UNITED STATES
SECURITY AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM SB-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
KINDER TRAVEL, INC.
Nevada (State or Jurisdiction of Incorporation or Organization) | 4700 (Primary Standard Industrial Classification Code Number) | 20-4939361 (IRS Employer Identification Number) |
1960 143rd Street, Surrey, BC Canada, V4A 7Z2
(Address and Telephone Number of Principal Executive Offices)
CSC Services of Nevada, Inc., 502 E. John Street, Carson City, NV 89706
(775) 882-3072
(Name, Address and Telephone Number of Agent for Service)
Copy of all Communications to:
SteadyLaw Group, LLP
6151 Fairmount Ave. Suite 201
San Diego, CA 92120
Tel. (619) 399-3090
Fax (619) 330-1888
Approximate date of proposed sale to the public: As soon as practicable after the effective date of the
Registration Statement.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act of 1933 check the following box. [X]
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the
Securities Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the
following box and list the Securities Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the
following box and list the Securities Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE |
Title Of Each Class of Securities To Be Registered | Dollar Amount to be Registered | Number of Shares to be registered | Proposed Maximum Aggregate Offering Price | Amount Of Registration Fee |
| | | | |
Common Stock | $120,000 | 2,400,000 | USD$0.05 | USD$12.84 |
*Unless otherwise indicated, all financial information set forth herein shall be presented in Canadian Dollars.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR THERE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Disclosure alternative used (check one): Alternative 1 __ Alternative 2 X
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Subject to Completion, Dated July 10, 2006
PROSPECTUS
KINDER TRAVEL, INC.
2,400,000 SHARES OF COMMON STOCK
The selling shareholders named in this prospectus are offering 2,400,000 shares of common stock of Kinder Travel, Inc. We will not receive any of the proceeds from the sale of these shares. The shares were acquired by the selling shareholders directly from us in a private offering of our common stock that was exempt from registration under the securities laws. The selling shareholders have set an offering price for these securities of USD$0.05 per share and an offering period of four months from the date of this prospectus. See “Security Ownership of Selling Shareholder and Management” for more information about the selling shareholder.
Our common stock is presently not traded on any market or securities exchange. The offering price may not reflect the market price of our shares after the offering.
This investment involves a high degree of risk. You should purchase shares only if you can afford a complete loss. See “Risk Factors” beginning on page __.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Shares Offered by | | Selling Agent | Proceeds to Selling |
Selling Shareholders | Price To Public | Commissions | Shareholder |
Per Share | USD$0.05 | Not applicable | USD$0.05 |
Minimum Purchase | Not applicable | Not applicable | Not applicable |
Total Offering | USD$120,000.00 | Not applicable | USD$120,000.00 |
Proceeds to the selling shareholders do not include offering costs, including filing fees, printing costs, legal fees, accounting fees, and transfer agent fees estimated at $35,500. Kinder Travel will pay these expenses.
This Prospectus is dated June 15, 2006.
Kinder Travel, Inc.
1960 143rd Street
Surrey, BC Canada
V4A 7Z2
TABLE OF CONTENTS
| Page |
PART I - NARRATIVE INFORMATION REQUIRED IN PROSPECTUS | |
| |
PROSPECTUS SUMMARY | 5 |
| |
THE OFFERING | 6 |
SELECTED FINANCIAL INFORMATION | 6 |
| |
RISK FACTORS | 7 |
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS | 13 |
DILUTION | 13 |
PLAN OF DISTRIBUTION | 13 |
USE OF PROCEEDS TO ISSUER | 13 |
BUSINESS OF THE ISSUER | 14 |
MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION | 21 |
| |
PLAN OF OPERATIONS | 21 |
RESULTS OF OPERATIONS | 22 |
LIQUIDITY AND CAPITAL RESOURCES | 22 |
| |
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES | 26 |
REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS | 28 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 29 |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | 30 |
DESCRIPTION OF SECURITIES | 31 |
DISCLOSURE OF SEC POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES | 32 |
LEGAL MATTERS | 32 |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 32 |
INTEREST OF NAMED EXPERTS AND COUNSEL | 32 |
EXPERTS AVAILABLE INFORMATION | 32 |
REPORTS TO SHAREHOLDERS | 33 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | AF-3 |
| |
| |
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS | |
| |
ITEM 1. INDEMNIFICATION OF OFFICERS AND DIRECTORS | 35 |
ITEM 2. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION | 36 |
ITEM 3. UNDERTAKINGS | 37 |
ITEM 4. UNREGISTERED SECURITIES ISSUED OR SOLD WITHIN ONE YEAR | 38 |
ITEM 5. INDEX TO EXHIBITS | 38 |
ITEM 6. DESCRIPTION OF EXHIBITS | 38 |
| |
SIGNATURES | 39 |
PART I
PROSPECTUS SUMMARY
KINDER TRAVEL, INC.
The following summary information is qualified in its entirety by the detailed information and financial statements appearing elsewhere in the Prospectus.
Background
In December 2005, Kinder Travel, Inc. (the “Company”, “we”, “our”, “us “, “Kinder Travel”, the “Registrant”, and like references) was formed as a Nevada corporation. Initial operations commenced under the name Kinder Travel & Tours (“KTT”), a sole proprietorship operating out of Surrey, British Columbia, in January 2005. In November 2005, KTT incorporated under the laws of the Province of British Columbia as Kinder Travel, Inc. (“KTBC”). Pursuant to the terms of an Asset Purchase Agreement (“Asset Purchase Agreement”) executed by and between the Company and KTBC, the Company acquired all assets and liabilities of KTBC in exchange for a convertible note for US$20,000 that was converted into 400,000 shares of common stock of the Company. This transaction closed on January 1, 2006 (the “Closing Date”).
Overview
Kinder Travel is a full-service, web-based and in-store travel agency offering a full range of travel services including corporate travel, vacations, cruise holidays, and group tours. However its primary focus is selling, marketing and providing travel services and tours to families, businesses and ministries. Kinder Travel, located in Surrey, British Columbia, Canada, commenced operations in January 2005 and expects to move rapidly towards growth and profitability due to its very unique character as a family vacation specialist and special interest tour operator.
Our primary goal is to provide web-based and in-store travel that promotes family values by and through our web site and in our store. Our internet site www.kindertravel.com will consist of an on-line booking engine geared to providing Christian families with travel options that promote unity.
The technology, infrastructure and operations of Kinder Travel provide consumers with a groundbreaking approach to online travel in a “family” environment aimed at providing affordable opportunities for memories that last a lifetime.
The objective for Kinder Travel is to promote family travel. We believe that traveling plays a vital role in the education of children and adults alike, while playing a pivotal role in “building childhood memories” and reaffirming or creating bonds between the traveling family members. Kinder Travel offers a range of travel and tour products that are suited and composed specifically for Christian families.
Kinder Travel aspires to become a leader in offering and operating a wide range of family oriented travel and tour products. The vast majority of travel agents do not address the very unique challenges a family faces when making their travel plans. From finding the right destination to the affordability of their family vacation, there are many considerations to contemplate before booking.
A scaled down, consumer version of the Company’s Internet site will make debut sometime in August 2006 (“Beta Test Version”). Finally, in October 2006, the Company plans to launch the full-scale version of its Internet site. Once our Internet sites are fully operational, consumers will be able to experience a revolutionary, cost-savings approach to online travel at www.kindertravel.com.
Kinder Travel is a boutique travel agency with a wide range of travel services available to their existing, well-established, client base. However by targeting a unique market segment that has been largely ignored, the family, the Company is well positioned for moderate growth and profitability.
Strategically placed advertising with family oriented newspapers and radio stations will ensure the name recognition and generate the interest to contact “the family travel specialists” either on the web or by email or phone.
We are not a “blank check company,” as we do not intend to participate in a reverse acquisition or merger transaction. A “blank check company” is defined by securities laws as a development stage company that has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person.
Our offices are located at 1960 143rd Street, Surrey, BC Canada, V4A 7Z2.
THE OFFERING
Securities Offered | 2,400,000 |
Selling Shareholder(s) | Mardan Consulting, Inc. Dirk Holzhauer |
Offering Price | USD$0.05 per share |
Shares outstanding prior to the offering | 2,400,000 |
Shares to be outstanding after the offering | 2,400,000 |
Use of Proceeds | We will not receive any proceeds from the sale of the common stock by the selling shareholder |
SELECTED FINANCIAL INFORMATION
The following selected financial data has been derived from our financial statements. We have prepared our financial statements in accordance with generally accepted accounting principles. The information below should be read in connection with “Management’s Discussion and Analysis or Plan of Operation” and our Financial Statements and related notes. The following information is presented as of and for the period ended March 31, 2006, for the year ended December 31, 2005.
| | Three Months Ended March 31, 2006 | Year Ended December 31, 2005 |
Statement of Operations Data | | | |
| Net Revenue | $61,585 | $118,727 |
| Operating Expenses | 62,509 | 115,024 |
| Net Income (Loss) | (924) | 3,703 |
Balance Sheet Data | | | |
| Total Current Assets | 136,193 | 37,045 |
| Current Liabilities | 174,965 | 72,418 |
| Stockholders’ Equity (Deficit) | 2,779 | 3,703 |
(See Financial Statements for complete and accurate financial information)
INVESTING IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS IN EVALUATING THE COMPANY AND ITS BUSINESS.
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 agreements with our airline, hotel and auto suppliers, and these agreements 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 agreements 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 may 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.
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 web-site, 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 OR 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. |
BECAUSE OUR MARKET IS SEASONAL, OUR QUARTERLY RESULTS WILL FLUCTUATE.
Our business 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 control fraudulent credit card transactions adequately 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 of 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, state and/or provincial regulations in Canada and 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 officers and directors control all of our common stock, and we do not have any non-employee directors. As a result, they effectively control 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. They also have the ability to block, by their 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 OUR OFFICERS AND DIRECTORS; IF WE LOSE THEIR SERVICES, OUR REVENUES MAY BE REDUCED.
The success of our business is dependent upon the expertise of Dirk Holzhauer and Daniel L. Baxter. Because they are essential to our operations, you must rely on their management decisions. They will continue to control our business affairs after the filing. If we lose their services, we may not be able to hire and retain other officers and directors with comparable experience. As a result, the loss of their services could reduce our revenues.
BECAUSE OUR COMMON STOCK WILL BE CONSIDERED A PENNY STOCK, ANY INVESTMENT IN OUR COMMON STOCK IS CONSIDERED A HIGH-RISK INVESTMENT AND IS SUBJECT TO RESTRICTIONS ON MARKETABILITY; YOU MAY BE UNABLE TO SELL YOUR SHARES.
If our common stock trades in the secondary market, we will be subject to the penny stock rules adopted by the Securities and Exchange Commission that require brokers to provide extensive disclosure to their customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our common stock, which in all likelihood would make it difficult for our shareholders to sell their securities.
BECAUSE THERE IS NOT NOW AND MAY NEVER BE A PUBLIC MARKET FOR OUR COMMON STOCK, INVESTORS MAY HAVE DIFFICULTY IN RESELLING THEIR SHARES.
Our common stock is currently not quoted on any market. No market may ever develop for our common stock, or if developed, may not be sustained in the future. Accordingly, our shares should be considered totally illiquid, which inhibits investors’ ability to resell their shares.
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.
BECAUSE WE HAVE A LIMITED OPERATING HISTORY, IT IS DIFFICULT TO EVALUATE OUR BUSINESS AND PROSPECTS.
Initial operations began January 2005 as KTT. As a result, we have only a limited operating history from which you can evaluate our business and our prospects. We will encounter risks and difficulties frequently experienced by early-stage companies in rapidly evolving industries, such as the online travel industry. Some of these risks relate to our ability to:
· | attract and retain consumers on a cost-effective basis; |
· | expand and enhance our service offerings; |
· | respond to regulatory changes or demands; |
· | operate, support, expand and develop our operations, our website and our software, communications and other systems; |
· | diversify our sources of revenue; |
· | maintain adequate control of our expenses; |
· | raise additional capital; |
· | respond to technological changes; and |
· | respond to competitive market conditions. |
If we are unsuccessful in addressing these risks or in executing our business strategy, our business, financial condition or results of operations may suffer.
OUR GROWTH CANNOT BE ASSURED. EVEN IF WE DO EXPERIENCE GROWTH, WE CANNOT ASSURE YOU THAT WE WILL GROW PROFITABLY.
Our business strategy is dependent on the growth of our business. For us to achieve significant growth, consumers and travel suppliers must accept our website as a valuable commercial tool. Consumers, who have historically purchased travel products using traditional commercial channels, such as local travel agents and calling suppliers directly, must instead purchase these products on our website. Similarly, travel suppliers will also need to accept or expand their use of our website and to view our website as an efficient and profitable channel of distribution for their travel products.
OUR GROWTH IS ALSO DEPENDENT ON OUR ABILITY TO BROADEN THE APPEAL OF OUR WEBSITE TO BUSINESS AND OTHER TRAVELERS.
Currently, our website has focused on serving the leisure traveler. Our ability to offer products and services that will attract a significant number of business travelers to use our services is not certain. If it does not occur, our growth may be limited.
OUR GROWTH WILL ALSO DEPEND ON OUR ABILITY TO BROADEN THE RANGE OF TRAVEL PRODUCTS WE OFFER.
Historically, the majority of our revenues have come from airline ticket sales. Our business strategy is dependent on our further diversifying our revenues into lodging, car rentals, cruises, vacation packages and other travel related products. We cannot assure you that our efforts will be successful or result in greater revenues or higher margins. Our business strategy also includes the establishment of direct connections to the airlines’ reservations systems, which will allow us to bypass global distribution systems, or GDSs, the traditional computerized reservation systems, for a portion of our airline ticket bookings. Our supplier link technology initiative is at an early stage and we cannot assure you that a large number of airline suppliers will be willing to enter into this type of relationship with us, or that these direct links will enable us to increase our revenue or lower our operating costs.
Our plans to pursue other opportunities for revenue growth and cost reduction are also at an early stage, and we can not assure you that our plans will be successful or that we will actually proceed with them as described.
WE OPERATE IN A HIGHLY COMPETITIVE MARKET, AND WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY.
The market for travel products is intensely competitive. We compete with a variety of companies with respect to each product or service we offer. We compete directly with Expedia, Travelocity, and many smaller companies in providing online travel products. In addition, we face significant competition from other distributors of travel products, including:
· | local, regional, national and international traditional travel agencies; |
· | consolidators and wholesalers of airline tickets, lodging and other travel products, including Orbitz, Cheaptickets.com, Priceline.com, Hotwire, Hotels.com; and |
· | operators of GDSs, which control the computer systems through which travel reservations historically have been booked. |
MANY OF OUR COMPETITORS HAVE LONGER OPERATING HISTORIES, LARGER CUSTOMER BASES, GREATER BRAND RECOGNITION AND SIGNIFICANTLY GREATER FINANCIAL, MARKETING AND OTHER RESOURCES THAN WE HAVE.
Some of our competitors benefit from vertical integration with GDSs. We cannot assure you that we will be able to effectively compete with other travel industry providers.
In addition, consumers may choose to use our website for route pricing and other travel information, and then purchase travel products from a source other than our website, including travel suppliers’ own websites. Many travel suppliers, such as airlines, lodging, car rental companies and cruise operators also offer and distribute travel products, including products from other travel suppliers, directly to the consumer through their own websites.
WE DEPEND ON OUR RELATIONSHIPS WITH TRAVEL SUPPLIERS AND COMPUTER RESERVATION SYSTEMS; ADVERSE CHANGES IN THESE RELATIONSHIPS COULD AFFECT OUR INVENTORY OF TRAVEL OFFERINGS.
Our business model relies on relationships with travel suppliers, and it would be negatively affected by adverse changes in these relationships. We depend on travel suppliers to enable us to offer our customers comprehensive access to travel services and products. Consistent with industry practices, we currently have few agreements with our travel suppliers obligating them to sell services or products through our websites. It is possible that travel suppliers may choose not to make their inventory of services and products available through online distribution. Travel suppliers could elect to sell exclusively through other sales and distribution channels or to restrict our access to their inventory, either of which could significantly decrease the amount or breadth of our inventory of available travel offerings.
A DECLINE IN COMMISSION RATES OR THE ELIMINATION OF COMMISSIONS COULD REDUCE OUR REVENUES AND MARGINS.
A substantial majority of our online revenues depends on the commissions paid by travel suppliers for bookings made through our online travel service. Generally, we do not have written commission agreements with our suppliers. As is standard practice in the travel industry, we rely on informal arrangements for the payment of commissions. Travel suppliers are not obligated to pay any specified commission rate for bookings made through our websites. We cannot assure you that airlines, hotel chains or other travel suppliers will not reduce current industry commission rates or eliminate commissions entirely, either of which could reduce our revenues and margins. Additionally, any decline in commissions received by the Company would cause a decline in the amount of cash back the Company would be able to give to customers from the commissions. If the Company is unable to offer sufficient cash back offers based on the commissions it receives it may not be able to offer competitive prices and may result in a material adverse effect on the business.
INTERRUPTIONS IN SERVICE FROM THIRD PARTIES COULD IMPAIR THE QUALITY OF OUR SERVICE.
We rely on third-party computer systems and other service providers, including the computerized central reservation systems of the airline, lodging and car rental industries to make airline ticket, lodging and car rental reservations and credit card verifications and confirmations. Third parties provide, for instance, our data center, telecommunications access lines and significant computer systems, support and maintenance services. Any interruption in these, or other, third-party services or deterioration in their performance could impair the quality of our service. We cannot be certain of the financial viability of all of the third parties on which we rely. If our arrangements with any of these third parties is terminated or if they were to cease operations, we might not be able to find an alternate provider on a timely basis or on reasonable terms, which could hurt our business.
IF WE FAIL TO INCREASE OUR BRAND RECOGNITION AMONG CONSUMERS, WE MAY NOT BE ABLE TO ATTRACT AND EXPAND OUR ONLINE TRAFFIC.
We believe that establishing, maintaining and enhancing the Company brand is a critical aspect of our efforts to attract and expand our online traffic. The number of Internet sites that offer competing services increases the importance of establishing and maintaining brand recognition. Many of these Internet sites already have well-established brands in online services or the travel industry generally. Promotion of the Company brand will depend largely on our success in providing a high-quality online experience supported by a high level of customer service. In addition, we intend to increase our spending substantially on marketing and advertising with the intention of expanding our brand recognition to attract and retain online users and to respond to competitive pressures. However, we cannot assure you that these expenditures will be effective to promote our brand or that our marketing efforts generally will achieve our goals.
IF WE ARE UNABLE TO INTRODUCE AND SELL NEW PRODUCTS AND SERVICES, OUR BRAND COULD BE DAMAGED.
We need to broaden the range of travel products and services and increase the availability of products and services that we offer in order to enhance our service. We will incur substantial expenses and use significant resources trying to expand the range of products and services that we offer. However, we may not be able to attract sufficient travel suppliers and other participants to provide desired products and services to our consumers. In addition, consumers may find that delivery through our service is less attractive than other alternatives. If we launch new products and services and they are not favorably received by consumers, our reputation and the value of the Company brand could be damaged.
Our relationships with consumers and travel suppliers are mutually dependent since consumers will not use a service that does not offer a broad range of travel services. Similarly, travel suppliers will not use a service unless consumers actively make travel purchases through it. We cannot predict whether we will be successful in expanding the range of products and services that we offer. If we are unable to expand successfully, this could also damage our brand.
IF WE FAIL TO ATTRACT CUSTOMERS IN A COST-EFFECTIVE MANNER, OUR ABILITY TO GROW AND BECOME PROFITABLE MAY BE IMPAIRED.
Our business strategy depends on increasing the overall number of consumer transactions conducted on our website in a cost-effective manner. In order to increase the number of consumer transactions, we must attract more visitors to our website and convert a larger number of these visitors into paying customers. Relative to our primary competitors, we believe that the Company brand has not established equally broad recognition. As a result, it may be necessary to spend substantial amounts on marketing and advertising to enhance our brand recognition and attract new customers to our website, and to successfully convert these new visitors into paying customers. We cannot assure you that our marketing and advertising efforts will be effective to attract new customers. If we fail to attract customers and increase our overall number of consumer transactions in a cost-effective manner, our ability to grow and become profitable may be impaired.
WE MAY NOT PROTECT OUR TECHNOLOGY EFFECTIVELY, WHICH WOULD ALLOW COMPETITORS TO DUPLICATE OUR PRODUCTS. THIS COULD MAKE IT MORE DIFFICULT FOR US TO COMPETE WITH THEM.
Our success and ability to compete in the online travel industry depend, in part, upon our technology. We rely primarily on patent, copyright, trade secret and trademark laws and provisions in our contracts to protect our technology. We attempt to negotiate beneficial intellectual property ownership provisions in our contracts. However, laws and our actual contractual terms may not be sufficient to protect our technology from use or theft by third parties. For instance, a third-party might try to reverse engineer or otherwise obtain and use our technology without our permission and without our knowledge, allowing competitors to duplicate our products. We may have legal or contractual rights that we could assert against such illegal use, but lawsuits claiming infringement or misappropriation are complex and expensive, and the outcome would not be certain. In addition, the laws of some countries in which we may wish to sell our products may not protect software and intellectual property rights to the same extent as the laws of the United States.
OUR PRODUCT FEATURES MAY INFRINGE ON CLAIMS OF THIRD-PARTY PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS, WHICH COULD ADVERSELY AFFECT OUR BUSINESS.
We cannot assure you that others will not obtain and assert patents or other intellectual property rights against us affecting essential elements of our business. If intellectual property rights are asserted against us, we cannot assure you that we will be able to obtain license rights on reasonable terms or at all. If we are unable to obtain licenses, we may be prevented from operating our business and our financial results may therefore be harmed.
IF WE DO NOT CONTINUE TO ATTRACT AND RETAIN QUALIFIED PERSONNEL, WE MAY NOT BE ABLE TO EXPAND OUR BUSINESS.
We depend substantially on the continued services and performance of our management. These individuals may not be able to fulfill their responsibilities adequately or may not remain with us. Our success also depends on our ability to hire, train, retain and manage highly skilled employees. We cannot assure you that we will be able to attract and retain a significant number of qualified employees or that we will successfully train and manage the employees we hire.
WE MAY ACQUIRE OTHER BUSINESSES, PRODUCTS OR TECHNOLOGIES; IF WE DO, WE MAY BE UNABLE TO INTEGRATE THEM WITH OUR BUSINESS, OR WE MAY IMPAIR OUR FINANCIAL PERFORMANCE.
If appropriate opportunities present themselves, we may acquire businesses, products or technologies that we believe are strategic. We do not currently have any understandings, commitments or agreements with respect to any acquisition. We may not be able to identify, negotiate or finance any future acquisition successfully. Even if we do succeed in acquiring a business, product or technology, we have no experience in integrating an acquisition into our business; the process of integration may produce unforeseen operating difficulties and expenditures and may absorb significant attention of our management that would otherwise be available for the ongoing development of our business. If we make future acquisitions, we may issue shares of stock that dilute other stockholders, expend cash, incur debt, assume contingent liabilities or create additional expenses related to amortizing other intangible assets with estimable useful lives, any of which might harm our business, financial condition or results of operations.
WE FACE RISKS SPECIFIC TO INTERNET-BASED COMMERCE IN FOREIGN MARKETS.
Our international risks include:
· | delays in the development of the Internet as a broadcast, advertising and commerce medium in international markets; |
· | unexpected changes in regulatory requirements; |
· | tariffs and trade barriers and limitations on fund transfers; |
· | difficulties in staffing and managing foreign operations; |
· | potential adverse tax consequences; |
· | exchange rate fluctuations; |
· | increased risk of piracy and limits on our ability to enforce our; and |
· | intellectual property rights |
Any of these factors could harm our business.
WE HAVE ARBITRARILY DETERMINED THE OFFERING PRICE, WHICH EXCEEDS THE BOOK VALUE OF THE SECURITIES.
Investors may be unable to recoup their investment if the value of our securities does not materially increase. We arbitrarily selected the price for the common stock. Since an underwriter has not been retained to offer the securities, our establishment of the offering price of the shares has not been determined by negotiation with an underwriter as is customary in underwritten public offerings. The offering price does not bear any relationship whatsoever to our assets, earnings, book value or any other objective standard of value. Therefore, investors may be unable to recoup their investment if the value of our securities does not materially increase. Among the factors we considered in determining the offering price were:
1. | Our lack of an operating history, |
2. | The proceeds we want to raise in this offering, |
3. | The amount of capital to be contributed by purchasers in this offering in proportion to the amount of stock to be retained by our existing stockholders, and |
4. | Our relative cash requirements. |
We must comply with laws and regulations applicable to online commerce. Increased regulation of the Internet or different applications of existing laws might slow the growth in the use of the Internet and commercial online services, which could decrease demand for our products, increase the cost of doing business or otherwise reduce our sales and revenues. The statutes and case law governing online commerce are still evolving, and new laws, regulations or judicial decisions may impose on us additional risks and costs of operations. 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.
Federal legislation imposing limitations on the ability of states to impose taxes on Internet-based sales was enacted in 1998. The Internet Tax Freedom Act, which was extended by the Internet Nondiscrimination Act, exempted certain types of sales transactions conducted over the Internet from multiple or discriminatory state and local taxation through November, 2007. The majority of products and services we sell are already taxed: hotel rooms and car rentals at the local level, and air transportation at the federal level with state taxation preempted. Nevertheless, failure to renew this legislation could allow state and local governments to impose additional taxes on some aspects of our Internet-based sales, and these taxes could decrease the demand for our products or increase our cost of operations.
WE MUST COMPLY WITH TRAVEL INDUSTRY REGULATION.
We must comply with laws and regulations relating to our sales activities, including those prohibiting unfair and deceptive practices and those requiring us to register as a seller of travel products, comply with disclosure requirements and participate in state restitution funds. In addition, many of our travel suppliers are heavily regulated and we are indirectly affected by such regulation.
As a travel company selling air transportation products, we are subject to regulation by government agencies having jurisdiction over economic issues affecting the sale of air travel, including consumer protection issues and competitive practices. Such agencies have the authority to enforce economic regulations, and may assess civil penalties or challenge our operating authority.
THERE IS NO ESTABLISHED TRADING MARKET FOR OUR COMMON STOCK, AND THE MARKET PRICE OF OUR COMMON STOCK MAY BE HIGHLY VOLATILE OR MAY DECLINE REGARDLESS OF OUR OPERATING PERFORMANCE.
There has not been a public market for our common stock prior to this offering. We cannot predict the extent to which a trading market will develop or how liquid that market might become. If you purchase shares of common stock in this offering, you will pay a price that was not established in the public trading markets. The initial public offering price will be determined us. You may not be able to resell your shares above the initial public offering price and may suffer a loss on your investment.
The market prices of the securities of Internet-related and online commerce companies have been extremely volatile. Broad market and industry factors may adversely affect the market price of our common stock, regardless of our actual operating performance. Factors that could cause fluctuation in the stock price may include, among other things:
· | actual or anticipated variations in quarterly operating results; |
· | changes in financial estimates by us or by any securities analysts who might cover our stock; |
· | conditions or trends in our industry; |
· | changes in the market valuations of other travel service providers; |
· | announcements by us or our competitors of significant acquisitions, strategic partnerships or divestitures; |
· | announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us; |
· | additions or departures of key personnel; |
· | sales of our common stock, including sales of our common stock by our directors and officers or our Founding Principles; and |
THE MARKET PRICES OF THE SECURITIES OF INTERNET-RELATED AND ONLINE COMMERCE COMPANIES HAVE BEEN ESPECIALLY VOLATILE.
Broad market and industry factors may adversely affect the market price of our common stock, regardless of our actual operating performance. In the past, following periods of volatility in the market price of their stock, many companies have been the subject of securities class action litigation. If we were sued in a securities class action, it could result in substantial costs and a diversion of management’s attention and resources and would adversely affect our stock price.
WE DO NOT EXPECT TO PAY ANY DIVIDENDS FOR THE FORESEEABLE FUTURE.
We do not anticipate that we will pay any dividends to our stockholders in the foreseeable future. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize on their investment. Investors seeking cash dividends should not purchase our common stock.
OUR SHARES QUALIFY AS PENNY STOCKS AND, AS SUCH, ARE SUBJECT TO THE RISKS ASSOCIATED WITH “PENNY STOCKS”. REGULATIONS RELATING TO “PENNY STOCKS” LIMIT THE ABILITY OF OUR SHAREHOLDERS TO SELL THEIR SHARES AND, AS A RESULT, OUR SHAREHOLDERS MAY HAVE TO HOLD THEIR SHARES INDEFINITELY.
The Company’s common shares may be deemed to be “penny stock” as that term is defined in Regulation Section “240.3a51 -1” of the Securities and Exchange Commission (the “SEC”). Penny stocks are stocks: (a) with a price of less than U.S. $5.00 per share; (b) that are not traded on a “recognized” national exchange; (c) whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ - where listed stocks must still meet requirement (a) above); or (d) in issuers with net tangible assets of less than U.S. $2,000,000 (if the issuer has been in continuous operation for at least three years) or U.S. $5,000,000 (if in continuous operation for less than three years), or with average revenues of less than U.S. $6,000,000 for the last three years.
Section “15(g)” of the United States Securities Exchange Act of 1934, as amended, and Regulation Section “240.15g(c)2” of the SEC require broker dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account. Potential investors in the Company’s common shares are urged to obtain and read such disclosure carefully before purchasing any common shares that are deemed to be “penny stock”.
(i) | control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; |
(ii) | manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; |
(iii) | boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; |
(iv) | excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and |
(v) | the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses |
Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. We use words such as “anticipate”, “expect”, “intend”, “plan”, “believe”, “seek” and “estimate”, and variations of these words and similar expressions to identify such forward-looking statements. You should not place too much reliance on these forward-looking statements. Our actual results are most likely to differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in the preceding “Risk Factors” section and elsewhere in this prospectus. These forward-looking statements address, among others, such issues as:
| · | future earnings and cash flow |
| · | development projects |
| · | business strategy |
| · | expansion and growth of our business and operations |
| · | our estimated financial information |
DILUTION
The common stock to be sold by the selling shareholders is common stock that is currently issued and outstanding. Accordingly, there will be no dilution to our existing shareholders.
PLAN OF DISTRIBUTION
The selling shareholders may sell some or all of their common stock in one or more transactions, including block transactions:
| | · on such public markets or exchanges as the common stock may from time to time be trading; |
| | · in privately negotiated transactions; |
| | · through the writing of options on the common stock; |
| | · in settlement of short sales; or |
| | · in any combination of these methods of distribution. |
The selling shareholders have set an offering price for these securities of USD$0.05 per share, no minimum purchase and an offering period of four months from the date of this prospectus.
The shares may also be sold in compliance with the SEC’s Rule 144. In the event of the transfer by the selling shareholders of their shares to any pledgee, donee, or other transferee, we will amend this prospectus and the registration statement of which this prospectus forms a part by the filing of a post-effective registration statement in order to name the pledgee, donee, or other transferee in place of the selling shareholder who has transferred his shares.
The selling shareholders may also sell their shares directly to market makers acting as principals or brokers or dealers, who may act as agent or acquire the common stock as a principal. Any broker or dealer participating as agent in such transactions may receive a commission from the selling shareholders or, if they act as agent for the purchaser of such common stock, a commission from the purchaser. The selling shareholders will likely pay the usual and customary brokerage fees for such services. Brokers or dealers may agree with the selling shareholders to sell a specified number of shares at a stipulated price per share and, to the extent such broker or dealer is unable to do so acting as agent for the selling shareholders, to purchase, as principal, any unsold shares at the price required to fulfill the respective broker’s or dealer’s commitment to the selling shareholder. Brokers or dealers who acquire shares as principals may thereafter resell such shares from time to time in transactions in a market or on an exchange, in negotiated transactions or otherwise, at market prices prevailing at the time of sale or at negotiated prices, and in connection with such resales may pay or receive commissions to or from the purchasers of such shares. These transactions may involve cross and block transactions that may involve sales to and through other brokers or dealers. We can provide no assurance that all or any of the common stock offered will be sold by the selling shareholders.
If, after the date of this prospectus, the selling shareholders enter into an agreement to sell their shares to a broker-dealer as principal and the broker-dealer is acting as an underwriter, we will need to file a post-effective amendment to the registration statement of which this prospectus is a part. We will need to identify the broker-dealer, provide required information on the plan of distribution, and revise the disclosures in that amendment, and file the agreement as an exhibit to the registration statement.
Also, the broker-dealer would have to seek and obtain clearance of the underwriting compensation and arrangements from the NASD Corporate Finance Department.
Any broker-dealers or agents that are involved in selling the shares are deemed to be “underwriters” in connection with such sales according to SEC rules and regulations.
We are bearing all costs relating to the registration of the common stock, which are estimated at $50,000. The selling shareholders, however, will pay any commissions or other fees payable to brokers or dealers in connection with any sale of the common stock.
We are paying the expenses of the offering because we seek to: (i) become a reporting company with the Commission under the Securities Exchange Act of 1934 (the “1934 Act”); and (ii) enable our common stock to be traded on the OTC Bulletin Board. We believe that the registration of the resale of shares on behalf of existing shareholders may facilitate the development of a public market in our common stock if our common stock is approved for trading on the OTC Bulletin Board.
We consider that the development of a public market for our common stock will make an investment in our common stock more attractive to future investors. In order for us to continue with our business model, we will at some point in the near future need to raise additional capital through private placement offerings. We believe that obtaining reporting company status under the 1934 Act and trading on the OTC Bulletin Board should increase our ability to raise these additional funds from investors.
The selling shareholders and any broker-dealers or agents must comply with the requirements of the Securities Act and the Securities Exchange Act in the offer and sale of the common stock. In particular, during such times as the selling shareholder and any broker-dealers or agents may be deemed to be engaged in a distribution of the common stock, and therefore be considered to be an underwriter, he must comply with applicable law and may, among other things:
| | · Not engage in any stabilization activities in connection with our common stock; |
| | · Furnish each broker or dealer through which common stock may be offered, such copies of this prospectus, as amended from time to time, as may be required by such broker or dealer; and |
| | · Not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities other than as permitted under the Securities Exchange Act. |
USE OF PROCEEDS TO ISSUER
We will not receive any proceeds from the sale of the common stock offered through this prospectus by the selling shareholders.
BUSINESS OF THE ISSUER
Background
In December 2005, Kinder Travel, Inc. (the “Company”, “we”, “our”, “us “, “Kinder Travel”, the “Registrant”, and like references) was formed as a Nevada corporation. Initial operations commenced under the name Kinder Travel & Tours (“KTT”), a sole proprietorship operating out of Surrey, British Columbia, in January 2005. In November 2005, KTT incorporated under the laws of the Province of British Columbia as Kinder Travel, Inc. (“KTBC”). Pursuant to the terms of an Asset Purchase Agreement (“Asset Purchase Agreement”) executed by and between the Company and KTBC, the Company acquired all assets and liabilities of KTBC in exchange for a convertible note for US$20,000 that was converted into 400,000 shares of common stock of the Company. This transaction closed on January 1, 2006 (the “Closing Date”).
Overview
Kinder Travel is a full-service, web-based and in-store travel agency offering a full range of travel services including corporate travel, vacations, cruise holidays, and group tours. However its primary focus is selling, marketing and providing travel services and tours to families, businesses and ministries. Kinder Travel, located in Surrey, British Columbia, Canada, commenced operations in January 2005 and expects to move rapidly towards growth and profitability due to its very unique character as a family vacation specialist and special interest tour operator.
Our primary goal is to provide web-based and in-store travel that promotes family values by and through our web site and in our store. Our internet site www.kindertravel.com will consist of an on-line booking engine geared to providing Christian families with travel options that promote unity.
The technology, infrastructure and operations of Kinder Travel provide consumers with a groundbreaking approach to online travel in a “family” environment aimed at providing affordable opportunities for memories that last a lifetime.
The objective for Kinder Travel is to promote family travel. We believe that traveling plays a vital role in the education of children and adults alike, while playing a pivotal role in “building childhood memories” and reaffirming or creating bonds between the traveling family members. Kinder Travel offers a range of travel and tour products that are suited and composed specifically for Christian families.
Kinder Travel aspires to become a leader in offering and operating a wide range of family oriented travel and tour products. The vast majority of travel agents do not address the very unique challenges a family faces when making their travel plans. From finding the right destination to the affordability of their family vacation, there are many considerations to contemplate before booking.
A scaled down, consumer version of the Company’s Internet site will make debut sometime in August 2006 (“Beta Test Version”). Finally, in October 2006, the Company plans to launch the full-scale version of its Internet site. Once our Internet sites are fully operational, consumers will be able to experience a revolutionary, cost-savings approach to online travel at www.kindertravel.com.
Kinder Travel is a boutique travel agency with a wide range of travel services available to their existing, well-established, client base. However by targeting a unique market segment that has been largely ignored, the family, the Company is well positioned for moderate growth and profitability.
Strategically placed advertising with family oriented newspapers and radio stations will ensure the name recognition and generate the interest to contact “the family travel specialists” either on the web or by email or phone.
Family Focused Travel
Kinder Travel has identified that Christian family travel is not represented and marketed with any special consideration or focus. Kinder Travel offers existing travel and tour products that are family-oriented as well as offering our own specially designed vacations for Christian families.
The following is a representative sample of the kind of travel packages available to families:
Europe Tours by Coach
The Company will focus on the family tour bus concept utilizing two level buses where parents and children can travel in the company of other parents and children. Child-care and related activities will be offered on the lower level. Parents can enjoy the en-route narrative, bible study or focus groups undisturbed on the upper level. City walks or museum visits can be as one group or split up among the ages.
Family Vacations
Transat A.T. Inc. (“Transat”) Holidays the leading package vacation operator for Western Canada is offering many, family oriented and specially priced all inclusive resorts in the charter market. Kinder Travel is exclusively featuring these products by Transat Holidays and aims to become Western Canada’s largest seller of Transat Holidays for families. With Kinder Travel the customer gets more information about resorts and the added benefits and perks that will be unique to booking with Kinder Travel.
Farm Stays in Germany, Austria and Switzerland
Some European farms have converted part of their housing into budget to moderate hotel style accommodations. Families will stay on the farm and will witness the operations first hand. Children will have the opportunity to learn and understand the importance of farming and will have direct contact with live farm animals.
Missionary Travel
Kinder Travel will offer missions to Mexico and other destinations in conjunction with local churches and organizations.
Devotional Tours
There will be spiritual journeys to the Holy Land of Israel and Pilgrimages to sites in Europe, like Lourdes or Camino de Santiago.
Family Adventure Travel
The Company will promote high-end family safaris in cooperation with Abercrombie & Kent, Butterfield & Robinson and Wildland Safaris.
Additional Products and Services
Our Christian focused, family oriented travel and tour products are complemented by the following array of products and services:
www.kindertravel.com
Our web-based program allows consumers to book travel from the convenience of their own home, or from wherever may be convenient for them. The same travel options offered in our store are available through our website.
Access to our web-based program is subject to an annual fee of $49 when you book your first online vacation.
We anticipate that our web-based program will open the door for families, ministries and others to more easily book vacations, thus promoting Christian based family travel.
Kinder Vacations Network (“KVN”)
Utilizing our web-based program, we aim to create the Kinder Vacations Network (“KVN”), which will focus on developing home-based travel agencies offering our travel products and services. These home-based agencies will have access to our booking system, and will receive 80% of our commission for products and services that they sell.
Our program is designed to sell certain geographic areas to interested parities. This will, in turn, afford interested consumers with the opportunity of contacting one of our home based travel representatives in their community.
A monthly fee is $100 is charged to our home-based travel agents, with a discount of $15 per month for a two-year contractual commitment.
Website Advertising
Website advertising will consist of banner ads from major vendors on the www.kindertravel.com website and customized ad placement for our home-based travel agents when consumers simply enter their postal code. This opportunity will allow our home based travel agents the ability to increase their revenue with advertising space that is included in their monthly fee.
Dream Away
The consumer Dream Away, serviced directly from our www.kindertravel.com Internet site, allows consumers to create a “wish list” of destinations, which automatically results in the email distribution of all travel specials for those locations. Additionally, this feature enables consumers to create and store a digital travel log where they are able to store photographs, create a slide show presentation with music and much, much more. The Dream Away feature also provides consumers with location specific tourist information, packing tips and toll-free numbers for all pertinent hotel, car and airline suppliers.
Kinder Travel Cafes
It is our goal to open Kinder Travel Cafes that will feature free access to our www.kindertravel.com website, bible study, and religious and travel seminars as well as typical café services. Additionally, our Kinder Travel Cafes include the following: a comfortable place to sit and read, travel books from the around the world, luggage for sale, travel related merchandise, and trained representatives to assist in booking one of our travel products.
Although our primary travel agency is now operating, there is not presently a timetable for launching our Super Travel Cafes as we are in the process of attempting to negotiate space in certain well-known public destinations such as bookstores, major department stores and university campuses.
“Travel as One” by Kinder
We will be producing a religious based travel video to allow our clients to maximize their family travel. We anticipate a 30 minute infomercial titled Travel as One (the “Travel Video”) to further entice consumers to purchase our travel products and to provide travel tips aimed at enhancing a family vacation. .
Active Web Presence
The website www.kindertravel.com will be operating as a user-friendly booking engine and can be used as a research and booking tool for families planning their vacations as well as businesses and ministries.
Kinder Foundation
Kinder Travel plans to establish a charitable foundation to fund Christian faith-based initiatives in Canada and the United States and to sponsor travel opportunities for families in need.
Industry Background
The Travel Industry
According to market research conducted by PhoCusWright, (“PhoCusWright”); a leading independent, travel, tourism and hospitality research firm specializing in consumer, business, and competitive intelligence; 2004-2006 estimates indicate that while total travel industry growth rates will increase slightly each year, the online share of that market will continue to rise. PhoCusWright projects that more than one-third of all U.S. travel will be booked online by leisure and unmanaged business travel sites in 2006, up from 15% in 2002 and 20% in 2003.
Purchasing travel can be a complicated process involving a variety of destinations, dates and price limitations and the purchase of several products from different suppliers, including air, lodging and car rental providers. To facilitate the exchange of travel information, travelers and suppliers have traditionally relied on travel agents as intermediaries. Travel agents typically perform the task of research, fact-finding and price comparison on behalf of consumers. However, traditional travel agents may not always present optimal choices for consumers and are generally not available 24 hours a day seven days a week.
Travel agents depend on computer reservation systems, referred to as electronic global distribution systems, or GDS, to access flight and other travel product availability and pricing, and to book air and other travel products. GDS may not be able to provide all the information and options that are available in the marketplace due to technical limitations of their legacy mainframe computer systems and their inherent computational limitations. As such, travel agents may not be able to provide consumers with the broadest array of available travel options. Travel agents who use GDS can also increase the overall distribution cost to both consumers and suppliers. For consumers, particularly business travelers, travel agencies typically charge a fee. Traditional consumer leisure travel fees are up to $25 and corporate travel fees generally range from $25 to $50 per transaction. The GDS fees that are charged to suppliers as part of a typical travel agency booking also represent a substantial distribution expense for suppliers. A portion of these fees is typically shared with travel agents each time a booking is made using their systems.
The Online Travel Industry
The sale of travel products online is rapidly gaining consumer acceptance. According to PhoCusWright leisure and unmanaged business travel is the largest consumer spending category on the Internet with approximately $39.4 billion in estimated gross travel bookings in 2003. The Internet empowers consumers and business travelers with a convenient and efficient way to compare and book travel options. In addition, delivery and confirmation of the travel product purchased can be made almost instantaneously through an e-mail sent to the consumer. The Internet also permits suppliers to employ targeted marketing strategies in order to optimize bookings and revenues. While online travel has been widely accepted by consumers, online travel as a percentage of total travel sales is still relatively low. According to PhoCusWright, online travel sales have experienced recent growth rates exceeding 30% annually. This growth is large when compared to the total travel sales, which have grown at only 2-3%.
Although online travel sales have been growing rapidly, we believe that a significant opportunity exists to further increase the number of consumers who purchase travel on the Internet and on www.kindertravel.com by using consumer and supplier-focused technologies and processes to improve the way travel is purchased and sold.
Competitive Advantage
The following attributes will give our Company a competitive advantage over other participants in the travel industry:
Audience and Brand Recognition
Our target audience is every consumer interested in travel, with an emphasis on those of the Christian Faith and families seeking to create those “once in a lifetime” memories. If you are an Internet booker and/or a vacation shopper, even a business client, you will receive the most comprehensive and cost effective travel options focused on promoting family unity. The support that we receive from our suppliers and the commission based incentives that we offer to home based agents in our Kinder Vacations Network will assist in the growth of our Company.
Kinder Vacations Network
We expect that our network of home-based travel agents will help us create a base of knowledgeable, experienced and courteous travel professionals to assist with your travel needs. By utilizing KVN, consumers are able to have their own potentially successful business, directly from the comfort of their own home.
Brand Awareness
It is our expectation that people and families will realize the benefits offered by our travel products and services. Provided this happens, we anticipate tremendous growth opportunities for us, members of KVN, our vendors and, ultimately, the consumer. As our volume of sales increases, we anticipate that suppliers will be inclined to pay higher commissions, making KVN more attractive and allowing us to more fully implement our business model.
Value for Consumers and Travel Suppliers
We will potentially to do business with the vast majority of major suppliers, enabling us to negotiate competitive pricing allowing us to give consumers better products and greater returns on money spent.
Family Oriented Travel Chart
Our technology is set-up to provide consumers with various Christian based and family oriented travel options that suit their interests in one, easy to see chart, allowing the consumer to choose the most desirable option.
Self-Marketing
We still believe that the best advertising is word of mouth. However, for us to effectively compete with the larger in-store and web based travel companies, we will also focus on more traditional forms of advertising, along with our commercial spots and Travel Video.
User friendly, innovative approach to travel
In order to keep consumers happy, you have to be able to service their needs. We take great pride in always being just a phone call away. That is the reason that some have come to refer to us as the “Christian Travel Company.”
Technology Services
Kinder Family Travel Platform
Kinder Family Travel Platform is our technology platform that establishes a direct link with a supplier’s internal reservation system. This allows us to reserve space directly with the supplier. Kinder Family Travel Platform allows our KVN agents to book travel and purchase our products. Consumers benefit by receiving family oriented travel options, while the travel agents will receive 80% of our commission, with the Company retaining the final 20%. We believe our Kinder Family Travel Platform technology is unique among our competitors.
Booking Engine Services
We have distribution and marketing agreements with numerous airlines, lodging companies, rental car companies and other travel suppliers. These agreements enable us to offer our consumers what we believe to be the most comprehensive selection of low fares generally available to the public and a wide array of competitive rates on other travel products.
Technology and Operations
We believe that the design and quality of our technology positions the Company for success, and distinguishes our website and product offerings from those of our competitors. Our goal has been to build an innovative travel management tool for consumers and to build systems that will move traffic and transactions through a low-cost channel. We believe that our system will continue to support rapid growth and differentiate us from our competitors.
Our hardware and software architecture is designed to maximize scalability, availability, reliability, efficiency, flexibility, manageability and security. By implementing many competing fares, checking availability, and booking transactions directly with supplier hosts, we have constructed our booking engine using Internet technologies rather than a system based around more traditional mainframe travel systems.
Use Kinder Vacations Network to increase sales in all sectors
While online sale of vacation travel is likely to be a primary revenue generating source, we believe that our kinder Vacations Network will drive the sales of all travel related purchases as consumers will have access to one of our local representatives. We have launched several key initiatives to take advantage of this opportunity:
· | Improve purchase efficiency through effective marketing techniques; |
· | Improve travel offerings; |
· | Home-based travel agents; |
· | Launch of our dynamic Travel Video; |
· | Low cost travel, with the consumer receiving a portion of our commission; and |
· | Strong Customer Retention. |
We offer consumers what we believe to be the broadest selection of family oriented travel options. As generally evident from the family oriented travel chart on our web site, we offer the largest selection of low fares generally available to the public and a wide array of competitive rates on other travel products. By and through the Kinder Vacations Network, we expect to generate a high degree of customer loyalty that will result in high customer retention rates. Key initiatives to promote higher customer retention include:
· | Continue to maintain strong supplier relationships to ensure competitive rates on commission based travel; |
· | Develop our technology to deliver a customer friendly website, providing the option to become a home-based travel agent; |
· | Invest in technologies and marketing strategies that will improve our ability to target our customers; |
· | Continue to develop our customer care capabilities to make travel more convenient for our customers; |
· | Capitalize on innovative travel platform; |
· | We will continue to capitalize on our strength in developing technological and marketing enhancements that benefit both our travel suppliers and customers; |
· | Feature certain vendors on our site that pay us higher commission structures and greater family oriented travel opportunities for our consumers; and |
· | Direct Relationships with Major Travel Suppliers. |
Expand our Customer Base
Our goal is to increase our customer base by acquiring new customers in a cost-effective manner and increasing our market share in the rapidly growing online travel industry. We intend to achieve this objective by:
· | Emphasizing performance-based online advertising and other targeted marketing strategies; |
· | Cost-effectively building our brand through traditional broadcast and print channels; |
· | Generating increased transactions by using direct mail recognition programs and encouraging infrequent bookers to purchase more travel from us using supplier incentives; and |
· | Offering web-based corporate travel. |
Pursue New Business Opportunities
We plan to use our innovative technology and our relationships with travel suppliers to expand and enhance our growth prospects.
We believe that our approach to travel uniquely positions us to capitalize on the emerging growth of the online travel industry. Since we have an established base of vendor contracts in place, we are able to meet the demands of consumers, all of whom are always looking for an easier and more efficient way to book travel. Our business objectives, once fully implemented, will allow Kinder Travel to continue to develop its wide array of products, putting fast and easy travel tools right at their fingertips.
In order to pursue these business opportunities and our other growth initiatives, we may make strategic acquisitions of other businesses, products and technologies. The discussion of our strategy in this section reflects our current view of the ways we intend to develop our business in the future. Many of the initiatives we describe above are at an early stage, and we continue to review them in light of changing business conditions. We may change our plans, and future developments could differ from those we intend or expect to occur.
For example, in its role as ministry travel provider, the Company is continually seeking new ministries with which it can partner. In 2005, it signed a multi-year revenue sharing agreement with Campus Crusade For Christ Canada (“CCCC”), giving it exclusive rights to all travel bookings in Canada . As part of this agreement, Kinder Travel set up an office within the CCCC head office and employs a full-time agent to service their travel needs.
Kinder Travel also secured the travel business of Alpha Canada, an organization which works with local churches across Canada offering a 10 week, thought-provoking course which explores the Christian faith in a relaxed, non-threatening environment.
Reservations
Our website enables consumers and business travelers to research and purchase a wide range of travel products and services, including airline tickets, hotel accommodations, car rentals, cruises, and vacation packages. We have established agreements with numerous travel suppliers and offer air fares and rates from hundreds of airlines, tens of thousands of hotel properties and a large number of car rental providers. Our advanced search technology allows our customers to easily find and compare what we believe to be the widest selection of travel prices and options from not only our site, but all leading online travel providers, the largest selection of low fares generally available and the opportunity to share in the commissions that we receive. Finally, we have developed what we believe is an intuitive and easy-to-use booking process for making reservations and purchasing travel services.
Flights
Our search engine can quickly analyze over billions of possible flight and fare combinations to provide customers with the largest selection of low fares generally available to the public. Our technology and innovative display allows consumers to choose the best rate or schedule that they find and begin their booking process. Our systems allow you be in total control over your travel choices, while continuously promoting Christian, family oriented travel options.
Our search options allow for easy vacation planning. For example, a person interested in finding a vacation would be asked the following type of questions: (1) Where are you departing from?; (2) Where are you going to?; (3) What are your dates of travel?; (4) How many people are in your party? This information will go out and search all major providers, after which our system will quickly display the best price for that vacation. Whether you are just booking a car, or need a hotel, to booking airline tickets to vacation packages and cruises, the choice is yours!
Our vacation packages feature allows customers to choose among a variety of suppliers of vacation packages, including air and lodging, escorted tours, last-minute and other packages. Consumers can select their tour based on destination, resort name or interest preferences. Our website features online specials and answers to frequently asked questions.
Customer Services
In addition to allowing travelers to book travel transactions, we also provide a broad array of useful information and services designed to optimize the consumer’s www.kindertravel.com experience.
We take the Christian approach to the travel industry. No matter what the question or concern, our representatives are standing by to assist you with all of your travel related questions. Additionally, our website is packed full of useful information that makes travel planning fun, educational and religious. Our search engine is very unique, providing resources not offered by other companies. If you are tired of wasting time doing travel research and still don’t know in which direction to go, then visit us on the internet by typing www.kindertravel.com.
Consumers in our stores are asked to answer a simple travel questionnaire, which we in turn use to offer you the most comprehensive, low-cost options available. Our website is premised on a similar questionnaire, followed by clicking search, after which all of your research will be completed in just a few moments. Whether in store or on our website, we are sure to provide you with all of the information you need to make an informed decision for a Christian oriented family vacation!
Corporate Travel
It is our intent to launch www.kindertravel.com/corporate, to tailor to the ever growing demand for corporate travel solutions that provide lower transaction costs, lower average ticket price, high degree of price transparency, access to a wide choice of low fares, and a superior, automation-enhanced service experience. The Company’s business site will offer companies the same functionality and ease of use that we offer for leisure bookings, while adding functionality and service features that address the needs of both business travelers and the corporate travel managers who administer corporate travel policies.
Our planned launch of this part of our business is early January 2007. While offering the same features as www.kindertravel.com, this aspect offers internal controls meant to maximize company travel policies. Traveler profiles will be uploadable to account for individual travel needs, along with company specific requirements to maximize savings.
Corporations will be charged a flat fee of $100 per month will be charged for access, thereby providing complete access to our corporate services.
Some additional corporate travel features are:
(i) | full integration of corporate negotiated fares and rates in our booking path; |
(ii) | travel arranger functionality, which allows personal assistants to manage travel on behalf of corporate employees; |
(iii) | functionality designed to control travel policies in more highly managed corporate environments, including the ability to track and report reasons for employees not choosing the lowest available fare and the ability to limit availability displays to only those suppliers with which the corporation has a preferred relationship; and |
(iv) | consolidated data reporting, which helps corporations track travel spending and support negotiations with suppliers. |
Consumer Marketing
We use various forms of cost-effective online marketing, including advertising on content sites and placement on comparative shopping tools as well as on search engine websites. We expect to use 30 and 60 second commercial spots as our primary marketing vehicle supplementing these commercials with our Travel Video. A smaller portion of our marketing budget is dedicated to other advertising such as internet, primarily cable, and print publications. Our marketing initiatives are subject to strict cost performance and measurement processes.
Our marketing efforts employ a comprehensive array of analytical tools that measure our spending effectiveness. We use these tools to ensure that we stay focused on achieving a high return on our marketing investment. We believe that focusing on performance-based marketing techniques and the financial implications of our marketing efforts is an important factor in pursuing our goal of profitable growth.
Hardware
Our focus on reducing costs per transaction keeps us focused on the efficiency of our hardware. We make extensive use of commodity hardware, which allows for flexibility and processing power capable of handling large amounts of traffic and data at low unit costs. In addition, we have built monitoring and automation tools to help us monitor, detect and fix problems in our hardware and software. This results in little downtime for maintenance and upgrades, while helping to keep costs of operating and maintaining the machines low despite increases in the number of machines. Our system’s hardware and network architecture are designed to avoid single points of failure.
Software
Our secure password system protects the consumer from any hackers, giving you complete privacy for your travel arrangements. Using your credit card on our site is also protected with an encrypted credit card processing program.
Our superior booking engine will do most of the work for the consumer. Once consumers complete the formatted screen, their data goes out to the major website providers and then to ours (which are the same ones that travel agencies use today). Their data comes back with a comparison, allowing them to make an educated decision for themselves. The data will come back in numerous boxes, so that consumers are able to see the various family oriented travel options. Once they make their decision, they can click on the box to expand it and begin booking the reservation.
Competitors
We operate in a highly competitive market and we may not be able to compete effectively. The market for travel products is intensely competitive. We compete with a variety of companies with respect to each product or service we offer, including:
| · | InterActiveCorp, an interactive commerce company, which owns or controls numerous travel-related enterprises, including Expedia, an online travel agency, |
| · | Hotels.com, a representative of online lodging reservations, Hotwire, a wholesaler of airline tickets, lodging and other travel products and Ticketmaster and |
| · | Citysearch, both of which offer destination information and tickets to attractions; |
| · | Sabre Holdings, which owns Travelocity, an online travel agency, GetThere, a provider of online corporate travel technology and services, and the Sabre Travel Network, a GDS (or "global distribution system"); |
| · | Orbitz, Inc., an online travel company that enables travelers to search for and purchase a broad array of travel products, including airline tickets, lodging, rental cars, cruises and vacation packages; |
| · | Cendant, a provider of travel and vacation services, which owns or controls the following: Galileo International, a worldwide GDS; Cheap Tickets, an online travel agency; Lodging.com, an online representative of hotel rooms; Howard Johnson, Ramada Inns and other hotel franchisors; Avis and Budget car rental companies; |
| · | Travelport, a provider of online corporate travel services and other travel-related brands; |
| · | Expedia, Lowestfare.com and Priceline.com are our primary competitors in the referral marketing business; |
| · | Other consolidators and wholesalers of airline tickets, lodging and other travel products, including Priceline.com and Travelweb; and |
| · | Other local, regional, national and international traditional travel agencies servicing leisure and business travelers. |
We are a relatively small player in this market. These competitors are in general larger, have greater financial and personnel resources and have achieved greater market penetration than we have.
Based solely upon management’s knowledge of and experience in the industry and not upon any research or other verifying data from independent third parties, our agents are quoted the same rates from travel service providers as other travel agents and agencies.
Research and Development
We conduct no research and development activities.
Intellectual Property
We have not applied for any patent or trademarks in connection with our operations.
Description of Property
We lease our corporate headquarters at 20185 64th Avenue , Langley , BC . The office space is a partitioned area of approximately 100 square feet partitioned off from the rest of the general office on the 2nd floor. This space includes utilities and a shared receptionist is provided free-of-charge as part of our revenue share agreement with CCCC. The property is generic office space that meets the Company’s executive and administrative requirements providing ample space for our executives to run the Company, as well as space to expand and hire new employees.
Travel Agency Bond
Travel agencies in Canada are regulated by the Business Practices and Consumer Protection Authority (“BPCPA”). BPCPA required the Company to purchase a Guaranteed Investment Certificate (“GIC”) from a financial institution as a condition for licensing as a travel agency. The financial institution then issued a letter of credit to the BPCPA. The GIC accrues interest at 2.77% and matures on December 14, 2007.
Government Regulation
We must comply with laws and regulations relating to our sales activities, including those prohibiting unfair and deceptive practices and those requiring us to register as a seller of travel products, comply with disclosure requirements and participate in state restitution funds. In addition, many of our travel suppliers are heavily regulated and we are indirectly affected by such regulation.
Travel Industry Regulation
As a travel company selling air transportation products, we are subject to regulation by federal, state and provincial agencies which have jurisdiction over economic issues affecting the sale of air travel, including consumer protection issues and competitive practices. Such agencies may have the authority to enforce economic regulations, and may assess civil penalties or challenge our operating authority. To the extent we sell travel products other than air transportation, we are subject to regulation by other federal, state or provincial agencies, which may have jurisdiction over a wide range of advertising, marketing and other consumer protection areas.
Internet Regulation
We must also comply with laws and regulations applicable to businesses engaged in online commerce. An increasing number of laws and regulations apply directly to the Internet and commercial online services. Moreover, there is currently great uncertainty whether or how existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the Internet and commercial online services. It is possible that laws and regulations may be adopted to address these and other issues. Further, the growth and development of the market for online commerce may prompt calls for more stringent consumer protection laws. New laws or different applications of existing laws would likely impose additional burdens on companies conducting business online and may decrease the growth of the Internet or commercial online services. In turn, this could decrease the demand for our products or increase our cost of doing business.
For example, in the United States, Federal legislation imposing limitations on the ability of states to impose taxes on Internet-based sales was enacted in 1998. The Internet Tax Freedom Act, which was extended by the Internet Nondiscrimination Act, exempted certain types of sales transactions conducted over the Internet from multiple or discriminatory state and local taxation through November 1, 2003. The majority of products and services we sell are already taxed: hotel rooms and car rentals at the local level, and air transportation at the federal level with state taxation preempted. Nevertheless, failure to renew this legislation could allow state and local governments to impose additional taxes on some aspects of our Internet-based sales, and these taxes could decrease the demand for our products or increase our cost of operations.
International
We may become subject to the laws and regulations of other countries, including with respect to transportation, privacy and consumer and online regulation. These may impose additional costs or other obligations on us.
Future Regulation
Federal, state, provincial or other governmental agencies may adopt new laws, regulations and policies regarding a variety of matters that could affect our business or operations. We cannot predict what other matters such agencies might consider in the future, or what the impact of such regulations might be on our business.
Employees
As of December 31, 2005, we employed no persons on a full-time basis and no individuals on a part-time basis.
MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PLAN OF OPERATIONS:
Our plan of operations for the next twelve months is to proceed with the implementation of our business plan. We will strive to launch all aspects of our operations. Primarily, we will focus on the launch of our website and home based network. Continuing operations will always focus on ways to increase our marketing sales force. We may require $300,000 in additional financing to expand our operations as outlined in the table below.
Goal | Expected Manner of Occurrence or Method of Achievement | Date When Step Should be Accomplished | Cost of Completion |
Develop infrastructure and Kinder Travel Cafes | Secure additional office space in various locations, office equipment and develop “specific” marketing materials and hiring additional employees | 6 - 24 months | $100,000 |
Launch full version of our web-site | Complete design and technology of our web-site | 4 - 6 months | $20,000 |
Launch Marketing Phase | Kinder Travel marketing and informational videos designed to develop sales force | 3 -12 months | $60,000 |
Creation of Travel Marketing staff | Marketing head and staff to drive bookings up | 6 - 8 months | $40,000 |
Kinder Vacations Network Sales of 1000 per month | Aggressively market and advertise to generate interest in our home based travel agent network | 9 - 24 months | $60,000 |
Travel as One Video | Create and film our religious travel video | 6 - 9 months | $20,000 |
All steps will be undertaken contemporaneously.
Our marketing effort will be directed at expanding our representative network through personal contact or seminars.
Cash Requirements
Any additional growth of the Company may require additional cash infusions. We may face expenses or other circumstances such that we will have additional financing requirements. In such event, the amount of additional capital we may need to raise will depend on a number of factors. These factors primarily include the extent to which we can achieve revenue growth, the profitability of such revenues, operating expenses, research and development expenses, and capital expenditures. Given the number of programs that we have ongoing and not complete, it is not possible to predict the extent or cost of these additional financing requirements.
Notwithstanding the numerous factors that our cash requirements depend on, and the uncertainties associated with each of the major revenue opportunities that we have, we believe that our plan of operation can build long-term value if we are able to demonstrate clear progress toward our objectives.
Progress in the development of our business plan will likely lend credibility to our plan to maintain profitability. We anticipate that we will hire several members to our sales, marketing, research and development, regulatory and administrative staff during the course of 2006 in order to fully implement our plans for growth.
The Company does not anticipate any contingency upon which it would voluntarily cease filing reports with the SEC, even though it may cease to be required to do so. It is in the compelling interest of this Registrant to report its affairs quarterly, annually and currently, as the case may be, generally to provide accessible public information to interested parties, and also specifically to seek and maintain its eligibility for the OTCBB.
The failure to secure any necessary outside funding would have an adverse affect on our development and results therefrom and a corresponding negative impact on shareholder liquidity.
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2006 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2005 (UNAUDITED).
REVENUE
Our net revenue amounted to $61,585 for the three months ended March 31, 2006 compared to $19,605 for the three months ended March 31, 2005. All revenues were derived from the sale of travel and travel related products. Fluctuations in our revenues is primarily the result of the nature of the business model we operate. The Company can neither predict, assess nor prevent fluctuation. We attempt to offer products and services at competitive prices. Our travel products and services are aimed at those interested in purchasing Christian based, family vacations. Because of the unpredictable nature of fluctuations, we do not attribute fluctuations to any particular item or event. Our business model is to respond to fluctuation with immediate change. We do not account for or analyze the fluctuations as we do not believe it to be a prudent use of resources, given our business model.
OPERATING EXPENSES
Our total operating expenses for the three months ended March 31, 2006 were $62,509 compared to $11,330 for the same period in the prior year. Expenses consisted primarily of general operating expenses and professional fees. The increase in operating expenses is mostly attributable to our accounting and legal expenses associated with our SEC filing and attempt to become listed on the OTCBB.
NET LOSS
Primarily as a result of the foregoing, we had a net loss of $924 for the three months ended March 31, 2006 compared to a net income of $8,275 for the same period in the prior year. Our net loss for the period ended March 31, 2006 is attributed to accounting and legal expenses associated with our SEC filing.
FISCAL YEAR ENDED DECEMBER 31, 2005
Operating Revenues
From inception to December 31, 2005, the Company’s sales totaled $118,727.
Selling, General and Administrative ( ”SG&A”) Expenses
SG&A expenses were $115,024 from inception to December 31, 2005. As a percent of sales, SG&A expenses were 96.88%. SG&A expenses were largely due to increased professional fees, including fees related to becoming a public company traded on the Over the Counter Bulletin Board (“OTCBB”). Additionally, SG&A expenses included $23,814 in management fees to our President.
Advertising costs were $5,713 from inception to December 31, 2005. This was primarily due to increase in spending on outside marketing contractors, including production of brochures and design and maintenance our web site. As the Company expands its operations in new geographic markets, the Company expects that such expenses will be reduced.
Excluding management fees indicated above, SG&A expenses from inception to December 31, 2005 were $91,210.
Net Income
Net income (pre-income tax) was $3,703 from inception to December 31, 2005.
Our cash and cash equivalent balances were $26,903 at December 31, 2005. Since inception, and at December 31, 2005 we had net income of $3,703.
During the year ended December 31, 2005, our operations were funded through loans from related parties whereby we secured $50,000. This $50,000 demand loan is unsecured and has not yet been paid.
Overview
Net cash from operating activities was $6,226 at December 31, 2005. Management believes that the Company will continue to generate sufficient cash from its operating activities for the foreseeable future, supplemented by an anticipated infusion of capital, to fund its working capital needs, strengthen its balance sheet and support its growth strategy of expanding its geographic distribution and product offerings. The infusion of capital is expected by the end of June 2006 and will come from the sale of treasury stock and/or newly issued shares of common stock to one of our directors.
Operating Activities
The Company has more current liabilities than current assets. Working capital (the difference between the Company’s current assets and current liabilities) was ($35,373) at December 31, 2005. Our net income for the year, as adjusted for amortization and future income taxes, was $3,703 for the fiscal year ended December 31, 2005.
Financing Activities
From inception to December 31, 2005, we had no net cash provided from the issuance of common stock through financing activities.
Off-Balance Sheet Arrangements
The Company has no material transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have or are reasonably likely to have a material current or future impact on its financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses.
In the normal course of business, the Company is exposed to foreign currency exchange rate and interest rate risks that could impact its results of operations.
The Company plans to sell its products worldwide via the internet, and a substantial portion of its net sales, cost of sales and operating expenses could be denominated in foreign currencies. This exposes the Company to risks associated with changes in foreign currency exchange rates that can adversely impact revenues, net income and cash flow.
Critical Accounting Policies and Estimates
Management has identified the following policies and estimates as critical to the Company’s business operations and the understanding of the Company’s results of operations. Note that the preparation of this Form 10-SB requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the Company’s financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates, and the differences could be material.
Revenue Recognition
The Company has various methods by which they receive revenue. At present, most revenue is derived substantially from the following sources:
· | Supplier Based Commissions: The Company receives commissions based upon contractual arrangements with leading travel providers. |
· | Consumer Service Fees: Upfront fees charged for each booking regardless of the type of travel. |
Revenue is recognized as follows for the services discussed above:
– | for service fees, when reservations are made and secured by a credit card or other form of payment; |
– | for air travel, cruises and package tours, when reservations are made and secured by a credit card or other form of payment; and |
– | for all travel such as hotel bookings and rental cars, when commissions are received from the travel supplier. |
In 2005, two customers accounted for 34% of total revenue.
Allowance for Doubtful Accounts
Management makes judgments, based on its established aging policy, historical experience and future expectations, as to the ability to collect the Company’s accounts receivable. An allowance for doubtful accounts has been established. The allowance for doubtful accounts is used to reduce gross trade receivables to their estimated net realizable value. When evaluating the adequacy of the allowance for doubtful accounts, management analyzes amounts based upon an aging schedule, historical bad debt experience, and current trends. The Company’s accounts receivable balances were $10,142, net of allowances of $1,265, at December 31, 2005.
Goodwill
The Company did not attribute any value to goodwill for the year ended December 31, 2005.
Accounting for Income Taxes
The Company accounts for income taxes under the asset and liability method. Under this method, deferred assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. The Company establishes a valuation allowance to the extent that it is more likely than not that deferred tax assets will not be recoverable against future taxable income.
Code of Ethics
We have adopted a Code of Ethics and Business Conduct for Officers, Directors and Employees that applies to all of our officers, directors and employees.
SEC Filing Plan
We intend to become a reporting company in 2006 after our SB-1 is declared effective. This means that we will file disclosure documents as required with the US Securities and Exchange Commission. Once this SB-1 is declared effective, we will file a Form 8-A filing in order to complete registration of our common stock.
Recently Issued Accounting Pronouncement
SFAS No. 151, Inventory Costs, is effective for fiscal years beginning after June 15, 2005. This statement amends the guidance in Accounting Research Bulletin No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). The adoption of SFAS No. 151 is expected to have no impact on the Company’s financial statements.
SFAS No. 152, Accounting for Real Estate Time-Sharing Transactions, is effective for fiscal years beginning after June 15, 2005. This statement amends SFAS No. 66, Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in American Institute of Certified Public Accountants Statement of Position 04-2, Accounting for Real Estate Time-Sharing Transactions. The adoption of SFAS No. 152 is expected to have no impact on the Company’s financial statements.
SFAS No. 123(R), Share-Based Payment, replaces SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. This statement requires that the compensation cost relating to share-based payment transactions be recognized at fair value in the financial statements. The Company is required to apply this statement in the first annual period that begins after December 15, 2005. The adoption of SFAS No. 123(R) is expected to have no impact on the Company’s financial statements.
SFAS No. 153, Exchanges of Nonmonetary Assets - an amendment of APB Opinion No. 29, is effective for fiscal years beginning after June 15, 2005. This statement addresses the measurement of exchange of nonmonetary assets and eliminates the exception from fair-value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29, Accounting for Nonmonetary Transactions, and replaces it with an exception for exchanges that do not have commercial substance. The adoption of SFAS No. 153 is not expected to have a significant impact on the Company’s financial statements.
The EITF reached consensus on Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, which provides guidance on determining when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. The FASB issued FSP EITF 03-1-1, Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Investments, which delays the effective date for the measurement and recognition criteria contained in EITF 03-1 until final application guidance is issued. The adoption of this consensus or FSP is expected to have no impact on the Company’s financial statements.
SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 changes the requirements for the accounting for and reporting of a change in accounting principle. Previously, most voluntary changes in accounting principles required recognition via a cumulative effect adjustment within net income of the period of the change. SFAS No. 154 requires retrospective application to prior periods’ financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, this statement does not change the transition provisions of any existing accounting pronouncements. The adoption of SFAS No. 154 is expected to have no impact on the Company’s financial statements.
In September 2005, the EITF reached consensus on Issue no. 05-08, Income Tax Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature. EITF 05-08 is effective for financial statements beginning in the first interim or annual reporting period beginning after December 15, 2005. The adoption of EITF 05-08 is expected to have no impact on the Company’s financial statements.
In September 2005, the EITF reached consensus on Issue 05-02, The Meaning of ‘Conventional Convertible Debt Instrument’ in EITF Issue No. 00-19, ‘Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock.’ EITF 05-02 is effective for new instruments entered into and instruments modified in reporting periods beginning after June 29, 2005. The adoption of EITF 05-02 is expected to have no impact on the Company’s financial statements.
In September 2005, the EITF reached consensus on Issue No. 05-07, Accounting for Modifications to Conversion Options Embedded in Debt Instruments and Related Issues. EITF 05-07 is effective for future modifications of debt instruments beginning in the first interim or annual reporting period beginning after December 15, 2005. The adoption of EITF 05-07 is expected to have no impact on the Company’s financial statements.
Reporting Currency
All of the Company’s transactions are denominated in Canadian currency so the Company has adopted the Canadian dollar as its functional and reporting currency. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the local functional currency are included in “General and Administrative expenses” in the statement of operations, which amounts were not material for 2005 or 2004.
The Department of Corporation Finance in its advisory letter titled International Financial Reporting and Disclosure Issues, dated May 1, 2001 has stated, “Regulation S-X presumes that a US-incorporated registrant will present its financial statements in US dollars. In rare instances, the staff has not objected to the use of a different reporting currency. Those instances have been limited to situations where the US-incorporated registrant had little or no assets and operations in the US, substantially all the operations were conducted in a single functional currency other than the US dollar, and the reporting currency selected was the same as the functional currency. In these circumstances, reporting in the foreign currency would produce little or no foreign currency translation effects under FASB Statement No. 52.”
First, the Company has its only facilities located Canada, and therefore has no assets or operations in the US. Second, all operations of the Company are conducted only in Canadian currency. Third, the reporting currency is in Canadian dollars which is the same currency that all operations were conducted in. Therefore, reporting in Canadian dollars would produce little or no foreign currency translation effects under FASB Statement No. 52.
Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters
(a) No shares of the Company’s common stock have previously been registered with the Securities and Exchange Commission (the “SEC”) or any state securities agency or authority. The Company intends to make application to the NASD for the Company’s shares to be quoted on the OTCBB. The application to the NASD will be made during the Commission comment period for this Form SB-1 or immediately thereafter. The Company’s application to the NASD will consist of current corporate information, financial statements and other documents as required by Rule 15c211 of the Securities Exchange Act of 1934, as amended. Inclusion on the OTCBB permits price quotation for the Company’s shares to be published by such service.
The Company is not aware of any existing trading market for its common stock. The Company’s common stock has never traded in a public market. There are no plans, proposals, arrangements or understandings with any person(s) with regard to the development of a trading market in any of the Company’s securities.
If and when the Company’s common stock is traded in the OTCBB, most likely the shares will be subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), commonly referred to as the “penny stock” rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on The NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the issuer’s net tangible assets; or exempted from the definition by the SEC. If the Company’s shares are deemed to be a penny stock, trading in the shares will be subject to additional sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors, generally persons with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse.
For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such securities and must have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities. Finally, the monthly statements must be sent disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker dealers to trade and/or maintain a market in the Company’s common stock and may affect the ability of shareholders to sell their shares.
(b) Holders. At June 30, 2006, there were two record holders of 2,400,000 shares of the Company’s Common Stock.
(c) Dividends. The Registrant has not paid any cash dividends to date and does not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of the Registrant’s business.
Equity Compensation Plans
We have no equity compensation program including no stock option plan and none are planned for the foreseeable future.
Dividends
There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:
1. | we would not be able to pay our debts as they become due in the usual course of business; or |
2. | our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution. |
We have not declared any dividends, and we do not plan to declare any dividends in the foreseeable future.
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
Information about our executive officers and directors follows:
NAME | AGE | POSITIONS | DATE FIRST HELD |
| | | |
Daniel L. Baxter | 43 | President, CEO, CFO & Director | January 1, 2006 |
Dirk Holzhauer | 38 | Secretary, Director & Treasurer | January 1, 2006 |
Our Articles of Incorporation provide for a Board of Directors ranging from 1 to 10 members, with the exact number to be specified by resolution of the board. All Directors hold office until the next annual meeting of the shareholders following their election and until their successors have been elected and qualified. The Board of Directors appoints Officers. Officers hold office until the next annual meeting of our Board of Directors following their appointment and until their successors have been appointed and qualified.
The business experience during the past five years of each of the persons presently listed above as an Officer or Director of the Company is as follows:
DANIEL L. BAXTER
Daniel Baxter, age 43, is a Professional Engineer registered in the Province of British Columbia. Since 1993, Mr. Baxter has been providing management consulting services to a number of local businesses, primarily in the area of corporate finance, through his company, Mardan Consulting Inc.
Until recently, he had served for 7 years as the Vice President Operations for Vancouver Fire & Security, the largest, privately held fire safety and security business in British Columbia. In that role his primary duties included system design, installation project management, recurring revenue services, and IT development.
In 2006, Mr. Baxter became our President, CEO and CFO.
DIRK HOLZHAUER
Dirk Holzhauer, age 38, was the original founder of Kinder Travel, Inc. Since 1989 he has worked in the travel services sector of various German travel agencies and tour operators, leading branches of DER in Cologne and Frankfurt. Immigrated to Canada in 1996 and established himself as travel agent in the local retail sector.
Kinder Travel, Inc. was conceived by Dirk as a small boutique style niche travel service provider. The focus is primarily family travel as well as ministry and missions travel, and corporate travel. The approach is to offer online self serve capabilities but to provide full flexibility and assist personally in planning travel arrangements.
No director, officer or affiliate of the Company has, within the past five years, filed any bankruptcy petition, been convicted in or been the subject of any pending criminal proceedings, or is any such person the subject or any order, judgment, or decree involving the violation of any state or federal securities laws.
The Company has not compensated any director for service on the Board of Directors or any committee thereof. The Company currently does not have any standing committees.
Currently, there is no arrangement, agreement or understanding between management and non-management stockholders under which non-management stockholders may directly or indirectly participate in or influence the management of the affairs of the Company. Present management openly accepts and appreciates any input or suggestions from stockholders. However, the Board is elected by the stockholders who have the ultimate say, by virtue of their voting rights, in who represents them on the Board. There are no agreements or understandings for any officer or Director to resign at the request of another person and none of the current offers or Directors are acting on behalf of, or will act at the direction of any other person.
Significant Employees
Kinder Travel has one employee who is not an executive officer or director, and who is expected to make a significant contribution to our business. This employee was hired in 2006.
Involvement in Certain Legal Proceedings
During the past five years, none of our directors or officers have been:
· | a general partner or executive officer of any business against which any bankruptcy petition was filed, either at the time of the bankruptcy or two years prior to that time; |
· | convicted in a criminal proceeding or named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
· | subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or |
· | found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated. |
Family Relationships
There are no family relationships by and among any of our officers or directors.
REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
Directors serve without compensation and there are no standard or other arrangements for their compensation.
There are no employment contracts, compensatory plans or arrangements, including payments to be received from the Company with respect to any Director or executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with the Company, or its subsidiaries, any change in control, or a change in the person’s responsibilities following a change in control of the Company.
There are no agreements or understandings for any Director or executive officer to resign at the request of another person. None of our Directors or executive officers acts or will act on behalf of or at the direction of any other person.
Compensation of Officers
Officers serve without compensation and there are no standard or other arrangements for their compensation.
The table below summarizes all compensation awarded to, earned by, or paid to our Officer for all services rendered in all capacities to us for the fiscal periods indicated.
The table below summarizes all compensation awarded to, earned by, or paid to our Officer for all services rendered in all capacities to us for the fiscal periods indicated.
Name and Principal Position | Fiscal Year | Annual Compensation | Long Term Compensation | All Other Compensation ($) |
Salary ($) | Bonus ($) | Other Annual Compensation ($) | Awards | Payouts |
Restricted Stock Awards ($) | Securities Underlying Options/SARS (#) | LTIP Payouts ($) |
Daniel L. Baxter, President, Director, Chief Executive Officer & Chief Financial Officer | 2006 | Nil | Nil | Nil | Nil | Nil | Nil | $1,000(3) |
Dirk Holzhauer, Secretary & Treasurer | 2006 2005 | Nil Nil | Nil Nil | $48,000(1) Nil | Nil Nil | Nil Nil | Nil Nil | $ $23,814(2) |
(1) | This represents a verbal commitment by the Company to pay $4,000 a month in management fees. The amount paid monthly is adjusted to reflect the current cash flow of the Company. |
(2) | This represents management fees paid during 2005. |
(3) | The Company has verbally agreed to compensate Mardan Consulting Inc. $1,000 a month commencing in August 2006 for bookkeeping services and assisting with the preparation of its financial statements. |
Employment Agreements
Currently, we do not have any written employment agreements.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth the amount and nature of beneficial ownership of any class of the Company’s voting securities of any person known to the Company to be the beneficial owner of more than five percent, as of the close of business on June 30, 2006 (the “Record Date”).
(1) | | (2) | | (3) | | (4) |
Title of Class | | Name and Address of Beneficial Owner | | Amount & Nature of Beneficial Ownership | | Percent of Class Before Offering/After Offering |
| | | | | | |
Common Stock | | Mardan Consulting | | 2,000,000 - Direct (a) | | 83% / 0% |
Common Stock | | Dirk Holzhauer | | 400,000 - Direct | | 17% / 0% |
(a) | Daniel L. Baxter indirectly controls these shares of Common Stock held by Mardan Consulting Inc. by virtue of his beneficial ownership of Mardan Consulting Inc. |
(b) | All shares indicated in the above table are restricted securities as defined in the Securities Act of 1933. |
No other person is the beneficial owner of more than five percent of any class of the Company’s voting securities.
Security Ownership of Management
The following table sets forth the amount and nature of beneficial ownership of any class of the Company’s voting securities of all of the Company’s directors and nominees and “named executive officers” as such term is defined in Item 402(a)(2) of SEC Regulation S-B, as of the close of business on June 30, 2006 (the “Record Date”).
Title of Class | | Name and Address of Beneficial Owner (1) | | Amount & Nature of Beneficial Ownership | | Percent of Class Before Offering/After Offering (2) |
| | | | | | |
Common Stock | | Daniel L. Baxter | | 2,000,000 - Indirect (3) | | 83% / 0% |
Common Stock | | Dirk Holzhauer | | 400,000 | | 17% / 0% |
(1) | The address of each beneficial owner is c/o the Company at 1960 143rd Street, Surrey, BC Canada, V4A 7Z2. |
(2) This table is based on 2,400,000 issued and outstanding shares.
(3) | Dan Baxter indirectly controls these shares of Common Stock held by Mardan Consulting Inc. by virtue of his beneficial ownership of Mardan Consulting Inc. |
(4) | As of the date of this prospectus, we have no other shareholders. |
Rule 144 Shares
None of the shares of our common stock are currently available for resale under Rule 144 of the Securities Act of 1933.
In general, under Rule 144 as currently in effect, a person who has beneficially owned shares of a company’s common stock for at least one year is entitled to sell within any three month period a number of shares that does not exceed the greater of:
1. | One percent of the number of shares of the company’s common stock then outstanding, which, in our case, will equal approximately 18,240 shares as of the date of this prospectus; or |
2. | The average weekly trading volume of the company’s common stock during the four calendar weeks preceding the filing of a notice on form 144 with respect to the sale |
Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about the company.
Under Rule 144(k), a person who is not one of the company’s affiliates at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, is entitled to sell shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. None of the shares of our common stock are presently available to be sold by shareholders in compliance with Rule 144(k).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of the date of this prospectus, other than the two transactions described below, there are no, and have not been since inception, any material agreements or proposed transactions, whether direct or indirect, with any of the following:
· our Directors or Executive Officers; |
· any nominee for election as a Director; |
· any principal security holder identified in the preceding “Security Ownership of Management and Certain Security Holders” section; or |
· any relative or spouse, or relative of such spouse, of the above referenced persons. |
(1) Convertible Promissory Note
The Company executed a convertible promissory note with Dirk Holzhauer (“Noteholder”) dated January 1, 2006, in the amount of $20,000 due twelve months from the issue date (“Note”) pursuant to the Asset Purchase Agreement executed with Kinder Travel BC. The Note enables the holder to convert the principal of the Note to 400,000 common shares of the Company. On conversion of the Note, the Holder is entitled to certain registration rights. The Note was converted in March 2006. The Noteholder is an “accredited investor” and the Company believes that the issuance and sale of the Convertible Note qualified for an exemption from registration pursuant to Section 4(2) of the Securities Act of 1933.
(2) Warrants
The Company granted a Common Stock Purchase Warrant to Mardan Consulting, Inc. on January 1, 2006 as an inducement for Daniel Baxter to serve as our CEO and CFO. The warrant exercise price is USD$0.05 per share for up to 2,000,000 shares of our common stock. The warrant expires in January 2011. The Warrant was exercised by Mardan Consulting, Inc. in June 2006. The warrant was issued pursuant to the exemption for non-public offerings under Section 4(2) of the Securities Act.
DESCRIPTION OF SECURITIES
The Company is authorized to issue seventy five million (75,000,000) shares of capital stock, comprised of sixty five million (65,000,000) shares of Common Stock, par value $.001 per share, and ten million (10,000,000) shares of preferred stock, par value $.001 per share (the “Preferred Stock”).
There may be more than one series of either or both of the Common Stock and/or Preferred Stock; the Board of Directors is authorized to determine and alter the rights, preferences, privileges and restrictions granted to, or imposed upon, a wholly unissued class of Common Stock and/or a wholly unissued class of Preferred Stock.
Common Stock
As of June 30, 2006, sixty five million (65,000,000) shares of Common Stock, par value $.001 per share, are authorized, of which 2,400,000 shares are issued and outstanding.
All shares of Kinder Travel, Inc., Common Stock have equal rights and privileges with respect to voting, liquidation and dividend rights. Each share of Common Stock entitles the holder thereof to:
(i) one non-cumulative vote for each share held of record on all matters submitted to a vote of the stockholders;
(ii) to participate equally and to receive any and all such dividends as may be declared by the Board of Directors out of funds legally available therefore; and
(iii) to participate pro rata in any distribution of assets available for distribution upon liquidation.
Stockholders have no preemptive rights to acquire additional shares of Common Stock or any other securities. Common shares are not subject to redemption and carry no subscription or conversion rights. All outstanding shares of Common Stock are fully paid and non-assessable.
Preferred Stock
As of June 30, 2006, ten million (10,000,000) shares of Preferred Stock, par value $.001 per share, are authorized and no shares are issued and outstanding.
Other Securities
No warrants, options, or debt securities have been issued as of the date hereof. No holder of any class of stock has any preemptive right to subscribe for or purchase any kind or class of our securities.
Articles of Incorporation and By-Laws
Provisions of our articles of incorporation and bylaws described below, to be determined, may be deemed to have an anti-takeover effect and may discourage takeover attempts not first approved by our board of directors, including takeovers which certain stockholders may deem to be in their particular best interests. These provisions also could have the effect of discouraging open market purchases of our Common Stock because they may be considered disadvantageous by a stockholder who desires subsequent to such purchases to participate in a business combination transaction with us or elect a new director to our board.
Director Vacancies and Removal
Our bylaws provide that vacancies on our board of directors may be filled for the unexpired portion of the term of the director whose place is vacant by the affirmative vote of a majority of the remaining directors. Our bylaws may provide that directors may be removed from office with or without cause by a majority vote of shareholders entitled to vote at an election of directors.
Actions by Written Consent
Our bylaws provide that any action required or permitted to be taken by our stockholders or Directors at an annual or special meeting of stockholders or directors may be effected without a meeting if, before or after the action taken, a written consent setting forth the action taken is signed by a quorum of stockholders or a quorum of directors, as the case may be. Such consent may be by proxy or attorney, but all such proxies and powers of attorney must be in writing.
Special Meetings of Stockholders
Our articles of incorporation and bylaws provide that a special meeting of stockholders may be called at any time by our President, board of directors, or a majority thereof. Our bylaws may provide that only those matters included in the notice of the special meeting may be considered or acted upon at that special meeting unless otherwise provided by law.
Advance Notice of Director Nominations and Stockholder Proposals
Our bylaws include advance notice and informational requirements and time limitations on any director nomination or any new proposal which a stockholder wishes to make at an annual meeting of stockholders.
Amendment of the Certificate of Incorporation
As required by Nevada law, certain amendments to our certificate of incorporation must be approved by a majority of the outstanding shares entitled to vote with respect to such amendment.
Amendment of Bylaws
Our articles of incorporation and bylaws provide that our bylaws may be amended or repealed by our board of directors or by the stockholders.
Transfer Agent And Registrar
Our independent stock transfer agent is West Coast Stock Transfer, located in Vancouver, British Columbia, Canada. Their mailing address and telephone number is: 850 W. Hastings, Suite 302, Vancouver, BC V6C 1E1; (604)-682-2556.
DISCLOSURE OF SEC POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Articles of Incorporation, as amended, provides to the fullest extent permitted by Nevada law, a director or officer of the Company shall not be personally liable to the Company or its shareholders for damages for breach of such director’s or officer’s fiduciary duty. The effect of this provision of our Articles of Incorporation is to eliminate the rights of the Company and its shareholders (through shareholders’ derivative suits on behalf of The Studio Zone) to recover damages against a director or officer for breach of the fiduciary duty of care as a director or officer (including breaches resulting from negligent or grossly negligent behavior), except under certain situations defined by statute. The Company believes that the indemnification provisions in its Articles of Incorporation are necessary to attract and retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act might be permitted to directors, officers or persons controlling our company under the provisions described above, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
The validity of the shares of common stock offered by the selling stockholders was passed upon by the SteadyLaw Group, LLP.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On January 2, 2006, the Registrant’s Board of Directors approved the engagement of Peterson Sullivan, PLLC (“PS”) as the Registrant’s independent registered public accounting firm to audit the Registrant’s financial statements for the year ended December 31, 2005.
The report issued by PS in connection with the audit for the year ended December 30, 2005 did not contain an adverse opinion or a disclaimer of opinion, nor was such report qualified or modified as to audit scope or accounting principles.
In connection with the audit of the Registrant’s financial statements for the year ended December 31, 2005, there were no disagreements with PS on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedure which, if not resolved to the satisfaction of PS, would have caused PS to make reference to the matter in their report.
INTEREST OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency basis or had, or is to receive, in connection with the offering, a substantial interest, directly or indirectly, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents, subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.
EXPERTS
Our financial statements as of and for the year ended December 31, 2005 filed with this prospectus and registration statement have been audited by Peterson Sullivan, PLLC, as set forth in their report accompanying the financial statements. The financial statements referred to above are included herein in reliance upon such reports given upon the authority of the firm as experts in accounting and auditing.
Available Information
We have not previously been subject to the reporting requirements of the Securities and Exchange Commission. We have filed with the Commission a registration statement on Form SB-1 under the Securities Act with respect to the shares offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to our securities and us you should review the registration statement and the exhibits and schedules thereto. Statements made in this prospectus regarding the contents of any contract or document filed as an exhibit to the registration statement are not necessarily complete. You should review the copy of such contract or document so filed.
You can inspect the registration statement and the exhibits and the schedules thereto filed with the commission, without charge, at the office of the Commission at Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549. You can also obtain copies of these materials from the public reference section of the commission at 450 Fifth Street, NW, Washington, D.C. 20549, at prescribed rates. You can obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The Commission maintains a web site on the Internet that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission at HTTP://WWW.SEC.GOV.
As a result of filing the registration statement, we are subject to the reporting requirements of the federal securities laws, and are required to file periodic reports and other information with the SEC. We will furnish our shareholders with annual reports containing audited financial statements certified by independent public accountants following the end of each fiscal year and quarterly reports containing unaudited financial information for the first three quarters of each fiscal year following the end of such fiscal quarter.
Kinder Travel, Inc. (the "Company") was incorporated under the laws of the state of Nevada. The Company is a full-service travel agency in Surrey, British Columbia, offering the full range of travel services including corporate travel, vacations, cruise holidays, and group tours. However its primary focus is selling, marketing and providing in-store and web-based travel services and tours to families, businesses and ministries.
Effective January 1, 2006, the Company acquired all of the assets and liabilities of a British Columbia corporation, Kinder Travel & Tours, Inc. ("KTT"). This acquisition is described in more detail in Note 2. Prior to the acquisition, the Company had limited operations and expenses were primarily related to becoming incorporated. Subsequent to the acquisition, the Company adopted the business plan of KTT and began operating a travel agency.
The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, with the instructions to Form 10-QSB, and with Regulation S-B. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The results of operations reflect interim adjustments, all of which are of a normal recurring nature and which, in the opinion of management, are necessary for a fair presentation of the results for such interim period. The results reported in these interim financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. Certain information and note disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. These unaudited interim financial statements should be read in conjunction with the audited annual financial statements for the year ended December 31, 2005.
The Company has various methods by which it receives revenue. At present, most revenue is derived substantially from the following sources:
Basic earnings per share is computed by dividing the net income available to common stockholders by the weighted average number of common shares outstanding in the period. Diluted earnings per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive securities. There are no potentially dilutive securities as of March 31, 2006. Common stock issuable is considered outstanding as of the original approval date for purposes of earnings per share computations. The shares issued in the conversion of the convertible note payable described in Note 2, were considered issued for the acquisition of KTT effective January 1, 2006.
All of the Company's transactions are denominated in Canadian currency so the Company has adopted the Canadian dollar as its functional and reporting currency. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the local functional currency are included in "general and administrative expenses" in the statement of operations, which amounts were not material for the first three months of 2006.
The preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of these financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from these estimates.
The Company accounts for income taxes under the asset and liability method. Under this method, deferred assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. The Company establishes a valuation allowance to the extent that it is more likely than not that deferred tax assets will not be recoverable against future taxable income.
There are no new accounting pronouncements expected to have a material effect on the Company's accounting policies or financial reporting.
Effective January 1, 2006, the Company acquired all of the assets and liabilities of Kinder Travel & Tours, Inc. ("KTT"), a British Columbia corporation, which had recently acquired all of the assets and liabilities of a sole proprietor. Prior to the acquisition, the Company was a non-operating shell. Accordingly, the acquisition is accounted for as a recapitalization of the Company. The historical financial statements presented are those of KTT as a combined entity with the sole proprietor.
Effective as of the date of the acquisition, the Company issued a convertible note payable to the shareholder of KTT in the amount of US $20,000 which represents a conversion rate of 400,000 shares of the Company's common stock at US $0.05 per share. During March 2006, the note was converted into 400,000 shares. The Company has accounted for the issuance of shares in the conversion of the note as a recapitalization of the Company. No gain or loss has been recorded on the note conversion. The net assets of KTT have been included in the balance sheet at their book values. No intangible assets were recorded in this acquisition. No cash was paid in this transaction.
Proforma results are not presented since the Company had no revenue or expenses prior to the acquisition of KTT.
In June 2006, Mardan Consulting Inc., a corporation owned by the Company's CEO, Daniel L. Baxter, exercised its right to purchase 2,000,000 shares of common stock under the terms of a Common Stock Purchase Warrant issued in January 2006.
In June 2006, the Company repaid a $75,000 demand loan in cash.
Kinder Travel & Tours, Inc.
We have audited the accompanying balance sheet of Kinder Travel & Tours, Inc. ("the Company"), as of December 31, 2005, and the related statements of operations, stockholders' equity, and cash flow for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Kinder Travel & Tours, Inc. as of December 31, 2005, and the results of its operations and its cash flow for the year then ended, in conformity with accounting principles generally accepted in the United States.
Kinder Travel & Tours, Inc. (the "Company") is incorporated in British Columbia, Canada. The Company was incorporated in 2004 but had no operations until January 2005. On November 1, 2005, the Company acquired all of the assets and liabilities of a sole proprietor. This acquisition is described in more detail in Note 2. Prior to the acquisition, the Company had limited operations and expenses were primarily related to becoming incorporated. Subsequent to the acquisition, the Company adopted the business plan of the sole proprietor and began operating a travel agency.
The Company is a full-service travel agency in Surrey, British Columbia, offering the full range of travel services including corporate travel, vacations, cruise holidays, and group tours. However its primary focus is selling, marketing and providing in-store and web-based travel services and tours to families, businesses and ministries.
Cash consists of funds in checking accounts held by financial institutions in Canada.
Accounts receivable are recorded at their principal amounts and are generally unsecured. Management considers all amounts over 60 days to be past due. Periodically management reviews receivables and establishes an allowance for uncollectible accounts based on historical collection and current economic conditions. Receivables deemed uncollectible are written off against the allowance.
Vehicles and equipment with a life of more than one year and a cost in excess of $500 are capitalized and depreciated. Depreciation is computed using the straight-line method over the estimated useful lives of the assets.
Travel agencies in Canada are regulated by the Business Practices and Consumer Protection Authority ("BPCPA"). BPCPA required the Company to purchase a Guaranteed Investment Certificate ("GIC") from a financial institution as a condition for licensing as a travel agency. The financial institution then issued a letter of credit to the BPCPA. The GIC accrues interest at 2.77% and matures on December 14, 2007.
The Company has a demand loan payable to an unrelated party that has no set repayment terms, does not bear interest, and is unsecured.
The fair value of the cash, accounts receivable, accounts payable and accrued expenses, and the demand loan payable approximate the stated carrying value due to their expected short-term nature. The fair value of long-term debt approximates stated carrying value due to market interest rates for the term of the debt.
Advertising costs are expensed as incurred. Advertising costs were $5,713 for 2005.
The Company has various methods by which they receive revenue. At present, most revenue is derived substantially from the following sources:
In 2005, two customers accounted for 34% of total revenue.
Basic net income per share is computed by dividing the net income available to common stockholders by the weighted average number of common shares outstanding in the period. Diluted loss per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive securities.
During 2005, no common shares had been issued and there were no shares outstanding, so per share information is not presented. In addition, there were no potentially dilutive securities during 2005.
All of the Company's operations are denominated in Canadian currency so the Company has adopted the Canadian dollar as its functional and reporting currency. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the local functional currency are included in "general and administrative expenses" in the statement of operations, which amounts were not material for 2005.
The preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of these financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from these estimates.
The Company accounts for income taxes under the asset and liability method. Under this method, deferred assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. The Company establishes a valuation allowance to the extent that it is more likely than not that deferred tax assets will not be recoverable against future taxable income.
On November 1, 2005, the Company acquired all of the assets and liabilities of a sole proprietor. Prior to the acquisition, the Company was a non-operating shell. Accordingly, the acquisition is accounted for as a recapitalization of the Company. The historical financial statements presented are those of the sole proprietor through October 31, 2005, as combined with the Company from November 1, 2005 through December 31, 2005.
The net assets of the sole proprietor have been included in the balance sheet at their book values. No cash or other consideration was paid in this acquisition.
The assets acquired and liabilities assumed of the sole proprietor are as follows:
The Company has a note payable to a bank. The note is secured by a vehicle, bears interest at 7.89% per year and requires monthly payments of $226 until June 2, 2010, at which time all remaining principal is due in full.
Annual principal payments for the years ending December 31 are required as follows:
The difference between the statutory federal tax rate and the tax provision of zero recorded by the Company is primarily due to differences in depreciation for tax purposes. Tax due on 2005 taxable income was less than $500 and deemed to be immaterial.
Deferred income taxes arise from temporary differences between financial statement and income tax recognition of depreciation expense. The deferred income tax liability at December 31, 2005, is not material.
Effective January 1, 2006, the Company was acquired by Kinder Travel, Inc. ("Kinder Travel"), a Nevada corporation. Kinder Travel paid $20,000 cash for all of the assets and liabilities of the Company. Subsequent to the acquisition, Kinder Travel adopted the business plan and operations of the Company.