service is booked and paid for.
Overrides are recognized on an accrual basis once the amount has been confirmed
with the travel supplier. Franchise fees are recognized when all material
services and conditions required of the Company have been performed and
collectibility of the franchise fee is relatively assured. We generally defer
recognition of franchise fees until such amounts have been collected from the
franchisee. Franchise service fees are recognized in the accrual basis as
earned.
With respect to travel services, revenues are generated by transactions
with customers who make offers to purchase tickets supplied by participating
sellers. Because we are the merchant record in these transactions, revenue for
these services includes the total amount billed to the customer.
The commission rates paid by travel suppliers, in addition to overrides,
are determined by individual travel suppliers and are subject to change.
Historically, typical standard base commission rates paid by travel suppliers
have been approximately 10% for hotel reservations, 5% to 10% for car rentals
and 10% to 15% for cruises and vacation packages. Based on the past several
years, leisure vendors (including tour operators, cruise lines and hotel and car
packagers) have not reduced their commission levels but, in fact, have offered
us incentive commissions above the standard compensation for our volume
business. We expect that our weighted average commission on online transactions
revenue will increase due to the fact that our leisure bookings are much greater
as a percentage of total sales than airline ticketing -- which offers us lower
commissions. There can be no assurance that travel suppliers will not reduce
commission rates paid to us or eliminate such commissions entirely, which could,
individually or in the aggregate, have a material adverse effect on our
business, operating results and financial condition.
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship of certain items from our consolidated statement of operations to
total revenues, except as indicated:
<TABLE>
Three Months Ended
MARCH 31,
2000 1999
REVENUES
<S> <C> <C>
Franchise fees 3.1% 19.2%
Franchise service
Fees and other 20.3 19.0
Travel products and services 72.2 60.4
Advertising and other 4.4 1.4
--- ---
TOTAL REVENUES 100.0% 100.0%
===== =====
OPERATING EXPENSES
Cost of travel products and sales 65.6 57.6
Marketing and selling 18.0 13.7
General and administrative 46.0 26.7
---- ----
TOTAL OPERATING EXPENSES (129.6%) 98.0%
Income (loss) before other
Income and income taxes (29.6) 2.0
Other income - primarily interest 1.1 1.1
Income (loss) before income taxes (28.5) 3.0
Income Taxes
Net income (loss) (28.5)% 3.0%
</TABLE>
Comparison of three months ended March 31, 2000 ("2000") and 1999 ("1999")
REVENUES
FRANCHISE FEES
Franchise fees declined in 2000 as compared to 1999 as a direct result of
management's decision in 1999 to focus all of our resources and funding on
development and growth of our Internet presence. In 1999, we reduced our
advertising and promotion of franchising activities in the domestic and
international market because of time and cost considerations and devoted full
attention to the development of Internet- based travel services. Our Internet
business has completed its beta testing which is expected to be released in
2000. Management believes that it will have the time and effort to resume an
aggressive promotion for our domestic and international franchising since we
will no longer be preoccupied with the development of the web based business.
FRANCHISE SERVICE FEES AND OTHER
The franchise service fees increased from 1999 to 2000 by approximately $
54,000 or 26%. The increase is principally attributable to the effect of
scheduled increases in franchisees service fees, offset by slightly less
franchisees in the system.
<PAGE>
TRAVEL PRODUCTS AND SERVICES
Travel products and services increased by approximately $7,000 from 1999 to
2000, an increase of approximately 1%. The increase is attributable to an
increase in the number of franchisees utilizing our services as their credit
card merchant of record, various incentives which we offer to franchisees to
interest franchisees customers in travel packages, increased customer traffic as
a result of our Internet ("online") presence and an increase in override
commissions received.
OPERATING EXPENSES
COST OF TRAVEL PRODUCTS AND SERVICES
The cost of travel products and services decreased by approximately $34,000
or 4%. These costs decreased as a result of lower commissions and fees paid to
franchisees in connection with the earlier noted incentives offered to
customers. The cost of travel products and services --as a percentage of travel
products and services sales -- were approximately 91% for 2000 and 95% for 1999.
MARKETING AND SELLING
Marketing and selling expenses increased by approximately $23,000 from 1999
to 2000. The increase represents a change of approximately 11%. Decreases in
payroll costs were offset by increases in incentives and online related
commissions.
GENERAL ADMINISTRATIVE
General and administrative expenses increased by approximately $233,000 or
64% from 1999 to 2000. As a percentage of net revenues, these costs were 46% in
2000 as compared to 26.7% in 1999. The increase in general and administrative
expense in 2000 (in dollar terms) is attributable to increases in consulting
expenses related to our expanding Internet activities, professional and other
fees related to our status (as of September 17, 1999) as a public company and
stock-based compensation related to the granting of stock options to employees
and consultants in 1999.
VARIABILITY OF RESULTS
Our travel products and services gross bookings have increased
significantly from year to year due to expansion of our distributions channels,
travel services and customer base, repeat purchases by existing customers and
increased customer acceptance of electronic commerce. Revenues from travel
products and services grew in conjunction with the growth in gross bookings.
Operating expenses have similarly increased on a year to year basis, reflecting
increased spending on developing our online operations and expanding strategic
relationships.
As a result of our limited operating history in online commerce and the
variability that can be experienced by our franchising operations, we are unable
to accurately forecast our revenues. Our current and future expense levels are
based predominantly on our operating plans. We may be unable to adjust spending
in a timely manner to compensate for any unexpected revenue shortfall.
Accordingly, any significant shortfall in revenues would likely have an adverse
effect on our business, operating results and financial condition. Further, we
currently intend to substantially increase our operating plans. We may be unable
to adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall in revenues would likely have
a material adverse effect on our business, operating results and financial
condition. Further, we currently intend to substantially increase our operating
expenses to develop and offer new and expanded travel services, to fund
increased sales and marketing and customer service operations to develop our
technology and transaction processing systems. To the extent such expenses
precede or are not subsequently followed by increased revenues, our operating
results will fluctuate and anticipated net losses in a given period may be
greater than expected.
We expect to experience significant fluctuations in our future quarterly
operating results due to a variety of other factors, many of which are outside
our control. Factors that may adversely affect our quarterly operating results
include, but are not limited to (i) our ability to retain existing customers,
attract new customers at a steady rate and maintain customer satisfaction, (ii)
changes in inventory availability from third party suppliers or commission rates
paid by travel suppliers, (iii) the announcement or introduction of new or
enhanced sites, services and products by us or our competitors, (iv) general
economic conditions specific to the Internet, online commerce or the travel
industry, (v) the level of use of online services and consumer acceptance of the
Internet and commercial online services for the purchase of consumer products
and services such as those offered by us, (vi) our ability to upgrade and
develop our systems and infrastructure and to attract new personnel in a timely
and effective manner, (vii) the level of traffic on our online sites, (viii)
technical difficulties, system downtime or Internet brownouts, (ix) the amount
and timing of operating costs and capital expenditures relating to expansion of
the our business, operations and infrastructure, (x) governmental regulation and
(xi) unforeseen events affecting the travel industry.
In addition, we expect to experience seasonality in our business,
reflecting seasonal fluctuations in the travel industry, Internet and commercial
online service usage and advertising expenditures. We anticipate that travel
bookings will typically increase during the first and second quarter in
anticipation of summer travel and will typically decline during the third
quarter. Internet and commercial online service usage and the rate of growth of
such usage may be expected typically to decline during the summer. Depending on
the extent to which the Internet and commercial online services are accepted as
an advertising medium, seasonality in the level of advertising expenditures
could become more pronounced for Internet-based advertising. Seasonality in the
travel industry, Internet and commercial online service usage and advertising
expenditures is likely to cause fluctuations in our operating results and could
have a material adverse effect on our business, operating results and financial
condition. Due to the foregoing factors, quarterly revenues and operating
results are difficult to forecast and we believe that period-to-period
comparisons of our operating results will not necessarily be meaningful and
should not be relied upon as an indication of future performance. It is likely
that our future quarterly operating results from time to time will not meet the
expectations of security analysts or investors. In such event, the price of our
Common Stock would likely be materially and adversely affected.
LIQUIDITY AND CAPITAL RESOURCES
Although we were successful in becoming a public entity in September 1999,
no capital was raised in connection therewith. Previously, in March 1999, our
wholly owned subsidiary, Global Travel Network, L.L.C., raised $210,000 (net of
$40,000 in syndication costs) in a private sale of membership interests. Cash
used in operations was approximately $54,000 in 2000. Cash provided by
operations was $67,000 in the 1999 period. Cash used in operating activities in
2000 was primarily attributable to our net loss, partially affected by decreases
in accounts receivable.
Cash provided by investing activities in 2000 was approximately $87,000 as
compared to a use of approximately $371,000 in 1999. Cash used in Investing
activities in 1999 was primarily for payments for short term investments.
Cash provided by financing activities was approximately $22,000 in 2000 and
$228,000 in 1999. Cash provided by financing activities consisted of proceeds
form the sale of equity interests of $210,000 in 1999. Cash collected from notes
receivable was approximately $22,000 in 2000 and $18,000 in 1999.
<PAGE>
As of March 31, 2000, we had approximately $76,000 in cash and
approximately $886,000 in short-term investments. Our principal commitments
consist of amounts due pursuant to our master lease with Wal-Mart. These
amounts, however, are substantially recovered by our subleases with our Wal-Mart
Supercenters franchisees. In addition, we are obligated to make additional
payments to the developer of our "Haggle" software in 2000, which we believe
could potentially aggregate $120,000.
We believe that results of operations, current cash, and short-term
investments will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures through the end of 2000. We have had
discussions with an investment banker for the sale, through a private placement,
of shares of our preferred stock.
POSSIBLE SALE OF FRANCHISE SYSTEM
We have been approached by an unrelated entity with respect to the possible
sale of our Travel Products and Services Division, including it franchise
system, to this entity. As of the date of filing on Form 10-QSB, a preliminary
asset purchase agreement has been drafted and negotiations continue. If the
transaction is effected, thereafter the "bricks and mortar" travel agency
activities of our Travel Products and Services Division, including the franchise
system, would be carried out by the purchaser and our online travel agency
activities would thereafter become our principal activity. Currently, we can
give no assurance that an agreement to sell substantially all of the assets of
our Travel Products and Services Division will be effected.
YEAR 2000 CONSIDERATIONS
We conducted a program to bring our internal systems and products into Year
2000 (Y2K) compliance. This program included upgrades to internal computer
systems and technical infrastructure, as well as a review of our product lines
to bring them into Y2K compliance. In addition, we surveyed our significant
suppliers to determine their ability to provide necessary products and services
that are critical to business continuation through Y2K.
We have experienced no interruptions in our business because of Y2K and is
not aware of any significant problems being experienced by our customers or
suppliers that would have a negative impact on us. There can be no assurance,
however, that unexpected difficulties related to Y2K compliance by us, our
customers, or suppliers will not occur. Such unexpected difficulties could have
a material adverse effect on us. Through December 31, 1999, the Company's Y2K
compliance for software testing, modifications and upgrades were completed
without any significant expenditures.
Our funding for regular updates to computer systems, technical
infrastructure and other requirements were not a significant expense.
FORWARD-LOOKING STATEMENTS
All statements other than statements of historical fact included in this
quarterly report, including without limitation statements regarding our
financial position, business strategy, Year 2000 readiness and the plans and
objectives of the management for future operations, are forward-looking
statements. When used in this quarterly report, words such as "anticipate",
"believe", "estimate", "expect", "intend" and similar expressions, as they
relate to us or our management, identify forward-looking statements. Such
forward-looking statements are based on the beliefs of our management, as well
as assumptions made by and information currently available to our management.
Actual results could differ materially from those contemplated by the
forward-looking statements as a result of certain factors, including but not
limited to, business and economic conditions, competitive factors and pricing
pressures, capacity and supply constraints and the impact of any disruption or
failure in our normal business activities as well as our customers and suppliers
as a consequence of Year 2000 related problems. Such statements reflect our
views with respect to future events and are subject to these and other risks,
uncertainties and assumptions relating to the operations, results of operations,
growth strategy and liquidity. Readers are cautioned not to place undue reliance
on these forward-looking statements. We do not undertake any obligation to
release publicly any revisions to these forward-looking statements to reflect
future events or circumstances or to reflect the occurrence of unanticipated
events.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
See Management's Discussion and Analysis or Plan of Operation -- Possible
Sale of Franchise System
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
ETRAVNET.COM, INC.
BY: /S/ MICHAEL Y. BRENT
___________________________
Michael Y. Brent, President
Dated: May 22, 2000
