Pro Travel Network 10Q Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(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, 2009

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to _____________

Commission file number: 333-132127

PRO TRAVEL NETWORK, INC.

(Exact name of registrant as specified in its charter)

Nevada	68-0571584
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

516 W. Shaw Avenue # 103, Fresno, CA	93704
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number (559) 224-6000

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 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 requirements for the past 90 days. Yes x No o

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

Large accelerated filer o Accelerated filer o Non-accelerated filer o 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, May 15, 2009 there were 27,889,145 outstanding shares of the issuer’s common stock, $.001 par value per share.

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
Item 2	Management’s Discussion and Analysis of Financial Condition and
	Results of Operations.	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
Item 4T.	Controls and Procedures.	16

PART II—OTHER INFORMATION		16
Item 1.	Legal Proceedings.	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	17
Item 3.	Defaults Upon Senior Securities.	17
Item 4.	Submission of Matters to a Vote of Security Holders.	17
Item 5.	Other Information.	17
Item 6.	Exhibits.	18

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PRO TRAVEL NETWORK, INC.

BALANCE SHEETS

(Unaudited)


	March 31,			June 30,
	2009			2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	149,460		$	368,204
Accounts receivable		861			861
Inventory		17,561			17,764
Investments		500,589			689,513
Prepaid expenses		4,800			16,214
Total current assets		673,271			1,092,556

PROPERTY and EQUIPMENT, net		108,442			106,362

OTHER ASSETS
Security deposits, net of allowance of $35,353		121,929			122,360
Intangible assets-goodwill		38,201			-
		160,130			122,360
TOTAL ASSETS	$	941,843		$	1,321,278

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	36,090		$	7,366
Accrued expenses		347,101			269,789
Deferred national event revenue		35,472			157,871
Total current liabilities		418,663			435,026

SHAREHOLDERS’ EQUITY
Common stock, $.001 par value; 50,000,000 shares authorized,
27,889,145 and 25,885,340 shares issued and outstanding		27,889			25,885
Additional paid-in-capital		3,607,777			3,005,775
Accumulated deficit		(2,624,684	)		(2,047,825	)
Accumulated other comprehensive loss		(487,802	)		(97,583	)
Total shareholders’ equity		523,180			886,252
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	941,843		$	1,321,278

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

PRO TRAVEL NETWORK, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	March 31,						March 31,
	2009			2008			2009			2008
REVENUE
Travel agent products	$	529,209		$	1,994,863		$	2,556,309		$	4,973,133
National events		66,891			158,716			274,141			325,578
Commissions		585,860			519,232			1,712,492			1,501,373
Total revenues		1,181,960			2,672,811			4,542,942			6,800,084

COST OF REVENUES
Travel agent products		102,983			1,159,411			1,048,653			3,150,494
National events		74,732			186,579			244,753			350,575
Commissions		401,768			222,654			1,166,924			895,690
Total cost of revenues		579,483			1,568,644			2,460,330			4,396,759
Gross profit		602,477			1,104,167			2,082,612			2,403,325
OPERATING EXPENSES
Compensation expense		443,293			540,195			1,807,170			1,333,305
Professional and consulting fees		64,978			49,770			365,484			115,922
General and administrative expenses		152,252			242,999			530,285			744,283
Depreciation expense		4,423			4,179			15,911			11,449
Total operating expenses		664,946			837,143			2,718,850			2,204,959
Income (loss) from operations		(62,469	)		267,024			(636,238	)		198,366
OTHER INCOME (EXPENSE)
Interest income, net		2,064			3,308			13,606			12,224
Gain (loss) on sale of investments		(1,409	)		2,830			38,411			2,830
Gain (loss) on foreign currency		(8,025	)		133			7,362			(11	)
Net income (loss) applicable to common stock		(69,839	)		273,295			(576,859	)		213,409

Unrealized loss on investments		(25,142	)		(32,207	)		(390,219	)		(27,996	)

Comprehensive income (loss)	$	(94,981	)	$	241,088		$	(967,078	)	$	185,413

Basic and Diluted Per Common Share Data
Basic and diluted net income (loss) per share	$	0.00		$	0.01		$	( 0.02	)	$	0.01

Weighted average shares outstanding - basic		27,889,145			25,703,449			27,112,806			25,703,449
Weighted average shares outstanding – fully diluted		27,889,145			26,703,449			27,112,806			26,703,449

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

PRO TRAVEL NETWORK, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the Nine Months Ended March 31, 2009
(Unaudited)

	Common Shares		Common Stock		Additional Paid in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Total
Balances, June 30, 2008		25,885,340	$	25,885	$	3,005,775	$	(2,047,825	)	$	(97,583	)	$	886,252

Stock issued for:
Services		2,003,805		2,004		518,850		-						520,854

Warrant/Option expense						83,152								83,152

Unrealized loss on investments		-		-		-		-			(390,219	)		(390,219	)

Net loss		-		-		-		(576,859	)		-			(576,859	)

Balances, March 31, 2009		27,889,145	$	27,889	$	3,607,777	$	(2,624,684	)	$	(487,802	)	$	523,180

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

PRO TRAVEL NETWORK, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended
	March 31,
	2009			2008
Cash flows from operating activities
Net income (loss)	$	(576,859	)	$	213,409

Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Share-based compensation		604,006			73,800
Gain on sale of investments		(38,411	)		(2,830	)
Depreciation and amortization		15,911			11,449
Changes in assets and liabilities:
Accounts receivable		-			(4,329	)
Inventory		203			(2,378	)
Prepaid expenses and other current assets		11,414			12,008
Accounts payable and accrued expenses		106,036			42,337
Deferred revenue		(122,399	)		145,231

Net cash provided by (used in) operating activities		(99	)		488,697

Cash flows from investing activities
Purchase of property and equipment		(17,991	)		(45,752	)
Purchase of investments		(737,633	)		(376,963	)
Sale of investments		586,636			23,515
Net cash paid on acquisition of KG&S Pty, Ltd.		(38,201	)		-
Deposits		431			-
Net cash flows used in investing activities:		(206,758	)		(399,200	)

Effect of exchange rate changes on cash		(11,887	)		-
Net increase (decrease) in cash and cash equivalents		(218,744	)		89,497
Cash and cash equivalents
Beginning of period		368,204			366,837
End of period	$	149,460		$	456,334

Supplemental Disclosures
Cash Paid During the Year for:
Interest	$	-		$	-
Income taxes		-			-

Non-Cash Investing Activities:
Unrealized loss on investment	$	(390,219	)	$	(27,996	)

The accompanying notes are an integral part of the financial statement

PRO TRAVEL NETWORK, INC.

NOTES TO FINANCIAL STATEMENTS

March 31, 2009

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-K. 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 2008 as reported elsewhere in this Form 10-Q have been omitted.

Accounting Policies

Goodwill

Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible assets of businesses acquired. The business acquired was KG&S Pty, Ltd. in December 2008. We evaluate goodwill for impairment utilizing undiscounted projected cash flows in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” As of March 31, 2009, we believe that no such impairment has occurred. Goodwill has been adjusted for purchase price adjustments recognized during the current fiscal year, if any.

NOTE B – NEW ACCOUNTING PRONOUNCEMENTS

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. SFAS 157 also established a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels:

Level 1—quoted prices in active markets for identical assets and liabilities.

Level 2—observable inputs other than quoted prices in active markets for identical assets and liabilities.

Level 3—unobservable inputs.

The adoption of FAS 157 did not have an effect on the Company’s financial condition or results of operations, but SFAS 157 introduced new disclosures about how we value certain assets and liabilities. Much of the disclosure is focused on the inputs used to measure fair value, particularly in instances where the measurement uses significant unobservable (Level 3) inputs.

As required by SFAS 157, financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. Following are the major categories of assets and liabilities measured at fair value on a recurring basis as of June 30, 2008, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):

	Fair Value Measurements at March 31, 2009 Using
	Level 1		Level 2		Level 3		Total
Assets (Liabilities):	$	500,589	$	-	$	-	$	-
Derivative liabilities	$	-	$	-	$	-	$	-
Total	$	500,589	$	-	$	-	$	-

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.

NOTE C — COMMON STOCK

Issuances for Services

During the nine months ended March 31, 2009, Pro Travel Network, Inc. issued 783,805 shares to third parties for services rendered valued at their fair market value using quoted market prices on the date of grant, resulting in total share-based compensation expense of $154,854, 1,105,000 shares to executive officers of Pro Travel Network, for services rendered valued at their fair market value using quoted market prices on the date of grant, resulting in total share-based compensation expense of $331,500, and 115,000 shares of common stock to twelve (12) employees valued at their fair market value using quoted market prices on the date of grant, resulting in total share-based compensation expense of $34,500.

NOTE D — STOCK OPTIONS/WARRANTS

On June 04, 2008, we entered into a consulting agreement with AGORACOM. In accordance with the terms and provisions of the consulting agreement: (i) we shall issue to AGORACOM 250,000 warrants to purchase up to 250,000 of our restricted common stock at $0.50 per share ; and (ii) AGORACOM shall perform such consulting services involving general business matters and other business consulting as mutually agreed upon. Compensation cost for the 250,000 warrants issued to AGORACOM for consulting services amounted to $82,928, with $12,203 recognized in the financial statements for the year ended June 30, 2008 and $66,605 recognized in the financial statements for the nine months ended March 31, 2009. The balance of $4,120 to be recognized over the remaining three months of the year ended June 30, 2009.

On September 25, 2008, we granted 800,000 options to Ray Lopez, CFO, under Pro Travel Network, Inc. 2008 Stock Incentive Plan to purchase up to 800,000 of our restricted common stock at $0.50 per share. The options will vest in equal amounts of 160,000 and stage over the next 60 months. All options not exercised by the expiration date are forfeited. Compensation cost for the 800,000 options issued to Ray Lopez amounted to $117,750, with $16,547 recognized in the financial statements for the nine months ended March 31, 2009 with the balance of $101,203 to be recognized over the period April 1, 2009 through December 24, 2014. The weighted average fair value of the options issued was $0.15. Variables used in the Black Scholes option pricing model includes (i) 1.97% risk-free interest rate (ii) expected life of sixty months (iii) expected volatility of 162% and (iv) zero expected dividends.

Summary information regarding options/warrants is as follows:
			Weighted Average
	Options/ Warrants		Share Price
Outstanding at June 30, 2008		1,250,000	$	0.46
Issued		800,000		0.50
Exercised		-		-
Forfeited		-		-
Outstanding at March 31, 2009		2,050,000	$	0.48

Options/Warrants outstanding and exercisable as of March 31, 2009:

		Outstanding			Exercisable
		Number of		Remaining	Number
Exercise Price		Options/Warrants		Life	of Shares
$	0.30		500,000	1 year		500,000
$	0.40		200,000	1 year		200,000
$	0.50		610,000	1 year		610,000
$	0.50		160,000	2 year		160,000
$	0.50		160,000	3 year		160,000
$	0.50		160,000	4 year		160,000
$	0.50		160,000	5 year		160,000
$	1.00		50,000	1 year		50,000
$	1.50		50,000	1 year		50,000
			2,050,000			2,050,000

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:

	For the Nine Months Ended
	March 31,
Description	2009		2008
Weighted-average shares used to compute basic net
income per common share		27,112,806		25,703,449
Securities convertible into shares of common stock used in calculation of common stock equivalents for fully diluted EPS:
Stock options/warrants		-		1,000,000
Weighted-average shares used to compute diluted net income per common share		27,112,806		26,703,449

Common stock equivalents for the nine months ended March 31, 2009 was not used in calculating fully diluted earnings per share as the effect would be anti-dilutive for the loss incurred.

NOTE F – COMMITMENTS AND CONTINGENCIES

On October 5th, 2008, a lawsuit was filed against Pro Travel Network by a recently dismissed employee. The lawsuit alleges that she was fired due to retaliation for filing a complaint of workplace sexual harassment. Pro Travel Network vehemently denies any and all allegations as completely false and without merit. It is remote that this lawsuit will settle in favor of the employee and, therefore, no contingency is recorded.

On January 31, 2009, the Company entered into an agreement with Omni Orlando Resort to hold an event at their hotel. If the agreement is cancelled before May 27, 2009, Pro Travel Network, Inc. will owe Omni Orlando Resort $20,400 to compensate the hotel for lost revenues. If the agreement is cancelled after May 8, 2009, the cancellation fee is $32,700.

NOTE G –ACQUISITION OF COMPANY

On December 19, 2008, Pro Travel Network, Inc. (the “Company”) completed its acquisition of KG & S Pty, Ltd., an Australian company for a cash purchase price of $41,743. The assets we acquired consisted of furnishings and fittings. In connection with the acquisition, we assumed no liabilities. The acquisition cost was allocated to assets as follows:


Property and equipment, net	$	3,542
Goodwill		38,201
	$	41,743

Goodwill is the excess of the fair values of tangible and identifiable intangible assets acquired over liabilities assumed. The amount recognized as Goodwill includes acquired intangible assets for which fair values could not be determined. Goodwill is not amortized, but is tested for impairment at least annually.

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

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 - 2 options,

CR – $19.99 one time license fee: basic Direct Sales opportunity

RT – $39.99 monthly license/membership fee: The optional RT upgrade includes a membership that provides an upgraded suite of marketing and support tools, enhanced income opportunities, and includes a minimum of 4 heavily discounted member training trips per year, called paycations

We currently support approximately 8,300 independent travel agents and over 3,500 Independent Representatives throughout North America.

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.

We launched an expansion into Australia on December 19, 2008 with our acquisition of KG & S Pty. Ltd. KG & S Pty, Ltd. has operated its travel business for nearly 20 years and is among the leading online travel agencies in the Melbourne area. The Australian market is strategic in the Company’s long term business plans and will allow the Company to expand services to customers in the Australian market. This acquisition brings incremental value to the Company and will immediately increase our customer base along with giving the Company immediate access to already established relationships with all major hotels, airlines and car rentals within the greater Australian area.

The Australian market is part of our strategic plans for the growth of the Company. We have a successful track record in business and experience from our Canadian expansion makes us confident in the international markets. Not only do we believe Australia is an important part of our expansion, but it also serves as the perfect launch pad to capture the lucrative Asia-Pacific travel market in the future.

As described below in “Liquidity and Capital Resources,” we believe we will be able to complete our expansion in Canada and launch our expansion in Australia without any need to obtain additional financing.

The economic downturn has had a significant effect on our operations over the past six months and we expect that it will continue to be a significant factor going forward. Most notably was the reduction in our investments as unrealized losses due to the severe contraction in stock prices across the board. Lower sales and the resulting reduction in revenues was also a serious issue that we attribute to the recession gaining in intensity.

Moving forward, we have reduced expenses significantly through several strong cost-cutting measures, including but not limited to layoffs, bonus and salary reductions, With a now leaner company, we believe the negative economy will still be a major factor working against profitability and revenue growth in the coming year, but we are equally satisfied that we have cut expenses and made significant marketing adjustments to carry us through 2009.

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 is 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, 2007 (See the section entitled “Legal Proceedings,” below)

Goodwill

Results of Operations

Nine Months Ended March 31, 2009 Compared to the Nine Months Ended March 31, 2008

For the nine months ended March 31, 2009, total revenues broke down as follows: Independent Travel Agent Program or ITAP sales – 56%, Travel Commissions – 38% and National Events – 6%. For the nine months ended March 31, 2008, total revenues broke down as follows: Independent Travel Agent Program or ITAP sales – 73%, Travel Commissions – 22% and National Events – 5%. We had total revenues of $4,542,942 for the nine months ended March 31, 2009, which is a decrease of $2,257,142, or 33%, below our total revenues for the nine months ended March 31, 2008, which was $6,800,084. The decrease in total sales was due to a decrease of $2,416,824 in Independent Travel Agent Program or ITAP sales, a decrease of $51,437 in National Events revenue which was offset by an increase of $211,119 in Travel Commissions revenue. The decrease in ITAP sales was due to the decrease in signing up of new agents due to declining economic conditions, whereas, the increase in travel commissions is based on expansion of our Canadian operations in 2008.

Our cost of sales decreased $1,936,429, or 44%, to $2,460,330 for the nine months ended March 31, 2009, as compared to cost of sales of $4,396,759 for the nine months ended March 31, 2008. The decrease in total cost of sales was mainly due to a decrease of $2,101,841 in Independent Travel Agent Program or ITAP sales, a decrease of $105,822 in National Events cost offset by an increase of $271,234 in Travel Commissions. Our cost of sales decreased as a direct result of lower sales of our products offset by reduction in sales bonuses during the nine months ended March 31, 2009.

We had gross profit of $2,082,612 for the nine months ended March 31, 2009, which was a decrease of $320,713, or 13%, when compared to our gross profit for the nine months ended March 31, 2008, which was $2,403,325. Our decrease in gross profit was primarily attributable to the decrease in signing up of new agents due to declining economic conditions.

Operating expenses increased $513,891, or 23%, to $2,718,850 for the nine months ended March 31, 2009, as compared to total operating expenses of $2,204,959 for the nine months ended March 31, 2008. The increase in total operating expenses was mainly due to an increase in compensation expense and professional and consulting fees offset by a decrease in general and administrative expenses. Compensation expense increased $473,865 to $1,807,170 for the nine months ended March 31, 2009, as compared to compensation expense of $1,333,305 for the nine months ended March 31, 2008. The increase in compensation expense was as follows:

·	$347,000 due to the issuance of 1,220,000 shares to employees and officers.

·	$126,000 due to the increase of our corporate and Canadian staffs and the addition of Ray Lopez, Vice President and COO.


·	Mr. Lopez provides management and other services to us under an employment agreement which was amended July 1, 2008 to increase his annual salary from $96,000 per year to $120,000 per year and change his commission of 2% of the net Travel Agent Product revenue, less all costs of sales expenses to .5% of actual gross revenue.

·	Mr. Henderson provides management and other services to us under an employment agreement which was amended July 1, 2008 to increase his annual salary from $200,000 to $240,000 per year and commission of 1.75% of actual gross revenue.

Professional and consulting fees increased $249,562 to $365,484 for the nine months ended March 31, 2009, as compared to professional and consulting fees of $115,922 for the nine months ended March 31, 2008. The increase in professional and consulting fees was primarily due to the issuance of warrants resulting in an expense to the company of $66,606 along with 783,805 shares of common stock issued for services resulting in an expense to the company of $154,854. Depreciation expense increased $4,462 to $15,911 for the nine months ended March 31, 2009, as compared to depreciation expense of $11,449 for the nine months ended March 31, 2008. General and administrative expenses decreased $213,998 to $530,285 for the nine months ended March 31, 2009, as compared to general and administrative expenses of $744,283 for the nine months ended March 31, 2008. The decrease in general and administrative expenses was primarily attributable to the decrease in office expense and travel resulting from the expansion of our US and Canadian operations in 2008 and merchant fees associated with the decrease in overall sales.

Other income and expenses included an increase in net interest income of $1,382, to $13,606 for the nine months ended March 31, 2009, as compared to net interest income of $12,224 for the nine months ended March 31, 2008, along with a gain on sale of investments of $38,411 for the nine months ended March 31, 2009, compared to gain on sale of investments of $2,830 for the nine months ended March 31, 2008, and a gain on foreign currency of $7,362 for the nine months ended March 31, 2009, compared to a loss on foreign currency of $11 for the nine months ended March 31, 2008.

We had a net loss applicable to common stock of $576,859 for the nine months ended March 31, 2009, as compared to net income applicable to common stock of $213,409 for the nine months ended March 31, 2008. The increase in net loss applicable to common stock was primarily attributable to the issuance of 2,003,805 shares of common stock for services along with the issuance of options/warrants resulting in a non-cash expense to the company of $604,006 and a decrease in signing up of new agents due to declining economic conditions along with the increase in our corporate and Canadian staffs.

We had other comprehensive loss for the nine months ended March 31, 2009, consisting of unrealized loss on investments of $390,219 resulting from market to market adjustment of stock owned by the Company at March 31, 2009 compared to an unrealized loss on investment of $27,996 for the nine months ended March 31, 2008.

Our comprehensive loss was $967,078 for the nine months ended March 31, 2009, as compared to comprehensive income of $185,413 for the nine months ended March 31, 2008. The increase in comprehensive loss of $1,152,491 for the nine months ended March 31, 2009 was primarily attributable to the increase in unrealized loss on investments of $390,219 and issuance of 2,003,805 shares of common stock for services along with the issuance of options/warrants resulting in a non-cash expense to the company of $604,006 and a decrease in signing up of new agents due to declining economic conditions along with the increase in our corporate and Canadian staffs.

Three Months Ended March 31, 2009 Compared to the Three Months Ended March 31, 2008

For the three months ended March 31, 2009, total revenues broke down as follows: Independent Travel Agent Program or ITAP sales – 45%, Travel Commissions – 50% and National Events – 5%. For the three months ended March 31, 2008, total revenues broke down as follows: Independent Travel Agent Program or ITAP sales – 75%, Travel Commissions – 19% and National Events – 6%. We had total revenues of $1,181,960 for the three months ended March 31, 2009, which is a decrease of $1,490,851, or 56%, below our total revenues for the three months ended March 31, 2008, which was $2,672,811. The decrease in total sales was due to a decrease of $1,465,654 in Independent Travel Agent Program or ITAP sales, a decrease of $91,825 in National Events revenue which was offset by an increase of $66,628 in Travel Commissions revenue. The decrease in ITAP sales was due to the decrease in signing up of new agents due to declining economic conditions, whereas, the increase in travel commissions is based on expansion of our Canadian operations in 2008.

Our cost of sales decreased $989,163, or 63%, to $579,483 for the three months ended March 31, 2009, as compared to cost of sales of $1,568,644 for the three months ended March 31, 2008. The decrease in total cost of sales was mainly due to a decrease of $1,056,428 in Independent Travel Agent Program or ITAP sales, a decrease of $111,847 in National Events cost offset by an increase of $179,114 in Travel Commissions. Our cost of sales decreased as a direct result of lower sales of our products offset by reduction in sales bonuses during the three months ended March 31, 2009.

We had gross profit of $602,477 for the three months ended March 31, 2009, which was a decrease of $501,690, or 45%, when compared to our gross profit for the three months ended March 31, 2008, which was $1,104,167. Our decrease in gross profit was primarily attributable to the decrease in signing up of new agents due to declining economic conditions.

Operating expenses decreased $172,197, or 21%, to $664,946 for the three months ended March 31, 2009, as compared to total operating expenses of $837,143 for the three months ended March 31, 2008. The decrease in total operating expenses was mainly due to a decrease in compensation expense and a decrease in general and administrative expenses. Compensation expense decreased $96,902 to $443,293 for the three months ended March 31, 2009, as compared to compensation expense of $540,195 for the three months ended March 31, 2008. The decrease in compensation expense was primarily due to a reduction of our staffs as a result of declining economic conditions. General and administrative expenses decreased $90,747 to $152,252 for the three months ended March 31, 2009, as compared to general and administrative expenses of $242,999 for the three months ended March 31, 2008. The decrease in general and administrative expenses was primarily attributable to the decrease in office expense and travel resulting from the expansion of our US and Canadian operations in 2008 and merchant fees associated with the decrease in overall sales.

Other income and expenses included an decrease in net interest income of $1,244, to $2,064 for the three months ended March 31, 2009, as compared to net interest income of $3,308 for the three months ended March 31, 2008, along with a loss on sale of investments of $1,409 for the three months ended March 31, 2009, compared to gain on sale of investments of $2,830 for the three months ended March 31, 2008, and a loss on foreign currency of $8,025 for the three months ended March 31, 2009, compared to a gain on foreign currency of $133 for the three months ended March 31, 2008.

We had a net loss applicable to common stock of $69,839 for the three months ended March 31, 2009, as compared to net income applicable to common stock of $273,295 for the three months ended March 31, 2008. The decrease in net loss applicable to common stock was primarily attributable to the decrease in signing up of new agents due to declining economic conditions, off-set by a decrease in compensation expense primarily due to a reduction of our staffs and a decrease in general and administrative expenses primarily merchant fees associated with the decrease in overall sales.

We had other comprehensive loss for the three months ended March 31, 2009, consisting of unrealized loss on investments of $25,142 resulting from market to market adjustment of stock owned by the Company at March 31, 2009 compared to an unrealized loss on investment of $32,207 for the three months ended March 31, 2008.

Our comprehensive loss was $94,981 for the three months ended March 31, 2009, as compared to comprehensive income of $241,088 for the three months ended March 31, 2008. The decrease in comprehensive loss was primarily attributable to the decrease in signing up of new agents due to declining economic conditions, off-set by a decrease in compensation expense primarily due to a reduction of our staffs and a decrease in general and administrative expenses primarily merchant fees associated with the decrease in overall sales.

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.

The lease on our primary operating facility 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. 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. On February 20, 2008, we renewed our lease for two years beginning March 2008 with all terms remaining the same.

On July 01, 2007, we leased 1,170 square feet of office space in St Jerome, Quebec Canada under a two year non-cancelable operating lease beginning in July 2007. On April 28, 2008, we leased 911 square feet of office space in Surrey, British Columbia Canada under a three year non-cancelable operating lease beginning in July 2008.

Liquidity and Capital Resources

As of March 31, 2009, we had total current assets of $673,271 consisting of cash and cash equivalents of $149,460, accounts receivable of $861, inventory of $17,561, investments of $500,589 and prepaid expenses of $4,800.

We had total current liabilities of $418,663 consisting of accounts payable of $36,090, accrued expenses of $347,101 and deferred revenue of $35,472. We have no long-term debt. Accrued expenses consisted of accrued employees salaries and benefits of $97,985, other expenses of $22,593 and commissions and rewards owed our representatives in the amount of $226,523, of which approximately $33,205 was the estimated full potential value of PTN Reward Points owed Agents and Managers and the reminder was primarily commissions held for payment at the end of every two weeks.

We had working capital of $254,608 as of March 31, 2009.

During the nine months ended March 31, 2009, net cash decreased by $218,744 consisting of $99 used in operating activities, $206,758 used in investing activities and $11,887 associated with exchange rate changes.

Net cash used in operating activities during the nine months ended March 31, 2009, consisted of a net loss from operations of $576,859, adjustments for depreciation and amortization of $15,911 along with share-based compensation of $604,006, an increase in accounts payable and accrued expenses of $106,036, a decrease in prepaid expenses and other current assets of $11,414 and a decrease in inventory of $203 which were offset by a decrease in deferred revenue of $122,399, and an adjustment for gain on sale of investments of $38,411.

Net cash used in investing activities during the nine months ended March 31, 2009, consisted of property and equipment purchases of $17,991, investments purchases of $737,633 and intangible assets-goodwill from acquisition of $38,201 which were offset by sale of investments of $586,636 and a decrease in deposits of $431..

We believe our cash resources of $149,460 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 Overview, above. We estimate that we need $125,000 of capital to complete the expansion of our operations in Australia. To date, we have generated sufficient cash flow from operations to satisfy 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 Overview section 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

Evaluation of Disclosure Controls and Procedures

As of March 31, 2009, under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures as of March 31, 2009 and concluded that our disclosure controls and procedures were ineffective as of March 31, 2009 due to the following: We have previously had a material weakness that relates to the lack of segregation of duties in that our CEO and CFO were the same person. In the preparation of audited financial statements, footnotes and financial data all of our financial reporting is carried out by our Chief Financial Officer. The lack of segregation of duties results from lack of a separate Chief Financial Officer with accounting technical expertise necessary for an effective system of internal control. We are, in fact, a small, relatively simple operation from a financial point of view. Following the end of fiscal year 2008, we hired a full time Chief Financial Officer and will continue our program to fully-implement internal controls procedures. Further, our CFO monitors the controls on an ongoing basis. All unexpected results are investigated. At any time, if it appears that any control can be implemented to continue to mitigate such weaknesses, it is immediately implemented.

There were no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2009, 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, except as follows:

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 pursuing 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.

On October 5th, 2008, a lawsuit was filed against Pro Travel Network by a recently dismissed employee. The lawsuit alleges that she was fired due to retaliation for filing a complaint of workplace sexual harassment. Pro Travel Network vehemently denies any and all allegations as completely false and without merit. Pro Travel Network has cut salaries of several employees and laid off several more over the last quarter in an attempt to properly cope with the current and continuing economic downturn.

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

During the nine months ended March 31, 2009, Pro Travel Network, Inc. issued 783,805 shares to thirty third parties for services rendered valued at their fair market value using quoted market prices on the date of grant, resulting in total share-based compensation expense of $122,985, 1,105,000 shares to executive officers of Pro Travel Network, for services rendered valued at their fair market value using quoted market prices on the date of grant, resulting in total share-based compensation expense of $331,500, and 115,000 shares of common stock to twelve (12) employees based on a two year plus vesting with the company valued at their fair market value using quoted market prices on the date of grant, resulting in total share-based compensation expense of $34,500.

We relied upon Section 4(2) of the Securities Act of 1933, as amended for the above issuances.

We believed that Section 4(2) of the Securities Act of 1933 was available because:

·	None of these issuances involved underwriters, underwriting discounts or commissions.


·	Restrictive legends were and will be placed on all certificates issued as described above.


·	The distribution did not involve general solicitation or advertising.


·	The distributions were made only to investors who were sophisticated enough to evaluate the risks of the investment.

In connection with the above transactions, although some of the investors may have also been accredited, we provided the following to all investors:

·	Access to all our books and records.


·	Access to all material contracts and documents relating to our operations.


·	The opportunity to obtain any additional information, to the extent we possessed such information, necessary to verify the accuracy of the information to which the investors were given access.

Item 3. Defaults Upon Senior Securities.

None

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

None

Item 5. Other Information.

Certain Options

Item 6. Exhibits.

Exhibit No.		Description of Exhibit
31.1		Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.1		Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.1		Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly 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, 2009

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Pro Travel Network 10-QQuarterly report

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