UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C., 20549

FORM 10-QSB

(Mark One)

x   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2008

o   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File No. 333-132127

PRO TRAVEL NETWORK, INC.
(Exact name of small business issuer as specified in its charter)
 
Nevada
 
68-0571584
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)
     
     
  516 W. Shaw Avenue # 103, Fresno, CA 93704
(Address of principal executive offices)
 
 
(559) 224-6000
(Issuer’s telephone number)


Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, and accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ¨   Accelerated filer   ¨  
Non-accelerated filer   ¨   Smaller reporting company   x


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o   No x

As of April 30, 2008 there were 25,885,340 outstanding shares of the registrant’s common stock $.001 par value per share.

Transitional Small Business Disclosure Format (Check one): Yes  o  No x
 
 
 
TABLE OF CONTENTS


 
 
PART I—FINANCIAL INFORMATION

Item 1.   Financial Statements.
 
PRO TRAVEL NETWORK, INC.
BALANCE SHEETS
(Unaudited)
           
   
March 31,
 
June 30,
 
   
2008
 
2007
 
ASSETS
         
CURRENT ASSETS
         
Cash and cash equivalents
 
$
456,334
 
$
366,837
 
Accounts receivable
   
7,134
   
2,805
 
Inventory
   
20,474
   
18,096
 
Investments
   
670,145
   
341,863
 
Prepaid expenses
   
14,050
   
26,058
 
Total current assets
   
1,168,137
   
755,659
 
               
PROPERTY and EQUIPMENT, net of accumulated depreciation
             
of $65,076 and $53,627, respectively
   
110,193
   
75,890
 
               
OTHER ASSETS
             
Security deposits, net of allowance of $35,353
   
121,178
   
121,178
 
TOTAL ASSETS
 
$
1,399,508
 
$
952,727
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
             
CURRENT LIABILITIES
             
Accounts payable
 
$
9,695
 
$
9,721
 
Accrued expenses
   
365,518
   
323,155
 
Deferred national event revenue
   
150,472
   
5,241
 
Total current liabilities
   
525,685
   
338,117
 
               
SHAREHOLDERS’ EQUITY
             
Common stock, $0.001 par value; 50,000,000 shares authorized;
             
25,885,340 and 25,680,340 shares issued and outstanding
   
25,885
   
25,680
 
Additional paid-in-capital
   
2,993,572
   
2,919,977
 
Accumulated deficit
   
(2,095,702
)
 
(2,309,111
)
Accumulated other comprehensive loss
   
(49,932
)
 
(21,936
)
Total shareholders’ equity
   
873,823
   
614,610
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
$
1,399,508
 
$
952,727
 


The accompanying notes are an integral part of the financial statements.


PRO TRAVEL NETWORK, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
                   
   
Three Months Ended
 
Nine Months Ended
 
   
March 31,
 
March 31,
 
   
2008
 
2007
 
2008
 
2007
 
REVENUE
                 
Travel agent products
 
$
1,994,863
 
$
688,701
 
$
4,973,133
 
$
1,720,277
 
National events
   
158,716
   
206,579
   
325,578
   
437,909
 
Commissions
   
519,232
   
216,512
   
1,501,373
   
684,419
 
Total revenues
   
2,672,811
   
1,111,792
   
6,800,084
   
2,842,605
 
                           
COST OF REVENUES
                         
Travel agent products
   
1,159,411
   
343,348
   
3,150,494
   
756,754
 
National events
   
186,579
   
190,158
   
350,575
   
385,254
 
Commissions
   
222,654
   
140,416
   
895,690
   
443,902
 
Total cost of revenues
   
1,568,644
   
673,922
   
4,396,759
   
1,585,910
 
Gross profit
   
1,104,167
   
437,870
   
2,403,325
   
1,256,695
 
 
OPERATING EXPENSES
                         
Compensation expense
   
540,195
   
822,990
   
1,333,305
   
1,152,904
 
Professional and consulting fees
   
49,770
   
1,146,119
   
115,922
   
1,230,278
 
General and administrative expenses
   
242,999
   
112,926
   
744,283
   
327,450
 
Depreciation expense
   
4,179
   
5,931
   
11,449
   
15,921
 
Total operating expenses
   
837,143
   
2,087,966
   
2,204,959
   
2,726,553
 
Income (loss) from operations
   
267,024
   
(1,650,096
)
 
198,366
   
(1,469,858
)
 
OTHER INCOME (EXPENSE)
                         
Interest income, net
   
3,308
   
4,312
   
12,224
   
13,151
 
Gain on sale of investments
   
2,830
   
—
   
2,830
   
3,722
 
Gain (loss) on foreign currency
   
133
   
796
   
(11
)
 
(856
)
Net income (loss) applicable to common stock
   
273,295
   
(1,644,988
)
 
213,409
   
(1,453,841
)
                           
Unrealized loss on investments
   
(32,207
)
 
(4,864
)
 
(27,996
)
 
(3,386
)
                           
Comprehensive income (loss)
 
$
241,088
 
$
(1,649,852
)
$
185,413
 
$
(1,457,227
)
                           
Basic and Diluted Per Common Share Data
                         
Basic and diluted net income (loss) per share
 
$
0.01
 
$
(0.07
)
$
0.01
 
$
(0.06
)
                           
Weighted average shares outstanding - basic
   
25,703,449
   
24,383,118
   
25,703,449
   
24,058,917
 
Weighted average shares outstanding - fully diluted
   
26,703,449
   
24,383,118
   
26,703,449
   
24,058,917
 
                           
 
The accompanying notes are an integral part of the financial statements.



PRO TRAVEL NETWORK, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
   
Nine Months Ended
 
   
March 31,
 
   
2008
 
2007
 
           
Cash flows from operating activities
         
Net income (loss)
 
$
213,409
 
$
(1,453,841
)
               
Adjustments to reconcile net income (loss) to net
             
   cash provided by (used in) operating activities:
             
Share based compensation
   
73,800
   
1,666,482
 
Depreciation and amortization
   
11,449
   
15,921
 
Gain on sale of investments
   
(2,830
)
 
(3,722
)
Changes in assets and liabilities:
             
  Accounts receivable
   
(4,329
)
 
9,223
 
  Inventory
   
(2,378
)
 
2,211
 
  Prepaid expenses and other
   
12,008
   
(37,260
)
  Accounts payable and accrued expenses
   
42,337
   
(20,050
)
  Deferred revenue
   
145,231
   
(158,571
)
Net cash provided by operating activities
   
488,697
   
20,393
 
               
               
Cash flows from investing activities
             
Purchase of property and equipment
   
(45,752
)
 
(41,459
)
Purchase of investments
   
(376,963
)
 
(122,097
)
Sale of investments
   
23,515
   
9,293
 
Net cash flows used in investing activities:
   
(399,200
)
 
(155,763
)
               
Net increase (decrease) in cash and cash equivalents
   
89,497
   
(135,370
)
Cash and cash equivalents              
Beginning of year
   
366,837
   
366,881
 
End of year
 
$
456,334
 
$
231,511
 
           
Supplemental Disclosures
         
Cash Paid for:
         
Interest
 
$
—
 
$
—
 
Income taxes
   
—
   
—
 
               
Non-Cash Investing Activities:
             
Unrealized loss on investment
 
$
27,996
 
$
3,386
 
               
 
The accompanying notes are an integral part of the financial statements.


PRO TRAVEL NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2008


NOTE A - BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Pro Travel Network, Inc., have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in Pro Travel’s Annual Report filed with the SEC on Form 10-KSB. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2007 as reported elsewhere in this Form 10-QSB have been omitted.

NOTE B - CHANGE IN ACCOUNTING POLICY

Pro Travel Network decided at the beginning of 2007 to change its method of accounting for commission expenses paid to its travel agents. Historically, Pro Travel netted commission expense against commission revenues. In this first interim period of our fiscal year ending June 30, 2008, we have adopted a revised policy of recording our commission revenues gross of commission expense and reflecting a separate cost of revenue items for these commission expenses paid to agents.

In making this change in accounting policy, we applied the following considerations encompassed in EITF 99-19:

In assessing whether revenue should be reported gross with separate display of cost of sales to arrive at gross profit or on a net basis, the [SEC] staff considers whether the registrant:

 
1.
Acts as principal in the transaction,
 
2.
Takes title to the products,
 
3.
Has risks and rewards of ownership, such as the risk of loss for collection, delivery, or returns, and
 
4.
Acts as an agent or broker (including performing services, in substance, as an agent or broker) with compensation on a commission or fee basis.

If the company performs as an agent or broker without assuming the risks and rewards of ownership of the goods, sales should be reported on a net basis.

Pro Travel does accept risk of loss on commission bookings of travel related revenues and historically has been required to make payment to cover losses on cancelled travel bookings. Pro Travel has research industry practice related to this accounting policy and has determined that the industry practice is to report such commission expenses gross and not to net them against the revenues.

The impact on the statement of operations included herein for the nine month period ended March 31, 2007 was to increase commission revenues and commission expense in the amount of $443,902. The impact on the statement of operations included herein for the three month period ended March 31, 2007 was to increase commission revenues and commission expense in the amount of $140,416.
 
NOTE C - NEW ACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (FIN 48). This Interpretation provides guidance on recognition, classification and disclosure concerning uncertain tax liabilities. The evaluation of a tax position requires recognition of a tax benefit if it is more likely than not it will be sustained upon examination. We adopted this Interpretation effective July 1, 2007. The adoption did not have a material impact on our consolidated financial statements.

In September 2006, the FASB issued SFAS 157, Fair Value Measurements , as amended in February 2008 by FASB Staff Position (“FSP”) FAS 157-2, Effective Date of FASB Statement No. 157 .  SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  FSP FAS 157-2 defers the effective date of SFAS 157 for all nonfinancial assets and liabilities, except those items recognized or disclosed at fair value on an annual or more frequently recurring basis, until January 1, 2009.  As such, we partially adopted the provisions of SFAS 157 effective January 1, 2008.  The partial adoption of this statement did not have a material impact on our financial statements.  We expect to adopt the remaining provisions of SFAS 157 beginning in 2009.  We do not expect this adoption to have a material impact on our financial statements.
 
 
PRO TRAVEL NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2007
 
NOTE D -COMMON STOCK

On February 29, 2008, Pro Travel Network, Inc. issued a total of 205,000 shares valued at $73,800, based upon a closing price of $0.36, for services, of which 100,000 shares valued at $36,000 were issued to a current executive officer of Pro Travel Network, Inc.
 
NOTE E - NET INCOME PER COMMON SHARE

Basic net income per common share is calculated by dividing the net income applicable to common shares by the weighted-average number of common shares outstanding during the period. Fully diluted net income per common share is calculated by dividing the net income applicable to common shares by the weighted-average number of common and common equivalent shares outstanding during the period. The weighted average common shares and common stock equivalents for both basic and fully diluted earnings per share calculations are as follows:

   
Three Months Ended
 
Nine Months Ended
 
   
March 31,
 
March 31,
 
Description
 
2008
 
2008
 
Weighted-average shares used to compute basic net
         
income per common share
   
25,703,449
   
25,703,449
 
Securities convertible into shares of common stock used in calculation of common stock equivalents for fully diluted EPS:
             
Stock warrants
   
1,000,000
   
1,000,000
 
Weighted-average shares used to compute diluted net income per common share
   
26,703,449
   
26,703,449
 

Common stock equivalents for the three and nine month periods ended March 31, 2007 were not used in calculating fully diluted earnings per share as the effect would be anti-dilutive for the loss incurred in those periods.

 
Item 2   Management’s Discussion and Analysis of Financial Condition and Results of Operations.

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include, among other things, statements concerning our expectations regarding our future financial performance, business strategy, milestones, projected plans and objectives. Statements preceded by, followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "projects", "estimates", "plans", "may increase", "may fluctuate" and similar expressions or future or conditional verbs such as "should", "would", "may" and "could" are generally forward-looking in nature and not historical facts. These forward-looking statements were based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this report, and in particular, the risks discussed in this section under the heading "Risk Factors." Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements including milestones. Most of these factors are difficult to predict accurately and are generally beyond our control. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Overview

We were originally incorporated in Nevada as PTN Investment Group, Inc. on October 23, 2003. In May 2005, we amended our Articles of Incorporation to change our name to Pro Travel Network, Inc. from PTN Investment Group, Inc. and reduce the aggregate number of our authorized shares to 50,000,000 from 75,000,000. Prior to the amendment, two non-employee shareholders returned an aggregate of 6,000,000 shares to us which we cancelled. Following this cancellation, we had 69,000,000 shares issued and outstanding. We wanted to restructure our capital structure in anticipation of going public. As our original employee stockholders had spent substantial time and effort on the development of our business and the original non-employee stockholders were passive investors, the two passive investors decided it would be more equitable for them to give up a portion of their share ownership to affect the proposed capital restructure. Contemporaneous with the reduction of the number of authorized shares, we issued new certificates for a total of 23,000,000 shares to replace the certificates for the then outstanding 69,000,000 shares that were previously issued in the name of PTN Investment Group, Inc.

Pro Travel Network, Inc. is an Internet provider of online travel stores for travel agencies and home-based representatives using our services and technology.

We currently offer the following products:

 
·
Independent Travel Agent Program or ITAP - $439.99 initial fee; $99 annual fee after first year - sold by our Independent Representatives.

 
·
Marketing Opportunity - $39.99 monthly license fee.

We currently support over 15,000 independent travel agents and over 6,000 Independent Representatives throughout North America.
 
Critical Accounting Estimates

The financial statements include estimates made by management that impact the amounts reflected for property and equipment as well as security deposits, as detailed below:



Property & Equipment

Management has estimated the useful lives as the basis for depreciating its property and equipment. Estimated useful lives utilized for depreciating property and equipment are three years for all computer equipment and software and seven years for furniture and fixtures. Management believes these estimates are very conservative.

Security Deposits

Security deposits represent operating lease deposits and amounts on deposit with credit card payment processing services that serve as collateral in case we were to cease operations or experience significant chargebacks from customers. Management has provided an allowance for unrecoverable deposits based on its estimate of collectibility in the amount of $35,353 as of March 31, 2008 (See the section entitled “Legal Proceedings,” below)

Results of Operations

Nine Months Ended March 31, 2008 Compared to the Nine Months Ended March 31, 2007

For the nine months ended March 31, 2008, total revenues broke down as follows: Independent Travel Agent Program or ITAP sales - 73%, National Training Events - 5%, Travel Commissions - 22%.  For the nine months ended March 31, 2007, total revenues broke down as follows: Independent Travel Agent Program or ITAP sales - 61%, National Training Events - 15%, and Travel Commissions- 24%.  We had total revenues of $6,800,084 for the nine months ended March 31, 2008, which is an increase of $3,957,479, or 139%, over our total revenues for the nine months ended March 31, 2007, which was $2,842,605. Total revenues increased as a result of increased sales across the board, due to increased awareness in the marketplace and the increase in the number of Independent Representatives marketing our products, with ITAP sales showing the largest percentage increase.   We expect that as ITAP sales and the number of active agents increase, the resulting travel commissions will continue to increase as a percentage of our overall revenue.

Our cost of sales increased $2,810,849, or 177%, to $4,396,759 for the nine months ended March 31, 2008, as compared to cost of sales of $1,585,910 for the nine months ended March 31, 2007.  Our cost of sales increased as a direct result of greater sales of our products along with bonuses associated with the 85% increase in the number of Independent Travel Agents and 140% increase in the number of Independent Representatives marketing our products.

We had gross profit of $2,403,325 for the nine months ended March 31, 2008, which was an increase of $1,146,630, or 91%, when compared to our gross profit for the nine months ended March 31, 2007, which was $1,256,695. Our increase in gross profit was primarily attributable to the increase in our sales which was slightly offset by our increase in cost of sales.

Operating expenses decreased $521,594 or 19%, to $2,204,959 for the nine months ended March 31, 2008 as compared to total operating expenses of $2,726,553 for the nine months ended March 31, 2007. The decrease in total operating expenses was mainly due to a decrease in professional and consulting fees and depreciation expense offset by an increase in general and administrative expenses and compensation expense. Professional and consulting fees decreased $1,114,356 to $1115,922 for the nine months ended March 31, 2008, as compared to professional and consulting fees of $1,230,278 for the nine months ended March 31, 2007. The decrease in professional and consulting fees was primarily due to issuance of 1,000,000 warrants to purchase up to 1,000,000 of our restricted common stock which was recognized in the financial statements in the amount of $1,126,482. Depreciation expense decreased $4,472 to $11,449 for the nine months ended March 31, 2008, as compared to depreciation expense of $15,921 for the nine months ended March 31, 2007. General and administrative expenses increased $416,833 to $744,283 for the nine months ended March 31, 2008, as compared to general and administrative expenses of $327,450 for the nine months ended March 31, 2007. The increase in general and administrative expenses was primarily attributable to the expansion of our corporate office, and the start-up of our Canadian offices along with an increase in advertising and marketing and merchant fees associated with the increase in


overall sales. Compensation expense increased $180,401 to $1,333,305 for the nine months ended March 31, 2008, as compared to compensation expense of $1,152,904 for the nine months ended March 31, 2007. The increase in compensation expense was primarily due to an increase in our corporate and Canadian staffs along with an increase in quarterly performance bonus due to the addition of Ray Lopez, Vice President and COO offset by a decrease in share base compensation to employees. Mr. Lopez provides management and other services to us under an employment agreement pursuant to which we pay a salary of $96,000 per year and a commission of 2% of the net Travel Agent Product revenue, less all costs of sales expenses. Mr. Henderson provides management and other services to us under an employment agreement which was amended January 1, 2008 to increase his annual salary from $180,000 to $200,000 per year and change his commission of 12% of the net Travel Agent Product revenue, less all costs of sales expenses to 1.75% of actual gross revenue.

Other income and expenses included an decrease in net interest income of $927, to $12,224 for the nine months ended March 31, 2008, as compared to net interest income of $13,151 for the nine months ended March 31, 2007, along with a gain on sale of investments of $2,830 for the nine months ended March 31, 2008, compared to gain on sale of investments of $3,722 for the nine months ended March 31, 2007, and a loss on foreign currency of $11 for the nine months ended March 31, 2008, compared to a loss on foreign currency of $856 for the nine months ended March 31, 2007.

We had a net income applicable to common stock of $213,409 for the nine months ended March 31, 2008, as compared to a net loss applicable to common stock of $1,453,841 for the nine months ended March 31, 2007. The increase in net income applicable to common stock was primarily attributable to the issuance of 1,000,000 warrants to purchase up to 1,000,000 of our restricted common stock during fiscal 2007 which was recognized in the financial statements in the amount of $1,126,482.

We had other comprehensive income for the nine months ended March 31, 2008, consisting of unrealized loss on investments of $27,996 compared to an unrealized loss on investment of $3,386 for the nine months ended March 31, 2007.

Our comprehensive income was $185,413 for the nine months ended March 31, 2008, as compared to comprehensive loss of $1,457,227 for the nine months ended March 31, 2007.

Commitments and Contingencies

Details regarding the lease for our principal place of business are as follows:

 
·
Address: City/State/Zip 516 W. Shaw Avenue #103, Fresno, CA 93704
 
·
Number of Square Feet: 6,059
 
·
Name of Landlord: J&D Properties
 
·
Term of Lease: 7 years, commencing March 2005
 
·
Monthly Rental: Escalating from $4,397 at commencement to $9,997 in the final year of the lease.

Our lease was amended in April, 2007, and monthly rent was increased, effective July, 2007. The amount of the increase was due to an additional 2,802 square feet bring our total office space to 6,059 square feet. All other terms remain the same. The lease is non-cancelable. On June 27, 2006, we leased 1,000 square feet of office space in London, Ontario Canada under a one year non-cancelable operating lease beginning in July 2006. On March 1, 2007, we moved our offices from London, Ontario Canada to Mississauga, Ontario Canada and leased 1,000 square feet of office space under a one year non-cancelable operating lease beginning in March 2007. Future minimum rental payments, for the fiscal year ending June 30, 2008 are $32,900 under these leases.

Milestones

We are in the final phase of completing the expansion of our operations in Canada. We opened a Canadian office in Ontario in July 2006, Quebec in July 2007 and currently are in the process of opening our final office in British Columbia. The most major goal towards achieving our business objectives over the next


year is our goal of having 100% of our agents booking travel. Continuing operations will always focus on ways to increase our marketing sales force. As described below in “Liquidity and Capital Resources,” we believe we will be able to complete our expansion in Canada without any need to obtain additional financing.
 
Milestone or Step
Expected Manner of Occurrence or Method of Achievement
Date When Step Should be Accomplished
Estimated Cost of Completion
Develop Canadian infrastructure
Secure office space in British Columbia, office equipment and develop “specific” marketing materials and hiring additional employees
3 months
$25,000
Launch Canadian Marketing Phase
PTN Canadian marketing tour and seminars designed to develop sales force
4 - 12 months
$50,000
Creation of Travel Marketing staff
Marketing head and staff to drive bookings up
2 - 6 months
$25,000
Achieve average ITAP sales of 1,000 per month
Aggressively Recruit top leadership in the multi-level marketing Industry
Very close to achieving
$ -

All steps will be undertaken contemporaneously.

Our marketing effort will be directed at expanding our representative network through personal contact or seminars.

Liquidity and Capital Resources

As of March 31, 2008, we had total current assets of $1,168,137 consisting of cash and cash equivalents of $456,334, accounts receivable of $7,134, inventory of $20,474, investments of $670,145 and prepaid expenses of $14,050. Our cash balances exceeded FDIC insurance protection levels by approximately $69,339 at March 31, 2008 and at certain points throughout the year subjecting us to risk related to the un-protected balance. We have determined that the risk of loss associated with these un-protected balances is remote and therefore no adjustment for the risk has been provided for the nine months ended March 31, 2008.

We had total current liabilities of $525,685 consisting of accounts payable of $9,695, accrued expenses of $365,518 and deferred revenue of $150,472. We have no long-term debt. Accrued expenses consisted of accrued employees salaries and benefits of $189,263, other expenses of $31,643 and commissions and rewards owed our representatives in the amount of $144,612, of which approximately $139,333 was the estimated full potential value of PTN Reward Points owed Agents and Managers and the remainder was primarily commissions held for payment at the end of every two weeks.

We had working capital of $642,452 as of March 31, 2008.

During the nine months ended March 31, 2008, net cash increased by $89,497 consisting of $488,697 provided by operating activities and $399,200 used in investing activities.

Net cash provided by operating activities during the nine months ended March 31, 2008, consisted of net income from operations of $213,409, adjustments for depreciation and amortization of $11,449, share based compensation of $73,800, and gain on sale of investment of $2,830, an increase in deferred revenue


of $145,231, an increase in accounts payable and accrued expenses of $42,337, and a decrease in prepaid expenses and other of $12,008 which were offset by an increase in inventory of $2,378 and an increase in accounts receivable of $4,329.

Net cash used in investing activities during the nine months ended March 31, 2008, consisted of property and equipment purchases of $45,752 and investments purchases of $376,963 offset by sale of investments of $23,515.

We believe our cash resources of $456,334 along with the $265,275 in certificate of deposits as of March 31, 2008, are sufficient to satisfy our current cash requirements over the next 12 months. In addition, based upon our prior experience, we believe we will generate sufficient cash flow from operations to also satisfy these requirements. We have expanded our business operations in Canada as outlined in the Milestone table, above. We estimate that we need $100,000 of capital to complete the expansion of our operations in Canada. To date, we have generated sufficient cash flow from operations to satisfy the expansion and believe this trend will continue. Should we need additional capital over the amount generated from cash flow, we hope to be able to raise additional capital from an offering of our stock in the future. However, this offering may not occur, or if it occurs, we may not raise the required funding. At this time, we have not secured or identified any additional financing. We do not have any firm commitments or other identified sources of additional capital from third parties or from our officers or directors or from shareholders. There can be no assurance that additional capital will be available to us, or that, if available, it will be on terms satisfactory to us. Any additional financing may involve dilution to our shareholders. In the alternative, additional funds may be provided from cash flow in excess of that needed to finance our day-to-day operations, although we may never generate this excess cash flow. If we raise additional capital or generate additional funds, we plan to use the funds to finance the minimum steps in the Milestone table that we would like to take to implement our business plan in the next 12 months; however, the amounts actually expended may vary significantly. Accordingly, we will retain broad discretion in the allocation of any additional capital that we may receive or funds that we may generate. If we do not raise additional capital or generate additional funds, implementation of our business plans as set forth in the Milestone table will be delayed.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

ITEM 4T. CONTROLS AND PROCEDURES

Our Chief Executive Officer and Principal Financial Officer has evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that we are required to apply our judgment in evaluating the benefits of possible controls and procedures relative to our costs.

Based on that evaluation, our Chief Executive Officer and Principal Financial Officer has concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are not effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure, and (ii) is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.
 
 
Changes in Internal Control over Financial Reporting
 
There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
PART II—OTHER INFORMATION

Item 1.   Legal Proceedings.

There are no pending or threatened lawsuits against us.

We are currently pursuing an operating credit card processing service that failed to return our deposit of approximately $35,000.  The credit card processing service is currently pursing action against its bank to recover this sum and has orally agreed to pay us this amount if recovered. However, as the processor is not located in the U.S., if they do not pay us as orally agreed, we do not intend to institute litigation due to the cost of litigation and uncertainty of collection. Although as the company is still in business and we may be able to collect, recovery is uncertain, so we have provided an allowance on our financial statements for the entire balance in case it is not collected.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3.   Defaults Upon Senior Securities.

None

Item 4.   Submission of Matters to a Vote of Security Holders.

None

Item 5.   Other Information.

Risk Related To Our Business

Because our Internet-based hosted home base travel agent and travel services company is a relatively new method to market travel services and to make travel arrangements, we face significant barriers to acceptance of our services.

Our sales and revenues will not grow as we plan if people who want to become independent travel agents do not purchase our Independent Travel Agent Program product or become independent representatives selling this program, if consumers and businesses do not purchase significantly more travel products online than they currently do, or if the use of the Internet as a medium of commerce for travel products does not continue to grow or grows more slowly than expected. Consumers and businesses have traditionally relied on personal contact with travel agents and travel suppliers and are accustomed to a high degree of human interaction in purchasing travel products. The success of our business is dependent on a significant increase in the number of people who want to become independent travel agents who purchase our Independent Travel Agent Program product or become independent representatives selling this program and consumers and businesses who use the Internet to purchase travel products from our agents.

Adverse changes or interruptions in our relationships with travel suppliers could affect our access to travel offerings and reduce our revenues.

We rely on various arrangements with our airline, hotel and auto suppliers, and these arrangements contain terms that could affect our access to inventory and reduce our revenues. All of the relationships we have are freely terminable by the supplier upon notice. None of these arrangements are exclusive and any of our suppliers could enter into, and in some cases may have entered into, similar arrangements with our competitors.


We cannot assure you that our arrangements with travel suppliers will remain in effect or that any of these suppliers will continue to supply us and our agents with the same level of access to inventory of travel offerings in the future. If access to inventory is affected, or our ability to obtain inventory on favorable economic terms is diminished, it could reduce our revenues.

Our failure to establish and maintain representative relationships for any reason could negatively impact sales of our products and reduce our revenues.
 
We distribute our products through independent representatives, and we depend upon them for sales revenue. For the six months ended December 31, 2006, 12% of our revenues were comprised of commissions. To increase our revenue, we must increase the number of, or the productivity of, our representatives. Accordingly, our success depends in significant part upon our ability to attract, retain and motivate a large base of representatives. There may be a high rate of turn-over among our representatives. Since our inception, we have had approximately 1,900 independent travel agents that have become inactive for non-payment of the annual fee after their first year as an agent. The loss of a significant number of representatives without replacements being secured for any reason could reduce sales of our products and could impair our ability to attract new representatives.
 
If we fail to attract and retain representatives in a cost-effective manner, our ability to grow and become profitable may be impaired.

Our business strategy depends on increasing our overall number of customer transactions in a cost-effective manner. In order to increase our number of transactions, we must attract new representatives. Although we have spent significant financial resources on sales and marketing and plan to continue to do so, these efforts may not be cost effective in attracting new representatives or increasing transaction volume. If we do not achieve our marketing objectives, our ability to grow and increase revenues may be impaired.

Our success depends on maintaining the integrity of our systems and infrastructure, which if not maintained could reduce our revenues.

In order to be successful, we must provide reliable, real-time access to our systems for our representatives, customers and suppliers. As our operations grow in both size and scope, we will need to improve and upgrade our systems and infrastructure to offer an increasing number of people and travel suppliers enhanced products, services, features and functionality. The expansion of our systems and infrastructure will require us to commit substantial financial, operational and technical resources before the volume of business increases, with no assurance that the volume of business will increase. Consumers and suppliers will not tolerate a service hampered by slow delivery times, unreliable service levels or insufficient capacity, any of which could reduce our revenues.

Our computer systems may suffer failures, capacity constraints and business interruptions that could increase our operating costs and cause us to lose customers and reduce our revenues.

Our operations face the risk of systems failures. Our systems and operations are vulnerable to damage or interruption from fire, flood, power loss, telecommunications failure, computer hacking break-ins, earthquake, terrorism and similar events. The occurrence of a natural disaster or unanticipated problems at our facilities or locations of key vendors could cause interruptions or delays in our business, loss of data or render us unable to process reservations. In addition, the failure of our computer and communications systems to provide the data communications capacity required by us, as a result of human error, natural disaster or other occurrence of any or all of these events could adversely affect our reputation, brand and business. In these circumstances, our redundant systems or disaster recovery plans may not be adequate. Similarly, although many of our contracts with our service providers require them to have disaster recovery plans, we cannot be certain that these will be adequate or implemented properly. In addition, our business interruption insurance may not adequately compensate us for losses that may occur.

Rapid technological changes may render our technology obsolete or decrease the attractiveness of our products to representatives and consumers.

To remain competitive in the online travel industry, we must continue to enhance and improve the


functionality and features of our website. The Internet and the online commerce industry are rapidly changing. In particular, the online travel industry is characterized by increasingly complex systems and infrastructures and new business models. If competitors introduce new products embodying new technologies, or if new industry standards and practices emerge, our existing website, technology and systems may become obsolete.

Our future success will depend on our ability to do the following:

·
enhance our existing products;
·
develop and license new products and technologies that address the increasingly sophisticated and varied needs of our prospective customers and suppliers; and
·
respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis.

Developing our website and other technology entails significant technical and business risks which could reduce our revenues.

We may use new technologies ineffectively or we may fail to adapt our website, transaction processing systems and network infrastructure to consumer requirements or emerging industry standards. For example, our website functionality that allows searches and displays of ticket pricing and travel itineraries is a critical part of our service, and it may become out-of-date or insufficient from our customers' perspective and in relation to the search and display functionality of our competitors' websites. If we face material delays in introducing new services, products and enhancements, our representatives, customers and suppliers may forego the use of our products and use those of our competitors.

Declines or disruptions in the travel industry, such as those caused by general economic downturns, terrorism, health concerns, strikes or bankruptcies within the travel industry could reduce our revenues.

Our business is affected by the health of the travel industry. Travel expenditures are sensitive to business and personal discretionary spending levels and tend to decline during general economic downturns. Since 2001, the travel industry has experienced a protracted downturn, and there is a risk that a future downturn, or the continued weak demand for travel, could adversely affect the growth of our business. Additionally, travel is sensitive to safety concerns, and thus may decline after incidents of terrorism, during periods of geopolitical conflict in which travelers become concerned about safety issues, or when travel might involve health-related risks. For example, the terrorist attacks of September 11, 2001, which included attacks on the World Trade Center and the Pentagon using hijacked commercial aircraft, resulted in a decline in travel bookings throughout the industry. The long-term effects of events such as these could include, among other things, a protracted decrease in demand for air travel due to fears regarding terrorism, war or disease. These effects, depending on their scope and duration, which we cannot predict at this time, could significantly reduce our revenues.

Other adverse trends or events that tend to reduce travel and may reduce our revenues include:

·
higher fares and rates in the airline industry or other travel-related industries;
·
labor actions involving airline or other travel suppliers;
·
political instability and hostilities;
·
fuel price escalation;
·
travel-related accidents; and
·
bankruptcies or consolidations of travel suppliers and vendors.

Evolving government regulations could impose taxes or other burdens which increase the cost of travel or otherwise make travel less desirable, which could decrease demand for travel and have the potential to materially reduce our revenues.

We must comply with laws and regulations applicable to online commerce and the sale of travel services. Increased regulation of the Internet or travel services or different applications of existing laws might slow


the growth in the use of the Internet and commercial online services, or could increase the cost of travel services, which could decrease travel and thus lead to reduced commission revenues.

In addition to federal regulation, state and local governments could impose additional taxes on Internet-based sales or on travel services such as air fares and hotel room and car rental rates. We would not have to pay these taxes; rather, they would be added to the room rates or other travel purchased and paid directly by the traveler. However, these taxes would increase travel costs. Increased travel costs could decrease the demand for travel and thus lead to reduced commission revenues. Any state and local governments in any jurisdiction in which we do business could, without us being aware, impose additional taxes on Internet-based sales or on travel services such as air fares and hotel room and car rental rates, including increased hotel occupancy taxes. If these types of taxes were imposed and travel and related hotel bookings materially decreased, the amount of commissions we receive and thus our revenues could be materially reduced. The statutes and case law governing online commerce are still evolving, and new laws, regulations or judicial decisions may impose on us additional risks which may lead to reduced revenues. In addition, new regulations, domestic or international, regarding the privacy of our users' personally identifiable information may impose on us additional costs and operational constraints.
 
Because our market is seasonal, our quarterly results could fluctuate.

Our market experiences seasonal fluctuations, reflecting seasonal trends for the products offered by our representatives, as well as Internet services generally. For example, traditional leisure travel bookings are higher in the first two calendar quarters of the year in anticipation of spring and summer vacations and holiday periods, but online travel reservations may decline with reduced Internet usage during the summer months. In the last two quarters of the calendar year, demand for travel products generally declines and the number of bookings flattens or decreases. These factors could cause our revenues to fluctuate from quarter to quarter. Our results may also be affected by seasonal fluctuations in the inventory made available to us by travel suppliers.

Our business is exposed to risks associated with online commerce security and credit card fraud which could reduce our revenues.  

Consumer concerns over the security of transactions conducted on the Internet or the privacy of users may inhibit the growth of the Internet and online commerce. To transmit confidential information such as customer credit card numbers securely, we rely on encryption and authentication technology. Unanticipated events or developments could result in a compromise or breach of the systems we use to protect customer transaction data. Our servers and those of our service providers may be vulnerable to viruses or other harmful code or activity transmitted over the Internet. A virus or other harmful activity could cause a service disruption.

In addition, we bear financial risk from products or services purchased with fraudulent credit card data. Although we have implemented anti-fraud measures, a failure to adequately control fraudulent credit card transactions could adversely affect our business. Because of our limited operating history, we cannot assure you that our anti-fraud measures are sufficient to prevent material financial loss. Since we cannot exert the same level of influence or control over our representatives as we could were they our own employees, our representatives could fail to comply with our policies and procedures, which could result in claims against us that could harm our financial condition and operating results. We are not in a position to directly provide the same direction, motivation and oversight for our representatives as we would if such representatives were our own employees. As a result, there can be no assurance that our representatives will participate in our marketing strategies or plans, accept our introduction of new products and services, or comply with our policies and procedures.

Because it can be difficult to enforce policies and procedures designed to govern the conduct of our representatives and to protect the goodwill associated with our business because of the number of representatives and their independent status, our revenues could be reduced if we fail to enforce these policies and procedures.

Violations by our representatives of applicable laws or our policies and procedures in dealing with customers could reflect negatively on our products and operations and harm our business reputation. In


addition, it is possible that a court could hold us civilly or criminally accountable based on vicarious liability because of the actions of our representatives.

Adverse publicity concerning any actual or purported failure of us or our representatives to comply with applicable laws and regulations, whether or not resulting in enforcement actions or the imposition of penalties, could harm the goodwill of our company and could reduce our ability to attract, motivate and retain representatives, which would reduce our revenues. We cannot ensure that all representatives will comply with applicable legal requirements.

Our marketing program could be found not to be in compliance with current or newly adopted laws or regulations in one or more markets, which could prevent us from conducting our business in these markets and reduce our revenues.

Our network marketing program is subject to a number of federal and state regulations administered by the Federal Trade Commission and various state agencies in the United States. We are subject to the risk that, in one or more markets, our network marketing program could be found not to be in compliance with applicable laws or regulations. Regulations applicable to network marketing organizations generally are directed at preventing fraudulent or deceptive schemes, often referred to as "pyramid" or "chain sales" schemes, by ensuring that product sales ultimately are made to consumers and that advancement within an organization is based on sales of the organization's products rather than investments in the organization or other non-retail sales-related criteria. The regulatory requirements concerning network marketing programs do not include "bright line" rules and are inherently fact-based and thus, even in jurisdictions where we believe that our network marketing program is in full compliance with applicable laws or regulations governing network marketing systems, we are subject to the risk that these laws or regulations or the enforcement or interpretation of these laws and regulations by governmental agencies or courts can change. The failure of our network marketing program to comply with current or newly adopted regulations could reduce our revenues.

We are also subject to the risk of private party challenges to the legality of our network marketing program. The multi-level marketing programs of other companies have been successfully challenged in the past. An adverse judicial determination with respect to our network marketing program, or in proceedings not involving us directly but which challenge the legality of multi-level marketing systems, in any market in which we operate, could reduce our revenues.

Because insiders control our activities, they may block or deter actions that you might otherwise desire that we take and may cause us to act in a manner that is most beneficial to such insiders and not to outside shareholders.

Our CEO, President and sole director, Mr. Paul Henderson, controls approximately 52.3% of our common stock, and we do not have any non-employee directors. As a result, he effectively controls all matters requiring director and stockholder approval, including the election of directors, the approval of significant corporate transactions, such as mergers and related party transaction. He also has the ability to block, by his ownership of our stock, an unsolicited tender offer. This concentration of ownership could have the effect of delaying, deterring or preventing a change in control of our company that you might view favorably.

Our management decisions are made by Paul Henderson, CEO and President; if we lose his services, our revenues may be reduced.

The success of our business is dependent upon the expertise of Paul Henderson, CEO and President. Because Paul Henderson is essential to our operations, you must rely on his management decisions. Paul Henderson, CEO and President will continue to control our business affairs after the filing. We have not obtained any key man life insurance relating to Paul Henderson. Paul is currently subject to an IRS lien. If we lose his services, we may not be able to hire and retain another CEO or President with comparable experience. As a result, the loss of the services of Paul Henderson could reduce our revenues.

Risk Related To Our Common Stock

Pro Travel Network, Inc. (Pink Sheets: PTVL) completed the necessary SEC filings and began trading as a


publicly held company on November 27, 2006.

Because the offering price of our most recent sales of common stock of $1.25 per share was arbitrarily set by our Board of Directors and accordingly does not indicate the actual value of our business, investors may not be able to sell their stock for a price in excess of $1.25 per share and thus could suffer an investment loss.

The offering price of our most recent sales of common stock of $1.25 per share was not based upon earnings or operating history, does not reflect our actual value, and bears no relation to our earnings, assets, book value, net worth or any other recognized criteria of value. No independent investment banking firm was retained to assist in determining the offering price for the shares. Accordingly, the offering price should not be regarded as an indication of any future price of our stock. Any investors in our common stock, including those who invest in our common stock at a price less than $1.25 per share, could suffer an investment loss.

Because sales of our common stock under Rule 144 could reduce the price of our stock investors may not be able to sell their stock for a price in excess of the price they paid to acquire our stock and thus could suffer an investment loss.

As of November 13, 2006, there are 900,340 shares of our common stock held by non-affiliates and 23,000,000 shares of our common stock held by officers, directors and stockholders that currently own more than 5% of our securities that Rule 144 of the Securities Act of 1933 defines as restricted securities. We registered 400,340 of these shares with the SEC on a registration statement on Form SB-2, as amended, File No. 333-132127, which was declared effective on July 19, 2006. No Shares have been sold pursuant to Rule 144 of the Securities Act of 1933.

In addition to the registered shares that are available for resale, as a result of the provisions of Rule 144, restricted securities could be available for sale in a public market, if developed, generally beginning 90 days after the effective date of the registration statement, assuming the holding period, volume and method of sale limitations in Rule 144 can be satisfied to the extent required. The availability for sale of substantial amounts of common stock under Rule 144 could reduce prevailing market prices for our securities.

Because we do not have an audit or compensation committee, shareholders will have to rely on the entire Board of Directors, all of which are not independent, to perform these functions.

We do not have an audit or compensation committee comprised of independent directors. Indeed, we do not have any audit or compensation committee. These functions are performed by the Board of Directors as a whole. All members of the Board of Directors are not independent directors. Thus, there is a potential conflict in that board members who are management will participate in discussions concerning management compensation and audit issues that may affect management decisions.

 
Item 6.   Exhibits.

Exhibit No.
Description of Exhibit
   
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 
 
SIGNATURES
 
In accordance with requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
PRO TRAVEL NETWORK, INC.
 
 
By:  /s/ Paul Henderson
Name: Paul Henderson
Title: Chief Executive Officer and President
Date: May 15, 2008
 
 
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