Summary of PRO TRAVEL NETWORK, INC

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

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

Overview

We currently support approximately 4500 independent travel agents and over 1200 Independent Representatives throughout North America.

The most major goal towards achieving our business objectives over the next year is our goal of having 100% of our agents booking travel. This is an ambitious goal that may be impossible to attain as many prospective agents or would be agents do not fully work the program. However, we continue to upgrade our training and mentoring programs in pursuit of this goal. Also, continuing operations will always focus on ways to increase our marketing sales force, which by definition will produce more sales of our ITAP and RTAP products which should produce more travel sales to ultimate consumers of travel. Pro Travel Network retains approximately 20-25% of the commission derived from bookings by our ITA (purchasers of our ITAP and RTAP).

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

We continue to believe that we must cut additional costs. While we have reduced expenses significantly through several strong cost-cutting measures, including but not limited to layoffs and bonus and salary reductions, we are looking at possibly closing one or more of our non performing Canadian offices in order to shift our resources where productivity is still vigorous and where we believe we can quickly achieve profitability, namely the new Pro Travel Retail Division. While Pro Travel Network is now leaner, we believe we must be leaner still, as the results the negative economy on our financial situation will take some time to correct, and will still be a major factor working against profitability and revenue growth in the coming months. However, we believe that should we have to make additional cuts, they would be sufficient, combined with previously made and on-going significant marketing adjustments, to carry us through 2010.

We continue to book travel a satisfactory pace throughout our US office and Toronto offices, and expect that as the economy rebounds, and our enhanced focus on cost cutting and strong marketing push, that we should see profitability by 1st fiscal quarter of 2010, although continuing economic uncertainty could cause us to miss this goal.

Pro Travel Retail

We initiated an expansion into Australia on December 19, 2008 with our acquisition of KG & S Pty. Ltd. KG & S Pty, Ltd. has operated its travel business for nearly 20 years and is among the leading online travel agencies in the Melbourne area. This acquisition brings incremental value to the Company and will immediately increase our customer base along with giving the Company immediate access to already established relationships with all major hotels, airlines and car rentals within the greater Australian area. The Australian market is strategic in the Company's long term business plans and will allow the Company to expand services to customers in the Australian market. However, to date we have not launched the Pro Travel network opportunity due to our decision that economic forces were not in our favor. Our CEO just recently visited Australia to begin the ground work for a proposed 2010 launch.

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

As described below in "Liquidity and Capital Resources," we believe we will be able to launch our expansion in Australia without any need to obtain additional financing. However, we may delay our expansion into Australia until 2010

Critical Accounting Estimates

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

Property & Equipment

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

Security Deposits

Security deposits represent operating lease deposits and amounts on deposit with credit card payment processing services that serve as collateral in case we were to cease operations or experience significant chargebacks from customers. Management has provided an allowance for unrecoverable deposits based on its estimate of collectability in the amount of $35,353 as of June 30, 2009 (See the section entitled "Legal Proceedings," below)

Goodwill

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

Results of Operations

Fiscal Year Ended June 30, 2009 Compared to the Fiscal Year Ended June 30, 2008

For the year ended June 30, 2009, total revenues broke down as follows:
Independent Travel Agent Program or ITAP sales - 59%, Travel Commissions - 36% and National Events - 5%. For the year ended June 30, 2008, total revenues broke down as follows: Independent Travel Agent Program or ITAP sales - 71%, Travel Commissions - 24% and National Events - 5%. We had total revenues of $5,438,297 for the year ended June 30, 2009, which is a decrease of $4,173,776, or 43%, below our total revenues for the year ended June 30, 2008, which was $9,612,073. The decrease in total sales was due to a decrease of $3,676,808 in Independent Travel Agent Program or ITAP sales, a decrease of $221,126 in National Events revenue and a decrease of $275,842 in Travel Commissions revenue. The decrease in ITAP sales was due to the decrease in signing up of new agents due to declining economic conditions.

Our cost of sales decreased $3,287,626, or 53%, to $2,922,609 for the year ended June 30, 2009, as compared to cost of sales of $6,210,235 for the fiscal year ended June 30, 2008. The decrease in total cost of sales was due to a decrease of $2,954,792 in Independent Travel Agent Program or ITAP sales, a decrease of $237,767 in National Events cost and a decrease of $95,067 in Travel Commissions. Our cost of sales decreased as a direct result of lower sales of our products offset by reduction in sales bonuses during the year ended June 30, 2009.

We had gross profit of $2,515,688 for the year ended June 30, 2009, which was a decrease of $886,150, or 26%, when compared to our gross profit for the year ended June 30, 2008, which was $3,401,838. Our decrease in gross profit was primarily attributable to the decrease in signing up of new agents due to declining economic conditions.

Operating expenses increased $260,245, or 8%, to $3,435,593 for the year ended June 30, 2009, as compared to total operating expenses of $3,175,348 for the year ended June 30, 2008. The increase in total operating expenses was mainly due to an increase in compensation expense and professional and consulting fees offset by a decrease in general and administrative expenses. Compensation expense increased $366,995 to $2,246,639 for the year ended June 30, 2009, as compared to compensation expense of $1,879,644 for the year ended June 30, 2008. The increase in compensation expense was as follows:

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

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

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

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

Professional and consulting fees increased $227,280 to $406,830 for the year ended June 30, 2009, as compared to professional and consulting fees of $179,550 for the year ended June 30, 2008. The increase in professional and consulting fees was primarily due to the issuance of warrants resulting in an expense to the company of $70,725 along with 783,805 shares of common stock issued for services resulting in an expense to the company of $154,070. Depreciation expense increased $7,236 to $23,048 for the year ended June 30, 2009, as compared to depreciation expense of $15,812 for the year ended June 30, 2008. Impairment expense increased to $65,000 for the year ended June 30, 2009, as compared to none for the year ended June 30, 2008. General and administrative expenses decreased $406,266 to $694,076 for the year ended June 30, 2009, as compared to general and administrative expenses of $1,100,342 for the year ended June 30, 2008. The decrease in general and administrative expenses was primarily attributable to the decrease in office expense and travel resulting from the expansion of our US and Canadian operations in 2008 and merchant fees associated with the decrease in overall sales.

Other income and expenses included a decrease in net interest income of $8,753, to $15,689 for the year ended June 30, 2009, as compared to net interest income of $24,442 for the year ended June 30, 2008, along with a loss on sale of investments of $133,057 for the year ended June 30, 2009, compared to gain on sale of investments of $8,243 for the year ended June 30, 2008, and a gain on foreign currency of $16,784 for the year ended June 30, 2009, compared to a gain on foreign currency of $2,111 for the year ended June 30, 2008.

We had a net loss applicable to common stock of $1,020,489 for the year ended June 30, 2009, as compared to net income applicable to common stock of $261,286 for the year ended June 30, 2008. The increase in net loss applicable to common stock was primarily attributable to the issuance of 2,003,805 shares of common stock for services along with the issuance of options/warrants resulting in a non-cash expense to the company of $616,175 and a decrease in signing up of new agents due to declining economic conditions along with the increase in our corporate and Canadian staffs.

We had other comprehensive loss for the year ended June 30, 2009, consisting of unrealized loss on investments of $127,171 resulting from market to market adjustment of stock owned by the Company at June 30, 2009 compared to an unrealized loss on investment of $75,647 for the year ended June 30, 2008.

Our comprehensive loss was $1,147,660 for the year ended June 30, 2009, as compared to comprehensive income of $185,639 for the year ended June 30, 2008. The increase in comprehensive loss of $1,333,299 for the year ended June 30, 2009 was primarily attributable to the increase in unrealized loss on investments of $127,171 and issuance of 2,003,805 shares of common stock for services along with the issuance of options/warrants resulting in a non-cash expense to the company of $616,175 and a decrease in signing up of new agents due to declining economic conditions along with the increase in our corporate and Canadian staffs.

Liquidity and Capital Resources

As of June 30, 2009, we had total current assets of $542,495 consisting of cash and cash equivalents of $164,703, accounts receivable of $12,026, inventory of $9,950, and investments of $355,816.

We had total current liabilities of $449,162 consisting of accounts payable of $70,571, accrued expenses of $337,961 and deferred revenue of $40,630. We have no long-term debt. Accrued expenses consisted of accrued employees salaries and benefits of $105,539, other expenses of $39,835 and commissions and rewards owed our representatives in the amount of $192,587, of which approximately $33,645 was the estimated full potential value of PTN Reward Points owed Agents and Managers and the reminder was primarily commissions held for payment at the end of every two weeks.

We had working capital of $93,333 as of June 30, 2009 and $657,530 as of June 30, 2008. This is a decrease of $564,197 and due to a decrease in the value of our investments.

During the year ended June 30, 2009, net cash decreased by $203,501 consisting of $117,797 used in operating activities, and $72,617 used in investing activities.

Net cash used in operating activities during the year ended June 30, 2009, consisted of a net loss from operations of $1,020,489, adjustment for impairment in investment of $65,000, adjustments for depreciation and amortization of $23,048 along with share-based compensation of $616,175, an increase in accounts receivable of $11,165, an increase in accounts payable and accrued expenses of $131,377, a decrease in prepaid expenses and other current assets of $16,214 and a decrease in inventory of $7,814 which were offset by a decrease in deferred revenue of $117,241, and an adjustment for gain on sale of investments of $171,470.

Net cash used in investing activities during the year ended June 30, 2009, consisted of property and equipment purchases of $14,450, investments purchases of $309,577 and business acquisition of $41,743 which were offset by sale of investments of $292,722 and a decrease in deposits of $431.

PTN's plan of operations for the coming fiscal year is to take the steps necessary to maximize its operating ability in the current recessionary economy. The downturn has had a significant effect on our earnings, we had a net loss from comprehensive operations for the year ended June 30, 2009 of $1,147,660, and cash used in operations, we had a net utilization of cash applied to operations for the year ended June 30, 2009 of $117,797, and has had a significant impact on our working capital. However, management believes that it has sufficient liquid assets, unrealized commission income from future travel bookings and other sources of working capital to continue operations for the foreseeable future and avoid any adjustments to the carrying value of our assets or liabilities that may be required if we were unable to continue to operate.