##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




---

FORM 10-Q



|    |                                                                                          
|--- | -----------------------------------------------------------------------------------------
|[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR
	 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR



|      |                                                                                          
|----- | -----------------------------------------------------------------------------------------
|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13
	OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30,
2000



---

Commission File No. 001-14353



---

Global Vacation Group, Inc.

(Exact name of Registrant as specified in
its charter)


|                                                                                               |  |                                                  
|---------------------------------------------------------------------------------------------- |  | -------------------------------------------------
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|New York(State or other jurisdiction of incorporation or
	organization)                        |  | 13-1894567(I.R.S. Employer Identification Number)
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|1420 New York Avenue, N.W., Suite 550
	Washington D.C.(Address of principal executive offices) |  | 20005(Zip Code)                                  

Registrants telephone number, including area code:
(202) 347-1800

Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes[X]  No

As of August 11, 2000 there were 14,392,825 shares of
Registrants Common Stock outstanding.



---






---

TABLE OF CONTENTS



|                                              |                                                                                               |  |  |  |  |  |  | 
|--------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|PART II. OTHER INFORMATION                   
|                                              | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|                                              | SIGNATURES                                                                                   
|STOCK PURCHASE AGREEMENT DATED MARCH 17, 1999
|STOCK PURCHASE AGREEMENT DATED APRIL 1, 1999 
|ASSET PURCHASE AGREEMENT                     
|AMENDMENT NO. 3 TO RESTATED CREDIT AGREEMENT 
|NOTE PURCHASE                                
|FINANCIAL DATA SCHEDULE                      



---



INDEX

|                             |  |                                                                                        |                                                                                                             |          |    |    | 
|---------------------------- |  | -------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | -------- | -- | -- | 
|                             |  |                                                                                        |                                                                                                             | Page No.
|                             |  |                                                                                        |                                                                                                             |         
|                            
|                            
|                            
|                            
|PART I FINANCIAL INFORMATION
|                            
|                            
|                            
|                            
|Item  1.                     |  | Financial Statements (unaudited)                                                       |                                                                                                             |          | 3  |   
|                            
|                            
|                            
|                            
|                             |  |                                                                                        | Condensed Consolidated Balance Sheets as of June 30, 2000
	and December 31, 1999                            |          |    | 3  | 
|                            
|                            
|                            
|                            
|                             |  |                                                                                        | Condensed Consolidated Statements of Operations For the Three and
	 Six Months Ended June 30, 2000 and 1999 |          |    | 4  | 
|                            
|                            
|                            
|                            
|                             |  |                                                                                        | Condensed Consolidated Statements of Cash Flows for the Six
	Months Ended June 30, 2000 and 1999            |          |    | 5  | 
|                            
|                            
|                            
|                            
|                             |  |                                                                                        | Notes to Condensed Consolidated Financial Statements                                                        |          |    | 6  | 
|                            
|                            
|                            
|                            
|Item  2.                     |  | Managements Discussion and Analysis of Financial Condition
	and Results of Operations |                                                                                                             |          | 11 |   
|                            
|                            
|                            
|                            
|                             |  |                                                                                        | Results of Operations                                                                                       |          |    | 12 | 
|                            
|                            
|                            
|                            
|                             |  |                                                                                        | Liquidity and Capital Resources                                                                             |          |    | 14 | 
|                            
|                            
|                            
|                            
|Item  3.                     |  | Quantitative and Qualitative Disclosures About Market Risk                             |                                                                                                             |          | 16 |   
|                            
|                            
|                            
|                            
|PART II OTHER INFORMATION   
|                            
|                            
|                            
|                            
|Item  4.                     |  | Submission of Matters to a Vote of Security Holders                                    |                                                                                                             |          | 17 |   
|                            
|                            
|                            
|                            
|Item  6.                     |  | Exhibits and Reports on Form 8-K                                                       |                                                                                                             |          | 17 |   

2



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##### Table of Contents



PART I.

FINANCIAL INFORMATION


Item  1:  Financial Statements

GLOBAL VACATION GROUP, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


ASSETS

|                                                     |                                                                                                                     |                                            |        |                   |         |  |        |         |         | 
|---------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ----------------- | ------- |  | ------ | ------- | ------- | 
|                                                     |                                                                                                                     | June 30, 2000                              |        | December 31, 1999
|                                                     |                                                                                                                     |                                            |        |                  
|                                                     |                                                                                                                     | (unaudited)                                |        |                  
|                                                    
|                                                    
|                                                    
|                                                    
|Current assets:                                      |                                                                                                                     |                                            |        |                   |         |  |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash and cash equivalents (includes $6,144 and $1,219 of
	restricted cash, respectively)                            |                                            | $      | 58,209            |         |  | $      | 24,152  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Short-term investments                                                                                              |                                            |        | 25                |         |  |        | 103     |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Accounts receivable, net of allowance of $585 and $1,222,
	respectively                                             |                                            |        | 24,725            |         |  |        | 20,068  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other current assets                                                                                                |                                            |        | 8,601             |         |  |        | 10,823  |        
|                                                     |                                                                                                                     |                                            |        |                   |         |  |        |        
|                                                     |                                                                                                                     | Total current assets                       |        |                   | 91,560  |  |        |         | 55,146  | 
|                                                     |                                                                                                                     |                                            |        |                   |         |  |        |        
|                                                     | Property and equipment, net                                                                                         |                                            |        | 21,978            |         |  |        | 22,615  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Related party and other long-term receivables                                                                       |                                            |        | 908               |         |  |        | 963     |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Intangible assets, net                                                                                              |                                            |        | 100,256           |         |  |        | 97,754  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other assets                                                                                                        |                                            |        | 155               |         |  |        | 2,197   |        
|                                                     |                                                                                                                     |                                            |        |                   |         |  |        |        
|                                                     |                                                                                                                     | Total assets                               |        | $                 | 214,857 |  |        | $       | 178,676 | 
|                                                     |                                                                                                                     |                                            |        |                   |         |  |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|LIABILITIES AND SHAREHOLDERS EQUITY                
|                                                    
|                                                    
|                                                    
|                                                    
|Current liabilities:                                 |                                                                                                                     |                                            |        |                   |         |  |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Accounts payable and accrued expenses                                                                               |                                            | $      | 76,807            |         |  | $      | 62,873  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Customer deposits                                                                                                   |                                            |        | 65,287            |         |  |        | 36,704  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Current portion of long-term debt                                                                                   |                                            |        |                  |         |  |        | 5,082   |        
|                                                     |                                                                                                                     |                                            |        |                   |         |  |        |        
|                                                     |                                                                                                                     | Total current liabilities                  |        |                   | 142,094 |  |        |         | 104,659 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Long-term debt, net of current portion               |                                                                                                                     |                                            |       |                   |         |  | 24,431 |        
|                                                    
|                                                    
|                                                    
|                                                    
|Other long-term liabilities                          |                                                                                                                     |                                            | 1,354  |                   |         |  | 621    |        
|                                                    
|                                                    
|                                                    
|                                                    
|Convertible notes                                    |                                                                                                                     |                                            | 27,500 |                   |         |  |       |        
|                                                     |                                                                                                                     |                                            |        |                   |         |  |        |        
|                                                     |                                                                                                                     | Total liabilities                          |        |                   | 170,948 |  |        |         | 129,711 | 
|                                                     |                                                                                                                     |                                            |        |                   |         |  |        |        
|Commitments and Contingencies
	Shareholders equity: |                                                                                                                     |                                            |        |                   |         |  |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Preferred Stock, $.01 par value, 6,000,000 shares authorized, no
	shares issued and outstanding                     |                                            |        |                  |         |  |        |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Common Stock, $.01 par value, 60,000,000 shares authorized,
	14,775,816, and 14,747,576 shares issued, respectively |                                            |        | 148               |         |  |        | 148     |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Deferred compensation                                                                                               |                                            |        | (23               | )       |  |        | (28     | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Additional paid-in capital                                                                                          |                                            |        | 95,771            |         |  |        | 95,771  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Retained deficit                                                                                                    |                                            |        | (49,671           | )       |  |        | (44,611 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Treasury stock, 382,991 and 382,991 shares at cost                                                                  |                                            |        | (2,316            | )       |  |        | (2,316  | )      
|                                                     |                                                                                                                     |                                            |        |                   |         |  |        |        
|                                                     |                                                                                                                     | Total shareholders equity                 |        |                   | 43,909  |  |        |         | 48,964  | 
|                                                     |                                                                                                                     |                                            |        |                   |         |  |        |        
|                                                     |                                                                                                                     | Total liabilities and shareholders equity |        | $                 | 214,857 |  |        | $       | 178,676 | 
|                                                     |                                                                                                                     |                                            |        |                   |         |  |        |        

See Notes to condensed consolidated financial statements.

3



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##### Table of Contents



GLOBAL VACATION GROUP, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)


(unaudited)


|                                                         |                   |              |        |                  |       |      |        |        |       |   |        |        |       |   |        |        |       | 
|-------------------------------------------------------- | ----------------- | ------------ | ------ | ---------------- | ----- | ---- | ------ | ------ | ----- | - | ------ | ------ | ----- | - | ------ | ------ | ----- | 
|                                                         |                   |              |        |                  |       |     
|                                                         |                   | Three Months |        |                 
|                                                         |                   | Ended        |        | Six Months Ended
|                                                         |                   | June 30,     |        | June 30,        
|                                                         |                   |              |        |                 
|                                                         |                   | 2000         |        | 1999             |       | 2000 |        | 1999  
|                                                         |                   |              |        |                  |       |      |        |       
|Net revenues                                             |                   | $            | 36,394 |                  |       | $    | 34,411 |        |       | $ | 63,746 |        |       | $ | 57,170 |       
|                                                        
|                                                        
|                                                        
|                                                        
|Operating expenses                                       |                   |              | 31,908 |                  |       |      | 29,329 |        |       |   | 59,275 |        |       |   | 50,750 |       
|                                                         |                   |              |        |                  |       |      |        |        |       |   |        |        |       |   |        |       
|                                                         |                   | Gross profit |        |                  | 4,486 |      |        |        | 5,082 |   |        |        | 4,471 |   |        |        | 6,420 | 
|                                                        
|                                                        
|                                                        
|                                                        
|General and administrative expenses                      |                   |              | 2,425  |                  |       |      | 3,519  |        |       |   | 4,843  |        |       |   | 6,586  |       
|                                                        
|                                                        
|                                                        
|                                                        
|Depreciation and amortization                            |                   |              | 1,893  |                  |       |      | 1,378  |        |       |   | 3,744  |        |       |   | 2,424  |       
|                                                         |                   |              |        |                  |       |      |        |        |       |   |        |        |       |   |        |       
|Income (loss) from operations                            |                   |              | 168    |                  |       |      | 185    |        |       |   | (4,116 | )      |       |   | (2,590 | )     
|                                                         |                   |              |        |                  |       |      |        |        |       |   |        |        |       |   |        |       
|Other income (expense)                                   |                   |              |        |                  |       |      |        |        |       |   |        |        |       |   |        |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Interest income   |              |        | 821              |       |      |        | 601    |       |   |        | 1,350  |       |   |        | 1,056  |      
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Interest expense  |              |        | (1,145           | )     |      |        | (430   | )     |   |        | (2,293 | )     |   |        | (574   | )    
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Other             |              |        | 11               |       |      |        | 48     |       |   |        | (1     | )     |   |        | 57     |      
|                                                         |                   |              |        |                  |       |      |        |        |       |   |        |        |       |   |        |       
|                                                         |                   | Total        |        |                  | (313  | )    |        |        | 219   |   |        |        | (944  | ) |        |        | 539   | 
|                                                         |                   |              |        |                  |       |      |        |        |       |   |        |        |       |   |        |       
|Income (loss) before income taxes and extraordinary item |                   |              | (145   | )                |       |      | 404    |        |       |   | (5,060 | )      |       |   | (2,051 | )     
|                                                        
|                                                        
|                                                        
|                                                        
|Income tax benefit (expense)                             |                   |              | (2,018 | )                |       |      | (135   | )      |       |   |       |        |       |   | 782    |       
|                                                         |                   |              |        |                  |       |      |        |        |       |   |        |        |       |   |        |       
|Income (loss) before extraordinary item                  |                   |              | (2,163 | )                |       |      | 269    |        |       |   | (5,060 | )      |       |   | (1,269 | )     
|                                                        
|                                                        
|                                                        
|                                                        
|Extraordinary item, net of income tax benefit of $144    |                   |              |       |                  |       |      |       |        |       |   |       |        |       |   | (257   | )     
|                                                         |                   |              |        |                  |       |      |        |        |       |   |        |        |       |   |        |       
|                                                         | Net income (loss) |              | $      | (2,163           | )     |      | $      | 269    |       |   | $      | (5,060 | )     |   | $      | (1,526 | )    
|                                                         |                   |              |        |                  |       |      |        |        |       |   |        |        |       |   |        |       
|Basic and diluted net loss per common share:             |                   |              |        |                  |       |      |        |        |       |   |        |        |       |   |        |       
|                                                        
|                                                        
|                                                        
|                                                        
|Income (loss) per share before extraordinary item        |                   | $            | (0.15  | )                |       | $    | 0.02   |        |       | $ | (0.35  | )      |       | $ | (0.08  | )     
|                                                        
|                                                        
|                                                        
|                                                        
|Extraordinary item per share                             |                   | $            |       |                  |       | $    |       |        |       | $ |       |        |       | $ | (0.02  | )     
|                                                         |                   |              |        |                  |       |      |        |        |       |   |        |        |       |   |        |       
|Basic net income (loss) per share                        |                   | $            | (0.15  | )                |       | $    | 0.02   |        |       | $ | (0.35  | )      |       | $ | (0.10  | )     
|                                                         |                   |              |        |                  |       |      |        |        |       |   |        |        |       |   |        |       
|Diluted net income (loss) per share                      |                   | $            | (0.15  | )                |       | $    | 0.02   |        |       | $ | (0.35  | )      |       | $ | (0.10  | )     
|                                                         |                   |              |        |                  |       |      |        |        |       |   |        |        |       |   |        |       
|Weighted Average Shares Outstanding:                     |                   |              |        |                  |       |      |        |        |       |   |        |        |       |   |        |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Basic             |              |        | 14,393           |       |      |        | 14,627 |       |   |        | 14,393 |       |   |        | 14,666 |      
|                                                         |                   |              |        |                  |       |      |        |        |       |   |        |        |       |   |        |       
|                                                         | Diluted           |              |        | 14,393           |       |      |        | 14,711 |       |   |        | 14,393 |       |   |        | 14,666 |      
|                                                         |                   |              |        |                  |       |      |        |        |       |   |        |        |       |   |        |       

See Notes to condensed consolidated financial statements.

4



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##### Table of Contents



GLOBAL VACATION GROUP, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


(unaudited)


|                                                                                 |                                                                      |                                                 |   |        |         |   |   |        |         |  
|-------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ----------------------------------------------- | - | ------ | ------- | - | - | ------ | ------- | -
|                                                                                 |                                                                      |                                                
|                                                                                 |                                                                      | Six Months Ended                               
|                                                                                 |                                                                      | June 30,                                       
|                                                                                 |                                                                      |                                                
|                                                                                 |                                                                      | 2000                                            |   | 1999  
|                                                                                 |                                                                      |                                                 |   |       
|Cash flows from operating activities:                                            |                                                                      |                                                 |   |        |         |   |   |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Net loss                                                             |                                                 | $ | (5,060 | )       |   | $ | (1,526 | )      
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Adjustments to reconcile net loss to net cash provided by
	operating activities: |                                                                      |                                                 |   |        |         |   |   |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Depreciation and amortization                                        |                                                 |   | 3,744  |         |   |   | 2,424  |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Amortization of deferred financing costs                             |                                                 |   | 549    |         |   |   | 435    |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Amortization of deferred compensation                                |                                                 |   | 5      |         |   |   | 60     |        
|                                                                                 | Changes in assets and liabilities, excluding effect of
	acquisitions |                                                 |   |        |         |   |   |        |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                      | Accounts receivable                             |   |        | (4,657  | ) |   |        | (3,392  | )
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                      | Other assets                                    |   |        | 1,122   |   |   |        | 2,274   |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                      | Accounts payable and accrued expenses           |   |        | 15,087  |   |   |        | 11,819  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                      | Customer deposits                               |   |        | 28,583  |   |   |        | 18,622  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                      | Other liabilities                               |   |        | 231     |   |   |        | (738    | )
|                                                                                 |                                                                      |                                                 |   |        |         |   |   |       
|                                                                                 | Net cash provided by operating activities                            |                                                 |   | 39,604 |         |   |   | 29,978 |        
|                                                                                 |                                                                      |                                                 |   |        |         |   |   |       
|                                                                                 | Cash flows from investing activities:                                |                                                 |   |        |         |   |   |        |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                      | Purchases of property and equipment             |   |        | (1,648  | ) |   |        | (2,691  | )
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                      | Net sales (purchases) of investments            |   |        | 78      |   |   |        | (169    | )
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                      | Acquisitions, net of cash acquired              |   |        |        |   |   |        | (31,161 | )
|                                                                                 |                                                                      |                                                 |   |        |         |   |   |       
|                                                                                 |                                                                      | Net cash used in investing activities           |   |        | (1,570  | ) |   |        | (34,021 | )
|                                                                                 |                                                                      |                                                 |   |        |         |   |   |       
|                                                                                 | Cash flows from financing activities:                                |                                                 |   |        |         |   |   |        |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                      | Net payments on loans from related parties      |   |        |        |   |   |        | (797    | )
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                      | Payments on capital lease obligations           |   |        | (746    | ) |   |        |        |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                      | Proceeds from borrowings under credit agreement |   |        |        |   |   |        | 33,641  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                      | Repayment of borrowings from credit agreement   |   |        | (29,422 | ) |   |        | (5,200  | )
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                      | Proceeds from convertible notes                 |   |        | 27,500  |   |   |        |        |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                      | Deferred financing costs                        |   |        | (1,309  | ) |   |        | (343    | )
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                      | Purchase of treasury stock                      |   |        |        |   |   |        | (1,563  | )
|                                                                                 |                                                                      |                                                 |   |        |         |   |   |       
|                                                                                 | Net cash (used in) provided by financing activities                  |                                                 |   | (3,977 | )       |   |   | 25,738 |        
|                                                                                 |                                                                      |                                                 |   |        |         |   |   |       
|                                                                                 | Net increase in cash and cash equivalents                            |                                                 |   | 34,057 |         |   |   | 21,695 |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Cash and cash equivalents beginning of period                        |                                                 |   | 24,152 |         |   |   | 30,317 |        
|                                                                                 |                                                                      |                                                 |   |        |         |   |   |       
|                                                                                 | Cash and cash equivalents end of period                              |                                                 | $ | 58,209 |         |   | $ | 52,012 |        
|                                                                                 |                                                                      |                                                 |   |        |         |   |   |       
|Supplemental disclosures of cash flow information:                               |                                                                      |                                                 |   |        |         |   |   |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Cash paid for:                                                       |                                                 |   |        |         |   |   |        |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 |                                                                      | Taxes                                           |   | $      | 4       |   |   | $      | 170     |  
|                                                                                 |                                                                      |                                                 |   |        |         |   |   |       
|                                                                                 |                                                                      | Interest                                        |   | $      | 638     |   |   | $      | 280     |  
|                                                                                 |                                                                      |                                                 |   |        |         |   |   |       

See Notes to condensed consolidated financial statements.

5



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##### Table of Contents



GLOBAL VACATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2000


(Unaudited)


1. Business Description and Organization

Global Vacation Group, Inc. and subsidiaries (the
Company or GVG) is one of the largest
U.S. providers of value-added vacation products and services
targeted to higher-income travelers. The Company assembles air,
hotel, rental car and other travel components in bulk and
provides complete vacations to travelers through retail travel
distributors, such as travel agents, and other distribution
channels, including the Internet and affinity groups. The Company
 provides flexible independent travel programs for individuals as
 well as escorted tours and group packages. Global Vacation
Group, Inc.s common stock is traded on the New York Stock
Exchange under the symbol GVG.

Headquartered in Washington D.C., the Company markets its major
products under the brand names Classic Custom Vacations,
Vacations By Globetrotters, and Allied Tours. Classic Custom
Vacations creates customized vacation packages for U.S. travelers
 seeking an individualized vacation. The Globetrotters brand is
targeted to the popular priced vacation buyer. The Allied Tours
brand creates packages for international travelers visiting the
U.S.

In March 1998, the Company was recapitalized and between
March 1998 and June 1999 acquired the stock or assets
of seven other vacation providers and one information system
provider. Through these acquisitions, GVG acquired the
outstanding capital stock of Haddon Holidays, Inc.
(Haddon), Classic Custom Vacations
(Classic), Globetrotters, Inc.
(Globetrotters), Friendly Holidays, Inc.
(Friendly), Island Resort Tours, Inc.
(Island), International Travel & Resorts, Inc.
(ITR), and substantially all the assets of MTI
Vacations, Inc. (MTI), and Trase Miller Solutions,
Inc. (Trase Miller) (collectively, the
Acquisitions or the Acquired Businesses).

Risks and Other Important Factors

For the year ended December 31, 1999, and for the six months
 ended June 30, 2000, the Company incurred a net loss of
$3.5 million and $5.1 million, respectively. To address
 these results, management has announced plans to restructure and
 consolidate certain aspects of its business related primarily to
 its Vacations By Globetrotters operations including the systems
acquired in the Trase Miller acquisition.

During the three months ended June 30, 2000, the Company
raised $27.5 million from a private investment group (see
Note 6) through the issuance of subordinated convertible 9%
notes due July 1, 2007 and subsequently paid down all
outstanding borrowings under its credit agreement. In conjunction
 with the repayment, the Company amended the financial covenants
and interest rate under its credit facility. The amended credit
agreement still requires the Company to meet certain financial
covenants and ratios. There can be no assurance that the Company
will continue to meet these conditions, and if it does not, the
Lenders could terminate the credit agreement with the Company. In
 that event, the Company might be required to locate additional
sources of capital. Although the Company believes it has the
ability to find such sources, there can be no assurance that
adequate capital will be available, or available on terms that
are reasonable or acceptable to the Company.

The success and future of the Company is dependent on its ability
 to maximize revenue growth and profitability from its Classic
Custom Vacations and Allied Tours brands, while restructuring the
 operations of its Vacations By Globetrotters brand. Although the
 restructuring is intended to significantly eliminate overhead
and other expenses, there can be no assurance that these actions
will improve the performance of the Company as a whole or its
operating results.

The Companys operations are subject to certain risks and
uncertainties, including, among others, current and potential
competitors with greater resources, dependence on effective
information systems, changing industry dynamics related to new
methods of distribution within the travel industry, industry
consolidations,

6



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##### Table of Contents



GLOBAL VACATION GROUP, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

seasonal fluctuations in operating results, dependence on rapidly
 changing technologies, reliance on key personnel, international
political and economic conditions impacting travel patterns, and
dependence on travel suppliers.

Restructuring Plan

On July 31, 2000 the Company announced that it plans to
restructure and consolidate certain aspects of its business. The
Company intends to merge the management of its Vacations By
Globetrotters operations under the direction of its Classic
Custom Vacations brand. As part of this consolidation, the
Company will migrate its Globetrotters domestic products to the
Classic technology platform. Upon finalization of these plans in
the third quarter, the Company expects to terminate approximately
 85 full-time employees and reduce the office facility
requirements of its Chicago operations. With the completion of
these plans, management expects to record a charge of
approximately $35.0 million for the resulting impairment of
systems, intangible assets as well as severance and restructuring
 costs.

2. Summary of Significant Accounting Policies

The preparation of financial statements in conformity with
generally accepted accounting principles 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 the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

The quarterly condensed consolidated financial statements
included herein have been prepared by the Company, without audit,
 pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC) and include, in the opinion
 of the Company, all adjustments, consisting of normal and
recurring adjustments, necessary for a fair presentation of
interim period results. Certain information and footnote
disclosures normally included in financial statements prepared in
 accordance with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to such
rules and regulations. The Company believes that its disclosures
are adequate to make the information presented not misleading.
These condensed consolidated financial statements should be read
in conjunction with the financial statements and notes thereto
included in the Companys 1999 Form 10-K. The results
of operations for the three and six month periods ended
June 30, 2000 are not necessarily indicative of the results
to be expected for the full year.

There have been no significant changes in the accounting policies
 of the Company during the periods presented. For a description
of these policies, refer to Note 2 to the Consolidated Financial
Statements and related Notes thereto included in the
Companys 1999 Form 10-K.

Net Revenues

Net revenues include commissions and markups on travel products
and services, volume bonuses received from travel suppliers,
cancellation fees and other ancillary fees such as travel waiver
and insurance products and are generally recognized upon the
commencement of travel. For the six months ended June 30,
2000 and 1999, the Company had net revenues of $63.7 million
 and $57.2 million, respectively, and net loss, before
extraordinary charges, of $5.1 million and
$1.3 million, respectively, derived from total dollar values
 of travel products and services of $283.0 million and
$246.1 million, respectively.

Income Taxes

The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standard (SFAS)
No. 109, Accounting for Income Taxes. Under SFAS
 No. 109, deferred tax assets and

7



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##### Table of Contents



GLOBAL VACATION GROUP, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

liabilities are computed based on the difference between the
financial statement and income tax bases of assets and
liabilities using the enacted marginal tax rate. SFAS
No. 109 requires that a net deferred tax asset be reduced by
 a valuation allowance if, based on the weight of available
evidence, it is more likely than not that some portion or all of
the net deferred tax asset will not be realized. During the three
 months ended June 30, 2000, the Company provided a
valuation allowance against previously recognized deferred tax
assets as a result of the Companys plan to restructure.

Long-lived Assets

The Company reviews its long-lived assets, including property and
 equipment, identifiable intangibles, and goodwill whenever
events or changes in circumstances indicate that the carrying
amount of the assets may not be fully recoverable. To determine
recoverability of its long-lived assets, the Company evaluates
the probability that future undiscounted net cash flows will be
less than the carrying amount of the assets. Other than as a
result of the restructuring, management believes that its
long-lived assets are recoverable.

The Companys estimates of anticipated net revenues, gross
profits, the remaining estimated lives of tangible and intangible
 assets, or both, could be reduced significantly in the future
due to changes in technology, regulation, or competitive
pressures in any of the Companys individual operating
brands. As a result, the carrying amount of long-lived assets and
 intangibles including goodwill could be further reduced
materially in the future.

Net Income (Loss) per Share

Basic income or loss per share is computed by dividing net income
 or loss available to common shareholders by the weighted average
 number of common shares outstanding for the period. Diluted
income or loss per share includes the potential dilution that
could occur if securities or other contracts to issue common
stock were exercised or converted into common stock.

The treasury stock effect of options to purchase 1,346,311 and
1,528,774 shares of common stock outstanding at June 30,
2000 and 1999, respectively, has not been included in the
computations of diluted loss per share for the three and six
months ended June 30, 2000 or the six months ended
June 30, 1999, as such effect would be anti-dilutive. The
treasury stock effect of options outstanding at June 30,
1999 has been included in the computation of diluted income per
share for the three months ended June 30, 1999.
Additionally, the effect of the convertible notes has not been
included in the computation of diluted loss per share for the
three and six months ended June 30, 2000, as such effect
would be anti-dilutive.

New Accounting Standards

In June 1998, the Financial Accounting Standards Board
(FASB) issued SFAS No. 133, Accounting for
 Derivative Instruments and Hedging Activities. SFAS
No. 133 establishes accounting and reporting standards
requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded
in the balance sheet as either an asset or liability measured at
its fair value. SFAS No. 133 requires that changes in the
derivatives fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. SFAS
No. 133 was initially proposed to be effective for all
fiscal years beginning after June 15, 1999, however the FASB
 issued SFAS No. 137 Accounting for Derivative
Instruments and Hedging Activities  Deferral of the
Effective Date of FASB Statement No. 133, and the
effective date of this SFAS has been deferred until issuance by
the FASB. Management has not yet determined the impact of
adopting this statement, but believes it will not have a material
 impact upon the Companys results of operations or
financial position.

In January 2000, the SEC issued Staff Accounting Bulletin
(SAB) No. 101, Revenue Recognition.
The Bulletin provides guidance for applying generally accepted
accounting principles to revenue recognition,

8



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##### Table of Contents



GLOBAL VACATION GROUP, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

presentation and disclosure in financial statements filed with
the SEC. SAB No. 101 is effective no later than the fourth
quarter for fiscal years beginning after December 15, 1999.
Management has not yet determined the impact of adopting this
statement.

3. Acquisitions

Since March 1998, the Company has acquired Haddon, Classic,
Globetrotters, Friendly, ITR, Island and substantially all of the
 assets of MTI and Trase Miller. Each of these acquisitions was
acquired with cash and certain assets. The Company financed the
Acquisitions with proceeds from the issuance of additional shares
 of convertible preferred and common stock and from borrowings
under its Credit Facility. The acquisition of each of these
businesses has been accounted for as a purchase for financial
reporting purposes. The Company allocated the excess of the
purchase price over the fair value of net assets acquired to
goodwill. The Company amortizes goodwill over 35 years.

In connection with the 1999 and 1998 acquisitions, the Company
recognized approximately $5.3 million in liabilities as the
cost of closing redundant facilities and terminating certain
employees. As of December 31, 1999, approximately
$3.2 million of the accrual remained. During the six months
ended June 30, 2000, the Company charged approximately
$1.0 million against the accrual for amounts paid during
this period. The remaining accrual relates primarily to lease and
 severance costs, substantially all of which are expected to be
paid in 2000.

4. Commitments and Contingencies

The Company is periodically a party to disputes arising from
normal business activities. In the opinion of management,
resolutions of these matters will not have a material adverse
effect upon the financial position or future operating results of
 the Company, and adequate provision for any potential losses has
 been made on the accompanying financial statements.

5. Second Amended Credit Facility

The Companys operating results during the year ended
December 31, 1999 required the Company to restructure its
credit facility by entering into an amended agreement (the
Second Amended Agreement) with the lenders of the
facility. The Second Amended Agreement changed the previously
established acquisition line of credit into a revolving line and
adjusted the total capacity of the facility to $41.0 million
 with maturity on January 31, 2002. The facility allowed for
 cash borrowings of up to $35.0 million and for the issuance
 of standby letters of credit up to a total of
$10.0 million. Under the Second Amended Agreement, the
Company continued to pay interest at an alternate base rate
advances (ABR Advances) or eurodollar advances
(Eurodollar Advances) plus an applicable margin.

The Second Amended Agreement also revised financial ratios and
covenants which the Company is required to meet. The Second
Amended Agreement also provided for an additional fee of up to
1.5% of outstanding borrowings if the Company did not raise a
minimum of $25.0 million in equity. The additional fee was
earned by the Lenders in 0.25% increments at 90, 120, and
150 days from October 28, 1999. During the six months
ended June 30, 2000, the Company paid $411,000 of these
additional fees.

During the three months ended June 30, 2000, the Company
further amended its credit facility in conjunction with raising
$27.5 million in convertible debt from a private investment
group (see Note 6). In exchange for complete paydown of all
outstanding borrowings, the Lenders agreed to amendments that
altered and replaced certain of the credit facilitys
prescribed financial covenants and ratios, including replacing
minimum EBITDA coverage with a leverage ratio. The amendment also
 provides reduction in certain of the applicable margins on
borrowings and fees under the credit facility.

9



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##### Table of Contents



GLOBAL VACATION GROUP, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

As of June 30, 2000, the remaining total facility commitment
 was $20.5 million and the maximum available for cash
borrowings was $13.9 million. As of such date, the Company
had no outstanding borrowings and had issued $6.6 million in
standby letters of credit leaving up to $3.4 million
available to secure additional standby letters of credit. The
facility allows for letters of credit up to a total of
$10 million with any additional letters of credit above this
 amount secured by cash deposited with the Lenders.

6. Convertible Debt

In June 2000, the Company raised $27.5 million from the
 issuance of subordinated convertible notes (the
Notes). Under terms of the transaction, the Company
issued 9%, seven-year subordinated notes, convertible into common
 stock at a price of $5.25 per share. The Notes may be converted,
 at any time, in total or partial to common stock. Under the
terms of the note purchase agreement, the Company is required to
meet certain financial ratios and covenants including a
debt-to-equity ratio and a fixed charge coverage ratio, among
others. In connection with the issuance of the Notes, the Company
 has incurred approximately $1.3 million in financing costs.
 The Company will amortize such costs over the term of the Notes.

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##### Table of Contents






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

Forward-Looking Information

The matters discussed in this Form 10-Q include
forward-looking statements that involve risks or uncertainties.
While forward-looking statements are sometimes presented with
numerical specificity, they are based on various assumptions made
 by management regarding future circumstances, over many of which
 the Company has little or no control. A number of important
factors, including those identified under the caption Risk
Factors in the Companys 1999 Form 10-K, as well
as factors discussed elsewhere in this Form 10-Q, could
cause the Companys actual results to differ materially from
 those in forward-looking statements or financial information.
Actual results may differ from forward-looking results for a
number of reasons, including the following: (i) changes in
general economic conditions and other factors that affect demand
for travel products or services; (ii) changes in the
vacation travel industry; (iii) changes in the
Companys relationships with travel suppliers;
(iv) competitive factors (including changes in travel
distribution methods); (v) the success of the Companys
 operating and growth strategies (including the ability to
integrate acquisitions into the Companys operations, the
ability of acquired companies to achieve satisfactory operating
results and the ability of the Company to manage the transition
to an integrated information platform) and (vi) alterations
to the Companys restructuring and consolidation plan upon
finalization and implementation of the plan. Should one or more
of these risks or uncertainties materialize, or should underlying
 assumptions prove incorrect, actual results may vary materially
from those anticipated, estimated or projected.

Overview

Global Vacation Group, Inc., and Subsidiaries (GVG or
 the Company) assembles air, hotel, rental car and
other travel components in bulk and provides complete vacations
to travelers through retail travel distributors, such as travel
agents, and other distribution channels including the Internet
and affinity groups. In March 1998, the Company was
recapitalized and between March 1998 and June 1999
acquired the stock or assets of seven other vacation providers
and one information system provider. Through these acquisitions,
GVG acquired the outstanding capital stock of Haddon Holidays,
Inc. (Haddon), Classic Custom Vacations
(Classic), Globetrotters, Inc.
(Globetrotters), Friendly Holidays, Inc.
(Friendly), Island Resort Tours, Inc.
(Island), International Travel & Resorts, Inc.
(ITR), and substantially all the assets of MTI
Vacations, Inc. (MTI), and Trase Miller Solutions,
Inc. (Trase Miller) (collectively, the
Acquisitions or the Acquired Businesses).
 The consideration for the Acquisitions consisted primarily of
cash. Each Acquisition has been accounted for under the purchase
method of accounting. The accompanying financial statements for
the three and six months ended June 30, 2000 and 1999
include the results of operations for each of the Acquisitions
from their respective acquisition dates.

Net revenues include commissions and markups on travel products
and services, volume bonuses received from travel suppliers,
cancellation fees and other ancillary fees such as travel waiver
and insurance products and are generally recognized upon the
commencement of travel. For the six months ended June 30,
2000 and 1999, the Company had net revenues of $63.7 million
 and $57.2 million, respectively, and net loss, before
extraordinary charges, of $5.1 million and
$1.3 million, respectively, derived from total dollar values
 of travel products and services of $283.0 million and
$246.1 million, respectively.

Operating expenses include travel agent commissions, salaries,
credit card merchant fees, telecommunications, advertising and
other costs associated with the selling and processing of travel
reservations, products and services. Commission payments to
travel agents are typically based on a percentage of the price
paid for the travel product or service, but in certain
circumstances are fixed dollar amounts. Reservations agents are
compensated either on an hourly basis, a commission basis or a
combination of the two. The Companys telephone costs
primarily relate to the cost of incoming calls on toll-free
numbers. General and administrative expenses consist primarily of
 compensation and benefits to administrative and other non-sales
personnel, fees for professional services, and other general
office expenses.

The Company derives a significant portion of its pre-tax results
from interest earned on funds related to customer deposits and
prepayments for vacation products. Generally, the Company
requires a deposit within one week of making a travel
reservation. Reservations are typically made two to three months
prior to

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##### Table of Contents





Results of Operations (unaudited)

The following table summarizes the Companys historical
results of operations as a percentage of net revenues for the six
 months ended June 30, 2000 and 1999.

|                                                      |                      |                           |          |         |  |        |        |      |   |  |          |         |  |  |        |      |  
|----------------------------------------------------- | -------------------- | ------------------------- | -------- | ------- |  | ------ | ------ | ---- | - |  | -------- | ------- |  |  | ------ | ---- | -
|                                                      |                      |                          
|                                                      |                      | Six Months Ended June 30,
|                                                      |                      |                          
|                                                      |                      |                           |          |        
|                                                      |                      | 2000                      |          | 1999   
|                                                      |                      |                           |          |        
|                                                      |                      | Amount                    |          | %       |  | Amount |        | %   
|                                                      |                      |                           |          |         |  |        |        |     
|Net revenues                                          |                      |                           | $63,746  |         |  |        | 100.0% |      |   |  | $57,170  |         |  |  | 100.0% |     
|                                                     
|                                                     
|                                                     
|                                                     
|Operating expenses                                    |                      |                           | 59,275   |         |  |        | 93.0   |      |   |  | 50,750   |         |  |  | 88.8   |     
|                                                      |                      |                           |          |         |  |        |        |      |   |  |          |         |  |  |        |     
|                                                      | Gross profit         |                           |          | 4,471   |  |        |        | 7.0  |   |  |          | 6,420   |  |  |        | 11.2 |  
|                                                     
|                                                     
|                                                     
|                                                     
|General and administrative expenses                   |                      |                           | 4,843    |         |  |        | 7.6    |      |   |  | 6,586    |         |  |  | 11.5   |     
|                                                     
|                                                     
|                                                     
|                                                     
|Depreciation and amortization                         |                      |                           | 3,744    |         |  |        | 5.9    |      |   |  | 2,424    |         |  |  | 4.2    |     
|                                                      |                      |                           |          |         |  |        |        |      |   |  |          |         |  |  |        |     
|                                                      | Loss from operations |                           |          | (4,116) |  |        |        | (6.5 | ) |  |          | (2,590) |  |  |        | (4.5 | )
|                                                      |                      |                           |          |         |  |        |        |      |   |  |          |         |  |  |        |     
|Interest income                                       |                      |                           | 1,350    |         |  |        | 2.1    |      |   |  | 1,056    |         |  |  | 1.8    |     
|                                                     
|                                                     
|                                                     
|                                                     
|Interest expense                                      |                      |                           | (2,293)  |         |  |        | (3.6   | )    |   |  | (574)    |         |  |  | (1.0   | )   
|                                                     
|                                                     
|                                                     
|                                                     
|Other, net                                            |                      |                           | (1)      |         |  |        |       |      |   |  | 57       |         |  |  | 0.1    |     
|                                                      |                      |                           |          |         |  |        |        |      |   |  |          |         |  |  |        |     
|Loss before income taxes and extraordinary item       |                      |                           | (5,060)  |         |  |        | (8.0   | )    |   |  | (2,051)  |         |  |  | (3.6   | )   
|                                                     
|                                                     
|                                                     
|                                                     
|Income tax benefit                                    |                      |                           |         |         |  |        |       |      |   |  | 782      |         |  |  | 1.4    |     
|                                                      |                      |                           |          |         |  |        |        |      |   |  |          |         |  |  |        |     
|Loss before extraordinary item                        |                      |                           | (5,060)  |         |  |        | (8.0   | )    |   |  | (1,269)  |         |  |  | (2.2   | )   
|                                                     
|                                                     
|                                                     
|                                                     
|Extraordinary item, net of income tax benefit of $144 |                      |                           |         |         |  |        |       |      |   |  | (257)    |         |  |  | (0.4   | )   
|                                                      |                      |                           |          |         |  |        |        |      |   |  |          |         |  |  |        |     
|Net loss                                              |                      |                           | $(5,060) |         |  |        | (8.0   | )%   |   |  | $(1,526) |         |  |  | (2.6   | )%  
|                                                      |                      |                           |          |         |  |        |        |      |   |  |          |         |  |  |        |     

Net revenues for the six months ended June 30, 2000 and
1999, were $63.7 million and $57.2 million,
respectively, which reflects the consolidated net revenues of the
 Company and the Acquired Businesses from their respective
acquisition dates. The increase in net revenues of 11.5% for the
six months ended June 30, 2000 was primarily due to the
effect of the Acquired Businesses and growth at the Classic
Custom Vacations brand partially offset by significant revenue
shortfalls at the Vacations By Globetrotters brand.

Operating expenses for the six months ended June 30, 2000
and 1999, were $59.3 million and $50.8 million,
respectively, or 93.0% and 88.8%, respectively, of net revenues.
The increase in operating expense as a percentage of net revenues
 is mainly due to higher operating expense ratios of the Acquired
 Businesses, and the product roll out of Better Homes and Gardens
 in certain test markets. These increases and significant revenue
 shortfalls from one of the operating brands resulted in a
decrease in gross profit percentage of 4.2% in the six-month
period ended June 30, 2000 from the six-month period ended
June 30, 1999.

General and administrative expenses for the six months ended
June 30, 2000 and 1999 were $4.8 million and
$6.6 million, respectively, or 7.6% and 11.5%, respectively,
 of net revenues. The decrease in general and administrative
expenses of 26.5% is primarily due to decreases in professional
fees and outside services as well as the integration of certain
operations of the Acquired Businesses into other brands.

Depreciation and amortization for the six months ended
June 30, 2000 and 1999 was $3.7 million and
$2.4 million or 5.9% and 4.2%, respectively, of net
revenues. The increase is due to the amortization of

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Interest income for the six months ended June 30, 2000 and
1999 was $1.4 million and $1.1 million, respectively,
or 2.1% and 1.8%, respectively, of net revenues. The increase in
interest income is due to higher cash balances and increased
rates of returns from more favorable interest rates.

Interest expense for the six months ended June 30, 2000 and
1999 was $2.3 million and $574,000, respectively, reflecting
 increased average levels of borrowings, higher interest rates
from credit facility amendments and market conditions and the
accelerated write-off of certain deferred finance costs from the
early paydown of debt.

A valuation reserve has been recognized at June 30, 2000
against the Companys deferred tax assets due to the
significance of historical losses and the expected loss upon the
restructuring of the Companys operations. The benefit for
income taxes for the six months ended June 30, 1999 was
$782,000 at a tax rate of 38.1%.

Net loss for the six months ended June 30, 2000 and 1999 was
 $5.1 million and $1.5 million, respectively, or 8.0%,
and 2.6%, respectively, of net revenues. Net loss for the six
months ended June 30, 1999 includes an extraordinary charge
of $257,000, net of tax benefit of $144,000, related to the
write-off of deferred financing costs associated with the
restructuring of the Companys credit facility.

The following table summarizes the Companys historical
results of operations as a percentage of net revenues for the
three months ended each of June 30, 2000 and 1999.

|                                    |                        |                           |         |          |  |        |       |      |    |  |         |       |  |  |       |      |  
|----------------------------------- | ---------------------- | ------------------------- | ------- | -------- |  | ------ | ----- | ---- | -- |  | ------- | ----- |  |  | ----- | ---- | -
|                                    |                        |                          
|                                    |                        | Six Months Ended June 30,
|                                    |                        |                          
|                                    |                        |                           |         |         
|                                    |                        | 2000                      |         | 1999    
|                                    |                        |                           |         |         
|                                    |                        | Amount                    |         | %        |  | Amount |       | %   
|                                    |                        |                           |         |          |  |        |       |     
|Net revenues                        |                        |                           | $36,394 |          |  |        | 100.0 | %    |    |  | $34,411 |       |  |  | 100.0 | %   
|                                   
|                                   
|                                   
|                                   
|Operating expenses                  |                        |                           | 31,908  |          |  |        | 87.7  |      |    |  | 29,329  |       |  |  | 85.2  |     
|                                    |                        |                           |         |          |  |        |       |      |    |  |         |       |  |  |       |     
|                                    | Gross profit           |                           |         | 4,486    |  |        |       | 12.3 |    |  |         | 5,082 |  |  |       | 14.8 |  
|                                   
|                                   
|                                   
|                                   
|General and administrative expenses |                        |                           | 2,425   |          |  |        | 6.7   |      |    |  | 3,519   |       |  |  | 10.2  |     
|                                   
|                                   
|                                   
|                                   
|Depreciation and amortization       |                        |                           | 1,893   |          |  |        | 5.2   |      |    |  | 1,378   |       |  |  | 4.0   |     
|                                    |                        |                           |         |          |  |        |       |      |    |  |         |       |  |  |       |     
|                                    | Income from operations |                           |         | 168      |  |        |       | 0.4  |    |  |         | 185   |  |  |       | 0.6  |  
|                                    |                        |                           |         |          |  |        |       |      |    |  |         |       |  |  |       |     
|Interest income                     |                        |                           | 821     |          |  |        | 2.3   |      |    |  | 601     |       |  |  | 1.7   |     
|                                   
|                                   
|                                   
|                                   
|Interest expense                    |                        |                           | (1,145) |          |  |        | (3.1  | )    |    |  | (430)   |       |  |  | (1.2  | )   
|                                   
|                                   
|                                   
|                                   
|Other, net                          |                        |                           | 11      |          |  |        |      |      |    |  | 48      |       |  |  | 0.1   |     
|                                    |                        |                           |         |          |  |        |       |      |    |  |         |       |  |  |       |     
|Income (loss) before income taxes   |                        |                           | (145)   |          |  |        | (0.4  | )    |    |  | 404     |       |  |  | 1.2   |     
|                                   
|                                   
|                                   
|                                   
|Income tax expense                  |                        |                           | (2,018) |          |  |        | (5.5  | )    |    |  | (135)   |       |  |  | (0.4  | )   
|                                    |                        |                           |         |          |  |        |       |      |    |  |         |       |  |  |       |     
|                                    | Net income (loss)      |                           |         | $(2,163) |  |        |       | (5.9 | )% |  |         | $269  |  |  |       | 0.8  | %
|                                    |                        |                           |         |          |  |        |       |      |    |  |         |       |  |  |       |     

Net revenues for the three months ended June 30, 2000 and
1999, were $36.4 million and $34.4 million,
respectively, which reflects the consolidated net revenues of the
 Company and the Acquired Businesses from their respective
acquisition dates. The increase in net revenues of 5.8% for the
three months ended June 30, 2000 were primarily due to the
increased sales at the Classic Custom Vacations brand, partially
offset by significant revenue shortfalls at the Vacations By
Globetrotters brand.

The Companys net revenues generally are highest in the
second and third quarters of the year, while its expenses, as a
percentage of net revenues, generally are highest in the first
and fourth quarters.

Operating expenses for the three months ended June 30, 2000
and 1999, were $31.9 million and $29.3 million,
respectively, or 87.7% and 85.2%, respectively, of net revenues.
The increase in operating expenses is due to the product roll out
 of Better Homes and Gardens in certain test markets.

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General and administrative expenses for the three months ended
June 30, 2000 and 1999 were $2.4 million and
$3.5 million, respectively, or 6.7% and 10.2%, respectively,
 of net revenues. The decrease in general and administrative
expenses of 31.1% is primarily due to decreases in professional
fees and outside services and the integration of certain
operations of the Acquired Businesses into other brands.

Depreciation and amortization for the three months ended
June 30, 2000 and 1999 was $1.9 million and
$1.4 million, or 5.2% and 4.0%, respectively, of net
revenues. The increase is principally due to the amortization of
goodwill and certain intangible assets and depreciation of the
technology platform acquired in the 1999 Acquisitions.

Interest income for the three months ended June 30, 2000 and
 1999 was $821,000 and $601,000, respectively, or 2.3% and 1.7%,
respectively, of net revenues. The increase is due to greater
levels of invested cash and generally higher rates of return for
the three months ended June 30, 2000 in comparison to the
three months ended June 30, 1999.

Interest expense for the three months ended June 30, 2000
and 1999 was $1.1 million and $430,000, respectively. The
increase is due to higher average levels of borrowings from the
Companys credit facility in the three months ended
June 30, 2000 in comparison to the same period in
June 30, 1999 due to the 1999 Acquisitions. In addition, the
 Company repaid all borrowings under the credit facility in May
and June of 2000 and accelerated the write-off of certain
deferred financing costs, in the amount of $213,000, related to
the credit facility.

The provision for income taxes for the three months ended
June 30, 2000 and 1999 was $2.0 million and $135,000,
respectively. The June 2000 amount reflects a valuation
allowance provided against previously recognized deferred tax
assets as a result of the Companys plan to restructure.

Net loss for the three months ended June 30, 2000 was
$2.2 million or $0.15 per share compared to net income at
June 30, 1999 of $269,000 or $0.02 per share.

Liquidity and Capital Resources

The Company receives advance payments and deposits prior to
commencement of travel. The Companys pricing of its
products and services is determined, in part, based upon the
amount and timing of advance payments received. A number of
states have regulations with respect to the financial security
and handling of customer deposits made in advance of travel. The
Company believes it is in compliance with all applicable
regulations relating to customer deposits. The Companys
investment policy and its credit facility restrict investments to
 investment-grade securities.

The Companys operating results during the year ended
December 31, 1999 required the Company to restructure its
credit facility by entering into an amended agreement (the
Second Amended Agreement) with the Lenders. The
Second Amended Agreement changed the previously established
acquisition line of credit into a revolving line and adjusted the
 total capacity of the facility to $41.0 million with maturity on
 January 31, 2002. The facility allowed for cash borrowings
of up to $35.0 million and for the issuance of standby
letters of credit up to a total of $10.0 million. Under the
Second Amended Agreement, the Company continued to pay interest
at an alternate base rate advances (ABR Advances) or
eurodollar advances (Eurodollar Advances) plus an
applicable margin.

The Second Amended Agreement also revised financial ratios and
covenants which the Company is required to meet. The Second
Amended Agreement also provided for an additional fee of up to
1.5% of outstanding borrowings if the Company did not raise a
minimum of $25 million in equity. The additional fee was
earned by the Lenders in 0.25% increments at 90, 120, and
150 days from October 28, 1999. During the six months
ended June 30, 2000, the Company paid $411,000 of these
additional fees.

During the three months ended June 30, 2000, the Company
further amended its credit facility in conjunction with raising
$27.5 million in convertible debt from a private investment
group (see Note 6). In exchange for complete paydown of all
outstanding borrowings, the lenders agreed to amendments that
altered and replaced certain of the credit facilitys
prescribed financial covenants and ratios, including replacing

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As of June 30, 2000 the remaining total facility commitment
was $20.5 million, and the maximum available for cash borrowings
was $13.9 million. As of such date, the Company had no
outstanding borrowings and had issued $6.6 million in standby
letters of credit leaving up to $3.4 million available to
secure additional standby letters of credit. The facility allows
for letters of credit up to a total of $10 million with any
additional letters of credit above this secured by cash deposited
 with the Lenders.

Net cash provided by operating activities for the six months
ended June 30, 2000 was $39.6 million as compared to
$30.0 million in net cash provided by operating activities
in the first six months of 1999. The increase of approximately
$9.6 million in operating cash flows relates primarily to
the increase in customer deposits in the first six months of 2000
 in relation to the same time period in 1999. The increase in
customer deposits relates to increased advance bookings and the
effect of the 1999 Acquisitions.

The Company made capital expenditures of $1.6 million in the
 six months ended June 30, 2000 and $2.7 million in the
 six months ended June 30, 1999. The Company used
$31.2 million of cash, net of cash acquired, for
acquisitions in the six months ended June 30, 1999. The
Company repaid approximately $29.4 million in credit
facility borrowings and raised $27.5 million in convertible
notes during the six months ended June 30, 2000. The Company
 borrowed approximately $33.6 million from its credit
facility to finance the acquisition of Friendly Holidays, Island
Resort Tours and Trase Miller for the six months ended
June 30, 1999.

Management continues to see strong advance bookings for year
2000. The positive trend in year 2000 booking patterns is a
result of strong advance bookings at Classic Custom Vacations
from existing products, the recent introduction of a Mexican
vacation product line and expansion of Caribbean, U.S. and
European destination products. The Companys in-bound travel
 brand, Allied Tours, also continues to post slow, steady growth
as a result of improvement in the Latin American and Asian
economies. The restructuring at the Vacations By Globetrotters
brand, however, will take time to stabilize before it can result
in net revenue and expense improvements.

The success and future of the Company is dependent on its ability
 to maximize revenue growth and profitability from its Classic
Custom Vacations and Allied Tours brands, while restructuring the
 operations of its Vacations By Globetrotters brand. In
July 2000, the Company announced plans to restructure its
Vacations By Globetrotters operations during the third quarter of
 2000. The details of the Companys plans include
restructuring and consolidating certain aspects of its Vacations
By Globetrotters operations. The Company intends to merge the
management of its these under the direction of its Classic Custom
 Vacations brand. As part of this consolidation, the Company will
 migrate its Globetrotters domestic products to the Classic
technology platform. Upon finalization of these plans in the
third quarter, the Company expects to terminate approximately 85
full-time employees and reduce the office facility requirements
of its Chicago operations. With the completion of these plans,
Management expects to record a charge of approximately
$35.0 million for the resulting impairment of systems,
intangible assets as well as severance and restructuring costs.
The Company expects to experience the major benefit of these
restructuring plans during calendar year 2001 while seeing modest
 improvements in its operating expenses during the remainder of
2000. There can be no assurance, however, that any restructuring
will improve the operating results or financial performance of
the Company.

New Accounting Standards

In June 1998, the Financials Accounting and Standards Board
(FASB) issued SFAS No. 133, Accounting for
 Derivative Instruments and Hedging Activities. The
Statement establishes accounting and reporting standards
requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded
in the balance sheet as either an asset or liability measured at
its fair value. SFAS No. 133 requires that changes in the
derivatives fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. SFAS
No. 133 was initially proposed to be effective for all
fiscal years beginning after June 15, 1999, however the FASB
 issued SFAS No. 137 Accounting for

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In January 2000, the SEC issued Staff Accounting Bulletin
(SAB) No. 101, Revenue Recognition.
The Bulletin provides guidance for applying generally accepted
accounting principles to revenue recognition, presentation and
disclosure in financial statements filed with the SEC. SAB
No. 101 is effective no later than the fourth quarter for
fiscal years beginning after December 15, 1999. Management
has not yet determined the impact of adopting this statement.




Item 3.  Quantitative and Qualitative
Disclosures About Market Risk

The Company is exposed to market risk from changes in interest
rates. The Company prices its products and services, in part,
based upon the interest income expected to be received from
investing customer deposits and advance payments. The
Companys investment policy and the terms of the
Companys credit facility provide that the Company may only
invest these deposits and advance payments in investment-grade
securities. A failure of these investment securities to perform
at their historical levels could reduce the interest income
realized by the Company, which could have a material adverse
effect on the business, financial condition and results of
operations of the Company.

Borrowings under the Companys credit facility are also
sensitive to changes in interest rates. The fair value of any
fixed rate debt is subject to change as a result of movements in
interest rates. Such changes could have material adverse effect
on the Companys financial position, and results of
operations.

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##### Table of Contents






PART II.

OTHER INFORMATION




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

The Annual Meeting of Stockholders of Global Vacation Group, Inc.
 was held on May 18, 2000 at the Willard Inter-Continental
Hotel, 1401 Pennsylvania Avenue, N.W., Washington D.C. 20004.

Out of 14,663,626 shares of Common Stock entitled to vote at the
meeting, 12,916,427 shares were present in person or by proxy.



| |     |                                                                                                                                 
| | --- | --------------------------------------------------------------------------------------------------------------------------------
| | (a) | The vote for the nominated directors, to serve for the ensuing
	three years, and until his successor is elected, was as follows:

|                   |  |          |            |          |  |  |        | 
|------------------ |  | -------- | ---------- | -------- |  |  | ------ | 
|Nominee            |  | In Favor |            | Withheld
|                   |  |          |            |         
|Carl J. Rickertsen |  |          | 12,882,402 |          |  |  | 34,025 | 
|James M. Sullivan  |  |          | 12,882,402 |          |  |  | 34,025 | 

The results of voting on the following items were as set forth
below:



| |     |                                                                                                                                            
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | Ratification of appointment of Arthur Andersen LLP as independent
	 auditors for the Company for the fiscal year ending
	December 31, 2000:

|         |            |         |  |         |        |  |  |  |       | 
|-------- | ---------- | ------- |  | ------- | ------ |  |  |  | ----- | 
|In Favor |            | Opposed |  | Abstain
|         |            |         |  |        
|         | 12,902,177 |         |  |         | 13,200 |  |  |  | 1,050 | 






|        |                                 
|------- | --------------------------------
|Item 6. | Exhibits and Reports on Form 8-K

(a) Exhibits

|   |  |       |  |                                                                                                                                                                                                                           
|-- |  | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1) |  | 10.38 |  | Stock Purchase Agreement detail as of March 17, 1999 between
	 Global Vacation Group, Inc., Friendly Holidays, Inc. and the
	Shareholders of Friendly Holiday Inc.                                                        
|2) |  | 10.39 |  | Stock Purchase Agreement detail as of April 1, 1999 between
	Global Vacation Group, Inc. Island Resort Tours Inc.,
	International Travel and Resorts, Stephen A. Hicks,
	Robert  A. Benett and Fairweather Holding Company
|3) |  | 10.40 |  | Asset Purchase Agreement detail as of June 1, 1999 between
	Global Vacation Group, Inc. and Trase Miller Solutions Inc.                                                                                                   
|4) |  | 10.41 |  | Amendment No. 3 to the Second Amended and Restated Credit
	Agreement                                                                                                                                                      
|5) |  | 10.42 |  | Note Purchase detail as of June 20, 2000 Agreement between
	Global Vacation Group, Inc. and GV Investment LLC                                                                                                             
|6) |  | 27.1  |  | Financial Data Schedule                                                                                                                                                                                                   



| |     |                                                             
| | --- | ------------------------------------------------------------
| | (b) | Reports on Form 8-K during the quarter ended June 30,
	2000.

The Company filed a Form 8-K on June 21, 2000 making an
 Item 5 disclosure of a press statement regarding the
issuance of $27.5 million in convertible debt.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.

Date:  August 11, 2000

| |                            
| | ---------------------------
| | Global Vacation Group, Inc.



| |     |                                                                              
| | --- | -----------------------------------------------------------------------------
| | By: | /s/ JAY G. STUART 
	 _______________________________________ 
	 Jay G. Stuart

| |                          
| | -------------------------
| | Executive Vice President 
| | & Chief Financial Officer

18