Mail Stop 4561
March 29, 2006
Paul Henderson
President and Chief Executive Officer
Pro Travel Network, Inc.
516 W. Shaw Avenue, # 103
Fresno, CA 93704
Re: Pro Travel Network, Inc.
Registration Statement on Form SB-2
Filed March 1, 2006
File No. 333-132127
Dear Mr. Henderson:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. Please supplementally provide us with copies of any graphics,
maps, photographs, and related captions or other artwork including
logos that you intend to use in the prospectus. Such graphics and
pictorial representations should not be included in any
preliminary
prospectus distributed to prospective investors prior to our
review.
Summary Information, page 5
2. Please clarify your disclosure to address the following in
connection with your reorganization in May 2005:
* How the company reduced its number of authorized common shares
from
69 million to 23 million; and,
* If the 69 million shares were exchanged for the 23 million
shares,
what exemption from registration was relied upon in connection
with
the exchange offer.
3. Please clarify whether anybody can become an Independent
Representative of Pro Travel Network or whether individuals must
first purchase the ITAP in order to be eligible. In connection
with
this, please disclose the amount of overlap in the number of your
travel agents and representatives.
Financial Summary, page 6
4. Where you provide summary information regarding your
"Statements
of Operations," please add a line item that discloses net
income/losses in the periods presented.
Risk Factors, page 8
Adverse changes or interruptions in our relationships with travel
suppliers could affect our access to travel offerings and reduce
our
revenues, page 8
5. Please provide additional information regarding the portion of
your agreements with suppliers that are terminable at will and the
portion that are one-year agreements. If you have experienced
disruptions as a result of the termination of agreements with
suppliers, please include disclosure as appropriate.
Our failure to establish and maintain representative relationships
for any reason could negatively impact sales of our products and
reduce our revenues, page 8
6. Please briefly discuss the level of turnover you have
experienced
and the effects it has had on your operations.
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,
page 10
7. We refer to your discussion of the decline in travel bookings
"including those through [y]our website" following the September
11,
2001 terrorist attacks. Please clarify this statement since you
did
not begin operations until late 2003.
Evolving government regulation could impose taxes or other burdens
on
our business, which could increase our costs or decrease demand
for
our products and reduce our revenues, page 10
8. Please disclose the state(s) that have indicated that they may
seek to collect hotel occupancy taxes from you and indicate the
portion of your operations conducted in these states.
Our business is exposed to risks associated with online commerce
security and credit card fraud which could reduce our revenues,
page
11
9. Your statement that you "proactively check for intrusions into
[y]our infrastructure" is language that tends to mitigate the risk
you are presenting and should be removed. If you choose to
discuss
what steps you take to prevent intrusions into your
infrastructure,
please include this disclosure in the Business section of the
prospectus.
Although we have implemented policies and procedures designed to
govern the conduct of our representatives and to protect the
goodwill
associated with our business, it can be difficult to enforce these
policies and procedures because of the number of representatives
and
their independent status which could reduce our revenues, page 11
10. Your first part of the risk factor heading is language that
tends to mitigate the risk you are presenting and should be
removed.
If you choose to discuss the procedures you have in place that are
designed to regulate the conduct of your representatives, please
include this disclosure in the Business section of the prospectus.
Special Information Regarding Forward Looking Statements, page 14
11. We refer to your statement that forward-looking statements in
the
prospectus involve "certain known and unknown risks, uncertainties
and other factors" which may affect the company`s operating
results.
The prospectus should contain a discussion of all known risks.
Please remove the reference to "unknown risks."
Legal Proceedings, page 18
12. We note that the company is pursuing the return of a deposit
in
the amount of $35,000 from a credit card processing service.
Please
expand your disclosure to indicate what steps the company has
taken
to pursue this action and whether it intends to litigate the
matter,
if necessary.
Directors, Executive Officers, Promoters and Control Persons, page
19
13. Please expand the employment history of Mr. Henderson to
clarify
the nature of the sales that he conducted while self-employed and
to
indicate the nature of the business conducted by ACN, Inc.
14. We refer to the disclosure regarding the IRS lien to which Mr.
Henderson is subject. Please indicate whether the lien covers any
of
the assets of the company and whether Mr. Henderson may be forced
to
sell a portion of his ownership in the company in order to satisfy
the lien.
Description of Business, page 22
15. Please expand your disclosure regarding the agreements you
have
with "selected travel providers, including major airlines, cruise
ships, hotels and car rental agencies, including wholesale travel
providers." Your disclosure should include, but not be limited
to, a
description of the services these companies provide to you and
your
representatives, the consideration you and/or your representatives
pay in exchange for these services, the duration of the
agreements,
whether such agreements contain any exclusivity clauses and
whether
you rely on any single supplier for these services. In addition,
please consider whether any of these agreements are material
contracts that would be required to be included as exhibits to the
registration statement.
16. Please discuss whether the company conducts research and
development activities and include estimates of the amount of time
and the costs involved with such activities. We refer to Item
101(a)(10) of Regulation S-B.
17. Please disclose whether the company has, or has applied for,
any
patents or trademarks in connection with its operations. We refer
to
Item 101(a)(7) of Regulation S-B.
Regulation, page 24
18. We refer to your disclosure regarding the Seller of Travel
Laws
in California and Nevada. Please indicate whether you have
complied
with the requirements noted on page 24 for all prior periods.
Competition, page 24
19. Please indicate your competitive position vis-a-vis the
entities
noted under this heading. Specifically, we refer to your
extensive
disclosure regarding such websites as Expedia, Travelocity, Orbitz
and others that have achieved greater market penetration and have
significantly greater resources than you do.
20. Please expand your disclosure to indicate in what ways your
agents have a "significant advantage" over the major online travel
companies. In connection with this please provide us with support
for your contention that, "Usually, the cost to book a trip
through
an home-based agent is comparable to booking a trip through a
major
online travel company."
21. Please provide us supplementally with a copy of the Credit
Suisse
First Boston report noted on page 25. In addition, please confirm
to
us that the company did not enlist CSFB to prepare the report in
connection with this or any other offering by the company.
Management`s Discussion and Analysis, page 26
22. Please expand your MD&A to include a discussion of any
critical
accounting estimates. Refer to SEC release 33-8350.
Significant Factors, page 27
23. In your next amendment, please remove the non-GAAP measure
which
excludes certain expenses incurred during the year related to
going
public. Refer to Item 10(h) of Regulation S-B.
24. We refer to the fourth bullet point under this heading.
Please
indicate how long you believe that cash flows and existing cash
will
satisfy your operating requirements without incurring debt.
Results of operations, page 27
25. Please expand upon your discussion of the results of
operations
for the year ended June 30, 2005 and the period from inception
through June 30, 2004. The fact that the periods are not
comparable
does not eliminate the requirement to discuss the periods and the
reason`s for the changes in the registrant`s results of
operations.
For example, it may be helpful to disclose the amount of revenues
that came from sales of ITAP versus Marketing Opportunity and
commissions, and if you expect your primary source of revenue to
change over time as the ITAP is more widely distributed.
26. Similar to a prior comment, we refer to your statement on page
28
that indicates that, had you not incurred the costs of this
registration statement, the company would have reported a profit
from
operations. The implication behind this statement is that the
costs
involved in the registration process are non-recurring. However,
since you will incur recurring costs related to being a public
reporting company, please remove this statement or provide
sufficient
disclosure to place your existing disclosure in the proper
context.
27. Where you discuss the increases in operating expenses, please
quantify the increase in the number of employees and the portion
of
the overall increase attributable to employee salaries.
Commitments and Contingencies, page 29
28. Please clarify when the monthly rental of your principal place
of
business is scheduled to escalate from $4,397 to $5,374. In
addition, please clarify which months have been prepaid by the
company. Finally, in light of the rental escalation , please
explain
why 2007 and 2009 rental costs are expected to be lower than the
surrounding years.
Milestones, page 29
29. Please expand your disclosure to indicate whether the items
listed are expected to be conducted contemporaneously with each
other, or whether they will be conducted consecutively.
30. Please expand your disclosure to indicate the types of
marketing
that you intend to conduct as well as an identification of the
target
audience (i.e. - potential representatives, consumers or
suppliers).
Liquidity and Capital Resources, page 30
31. Please quantify the portion of your liabilities that comprise
commissions and rewards owed to your representatives and accrued
salaries by your officers.
32. Please discuss the agreement you entered into with
GoPublicToday.com and its affiliates and your requirements
pursuant
to this agreement. For example, please disclose your obligation
to
pay GPT $4,000 per month to conduct compliance activities.
33. Please clarify your discussion of the phasing out of major
infrastructure expenses to explain why you do not expect to incur
expenses related to replacing furniture, computers and software in
future periods. We believe these expenses will be realized
through
depreciation expense over the next few years. Also, if you are
going
to discuss the expected reduction of expenses you should also
discuss
the costs of running a public company versus a private company.
34. Please revise your discussion to explain what the source of
the
additional $250,000 needed to implement your business plan for the
next 12 months will be.
Description of Property, page 30
35. This section appears to be duplicative of disclosure found on
page 29. Please remove repetitive text. In addition, we note
that
the rental figures included in the table on page 30 are higher
than
the corresponding figures found in the table on page 29. Please
revise accordingly.
Certain Relationships and Related Transactions, page 31
36. We note that the issuance of founders` shares did not appear
to
be based on a single value ascribed to the securities issued. For
example, we note that Ms. Penley received shares in exchange for
no
consideration, while the other founders received varying amounts
of
shares in return for $10,000 each. Please explain why the cash
consideration did not correspond to the number of shares received
by
the founders and how you accounted for this transaction.
37. Please identify your promoters and include the information
required by Item 404(d) of Regulation S-B.
38. Please file copies of the agreements you entered into with GPT
and PCMS as exhibits to the registration statement. In addition,
please expand your disclosure to describe the specific
registration
rights granted to these entities.
Market for Common Equity and Related Stockholder Matters
OTC Bulletin Board Qualification for Quotation, page 33
39. Please expand your disclosure to discuss the specific
limitations
on the resale of shares held by affiliates pursuant to Rule 144.
Executive Compensation, page 34
40. We note that certain compensation to be awarded to Mr.
Henderson
has been accrued by the company and is payable to him. Please
include this information in a footnote to the table.
Interim Financial Statements, page 36
41. Please revise your interim financial statements to disclose
any
events which occurred subsequent to the end of the most recent
fiscal
year which have a material impact on the registrant. At a
minimum,
provide disclosure about the sale of common stock in December
2005.
Additionally, please tell us whether any of the warrants discussed
on
page 44 have been issued during the 2006 fiscal year to date, and
if
not, whether any of the performance obligations have been
completed.
Balance Sheet, page 36
42. Please tell us why you have classified the sale of 171,340
shares
of common stock in December 2005 as a liability on your balance
sheet, and not as part of shareholder`s equity. Please cite the
specific accounting literature in that you have relied upon in
your
response.
Statements of Operations, page 37
43. Please revise your statements of operations to display cost of
sales on a disaggregated basis, displaying a separate cost of
sales
line item for each revenue line item presented.
Statements of Cash Flows, page 37
44. Please revise your statements of cash flows to classify the
proceeds received from the sale of common stock in December 2005
as a
cash flow from financing activities. Additionally, revise your
entire document to remove any statements you have made that
indicate
cash flows from operations were positive for the six-month period
ended December 31, 2005.
45. Please revise the change in accounts payable and accrued
expense
for the six months ended December 31, 2005 to be shown as a cash
outflow and net income for the six months ended December 31, 2004
to
be shown as income rather than a loss.
Financial Statements, page 38
Note B - Significant Accounting Policies, page 41
Revenue Recognition, page 42
46. Please revise your revenue recognition policy related to
Travel
Agent Products to be more specific about how revenues are
recognized
for the various items you are selling. Specifically, address how
revenues are recognized for monthly license fees and when you
consider services to be rendered. Address whether these sales
require you to perform any services for the purchaser going
forward,
and if the purchaser has any opportunity to receive a refund of
their
purchase price for any length of time for any reason.
47. Please revise your revenue recognition policy for commission
revenues to address how you determined that it is appropriate for
you
to recognize the entire gross commission received as revenue.
Please
note that a thorough analysis should address each of the
indicators
within EITF 99-19.
Part II
Recent Sales of Unregistered Securities, page 46
48. Please expand your disclosure regarding the April/May and
December 2005 issuances to explain how you determined that the
individuals who were not "accredited investors" possessed the
necessary sophistication and access to information as required in
a
valid 4(2) private offering. In connection with this, please also
tell us how the offerings were conducted and whether an offering
circular was used in connection with these sales.
Exhibits
49. Please file your legality opinion with your next amendment or
provide us with a draft so that we have an opportunity to review
it.
* * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities Act
of
1933 and that they have provided all information investors require
for an informed investment decision. Since the company and its
management are in possession of all facts relating to a company`s
disclosure, they are responsible for the accuracy and adequacy of
the
disclosures they have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert staff comments and the declaration
of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Eric McPhee at 202-551-3693 or Daniel
Gordon,
Accounting Branch Chief, at (202) 551-3486 if you have questions
regarding comments on the financial statements and related
matters.
Please contact me at 202-551-3694 with any other questions.
Sincerely,
Owen Pinkerton
Senior Counsel
cc: Michael T. Williams, Esq. (via facsimile)
Paul Henderson
Pro Travel Network, Inc.
March 29, 2006
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