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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                   FORM 10-KSB

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
                        COMMISSION FILE NUMBER 33-4734-D

              GRAND ADVENTURES TOUR & TRAVEL PUBLISHING CORPORATION


               (Exact name of registrant as specified in charter)


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<S>                                                                      <C>
              OREGON                                                                              93-0950786
              ------                                                                              ----------
    (State or other jurisdiction of                                                            (I.R.S. Employer
    incorporation or organization)                                                            Identification No.)

211 EAST 7TH STREET, 11TH FLOOR, AUSTIN, TEXAS                                                       78701
----------------------------------------------                                                       -----
         (Address of principal executive offices)                                                  (Zip Code)

Registrant's telephone number, including area code                                                (512) 391-2000
                                                                                                  --------------

Securities registered pursuant to section 12(b) of the Act:

   TITLE OF CLASS                                                        NAME OF EACH EXCHANGE ON WHICH REGISTERED
       NONE                                                                                 NONE
       ----                                                                                 ----
</TABLE>

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      NONE

                                (TITLE OF CLASS)

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy of information
statements incorporated by reference in Part 10-KSB or any amendment to this
Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year: $ 27,914,626.

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock as of a specified date within the past 60
days: As of April 13, 2000, the aggregate market price of the voting stock held
by non-affiliates was approximately $8,008,000.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of April 13, 2000, the Company had
outstanding 3,024,883 shares of its common stock, par value $0.0001.

                     Transitional Small Business Disclosure
                        Format (Check one): Yes     No X
                                               ---    ---

                   Page 1 of 43 consecutively numbered pages.
                        Exhibit index appears on page 42.


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                                TABLE OF CONTENTS

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ITEM NUMBER AND CAPTION                                                                              PAGE
-----------------------                                                                              ----
<S>                                                                                                 <C>
PART I

  ITEM 1.    DESCRIPTION OF BUSINESS                                                                    3
  ITEM 2.    DESCRIPTION OF PROPERTY                                                                    8
  ITEM 3.    LEGAL PROCEEDINGS                                                                          9
  ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF
             SECURITY HOLDERS                                                                           9

PART II

  ITEM 5.    MARKET FOR REGISTRANTS COMMON EQUITY AND
             RELATED STOCKHOLDER MATTERS                                                               10
  ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             FINANCIAL CONDITION OR PLAN OF OPERATION                                                  11
  ITEM 7.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                               16
  ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
             ON ACCOUNTING AND FINANCIAL DISCLOSURE                                                    33

PART III

  ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
             CONTROL PERSONS: COMPLIANCE WITH SECTION 16(a)
             OF THE EXCHANGE ACT                                                                       33
ITEM 10.     EXECUTIVE COMPENSATION                                                                    34
ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
             OWNERS AND MANAGEMENT                                                                     36
ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                            36
ITEM 13.     EXHIBITS AND REPORTS ON FORM 8-K                                                          37
</TABLE>


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PART I

ITEM 1. DESCRIPTION OF BUSINESS

THE OFFERING

The Company is publicly held and traded and files annual and other periodic
reports pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, and such reports and other information filed by the Company may be
inspected and copied at the public reference facilities of the Commission in
Washington, D.C., and can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a website that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the Commission at http://www.sec.gov.

The mailing address of the Company's principal executive offices is 211 East 7th
Street, 11th Floor, Austin, Texas 78701, and its investor relations telephone
number is (512) 391-2031.

BUSINESS OF ISSUER

The Company publishes magazines, manages web sites and sells travel products to
certain niche markets.

As of December 31, 1999, the Company serves three niche markets, as follows:

          1.   Interliners - Interliners are the active employees and retirees
               of the airline industry, who may fly on many carriers for free or
               at a significantly reduced fare, as well as their families and
               friends to whom they pass along their allotments of no-cost or
               low-cost flying privileges.

          2.   Travel agents - Travel agents are those individuals recognized by
               a travel industry association, such as The International Airlines
               Travel Agent Network (IATAN) or the Cruise Line Industry
               Association (CLIA), as a seller of travel products or packages.

          3.   Destination weddings and honeymoons - A "destination wedding" is
               any wedding performed at a location other than the home area of
               the bride or groom. Honeymoon travel includes any travel by a
               newly married couple within one year of their wedding.

The Company promotes travel sales by publishing the following Publications:

     1.   Interline Adventures - A 30 year-old, four-color, bi-monthly magazine,
          Interline Adventures provides general travel editorial coverage and,
          in a section known as the Interline Vacation Guide, a significant
          focus on hotel, resort, cruise and tour opportunities for interliners.
          Approximately 185,000 copies of the magazine are mailed to the homes
          of subscribers, requesters, current and past customers, and airline
          representatives. Copies of Interline Adventures not otherwise
          delivered, as well as Updates and other Company publications, are
          placed in airport areas and rooms reserved for and frequented by
          airline employees. Among these areas and rooms are employee break
          rooms, reservation and office areas, and pass bureaus. "Pass bureaus"
          are offices maintained by airlines to facilitate employee travel on
          other airlines - i.e., a Continental employee wishing to make travel
          arrangements on American Airlines may utilize the services of
          Continental's pass bureau. Airlines generally establish a pass bureau
          in their "hub airports."

     2.   Interline Update - A monthly 16-page brochure directed to interliners.
          Approximately 400,000 copies are distributed by hand without charge in
          airport areas and rooms reserved for and frequented by airline
          employees including airline lounges, locker rooms, cafeterias and pass
          bureaus.

     3.   Destination Weddings & Honeymoons - A quarterly magazine directed to
          newly engaged couples. Approximately 200,000 copies are distributed
          through newsstand sales, bridal salons, bridal consultants, and
          mailings to subscribers and newly engaged couples. The premier issue
          of the magazine was published in December, 1999. The magazine features
          articles and editorial on various wedding and honeymoon topics.


                                       3

<PAGE>   4

The Company also promotes travel sales over the Internet through its four web
sites:

         www.Perx.com
         www.DWHMagazine.com
         www.DestinationWeddings.com
         www.AgentPerx.com


SOURCES OF REVENUE

The Company receives revenue from various sources including advertising sales,
travel sales, publication sales and subscriptions, airline ticket sales and
wedding planning fees. Each of these revenue sources is described in further
detail in the following sections.

Advertising Sales - The Company solicits advertising from various travel
suppliers including hotels, resorts and cruise lines. Cruise lines and
non-travel suppliers pay for advertising in cash. Hotels and resorts pay for
advertising with room nights at their properties. The Company holds these room
nights in inventory for resale to its markets through its call centers. At the
time of sale, the Company records revenue from advertising and records the room
nights received as inventory. Ad sales and inventory are booked at the lower of
cost or market, with cost being equal to the net rate at which the Company could
purchase the rooms from the advertiser and market being the expected sale price
less the cost of sale.

Travel Sales - The Company operates two reservation call centers - one that
sells travel primarily to the Interline market and another that sells primarily
to the destination wedding and honeymoon markets. The Company's travel products
are supplied from three primary sources:

     1.   Room nights received in exchange for publication and web site
          advertising. These room nights are sold from inventory. The Company
          has advertising arrangements with approximately 280 resorts and
          hotels.

     2.   Room nights purchased under net rate agreements negotiated with hotels
          and resorts. These agreements provide for the purchase of rooms at a
          fixed cost. These net rates are then marked up for sale to customers
          through the Company's call centers. The Company has net rate
          agreements with approximately 1,500 hotels and resorts.

     3.   Room nights and cruises sold on a commissionable basis. The Company
          sells these room nights and cruises to its markets and receives a
          commission from the hotel, resort or cruise line. These commissions
          range from 10% to 20% of selling price. The Company sells travel
          products from approximately 40 cruise lines and approximately 5,000
          hotels and resorts.

Magazine Sales and Subscriptions - The Company receives subscription revenue
from the sale of Interline Adventures and Destination Weddings and Honeymoons
magazines. In addition, the Company sells the Destination Weddings and
Honeymoons magazine through newsstands.

Airline Ticket Sales - The Company sells commercial airline tickets as an
accommodation to its customers and to supplement its wedding and honeymoon
packages. The Company receives a commission from the airlines for such sales.
Currently, the commissions on domestic airline tickets are approximately 5% of
the selling price with a maximum commission of $50 for a round trip ticket.
International tickets are commissionable at the rate of 5% with a maximum
commission of $100 for a round trip ticket. Airline ticket sales are not
currently a significant source of revenue for the Company.

Wedding Planning Fees - In certain circumstances, the Company receives a fee for
the planning and coordination of wedding trips and plans. Although the Company
is developing this market, as of December 31, 1999, these fees did not
constitute a significant source of revenue for the Company.


                                       4

<PAGE>   5

ORGANIZATIONAL STRUCTURE OF ISSUER

The Company is organized into two major divisions: Publishing and Marketing.

The Publishing Division

The Publishing Division produces, publishes and distributes Interline
Adventures, Destination Weddings & Honeymoons (the "Publications") and Interline
Update (the "Update"). The Magazines, the Update and all other Company marketing
material are hereinafter referred to as the "Publications."

The Publications serve as the primary marketing channel for the company, which
advertises its products and services therein. In addition, the Publications
provide an advertising outlet for the cruise lines, hotels and resorts
frequented by the Company's clients. In 1999, the Company also launched a web
site, "AgentPerx.com", to market to travel agents for their personal travel.

Advertising space within the Publications is marketed to hotels, resorts, cruise
lines and tour operators through direct sales, telemarketing and distribution of
media kits to the advertisers and, on a selective basis, to agencies
representing the advertisers. Although many of the advertisers are hotels,
resorts, cruise lines, and tour operators who have net rate agreements with the
Company, the Magazines also sell advertising space to travel suppliers who do
not have a net rate agreement or arrangement with the Company. The Company
offers advertisers the opportunity to purchase advertising space within the
Publications in exchange for room nights in hotels, resorts and cruise cabins,
which the Company then re-markets at an additional profit.

The Marketing Division

The Marketing Division operates under the names "Interline TravelReps" and
"WeddingTrips."

"Interline TravelReps," provides hotel and resort accommodations (comprised of
rooms or vacation packages), cabins on cruises, and seats on escorted tours.
"Interline TravelReps" offers hotel and resort accommodations throughout the
world with a particular focus on Mexico and the Caribbean. The Company offers
cruises on over 30 cruise lines with over 100 ships in various worldwide
destinations and a wide variety of escorted tours, primarily to England, Europe
and Africa. Cruise lines and escorted tour operators typically limit the
interline companies that market their products or commodities to those which
have a demonstrated ability to effectively serve interline travelers. The
Company is permitted to market all of the major cruise lines serving the
interline market. The Company maintains an office in Boca Raton, Florida, in
order to facilitate its relations with the substantial number of cruise lines
that are located in that area. Retention of the ability to sell cruise cabins to
the interline market is key to the continued success of the Company and is
subject to the continued satisfaction of the cruise lines with the Company's
service.

The Company markets its hotel and resort rooms and packages, cruises, and
escorted tour products through advertisements within the Company's Publications
and also advertises in the publications and newsletters published by airlines
for their employees. In addition, the Company has a network of more than 2,000
current and former airline employees who distribute the Update, brochures and
flyers into airline "Employee Areas" throughout the United States, Canada, the
United Kingdom and western Europe. The Marketing Division's other significant
marketing tools include its reservation center and the reservation agents who
answer phone calls and sell travel to interliners in response to the Company's
promotional activities.

The amount charged to the interline customer is established and published in the
Company's Publications and is quoted over the phone by the company's
reservationists. The Company believes that the market for interline products is
price sensitive and determines prices accordingly.

Under the name "WeddingTrips" the Company provides hotel and resort
accommodations (comprised of rooms or vacation packages), cabins on cruises, and
wedding planning services. "WeddingTrips" offers hotel and resort accommodations
throughout the world with a particular focus on Mexico and the Caribbean.
"WeddingTrips" offers


                                       5

<PAGE>   6

cruises on over 30 cruise lines with over 100 ships in various worldwide
destinations and a wide variety of escorted tours, primarily to England, Europe
and Africa.

The Company markets its hotel and resort rooms and packages, cruises, and
wedding planning services through advertisements within Destination Weddings &
Honeymoons magazine and also advertises in the Company's other publications.
"WeddingTrips" manages a reservation center that is staffed by travel agents and
Certified Wedding Consultants.

COMPETITION

Particularly the Magazines compete with other publications for readership and
for advertisers' patronage.

Interline Adventures is the only four-color publication available which is
updated and published six times annually. Within the interline segment,
Interline Adventures has one primary competitor, the ASU Travel Guide -- a
400-page guide, published quarterly, with the look and feel of a paperback
novel. The ASU Travel Guide, which has been published successfully for a number
of years and enjoys widespread circulation, competes with Interline Adventures
for advertisements targeting interliners.

Destination Weddings & Honeymoons magazine competes on the newsstand with
several bridal magazines, such as Brides, Modern Bride and Martha Stewart's
Weddings. In addition, the magazine competes with a variety of niche and popular
publications for advertising and readership.

MARKETING

Management believes that competition within the interline travel industry is
based on price, market visibility and the nature and variety of products and
services offered. As most interline companies are quoted the same price by
hotels, resorts, cruise lines and tour operators, price is not usually the basis
for a competitive advantage. Although, there are several competitors in the
interline travel industry, none are publicly held, and reliable sales
information is not available. Much of the Company's competition appears to be
smaller organizations established by former airline employees and retail travel
operators which view the interline market as merely a portion of their business.
Most interline companies tend to focus on a specific destination (Mexico and the
Caribbean, ski trips, etc.) or specific airline (e.g., only Continental). A few,
like the Company, offer a more complete range of interline travel products and
services

The Company is not aware of any other company that is engaged in direct
competition for travel sales specifically to the destination wedding and
honeymoon market. The primary competition for travel sales in this market is
from traditional travel agencies and from hotels, resorts and cruise lines that
market wedding packages directly to the customers.

SOURCES OF MATERIALS

The Publications are printed and distributed by contract printing operations at
prices negotiated from time to time between the Company and printers. There are
a number of printers who could print and distribute the Publications. One of the
significant factors influencing the Company's expenses in printing and
distributing the Publications is the price of paper. Paper prices are volatile
and, although currently higher than historical averages and, in the belief of
the Company's management, not likely to rise significantly in the foreseeable
future, the possibility that paper prices will rise further cannot be completely
discounted. Significant increases in paper prices could have a materially
adverse effect on the printing expenses of the Publications and the
profitability of the Company.

The company obtains hotel and resort accommodations, cruise ship cabins, and
tour reservations directly from the operators of those businesses. The company
negotiates prices, terms and availability of hotel and resort accommodations in
person, over the telephone, via fax and at industry conferences. With the
exception of instances where the Company is able to negotiate a better rate, the
Company obtains the rate quoted by a given hotel or resort to all interline
travel sellers. In contrast to hotel and resort operators, most cruise lines and
tour operators pay a

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commission based on a pre-determined price to the interline customer. Wedding
and honeymoon travel is not normally eligible for interline rates and is sold to
customers at retail rates.

SEASONALITY

When airlines operate at nearly full capacity, interline travel decreases. While
the most dramatic events that lead to full capacities (labor issues, airline
failures and similar occurrences) have happened infrequently, airlines usually
operate at high capacities during the holiday season -- from the middle of
November through the middle of January. Since very few interline customers
travel during this period, the Company's income during this eight-week period is
substantially lower than the income during the remainder of the year.

While the Company believes that wedding and honeymoon travel is not subject to
the same seasonal factors, we do not yet have enough experience in this niche to
precisely predict seasonality.

RISK FACTORS

Recent Operating Losses - The Company had net operating losses for 4 of the last
5 fiscal years (since its inception). See, "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

Risks Associated with the Travel Industry; General Economic Conditions - The
Company's results of operations are dependent upon factors affecting the travel
industry. The Company's revenues and earnings are especially sensitive to events
that affect domestic and international air travel, cruise travel and resort
hotels in Mexico and the Caribbean. A number of factors, most notably labor
disturbances, but including political instability, armed hostilities,
international terrorism, extreme weather conditions, a rise in fuel prices, a
decline in the value of the U.S. dollar and excessive inflation, could result in
an overall decline in demand for travel. These types of events could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, demand for the Company's travel services may
be significantly related to the general level of economic activity and
employment in the U.S. Therefore, any significant economic downturn or recession
in the U.S. could have a material adverse effect on the Company's business,
financial condition and results of operations.

Reliance on Suppliers - Although the Company sells all of the major cruise
lines, many of the cruise lines are part of holding company structures. Should
one of these holding companies fail, the possible adverse effects on the Company
would be twofold. First, the Company would be denied a significant supply of
cruise berths to be sold to its travel customers. Second, the amount of overall
supply in the cruise industry would be reduced, which would also reduce the
amount of usual or "marginal" capacity available for sale to interlines. During
the Company's operations within the interline industry, no major cruise line
operator has failed, making it difficult to estimate the impact such failure
would have on the Company's operation.

Dependence on Technology - The Company's business is dependent upon a number of
different state-of-the-art information and telecommunication technologies for
its access to information and to manage a high volume of inbound and outbound
calls. Any failure of this technology could have a material adverse effect on
the Company's business, financial condition and results of operations. The
Company is dependent upon certain third party vendors, including central
reservation systems operators such as the SABRE Group, for access to certain
information. Any failure of these systems or restricted access by the Company
could have a material adverse effect on the Company's business, financial
condition and results of operations. See, "ITEM 2. DESCRIPTION OF PROPERTY."

SHARES ELIGIBLE FOR FUTURE SALE

Future sales of shares of Common Stock by the Company or its existing
stockholders, or the perception that such sales may occur, could adversely
affect the market price of the Common Stock. Approximately 3,024,883 shares of
Common Stock are outstanding. Of the outstanding shares, approximately 2,197,000
shares held by existing stockholders are tradable without restriction. The
remaining shares of Common Stock are "restricted securities" (the "Restricted
Securities") within the meaning of Rule 144 under the Securities Act and may not
be publicly resold, except in compliance with the registration requirements of
the Securities Act or pursuant to an exemption from


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<PAGE>   8

registration, including that provided by Rule 144 promulgated under the
Securities Act. Approximately 27% of the outstanding shares of Common Stock, in
addition to being Restricted Securities, are subject to agreements to not sell
such Restricted Shares for a 48-month period beginning on February 5, 1998,
except under agreed upon limited restrictions. Sales of substantial amounts of
Common Stock, or the perception that such sales could occur, could adversely
affect the prevailing market price of the Common Stock.

In addition to the outstanding shares of Common Stock, there are 159,932 shares
subject to outstanding warrants and options at a weighted average exercise price
of $6.49 per share. See, "MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS". There are also 450,000 shares of Common Stock reserved for issuance
under the Company's stock option plans, of which 323,409 shares are subject to
outstanding options at a weighted average exercise price of $4.31 per share. See
"EXECUTIVE COMPENSATION - Long-term Incentive Plan". During the year, the
Company issued 22,500 non-qualified stock options to directors. These options
vest over two years with an exercise price of $1.75 per share. These options
expire July 1, 2008. The Company has a total of 162,500 non-qualified options
outstanding at a weighted average exercise price of $4.55.

During the fourth quarter of 1999, the Company issued $1,500,000 of convertible
debentures. The debentures, which bear interest at 10% per annum, payable
quarterly, are due on September 30, 2003. At the option of the holders, the
debentures are convertible into the Company's Common Stock. If the conversion
occurs before September 21, 2000, the debentures are convertible into one share
of Common Stock for each $2.625 of debenture face value. If the conversion
occurs after September 20, 2000, the debentures are convertible into one share
of Common Stock for each $2.50 of debenture face value.

Registration statements are expected to be filed to permit the resale of shares
issuable upon exercise of warrants or the conversion of debentures. The resale
of such shares could adversely affect the prevailing market price of the Common
Stock.

VOTING CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS

The Company's executive officers and directors, entities affiliated with them
and employees of the Company and holders of at least 5% of the outstanding
Common Stock affiliated with the executive officers and directors beneficially
own shares of Common Stock representing more than 29% of the total voting power
of the Common Stock. These persons, if acting in concert, will be able to
exercise control over the Company's affairs and are likely to be able to control
the Board of Directors and the disposition of any matter submitted to a vote of
stockholders.

ITEM 2. DESCRIPTION OF PROPERTY

The Company maintains an extensive phone and computer system with which it
handles the telephone calls generated by its advertisements and completes the
reservation process through its reservation centers. The phone system and
computer system maintained by the Company are critical elements in the Company's
marketing efforts. The Company believes the phone system and computer network is
capable of handling the Marketing Division's needs for the foreseeable future.
However, the Company is constantly evaluating new technologies, upgrades or
product enhancements which would serve to enhance the Company's operations. The
Marketing Division's ability to service interliners will be dramatically reduced
should either the phone or computer system become inoperable. The Company
believes that it has taken appropriate steps to assure that the phone and
computer system are as reliable and well protected as electronic equipment can
reasonably be expected to be. There can be no assurances, however, that the
Company's electronic equipment will at all times be usable by the Marketing
Division in its efforts to service interline customers.

The Company occupies approximately 17,000 square feet of office space at 211
East Seventh Street, Suite 1100, Austin, Texas 78701, its main office, and 630
square feet of office space at 1499 West Palmetto Park Road, Suite 222, Boca
Raton, Florida 33486. The Company's phone number is (512) 391-2000. The Company
owns no property other than office furniture, equipment and software.

The Company currently employs 105 full time people. It is anticipated that up to
200 additional personnel will be required to meet the demands of the projected
market over the next five years. Most of these positions will be in the


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areas of reservations and operations processing and servicing the Company's
projected volume increases. None of the Company's employees are members of a
labor union and the Company has not suffered any work stoppages or labor unrest.

ITEM 3. LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings, and no material
legal proceedings have been threatened by or, to the best of the Company's
knowledge, against the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The annual Shareholders' meeting was held at the Company's corporate offices in
Austin, Texas on June 22, 1999. The number of qualified shareholder votes
attending the meeting either in person or by proxy totaled 1,264,552 shares. The
total outstanding number of common shares of the Company as of April 9, 1999,
the date of record for the Shareholder meeting totaled 3,024,883 shares.
Therefore, a quorum was present.

The Shareholders elected the following individuals to the Board of Directors to
serve until the next annual meeting:

         Matthew O'Hayer, Chairman of the Board
         Robert Sandner, Director
         Robert G. Rader, Director
         Duane K. Boyd, Director

         Mr. O'Hayer received 1,262,552 votes for, 2,000 votes abstaining, and
         no votes against

         Mr. Sandner received 1,262,552 votes for, 2,000 votes abstaining, and
         no votes against

         Mr. Rader received 1,262,552 votes for, 2,000 votes abstaining, and no
         votes against

         Mr. Boyd received 1,262,552 votes for, 2,000 votes abstaining, and no
         votes against

         There being no further business, the Shareholder meeting was adjourned.




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<PAGE>   10


                                     PART II



ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET FOR COMMON STOCK

The Common Stock is currently traded in the NASDAQ SmallCap(R) Market under the
symbol "GATT." Prior to the Offering and the inclusion of the Common Stock in
the NASDAQ SmallCap(R) Market, the Common Stock was traded irregularly and
infrequently in the over-the-counter market and quoted on OTC EBB under the same
symbol and quoted in the pink sheets published by the National Quotations
Bureau. Prior to the Company's February, 1998, public offering, a very small
number of securities broker-dealers published only intermittent quotations for
the Common Stock, and there was no continuous, consistent trading market. The
limited nature of the trading market created the potential for significant
changes in the trading price for the Common Stock as a result of relatively
minor changes in the supply and demand for Common Stock and perhaps without
regard to the Company's business activities. The following table sets forth, for
each of the Company last eight fiscal quarters, the high and low bid and ask
prices for the Common Stock. All of the 1997 transactions were effected prior to
the 1-for-7 reverse stock split effected in December, 1997:

<TABLE>
<CAPTION>
                                              BID                 ASK
                                              ---                 ---
                    QUARTER ENDED        HIGH       LOW      HIGH       LOW
-------------------------------------    ----       ---      ----       ---
<S>                                     <C>        <C>       <C>       <C>
December 31, 1999.....................     3 1/2     2 3/8   3 15/16     2 3/8
September 30, 1999....................     2 3/4    2 9/16    3 7/32     2 1/4
June 30, 1999.........................         2   1 13/16         2     1 3/8
March 31, 1999........................   1 13/16     1 3/8     2 1/2         1
December 31, 1998.....................   2 15/16     1 1/4         3    1 9/16
September 30, 1998....................     3 5/8    1 9/16     3 7/8     1 3/4
June 30, 1998.........................     4 7/8     3 1/4     5 1/8     3 1/2
March 31, 1998........................   4 13/16    3 5/16   4 15/16    3 7/16
</TABLE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, the Common Stock was traded on the National Association
of Security Dealers, Inc.'s electronic bulletin board. Trading actively was
infrequent. Sales of substantial amounts of Common Stock in the public market
could adversely affect the market price of the Common Stock.

As of March 31, 1999, the Company had approximately 3,024,883 shares of Common
Stock outstanding. Of these shares, approximately 2,197,000 shares are
transferable without restriction or further registration under the Securities
Act, unless they are held by "affiliates" of the Company within the meaning of
Rule 144 promulgated under the Securities Act. All of the remaining shares,
which total approximately 829,000 shares are Restricted Securities and, as such,
may not be sold in the absence of registration under the Securities Act or an
exemption therefrom under Rule 144, and are subject to 48-month "lock-up"
agreements. Small portions of these 48-month Lock-up Shares may be sold by the
holders thereof after the second and third anniversaries of the Offering and the
remainder may be sold after the fourth anniversary.

In addition to the outstanding shares of Common Stock, and exclusive of options
granted pursuant to the Company's employee stock option plan, there are 159,932
shares of Common Stock subject to outstanding warrants and options at a weighted
average exercise price of $6.49 per share (as adjusted for the Reverse Stock
Split). Such warrants are exercisable for periods expiring at various dates
between 1999 and 2002. The Company has granted the holders of such warrants
certain registration rights relating to the Common Stock purchasable upon the
exercise of such warrants. The Company has agreed with the Boston Stock Exchange
that it will not issue or grant warrants, options or other securities
convertible or exercisable into shares of the Common Stock at a conversion or
exercise price less than 85% of the market price of the Common Stock as of the
time of such issuance or grant.

The Company can make no prediction as to the effect, if any, that sales of
shares of Common Stock or the availability of shares for sale will have on the
market price of Common Stock. Nevertheless, sales of significant amounts of
Common Stock could adversely affect the prevailing market price of Common Stock,
as well as impair


                                       10
<PAGE>   11

the ability of the Company to raise capital through the issuance of additional
equity securities. Prior to the Offering, there was no viable trading market for
the Common Stock. The Company anticipates that the trading market in the Common
Stock, if any, will be limited based upon the number of shares currently
outstanding.

The Company has reserved an aggregate of 450,000 shares of Common Stock for
issuance pursuant to the Company's stock option plan and options to purchase
323,409 shares at an average exercise price of $4.39 per share were outstanding
on December 31, 1999. The Company also issued non-qualified stock options to
acquire 162,500 shares of common stock to members of the Board of Directors, one
member of management and one outside consultant as of July 1, 1998 at an
exercise price of $5.00 per share. These options expire July 1, 2008. The
Company intends to file a registration statement under the Securities Act to
register shares of Common Stock reserved for issuance under such plans in the
near future. See "EXECUTIVE COMPENSATION - Long-term Incentive Plan."

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The financial information set forth in the following discussion should be read
in conjunction with, and qualified in its entirety by, the financial statements
of the Company included elsewhere herein.

GENERAL

The Company made significant advances in 1999. Among the most significant
advances are:

     o    The Company finished the year with a pre-tax profit of $402 thousand.

     o    The implementation of the "World Wide Marketing Program" (WWMP). The
          WWMP was an initiative to increase Publication advertising by
          aggressively promoting the Company's "room nights for advertising"
          approach. As a result of this initiative the Company increased its
          advertising in Interline Adventures and Interline Update from
          approximately $765,000 in 1998 to $2,425,500 in 1999. This program
          increased the Company's room and cabin inventory from $254,000 at
          December 31, 1998 to $2,030,000 at December 31, 1999. The Company
          anticipates significant continued growth from this program in future
          years.

     o    The Company started operating in the wedding and honeymoon markets. In
          December, 1999, the Company published the premier issue of Destination
          Weddings & Honeymoons magazine. Approximately 200,000 copies of the
          magazine were distributed through a combination of direct mailings to
          engaged couples, mailings to bridal salons and wedding consultants and
          newsstand sales. In conjunction with this magazine launch, the Company
          also established the WeddingTrips division to arrange travel and
          provide wedding planning services. WeddingTrips is staffed by
          experienced travel agents and Certified Wedding Consultants. The
          Company also established two web sites to support its marketing
          efforts in this business.

          The Destination Weddings & Honeymoons magazine is published quarterly.
          Management expects the magazine circulation and advertising revenue to
          increase with each issue in the year 2000. The growth in circulation
          and advertising revenue should increase the volume of travel sales
          processed by the WeddingTrips staff.

     o    The establishment of AgentPerx.com, a web site directed to the sale of
          travel to travel agents for their own personal travel. Through this
          site, the company markets its World Wide Marketing Plan inventory to
          travel agents at prices that are lower than the agents can obtain
          directly from the hotel or resort. The Company believes that this
          business unit has significant growth potential in the next several
          years.

     o    The Company increased circulation of Interline Adventures to 185,000
          during the year. This increase in circulation was due to the efforts
          of the Company's marketing division and field marketing
          representatives. At the same time, the Company completed a thorough
          review of the distribution lists and eliminated those names and
          addresses that were outdated, no longer interliners or that were not
          active customers. These


                                       11
<PAGE>   12

          efforts have provided a larger and better quality mailing list. The
          Company believes that these efforts will continue to pay off for many
          years.

     o    On November 8, 1999, the Company acquired the interline related assets
          of Weissman Sales & Marketing, Inc., a privately held travel company
          offering cruises and tours to the retail and interline markets. The
          purchase consideration was paid in cash and accounted for using the
          purchase method of accounting. This acquisition is expected to
          generate in excess of $2 million in annual revenues with no material
          increase in related operating expenses. Among the assets acquired were
          the trade name "Ventures Extraordinaire and Holidays by Sea " and a
          client list with over 20,000 airline employee names.

     o    In December, 1999, the Company entered into a definitive purchase
          agreement to acquire the interline related assets of Non Rev Travel
          International, a privately held travel company in Atlanta, Georgia
          offering hotels, cruises and resorts to the interline market. This
          acquisition is expected to generate in excess of $2 million in sales
          annually. The acquisition closed on February 1, 2000.

     o    The Company completed the private placement of $1,500,000 of
          convertible debentures in September and October, 1999. The debentures
          bear interest at 10%, payable quarterly, are due on September 30, 2003
          and are convertible, at the holders option, into shares of the
          Company's common stock. If the debentures are converted before
          September 30, 2000, the debentures holders will receive one share of
          common stock for each $2.625 of debenture face value. If conversion
          occurs after September 30, 2000, the conversion rate will be one share
          of common stock for each $2.50 of debenture face value.

The Company believes that it will continue to increase sales and profitability
in the year 2000 and future years.


FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION

The Company had a positive working capital of $3.0 million as of December 31,
1999, as compared to $1.4 million at December 31, 1998. The significant increase
in working capital between years was primarily the result of an increase in
inventory from advertising. Total current assets increased 36.9% between years
to $4.9 million with the largest increase being in inventory. Current
liabilities increased 10.9% between years. The slight increase in current
liabilities was resulted from an increase in accounts payable as it relates to
Publication distribution costs during the year and accrued interest from the
private offering in September, 1999. The "travel" revenue benefits will not be
recognized as revenue until future periods.

Deferred revenue for hotels and cruises represent money received from passengers
that are deferred for revenue recognition purposes until the passenger has
completed travel. These deferred liabilities are short-term in nature due to the
short time frame between the date the reservations are booked and the travel
date. Deferred subscription revenue represents subscription money received but
not earned at year end. Publication subscriptions are normally paid in full in
advance for the one- or two-year subscription period. Subscription revenue is
earned on a pro rata basis as the Publications are printed and shipped to the
subscribers. It is anticipated that subscription revenue will continue to
decrease as the Company focuses on controlled (complementary) distribution of
the Publications that will put more emphasis on advertising revenue as opposed
to a subscription base.

During the last quarter of 1998 and through the third quarter of 1999, the
Company borrowed funds against its investment accounts on a short-term basis in
order to fund the acquisition and the publications mentioned above.

Total assets increased 60% totaling $6.8 million at December 31, 1999. $2.1
million, or 85% of the total increase, is room and cabin inventory resulting
from the Company's aggressive marketing programs and new Publications. Cash and
cash equivalents amounted to $1.6 million at the end of the 1999. The restricted
cash balance of $222 thousand represents a portion of the Company's certificates
of deposit pledged as a reserve for charge backs against the Company's
Visa/MasterCard credit card processing and also pledged against various letters
of credit to hotel/cruise vendors. The letters of credit serve as security for
the vendors to allow the Company to make last minute bookings


                                       12
<PAGE>   13

with these vendors without having to pay in advance of travel. None of these
letters of credit have been drawn on to date.

The accounts receivable balance is comprised primarily of cash advertising
revenue due from vendors that advertised in the Publications. Prepaid hotel cost
and prepaid cruise cost represent funds paid to hotels and cruise lines as of
December 31, 1999, for travel dates that occur after that date. These prepaid
items relate directly to the previously discussed deferred revenues and are also
very short-term in nature. Room/cabins held for sale arises out of advertising
agreements where hotels and cruises allot rooms in exchange for advertising in
the Company's Publications. These rooms/cabins are recorded in inventory at a
value based on the Company's resale agreements with the advertising hotels,
resorts and cruise lines. At the time that the Company resells the room/cabin to
its customers, the Company relieves the inventory account by the appropriate
value and recognizes the corresponding cost of travel sale. As a result, the
Company realizes the cash flow benefit of both the advertising sale and the
travel sale at the time it receives payment from the customer. The cash flow
benefit may be realized in a period subsequent to the period in which the
advertising revenue is recognized. There was also a balance due from affiliates
(BEI/IMS) which is secured by a short term promissory note bearing interest and
collateralized by shares in a publicly traded company. The agreement calls for
the shares to be sold on the open market over time with the proceeds being used
to pay off the balance due the Company. The Company set up a reserve for
uncollectible accounts of $128 thousand at December 31, 1999 against this
affiliate balance based on the approximate fair market value of the collateral.

RESULTS OF OPERATIONS

Overall Operating Results - The Company's net income for the year ended December
31, 1999 was $402 thousand, as compared to a loss of $1.6 million for the prior
year. The current year profitability is primarily a result of increased
advertising revenue resulting from more aggressive marketing plans.

Revenue - Gross revenue for the year ended December 31, 1999 increased 70.5% to
$27.9 million from $16.3 million in 1998. Hotel and resort sales increased
102.5% while cruise and tour sales increased 33.1% over 1998. Advertising and
subscription revenue increased 281.4% over this same time frame. Management
anticipates that both travel and advertising sales should continue to grow with
the aid of a stronger distribution network for its publications and a consistent
and increased publishing schedule. Management believes that the revenues from
the publishing and travel portions of its business are integrally tied to one
another - improved hotel sales facilitate advertising sales and, increased hotel
advertising improves the likelihood of room sales within the advertising hotels.

The Company recognizes hotel and cruise revenue on a "booked, paid, traveled"
basis (i.e. revenue is not earned until the passenger has traveled). The Company
sells advertising over a given number of issues and advertising revenue is
recognized as the applicable publications are printed and distributed.

Cost of Goods Sold - The typical gross margin for hotel and resort sales ranges
from 20% to 23%. Typical cruise and tour gross margins range from 11% to 13%.
For the year ended December 13, 1999, hotel and cruise gross margins were 23.4%
and 13%, respectively. Margins for both hotels and cruises can fluctuate
depending on a number of factors relative to the properties being sold
(competition, location, and availability of supply and others). Publishing cost
increased due to a large increase in the number of publications being
distributed for Interline Adventures and the premier publication of Destination
Weddings & Honeymoons. The Company anticipates that the number of Publications
issued in the future will continue to increase as the Company increases its
airline employee database through its marketing efforts as well as possible
future acquisitions of interline related companies.

Operating Expenses - Operating expenses for the year increased 35.9%. The
primary increases in expenses relate to staffing at both the support and
reservation personnel levels. The Company added reservation, marketing,
accounting, CFO, and management information services personnel in order to
service both the increase in telephone and web site inquiries.

There were also increases in depreciation and goodwill amortization due to the
aforementioned furniture and equipment purchases and acquisitions.


                                       13
<PAGE>   14

Because of the increase in new bookings, the Company also experienced a
significant increase in credit card fees, telephone and postage and delivery
charges. The revenue associated with these expenditures will be recognized when
travel has occurred which may or may not be in the same quarter as the expense.
The Company is currently undergoing a postal rate audit on the distribution of
the Publications which, if successful, should result in substantial on-going
savings in that area as well.

As already noted, the Company anticipates experiencing increased travel and
advertising sales in 2000. The Company believes that the following types of
operating expenses will vary with travel sales and generally increase as travel
sales increase: reservation personnel costs, credit card fees, telephone expense
and postage and delivery expenses. The actual levels of these expenses will be a
function of numerous factors including but not limited to the experience,
closing capabilities and product knowledge of the reservation staff. The Company
believes that advertising sales can increase substantially without proportionate
increases in operating expenses.

LIQUIDITY AND CAPITAL RESOURCES

The Company has an accumulated deficit of $3.7 million ($544,000 of this deficit
is attributable to periods prior to the Company's commencement of operations
within the interline travel industry).

As discussed in "Financial Condition and Changes in Financial Condition", the
Company has increased its inventory of rooms/cabins by approximately $2.1
million from 1998 to 1999. This increase has required the Company to utilize its
cash resources to finance growth. The Company believes that the ongoing sale of
this inventory will produce sufficient liquidity to meet its operating and
growth plans.

INFLATION

The Company's results of operations have not been affected by inflation and
management does not expect inflation to have a significant effect on its
operations in the future because of the short time frame between reservation
bookings and the dates of travel.

FOREIGN CURRENCY RISK

The Company has recently entered into contracts with certain hotels/resorts
located primarily in Europe which stipulate conversion of U.S. dollars into
different European currencies at time of travel. The Company is currently
evaluating its foreign currency risk in regard to these contracts. To date, the
amount of Company sales of these properties has been immaterial to the Company's
financial operations and the Company has not experienced any erosion of margins
on sales of these properties due to currency conversion rates.

FORWARD-LOOKING INFORMATION

From time to time, the Company or its representatives have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but not limited to, press releases, oral
statements made with the approval of an authorized executive officer or in
various filings made by the Company with the Securities and Exchange Commission.
Words or phases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project or projected", or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"). The Company
wishes to ensure that such statements are accompanied by meaningful cautionary
statements, so as to maximize to the fullest extent possible the protections of
the safe harbor established in the Reform Act. Accordingly, such statements are
qualified in their entirety by reference to and are accompanied by the following
discussion of certain important factors that could cause actual results to
differ materially from such forward-looking statements.

Management is currently unaware of any trends or conditions other than those
previously mentioned in this management's discussion and analysis that could
have a material adverse effect on the Company's financial position, future
results of operations, or liquidity. However, investors should also be aware of
factors that could have a negative impact on the Company's prospects and the
consistency of progress in the areas of revenue generation, liquidity, and
generation of capital resources. These include: (i) variations in the mix of
hotel, cruise, and Publication


                                       14
<PAGE>   15

revenues, (ii) possible inability to attract investors for its equity securities
or otherwise raise adequate funds from any source should the Company seek to do
so, (iii) increased governmental regulation, (iv) increased competition, (v)
unfavorable outcomes to litigation involving the Company or to which the Company
may become a party in the future and, (vi) a very competitive and rapidly
changing operating environment. Furthermore, reference is also made to other
sections of this report that include factors that could adversely impact the
Company's business and financial performance.

The risks identified here are not all inclusive. New risk factors emerge from
time to time and it is not possible for Management to predict all of such risk
factors, nor can it assess the impact of all such risk factors on the Company's
business or the extent to which any factor or combination of factors may cause
actual results to differ materially from those contained in any forward-looking
statements. Accordingly, forward-looking statements should not be relied upon as
a prediction of actual results.



                                       15
<PAGE>   16


ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                                       16
<PAGE>   17


                    GRAND ADVENTURES TOUR & TRAVEL PUBLISHING
                                   CORPORATION

                              FINANCIAL STATEMENTS
                            AND REPORT OF INDEPENDENT
                          CERTIFIED PUBLIC ACCOUNTANTS

                           DECEMBER 31, 1999 AND 1998



                                       17
<PAGE>   18


To The Board of Directors
  of Grand Adventures Tour & Travel Publishing Corporation
Austin, Texas

We have audited the accompanying balance sheets of Grand Adventures Tour &
Travel Publishing Corporation as of December 31, 1999 and 1998, and the related
statements of operations, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Grand Adventures Tour & Travel
Publishing Corporation as of December 31, 1999 and 1998, and the results of its
operations and cash flows for the years referred to above, in conformity with
generally accepted accounting principles.


ANDERSEN ANDERSEN & STRONG, L.C.



April 13, 2000
Salt Lake City, Utah





                                       18
<PAGE>   19


                   GRAND ADVENTURES TOUR AND TRAVEL PUBLISHING
                                   CORPORATION
                                 BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                         DECEMBER 31,    DECEMBER 31,
                                                                             1999            1998
                                                                         ------------    ------------
<S>                                                                      <C>             <C>
ASSETS
CURRENT ASSETS
   Cash and cash equivalents                                             $    273,189    $    236,452
   Available for sale securities                                            1,123,037       1,868,469
   Cash-restricted                                                            221,500         175,500
   Accounts receivable, net of allowance for doubtful accounts
     of $29,108 in 1999 and $43,163 in 1998                                   563,755         191,226
   Due from affiliate, net of allowance for reserve for
     impairment of $163,130 and $128,046 in 1999 and 1998,                    128,405          80,065
respectively
Accrued investment income                                                       5,206          17,850
Other prepaid expenses                                                         43,833          96,613
Rooms/cabins held for sale                                                  2,425,525         253,901
Prepaid hotel cost                                                             47,576         135,252
Prepaid cruise and tour cost                                                   92,835          78,943
                                                                         ------------    ------------
     Total Current Assets                                                   4,924,861       3,134,271
                                                                         ------------    ------------
PROPERTY AND EQUIPMENT, at cost,
   net of accumulated depreciation                                          1,240,418         410,505
OTHER ASSETS
   Other assets                                                                11,680          11,680
   Intangible assets, net of accumulated amortization                         615,687         680,543
                                                                         ------------    ------------
                                                                         $  6,792,647    $  4,236,999
                                                                         ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable                                                      $    532,595    $    277,802
   Other current liabilities                                                  125,224         196,908
   Current portion of long-term debt                                          783,675         616,500
   Deferred hotel revenue                                                     445,808         471,034
   Deferred cruise and tour revenue                                           102,774          92,209
   Deferred subscription revenue                                               13,112          48,706
                                                                         ------------    ------------
     Total Current Liabilities                                              2,003,188       1,703,159
                                                                         ------------    ------------
OTHER LIABILITIES
   Long-term debt                                                           1,852,634              --
                                                                         ------------    ------------
     TOTAL LIABILITIES                                                      3,855,822       1,703,159
                                                                         ------------    ------------
STOCKHOLDERS' EQUITY
   Preferred stock, no par value; authorized 10,000,000 shares;
     none issued and outstanding                                                   --              --
   Common stock, $.0001 par value; authorized 30,000,000 shares;
     issued and outstanding 3,024,883 and 3,024,883 in 1999 and
     1998, respectively                                                           302             302
   Additional paid-in capital                                               6,610,474       6,610,474
   Accumulated deficit                                                     (3,673,951)     (4,076,936)
                                                                         ------------    ------------
     TOTAL STOCKHOLDERS' EQUITY                                             2,936,825       2,533,840
                                                                         ------------    ------------
                                                                         $  6,792,647    $  4,236,999
                                                                         ============    ============
</TABLE>


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



                                       19
<PAGE>   20



                   GRAND ADVENTURES TOUR AND TRAVEL PUBLISHING
                                   CORPORATION
                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                  DECEMBER 31,   DECEMBER 31,
                                                      1999           1998
                                                  ------------   ------------
<S>                                               <C>            <C>
REVENUES
   Hotel revenue                                  $ 11,492,997   $  5,675,904
   Cruise and tour revenue                          13,011,681      9,752,847
   Advertising revenue                               2,919,556        765,579
   Investment and other revenue                        490,392        162,344
                                                  ------------   ------------
     TOTAL REVENUES                                 27,914,626     16,356,674
                                                  ------------   ------------
COST OF GOODS SOLD
   Hotel cost                                        8,804,638      4,405,837
   Cruise and tour cost                             11,352,001      8,629,259
   Publishing cost                                   1,809,473      1,109,238
   Merchandise cost                                    251,651             --
                                                  ------------   ------------
     TOTAL COST OF GOODS SOLD                       22,217,764     14,144,334
                                                  ------------   ------------
          GROSS PROFIT                               5,696,862      2,212,340

OPERATING EXPENSES
   Selling, general and administrative expenses      2,322,086      1,605,349
   Wages                                             2,766,471      2,202,622
   Depreciation and amortization                       205,319         90,004
                                                  ------------   ------------
     TOTAL OPERATING EXPENSES                        5,293,877      3,897,975
                                                  ------------   ------------
Net Income (Loss) before Income Taxes                  402,985     (1,685,635)
Income Tax Expense                                          --             --
NET INCOME (LOSS)                                 $    402,985   $ (1,685,635)
                                                  ============   ============

Average Common Equivalent Shares
   Basic                                             3,024,883      3,024,883
                                                  ============   ============
   Diluted                                           3,624,883      3,024,883
                                                  ============   ============
Net Income (Loss) per Common Share
   Basic                                          $       0.13   $      (0.56)
                                                  ============   ============
   Diluted                                        $       0.11   $      (0.56)
                                                  ============   ============
</TABLE>


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



                                       20
<PAGE>   21


                   GRAND ADVENTURES TOUR AND TRAVEL PUBLISHING
                                   CORPORATION
                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                          COMMON       COMMON       ADDITIONAL
                                          STOCK        STOCK         PAID-IN      RETAINED
                                          SHARES       AMOUNT        CAPITAL       DEFICIT         TOTAL
                                       -----------   -----------   -----------   -----------    -----------
<S>                                    <C>           <C>           <C>           <C>            <C>

Balance at December 31, 1997             1,431,858           143   $   959,447   $(2,391,302)   $(1,431,712)
   Issuance of common shares
     ($5,00 per share less offering      1,200,000           120     4,787,678            --      4,787,798
     costs)
   Conversion of notes payable into
     Common shares ($2.20 per share)       393,025            39       863,349            --        863,388
   Net loss                                     --            --            --    (1,685,635)    (1,685,635)
                                       -----------   -----------   -----------   -----------    -----------
Balance at December 31, 1998             3,024,883           302     6,610,474    (4,076,937)     2,533,840
   Net income                                   --            --            --       402,985        402,985
                                       -----------   -----------   -----------   -----------    -----------
Balance at December 31, 1999             3,024,883           302   $ 6,610,474   $(3,673,952)   $ 2,936,825
                                       ===========   ===========   ===========   ===========    ===========
</TABLE>


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



                                       21
<PAGE>   22


                   GRAND ADVENTURES TOUR AND TRAVEL PUBLISHING
                                   CORPORATION
                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                      DECEMBER 31,    DECEMBER 31,
                                                          1999            1998
                                                      ------------    ------------
<S>                                                   <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income/(Loss)                                     $    402,985    $ (1,685,635)
Adjustments to reconcile net income/(loss)
   to cash provided by operating activities:
     Depreciation and amortization                         205,319          90,004
     Provision for losses on accounts receivable                --         159,189
Changes in operating assets and liabilities:
     Restricted cash                                       (46,000)          5,875
     Accounts receivable                                  (372,529)       (119,059)
     Rooms/cabins held for sale                         (2,171,624)        (70,923)
     Prepaid offering expenses                                  --         113,508
     Other prepaid expenses                                 52,780         (17,850)
     Accrued investment income                              12,644         (96,613)
     Prepaid hotel cost                                     87,676         (82,225)
     Prepaid cruise and tour cost                          (13,892)          1,539
     Other assets                                          (35,542)         25,499
     Accounts payable                                      254,793        (142,501)
     Accrued expenses                                      (71,684)       (138,386)
     Receivable from affiliates and other                  (48,340)         47,250
     Deferred hotel revenue                                (25,226)        186,095
     Deferred cruise and tour revenue                       10,565         (60,847)
     Deferred subscription revenue                         (35,594)        (31,935)
                                                      ------------    ------------
          Net Cash Used by Operating Activities         (1,793,669)     (1,817,015)
                                                      ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Sale of marketable short-term investments             745,432      (1,868,469)
     Business acquisitions                                 (20,287)       (329,731)
     Purchase of property and equipment                   (914,547)       (416,550)
                                                      ------------    ------------
          Net Cash Used by Investing Activities           (189,403)     (2,614,750)
                                                      ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from sale of common stock                         --       5,651,186
     Proceeds from convertible debentures                1,500,000         636,500
     Proceeds from leases payable                          449,725              --
     Net proceeds from notes payable                        70,084      (1,593,374)
                                                      ------------    ------------
          Net Cash Provided by Financing Activities      2,019,809       4,694,312
                                                      ------------    ------------
     Net Increase in Cash                                   36,737         262,547
     Cash at Beginning of Period                           236,452         (26,095)
                                                      ------------    ------------
     Cash at End of Period                            $    273,189    $    236,452
                                                      ============    ============

SUPPLEMENTAL CASH FLOW INFORMATION
     Cash paid during the year for interest                 78,041          53,892
</TABLE>



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


                                       22
<PAGE>   23


                   GRAND ADVENTURES TOUR AND TRAVEL PUBLISHING
                                   CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998


1.       BUSINESS ACTIVITIES

The Company publishes magazines, manages web sites and sells travel products to
certain niche markets in the travel industry. The three niche markets the
Company served as of December 31, 1999, include (1) interliners, active
employees and retirees of the airline industry who may fly on many carriers for
free or at a significantly reduced fare, as well as their families and friends
to whom they pass along their allotments of no-cost or low-cost flying
privileges, (2) travel agents, those individuals recognized by a travel industry
association such as The International Airlines Travel Agent Network (IATAN), as
a seller of travel products, and (3) destination weddings and honeymoons. A
destination wedding is any wedding performed at a location other than the home
area of the bride or groom. Honeymoon travel includes any travel by a newly
married couple within one year of their wedding.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

Travel revenue is recognized on a "booked, paid, traveled" basis. This means
that all client funds received and all funds paid to travel suppliers prior to
the travel date are deferred for income recognition until such time as the
client has traveled and the Company has completed its commitment to the client
and the travel suppliers. Subscription sales are deferred for income recognition
until magazines are delivered to subscribers.

Subscription sales are deferred as unearned income at the time of sale. Magazine
customers normally pay for a one-year or two-year subscription in advance. As
magazines are delivered to subscribers, the proportionate share of the
subscription price is taken into revenue. Magazine subscription selling expenses
are charged to operations as incurred.

The assets "Prepaid Hotel Cost", "Prepaid Cruise and Tour Cost" and
"Rooms/Cabins Held for Sale" represent expenses paid for tours and cruises,
which have been booked but not yet taken by the customer. The liabilities
"Deferred Hotel Revenue" and "Deferred Cruise and Tour Revenue" represent
payments received for tours and cruises booked but not recognized as revenue
until the customer completes the tour or cruise.

Cash and Cash Equivalents

Substantially all of the balances in the cash and short-term investment accounts
consist of operating accounts and investments in commercial paper funds.
Restricted cash represents certificates of deposits pledged against as a reserve
for credit card processing and against letters of credit issued to various
hotels and cruise lines which allows the Company to process last minute
bookings.

The Company considers all highly liquid instruments purchased with a maturity at
the time of purchase of less than three months to be cash equivalents.

Allowance for Uncollectible Accounts

The Company provides an allowance for accounts receivable which are doubtful of
collection. The allowance is based upon management's periodic analysis of
receivables, evaluation of current economic conditions, and other pertinent
factors. Ultimate losses may vary from the current estimates and, as additions
to the allowance become necessary, they are charged against earnings in the
period in which they become known. Losses are charged and recoveries are
credited to the allowance.



                                       23
<PAGE>   24


                   GRAND ADVENTURES TOUR AND TRAVEL PUBLISHING
                                   CORPORATION
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998


Basic and Diluted Net Income (Loss) per Share

Basic net income (loss) per share is computed using the weighted average number
of shares outstanding during the period. Diluted net income (loss) per share is
computed using the weighted average number of common shares and common
equivalent shares outstanding during the period. Common equivalent shares
consist of shares issuable upon the exercise of stock options, stock warrants
and debentures.

Depreciation and Amortization

Property and equipment are stated at cost. Depreciation is computed on the
straight-line method for financial statement purposes. Estimated useful lives
range from 5 to 7 years. Intangibles, consisting of "excess of cost over net
assets acquired" and non-compete covenants are stated at cost and are being
amortized over 40- year, 5-year, and 3-year periods.

Income Taxes

Income taxes are computed using the asset and liability method. Under this
method, deferred income tax assets and liabilities are determined based on the
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the currently enacted tax rates and laws.
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes", requires a valuation allowance against deferred tax assets if, based on
the weight of available evidence, it is more likely than not that some or all of
its deferred tax assets will not be realized.

Stock-Based Compensation

The Company accounts for stock-based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board Opinion (APB) No.
25, "Accounting for Stock Issued to Employees", and complies with the disclosure
provisions of SFAS No.123, "Accounting for Stock-Based Compensation". The
Company accounts for stock-based compensation to employees and directors using
the intrinsic value method, whereby, compensation cost is recognized when the
exercise price at the date of grant is less than fair market value of the
Company's common stock. The Company discloses the pro forma effect of
compensation cost based on the fair value method for determining compensation
cost. Stock-based compensation awarded to non-employees is determined using the
fair value method. Compensation cost is recognized over the service or vesting
period. (See Note 11.)

Estimates and Assumptions

Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could vary from the estimates that were assumed in
preparing the financial statements.

Impairment of Long-Lived Assets

The Company evaluates the recoverability of long-lived assets in accordance with
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed
of". SFAS No. 121 requires recognition of impairment of long-lived assets in the
event the net book value of such assets exceeds the future undiscounted cash
flows attributable to such assets.



                                       24
<PAGE>   25


                   GRAND ADVENTURES TOUR AND TRAVEL PUBLISHING
                                   CORPORATION
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998


Marketing and Advertising Costs

The Company recognizes advertising expenses in accordance with Statement of
Position 93-7, "Reporting on Advertising Costs". As such, the Company expenses
the cost of communicating advertising in the period in which the advertising
space or airtime is used. Advertising expenses amounted to $165,728 and $108,332
for the years ended December 31, 1999 and 1998, respectively.

Investments

The Company classifies its marketable debt securities as "held to maturity" if
it has the positive intent and ability to hold the securities to maturity. All
other marketable securities are classified as "available for sale." Securities
classified as "available for sale" are carried in the financial statements at
fair value. Realized gains and losses, determined using the first-in, first-out
(FIFO) method, are included in earnings; unrealized holding gains and losses are
reported in other comprehensive income. Securities classified as held to
maturity are carried at amortized cost. Unrealized gains were immaterial for the
years ended December 31, 1999 and 1998.

Concentrations of Credit Risk Arising from Cash Deposits in Excess of Insured
Limits


The Company maintains cash balances at several financial institutions located in
Texas. Accounts at each institution are insured by the Federal Deposit Insurance
Corporation up to $100,000. At December 31, 1999, the Company's uninsured cash
balances total $67,062.

Recent Accounting Pronouncements

In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use". This standard requires
companies to capitalize qualifying computer software costs, which are incurred
during the application development stage and amortize them over the software's
estimated useful life. SOP 98-1 is effective for fiscal years beginning after
December 15, 1998. The Company does not expect that the adoption of SOP 98-1
will have a material impact on its consolidated financial statements.

In April 1998, the American Institute of Certified Public Accountants issued SOP
98-5, "Reporting on the Costs of Start-Up Activities". SOP 98-5 is effective for
the Company's fiscal year ending March 31, 2000. SOP 98-5 requires costs of
start-up activities and organization costs to be expensed as incurred. Adoption
is not expected to have a material effect on the Company's financial statements.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999. SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designed as part of a
hedge transaction and, if it is, the type of hedge transaction. The Company does
not expect that the adoption of SFAS No. 133 will have a material impact on its
financial statements because the Company does not currently hold any derivative
instruments.

In January 2000, the FASB issued EITF 99-17, "Accounting for Advertising Barter
Transactions". EITF 99-17 is effective for transactions occurring after January
20, 2000. This pronouncement requires that revenues and expenses should be
recognized from advertising barter transactions at the fair value of the
advertising surrendered or received only when an entity has a historical
practice of receiving or paying cash for similar advertising transactions. It
has not been determined whether EITF 99-17 will apply to the Company. If the
provisions of EITF 99-17 had applied to the Company during fiscal 1999, it would
have reduced its revenues by approximately $1.7 million.



                                       25
<PAGE>   26




                   GRAND ADVENTURES TOUR AND TRAVEL PUBLISHING
                                   CORPORATION
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998


3.       PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                                                       1999            1998
                                                  ------------    ------------
<S>                                               <C>             <C>
Property and equipment                            $  1,428,385    $    524,856
Leasehold improvements                                  44,763              --
Less: accumulated depreciation and amortization       (232,730)       (114,351)
                                                  ------------    ------------
Net property and equipment                           1,240,418         410,505
                                                  ============    ============
</TABLE>

Depreciation and amortization expense for the years ending December 31, 1999 and
1998 was $205,319 and $90,004, respectively.

4.       ACQUISITIONS

On November 8, 1999, the Company acquired the interline related assets of
Weissman Sales & Marketing, Inc., a privately held travel company offering
cruises and tours to the retail and interline markets. The purchase
consideration of $10,500 was paid in cash. The Company acquired intangible
assets in the form of customer names, addresses, phone numbers, e-mail
addresses, fax numbers, company telephone numbers, 800 sales numbers, existing
vendor contracts, distribution addresses, non-compete agreements and all
internet web addresses and the trade name "Ventures Extraordinaire". In addition
to the purchase agreement, the Company entered into a five year consulting
agreement with the seller. The consulting agreement provides for payments of
$3,500 per month in exchange for services related to interline product and
marketing development.

Subsequent to year-end, the Company acquired the interline related assets of
Non-Rev International, LLC. The transaction occurred on February 1, 2000. The
purchase consideration of $50,000 was paid in cash. The Company acquired
intangible assets in the form of customer names, addresses, phone numbers, fax
numbers and 800 sales numbers.

On November 5, 1998, the Company acquired the interline related assets of
Exclusively Cruises, Atlanta Inc. a privately held travel company offering
cruises and tours to the interline market. The purchase consideration was in the
form of cash of $12,500 and a non-interest bearing note payable with a balloon
payment of $20,000 due on December 4, 1999. The assets acquired included the
trade name "Exclusively Interline," client lists and telephone numbers. No
liabilities were assumed in the acquisition.

Assets acquired from Exclusively Interline consist of the following:

Excess of cost over net assets acquired   $32,836
                                          -------
Total assets acquired                      32,836
                                          =======

The purchase method of accounting was used to account for the above transaction
and the excess of cost over net assets acquired is being amortized over 5 years.



                                       26
<PAGE>   27


                   GRAND ADVENTURES TOUR AND TRAVEL PUBLISHING
                                   CORPORATION
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998


On December 11, 1998, the Company acquired certain assets and liabilities of Sun
Central Reservations, Inc. and The Pass Bureau, Inc., two privately held travel
companies offering hotel, resorts and cruises to the interline market. The
purchase consideration was in the form of cash. In addition to assets listed
below, the Company acquired intangible assets in the form of customer names,
addresses, phone numbers, e-mail addresses, fax numbers, company telephone
numbers, 800 sales numbers, existing vendor contracts, distribution addresses,
non-compete agreements and all internet web addresses and the trade names "The
Pass Bureau" and "Sun Central Reservations."

Assets acquired from Sun Central/Pass Bureau consist of the following:

<TABLE>
<S>                                       <C>
Certificate of deposit                    $     21,079
Furniture and equipment                         35,277
Receivables due from hotels and clients         81,882
Excess of cost over net assets acquired        296,896
                                          ------------
Total assets acquired                     $    435,134
                                          ============
</TABLE>

Liabilities assumed from Sun Central/Pass Bureau consist of the following:

<TABLE>
<S>                                      <C>
Client refunds due                       $     39,072
Client credit vouchers                         23,903
Payables due hotels                            81,012
Payables due trade vendors and payroll        274,147
Note payable                                   17,000
                                         ------------
Total liabilities assumed                $    435,134
                                         ============
</TABLE>

The purchase method of accounting was used to account for the above transaction
and the excess of cost over net assets acquired is being amortized over 5 years.

5.       INTANGIBLE ASSETS

Intangible assets at December 31, 1999 and 1998 are as follows:

At December 31, 1999 and 1998, the unamortized cost consists of the following:

<TABLE>
<CAPTION>
                                    1999            1998
                                ------------    ------------
<S>                             <C>             <C>
Cost                            $    691,043    $    754,175
Less accumulated depreciation        (75,356)        (73,632)
                                ------------    ------------
Net                             $    615,687    $    680,543
                                ============    ============
</TABLE>

Amortization expense for the years ended December 31, 1999 and 1998, was $92,745
and $25,108, respectively.

6.       DUE TO AFFILIATE

The Company and IMS entered into an Inventory Marketing Agreement whereby the
Company sells certain IMS inventories. The Company is required to make monthly
payments to IMS equaling (i) the cash value of the inventory sold plus (ii) 25%
of the collected revenue generated from such sales less such cash value. This
agreement was cancelled as of January 31, 1998.



                                       27
<PAGE>   28



                   GRAND ADVENTURES TOUR AND TRAVEL PUBLISHING
                                   CORPORATION
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998


At December 31, 1999 and 1998, BEI owed the Company $291,451 and $208,111
respectively. The receivable at December 31, 1999 is collateralized by
investment securities held by BEI. The terms of the note receivable dated
December 31, 1999 are 10% annual interest with principle and interest due on
demand. The Company has not included any accrued interest in the financial
statements. The Company set up a reserve for impairment of $128,046 at December
31, 1999, based upon the fair market value of collateralized securities.

7.       LONG-TERM DEBT

At December 31, 1999 and 1998, long-term debt consisted of the following:

<TABLE>
<CAPTION>
                                                             1999            1998
                                                         ------------    ------------
<S>                                                      <C>             <C>
Margin loan, 8% annual interest, secured by marketable   $    541,584    $    250,000
securities
Norwest line of credit, interest at prime + 1% payable        125,000         346,500
monthly
Secured by certificates of deposit - Exclusively
     Interline acquisition                                     20,000          20,000
Capital leases                                                449,725
Convertible debentures issued, 10% annual interest          1,500,000              --
                                                         ------------    ------------
                                                            2,636,309         616,500
Less current portion                                         (783,675)       (616,500)
                                                         ------------    ------------
TOTAL                                                    $  1,852,634              --
                                                         ============    ============
</TABLE>

Maturities of long-term obligations for future years ending December 31:

<TABLE>
<CAPTION>
                                                  CAPITAL
                                  PRINCIPAL        LEASE
                                  PAYMENTS       OBLIGATIONS       TOTAL
                               --------------  --------------  -------------
<S>                           <C>              <C>             <C>
                        2000     $   686,584       $ 139,338     $  825,922
                        2001                         139,338        139,338
                        2002                         126,228        126,228
                        2003       1,500,000          86,898      1,586,898
                        2004                          63,470         63,470
                                 -----------       ---------     ----------
                                   2,186,584         555,272      2,741,856
                                 -----------       ---------     ----------
Amount representing interest               -        (105,547)      (105,547)
                                 -----------       ---------     ----------
                       Total     $ 2,186,584       $ 449,725     $2,636,309
                                 ===========       =========     ==========
</TABLE>


During September 1999, the Company raised $1,500,000 in the form of Convertible
Debentures. The Debentures earn interest at 10% per year and the interest is
paid quarterly. The holders of the Debentures have the right, at their option,
at any time and from time to time prior to the Maturity Date, to convert all or
any portion of the outstanding principal amount of the Debentures into fully
paid and non-assessable shares of Common Stock at the conversion price of $2.50
of such outstanding principal amount for each share of Common Stock subject to
adjustments. However, if any portion of the Debentures are converted prior to
September 21, 2000, the Conversion Price as to such converted portion will be
$2.625, subject to the same adjustments as would have been effected had such
price been established at the Conversion Price at the date of execution of the
Debentures.



                                       28
<PAGE>   29




                   GRAND ADVENTURES TOUR AND TRAVEL PUBLISHING
                                   CORPORATION
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

8.       INCOME TAXES

The components of the provision for income taxes at December 31, 1999 and 1998
are as follows:

<TABLE>
<CAPTION>
                                         1999           1998
                                     ------------   ------------
<S>                                  <C>            <C>
Current-Federal                      $         --   $         --
Deferred-Federal
                                     ------------   ------------
INCOME TAX PROVISION                 $         --   $         --
                                     ============   ============
</TABLE>


A reconciliation of the income tax provision to the amount expected using the
U.S. federal statutory rate follows:


<TABLE>
<CAPTION>
                                              1999           1998
                                          ------------   ------------
<S>                                       <C>            <C>
Expected amount using:
U.S. Federal statutory rate               $         --   $         --
Non-deductible expenses
Depreciation and amortization allowance
                                          ------------   ------------
Effective tax                             $         --   $         --
                                          ============   ============
</TABLE>


Deferred tax assets (liabilities) consisted of the following at December 31,
1999 and 1998:

<TABLE>
<CAPTION>
                                         1999            1998
                                     ------------    ------------
<S>                                  <C>             <C>
Deferred tax assets:
   Bad debt allowance                $      9,897    $     14,674
   Intangible assets                        2,120              --
   Net operating loss carryforward        474,594         770,136
   Valuation allowance                   (420,451)       (762,058)
                                     ------------    ------------
                                           66,160          22,752
Deferred tax liabilities:
   Fixed assets                           (66,160)         (6,217)
   Intangible assets                           --         (16,535)
                                     ------------    ------------
                                          (66,160)        (22,752)
                                     ------------    ------------
                                     $         --    $         --
                                     ============    ============
</TABLE>


At December 31, 1999, the Company has a net operating loss carryforward totaling
approximately $1,400,000 that may be offset against future taxable income. If
not used, the carryforward will expire in 2012. Under certain circumstances,
Section 382 of the Internal Revenue Coded of 1986 restricts a corporation's use
of its net operating loss carryforward. Due to the Company's issuance of
additional stock, the Company's use of its existing net operating loss
carryforward could be limited, therefore, the Company may have to pay federal
income taxes sooner than if the use of its net operating loss carryforward were
not restricted.

9.       COMMON STOCK

In February of 1998, the Company issued 1,200,000 shares of its Common stock at
$5.00 per share, pursuant to a public offering, for net proceeds (after offering
costs) of $4,787,798. Also, in February of 1998, the Company issued 393,025
common shares valued at $2.20 per share to holders of $863,388 of convertible
debentures. There were no issuances of common stock during 1999.



                                       29
<PAGE>   30



                   GRAND ADVENTURES TOUR AND TRAVEL PUBLISHING
                                   CORPORATION
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998



10.      LEASING ARRANGEMENTS

On December 1, 1997, the Company entered into a lease agreement for office
space. The terms of the lease agreement call for 10,567 square feet of net
rentable area for a period of five years and three months with an option to
renew for five years. Monthly rent payments over the initial term of the lease
are $12,328 from March 1, 2000 to February 28, 2001 and $12,478 from March 1,
2001 to February 28, 2003. The option year rates will be based on market
conditions upon the renewal date.

On August 15, 1999, the Company entered into a month-to-month lease on
approximately 3,310 square feet in the same building. The lease provides for
monthly payments of $4,138 and is cancelable upon 30 days notice. On March 15,
2000, the Company canceled the lease effective April 18, 2000.

On January 24, 2000, the Company entered into a lease agreement for office space
on approximately 6,375 square feet in the same building. Monthly rent payments
over the initial term of the lease are $7,437 from April 1, 2000 through
February 28, 2001, and $7,528 from March 1, 2001 through February 28, 2003.

The following is a schedule of future minimum rentals under the non-cancelable
lease agreement at December 31, 1999.


<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:            AMOUNT
                                   ---------
<S>                                <C>
1999                               $ 135,614
2000                                 146,176
2001                                 149,436
2002                                 149,736
2003                                  24,956
                                   ---------
                                   $ 606,218
                                   =========
</TABLE>


11.      STOCK OPTION PLAN

The Company has a stock option plan under which employees may be awarded
incentive stock options. The plan authorizes the grant of options for the
purchase of up to 450,000 shares of common stock. At December 31, 1999, there
are 323,409 incentive stock options outstanding. Under the plan, the option
exercise price for incentive stock options may not be less than the fair market
value of the Company's common stock at the date of grant as determined by the
Board of Directors. Options expire no later than five years from the date of
grant and vest over three to four years.

The Company also has a stock option plan under which officers, directors, and
consultants may be awarded nonqualified stock options. The plan authorizes the
grant of options for the purchase of up to 250,000 shares of common stock. At
December 31, 1999, there are 162,500 nonqualified stock options outstanding.
Options expire no later than five years from the date of grant, and vesting
established at the time of grant, which is generally one year.



                                       30
<PAGE>   31




                   GRAND ADVENTURES TOUR AND TRAVEL PUBLISHING
                                   CORPORATION
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

Stock option activity is as follows:

<TABLE>
<CAPTION>
                                   Common            Common        Weighted
                                   Shares            Shares         Average
                                  Available          Options       Exercise        Options
                                  for Grant        Outstanding       Price       Exercisable
                               ----------------   --------------  ------------   ------------
<S>                            <C>                <C>             <C>            <C>
Balance, December 31, 1997             351,925           98,075       $  7.00         38,450
                                                                                 ===========
     Authorized                        250,000               --
     Granted                         (354,000)          354,000       $  5.00
     Forfeited                          34,091          (34,091)      $  7.00
                               ---------------    -------------   -----------
Balance, December 31, 1998             282,016          417,984       $  5.46        141,991
                                                                                 ===========
     Granted                         (128,000)          128,000       $  1.99
     Forfeited                          60,075          (60,075)      $  6.25
                               ---------------    -------------   -----------
Balance, December 31, 1999             214,091          485,909       $  4.39        269,263
                               ===============    =============   ===========    ===========
</TABLE>


The following summarizes options outstanding at December 31, 1999:

<TABLE>
<CAPTION>
                    Options Outstanding                            Options Exercisable
                   --------------------                        ---------------------------
                                    Weighted
                                     Average      Weighted                     Weighted
   Range of                         Remaining      Average                      Average
   Exercise           Number        Contractual   Exercise        Number       Exercise
     Price          Outstanding       Life          Price      Exercisable       Price
----------------   --------------  ------------  ------------  -------------  ------------
<S>                <C>             <C>           <C>           <C>            <C>
$1.75 to $2.50        128,000         4.52          $ 1.99         11,250        $ 1.75
     $5.00            313,750         2.67          $ 5.00        222,000        $ 5.00
     $7.00             44,159         2.54          $ 7.00         36,013        $ 7.00
</TABLE>


All options were granted with the exercise price at an amount equal to or
greater than the per-unit fair market value of the Company's Common stock on the
date of grant. Accordingly, no compensation cost was recorded in 1999 and 1998.
Had compensation cost for stock option plan been determined based on the fair
value of the options at the grant dates consistent with the method prescribed in
the SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's
operating results would have been different as indicated in the pro forma
amounts below:


<TABLE>
<CAPTION>
                                                        1999              1998
                                                     -----------      -------------
<S>                                                  <C>              <C>
Net income (loss), as reported                       $   402,985      $ (1,685,635)
Net income (loss), pro forma                         $   346,541      $ (1,720,726)

Net income (loss) per common share, as reported      $      0.13      $      (0.58)
Net income (loss) per common share, pro forma        $      0.11      $      (0.59)
</TABLE>


                                       31
<PAGE>   32


                   GRAND ADVENTURES TOUR AND TRAVEL PUBLISHING
                                   CORPORATION
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998


In 1999, options were granted at an exercise price equal to the underlying fair
value of the Company's Common stock. In 1998, the options were granted at an
exercise price greater than the underlying fair value of the Company's Common
stock. The weighted average fair value of the options granted was estimated to
be $1.45 in 1999 and $0.23 in 1998 using Black-Scholes option-pricing model with
the following assumptions on the date of grant: 0% dividend yield, volatility of
41% to 95.5%, 5% forfeitures per year, risk-free interest rate of 6.00% to
6.20%, expected life of four to five years.

12.      FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts reflected in the consolidated balance sheets for restricted
cash, accounts receivable, accounts payable and notes payable approximate the
respective values due to the short maturities of those instruments. The
estimated fair values have been determined by the Company using appropriate
valuation methodologies and available market information. Considerable judgement
is necessarily required in interpreting market data to develop the estimates of
fair value and, accordingly, the estimates are not necessarily indicative of the
amounts that the Company could realize in a current market exchange. A
comparison of the carrying value of those financial instruments, none of which
are held for trading purposes, is as follows:

<TABLE>
<CAPTION>
                                              Carrying          Fair
                                               Amount           Value
                                            -------------  ---------------
<S>                                         <C>            <C>
Assets:
  Restricted cash                             $  221,500       $  221,500
  Accounts receivable                                 --              --
  Due from affiliate                             291,451          291,451
Liabilities:
  Accounts payable and other liabilities         657,819          657,819
  Short-term debt                                686,584          686,584
</TABLE>

Restricted cash, accounts receivable and accounts payable: The carrying value of
such items approximates their fair value at December 31, 1999.

Short-term debt: Fair value of such debt is based on rates currently available
to the Company for debt of similar terms and remaining maturities. There are no
quoted prices for the debt or similar debt.




                                       32
<PAGE>   33


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

There have been no changes or disagreements with the Company's independent
accountant during the last 2 fiscal years.

No consultations occurred between the Company and Andersen Andersen & Strong,
L.C.'s appointment regarding the application of accounting principles to a
specific completed or contemplated transaction, the type of audit opinion, or
other information considered by the Company in reaching a decision as to an
accounting, auditing, or financial reporting issue.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

The following table sets forth information concerning the directors and
executive officers of the Company and their age and position with the Company.
Each director holds office until the next annual stockholders' meeting and
thereafter until the individual's successor is elected and qualified. Officers
serve at the pleasure of the board of directors.


<TABLE>
<CAPTION>
              NAME                          AGE                               POSITION
   --------------------------               ---            ---------------------------------------------
<S>                                        <C>            <C>
   Matthew O'Hayer.................          45            Chairman, Chief Executive Officer
   Joseph S. ("Jay") Juba..........          36            President, Chief Operating Officer, Secretary
   Robert R. Roe...................          52            Chief Financial Officer, Vice President
   Fernando Cruz Silva.............          38            Senior Vice President of Sales & Marketing
   Patti Macchi....................          54            Vice President of Cruise Sales & Marketing
   Robert Sandner..................          44            Director
   Robert G. Rader.................          63            Director
   Duane K. Boyd, Jr...............          54            Director
</TABLE>


Matthew O'Hayer has served as Chairman and Chief Executive Officer of the
Company since the Merger and of Airfair since its inception. Mr. O'Hayer founded
Barter Exchange, Inc. (now known as BEI Holdings, Inc. "BEI") in 1983, served as
its President and Chief Executive Officer from its founding until 1995. Mr.
O'Hayer also serves on the boards of several small businesses and non-profit
organizations.

Joseph S. ("Jay") Juba has served as President and Chief Operating Officer of
the Company since the Merger and of Airfair since its inception. He was elected
to the same offices of BEI in January, 1996. Mr. Juba joined BEI in 1991 as
Director of Advertising after working for more than five years in the
advertising industry. From May 1994 through December 1995, Mr. Juba served as
Senior Vice President of BEI.

Robert Roe, a Certified Public Accountant, has served as Chief Financial Officer
of the Company since December, 1999. Mr. Roe provided consulting services with
respect to accounting and financial management from August, October 1999 through
November, 1999. From August, 1997 Mr. Roe operated as an independent consultant
to several companies in the Austin, Texas area. From April, 1991 through August,
1997 Mr. Roe was employed Uniglobe Travel in several different capacities
including Chief Financial Officer and Regional President. Prior to April, 1991,
Mr. Roe practiced public accounting for approximately 20 years.

Fernando Cruz Silva, serves as Senior Vice President of Sales and Marketing.
Prior to joining Airfair in January 1996, Mr. Silva held the same titles at
Inventory Merchandising Services, Inc. ("IMS"), a subsidiary of BEI. Mr. Silva
became employed by IMS in May of 1994 after having worked as Director of Sales
and Marketing at the Fiesta Americana Hotel in Cancun, Mexico, and the Las
Brisas resort in Acapulco, Mexico and served in senior sales capacities at the
Hyatt and Fiesta Americana hotels in Puerto Vallarta, Mexico City, and Cancun.

Patricia H. Macchi is Vice President of Sales for the Company but also
contributes editing and marketing expertise to the Publications. Ms. Macchi
joined the Company in 1990 after working for six years with Norwegian Caribbean


                                       33
<PAGE>   34

Line. Ms. Macchi is responsible for negotiating rates and maintaining
relationships with the 27 cruise lines represented in IRL's product offering.

Robert Sandner has served as a director of Airfair since February 1996 and of
the Company since the Merger. A co- founder of BEI, Mr. Sander has served as
director of BEI and IMS throughout the last five years. Mr. Sandner served as
President of Cellular Resources, Inc. of South Texas a cellular service provider
based in Uvalde, Texas from its inception in 1991 and until its sale in August
1996. Prior to the organization of Cellular Resources, Inc., Mr. Sandner held
various offices within BEI and operated a barter franchise office in San
Antonio, Texas.

Robert G. Rader became a director of the Company as of February 3, 1998. Since
the founding of Capital West Securities, Inc. ("Capital West") in 1995, Mr.
Rader has served as its Managing Director of Corporate Finance. Capital West
served as the managing underwriter of the Offering.

Duane K. Boyd, Jr. became a director of the Company as of July 8, 1998. Mr.
Boyd, a Certified Public Accountant, has served as Senior Vice President of
American Physicians Service Group, Inc. ("APS") since July 1991. APS through its
affiliates and subsidiaries provides health care and financial related services
to individuals and institutions. From 1974 to 1991, Mr. Boyd was with KPMG Peat
Marwick. He was a partner with that firm from 1982.

Messrs. Boyd, Rader and Sandner serve as Audit Committee members with Mr. Boyd
serving as chairman. These same gentlemen also serve as members of the Company's
Compensation Committee.

ITEM 10. EXECUTIVE COMPENSATION

The following table reflects compensation paid to the two mostly highly
compensated executive officers of the Company.


<TABLE>
<CAPTION>
                                                                                     LONG TERM COMPENSATION AWARDS
                                                                       ------------------------------------------------------
                                            ANNUAL COMPENSATION        RESTRICTED    SECURITIES                    ALL
                                      -------------------------------    STOCK       UNDERLYING       LTIP        OTHER
                                        SALARY      BONUS     OTHER      AWARD      OPTIONS/SARS     PAYOUT   COMPENSATION
NAME AND PRINCIPAL POSITION     YEAR      ($)        ($)       ($)        ($)            ($)          ($)          ($)
---------------------------------------------------------------------  ---------------------------   ------------------------
<S>                              <C>    <C>          <C>      <C>      <C>           <C>             <C>      <C>
Matthew O'Hayer
   Chairman & CEO                1999   $ 133,865      $ -     $ -        $ -               -         $ -          $ -

Joseph S. ("Jay") Juba
   President, COO & Secretary    1999   $  89,560      $ -     $ -        $ -               -         $ -          $ -
</TABLE>


The following table reflects option grants issued to the two mostly highly
compensated executive officers of the Company.


<TABLE>
<CAPTION>
                                 NUMBER OF
                                 SECURITIES      PERCENTAGE OF
                                 UNDERLYING      TOTAL OPTIONS/      EXERCISE OR    EXPIRATION
                                  OPTIONS         SARS GRANTED        BASE PRICE     DATE IN
NAME                            SARS GRANTED      TO EMPLOYEES        ($/SHARE)     FISCAL YEAR
QUALIFIED PLAN:
<S>                             <C>               <C>                <C>            <C>
Matthew O'Hayer
   Chairman & CEO                       13,500        13.8%            $   2.00      1-Jul-02

Joseph S. ("Jay") Juba
   President, COO & Secretary           11,000        11.2%            $   2.00      1-Jul-02
</TABLE>



                                       34

<PAGE>   35


COMPENSATION OF DIRECTORS

The Company does not currently compensate directors in cash for any services
provided as a director. Directors were granted a total of 135,000 of
non-qualified stock options on July 1, 1998 at an exercise price of $5.00 per
share. These options vest over 2 years with 1/2 of the options vesting on July
1, 1998 and the remaining 1/2 vesting on July 1, 1999. The directors were also
granted 22,500 options on July 1, 1999 at an exercise price of $1.75 per share.
These options vest over 2 years with 1/2 of the options vesting on July 1, 1999
and the remaining 1/2 vesting on July 1, 2000.

EMPLOYMENT CONTRACTS

Matthew O'Hayer, who serves as the Company's Chairman of the Board and Chief
Executive Officer is not party to an employment agreement with the Company or
any affiliate thereof.

Joseph S. Juba, the President and Chief Operating Officer of the Company has
signed an employment agreement with BEI Holdings, Inc., together with Airfair
and BEI, the "Employers. The following is a description of the terms and
conditions of Mr. Juba's employment agreement which was entered into March 1,
1995:

Mr. Juba is paid $84,000 per year with 7% annual increases, commencing with the
first anniversary of the employment agreement, and a bonus equal to 2% of both
BEI's and Airfair's company's Pre-Tax Net Income after allocations of corporate
overhead, based upon audited financial statements. Such bonus to be calculated
on an annual basis, with quarterly draws of up to 50% of bonus due with respect
to each quarter's net income. Mr. Juba was granted shares of common stock of BEI
and Airfair, subject to repurchase rights which lapse over time. Mr. Juba was
paid an auto allowance of $420 per month for two years commencing in April,
1996. Mr. Juba is subject to three-year prohibitions (commencing with the date
of employment termination) on competition, non-disclosure and non-use of
proprietary information, contact with current or future customers or
interference with the Employers' relationship with any current or future
customers, but if terminated without cause, the prohibitions on competition and
interference are terminated. If the Employers terminate the agreement without
cause or if the Employer materially reduces the responsibilities of the
employee, (i) the employee is to be paid all non-salary monetary compensation
accrued through the date of termination and (ii) the employee is to receive, for
a period of months equal to the number of years of the employee's service to one
or more of the Employers since September 5, 1991, a monthly cash severance
payment equal to the highest monthly salary paid to the employee. The employee
is indemnified against any lawsuits or claims by any third party arising out of
any action taken in good faith by the employee in the performance of his duties.

LONG-TERM INCENTIVE PLAN

The Company has a long-term stock incentive plan (LTSIP) that reserves 450,000
shares of Common Stock for grants to employees and others who are determined to
be key to the future operational success of the Company.

An option's maximum term is five years. Employee options were granted on August
1, 1996 and vest in three years. Options were also granted on February 1, 1997,
July 1, 1998 and July 1, 1999 and vest over 4 years. The fair value of each
option grant is estimated on the grant date using an option-pricing model with
the following weighted-average assumptions used for grants in 1996: risk-free
interest rate of 6%, and expected lives of 5 years for the options.

The Company has a non-qualifying stock incentive plan that reserves 300,000
shares of common stock for grants to officers, directors, consultants and
contractors who are determined to be key to the operational success of the
Company (See "Exhibit 10.05 - 1998 Non-qualifying Incentive Plan"). An option's
maximum term is ten years. Options were granted July 1, 1998 and vest over two
years. The Board of Directors has approved this plan.



                                       35
<PAGE>   36




ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of December 31, 1998, the name and
shareholdings, including options to acquire Common Stock, of each person who
owns of record, or was known by the Company to own beneficially, 5% or more of
the shares of the Common Stock currently issued and outstanding; the name and
shareholdings, including options to acquire the Common Stock, of each director;
and the shareholdings of all executive officers and directors as a group. The
address of each of the individuals listed below is the address of the Company.


<TABLE>
<CAPTION>
                                       NATURE OF       NUMBER OF          PERCENTAGE
NAME OF PERSON OR GROUP                OWNERSHIP      SHARES OWNED       OF OWNERSHIP
------------------------------------  -----------    ----------------   ---------------
<S>                                   <C>            <C>                <C>
Matthew O'Hayer                          Direct           559,144           18.5%
Joseph S. "Jay" Juba                     Direct           157,142            5.2%
Fernando Cruz Silva                      Direct            44,286            1.5%
Robert Sandner                           Direct           111,786            3.7%
Duane K. Boyd Jr.                        Direct            24,000            0.8%

All executive officers and
directors as a group (seven              Direct           896,358           29.6%
persons)
                                        Options           244,286            8.1%
                                                     ------------       --------
                                                        1,140,644           37.7%
                                                     ============       ========
</TABLE>

The Company's executive officers and directors, entities affiliated with them
and employees of the Company and holders of at least 5% of the outstanding
Common Stock affiliated with the executive officers and directors will
beneficially own shares of Common Stock representing more than 29% of the total
voting power of the Common Stock after giving effect to the Offering. These
persons, if acting in concert, will be able to exercise control over the
Company's affairs and are likely to be able to control the Board of Directors
and the disposition of any matter submitted to a vote of stockholders.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Prior to the Offering, the Company had only one disinterested director. The
Company has agreed with the state securities administrators of certain states,
as well as the Boston Stock Exchange and the Nasdaq SmallCap(SM) Market, that
from and after the consummation of the Offering, the Company will have at least
two directors who are independent and capable of exercising independent
judgment. Currently the Company has four directors, three of whom are
independent. The Company represents that (A) all future material affiliated
transactions and loans will be made or entered into on terms that are no less
favorable to the Company than those that can be obtained from unaffiliated third
parties; and (B) all future material affiliated transactions and loans, and any
forgiveness of loans, will be approved by a majority of the Company's
independent directors who (i) do not have an interest in the transactions and
(ii) have access, at the Company's expense, to the Company's or independent
legal counsel. Unless otherwise indicated, the terms of the following
transactions were not the results of arm's length negotiations, but in the
opinion of management of the Company each transaction is on terms as fair to the
Company as could be obtained in arm's length negotiations in similar
circumstances.



                                       36
<PAGE>   37


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

 a)     Exhibits

     The following exhibits are filed electronically herewith:

     10.05   1998 Non-qualifying Incentive Plan
     27.01   Financial Data Schedule

       2.  Employment Contracts are set out in Item 10 herein.

       3.  1998 Non-qualifying Incentive Plan:
           Exhibit 10.05 1998 Non-qualifying Incentive Plan



    The following exhibits are incorporated by reference from Form 8-K filed
    October 15, 1996:

    Exhibits

    2.01   Agreement and Plan of Merger entered into effective July 19,1996, by
           and between Riley Investments, Inc, and Airfair Publishing, Inc.

    3.01   Restated Articles of Incorporation of Grand Adventures Tour & Travel
           Publishing, Corporation

    10.01  Advisory Services Agreement effective October 10, 1996 by and between
           Riley Investments, Inc. to Mark Waller

    10.02  Long Term Stock Incentive Option Plan

    10.03  Non-Qualified Stock Option granted effective August 19, 1996 by Riley
           Investments, Inc. to Mark Waller

    10.04  Indemnification and Pledge Agreement

    The following exhibits are incorporated by reference from the Registration
    Statement on Form SB-2 filed October 24, 1997:

    3.02   Bylaws

    21.1   Subsidiaries of the Registrant

    10.05  Employment Agreement with Joseph S. Juba

b)       Reports on Form 8-K

         The Company filed a Form 8-K in October 1999 regarding the private
         placement of $1,500,000 in Convertible Debentures. No financial
         statements were filed with Form 8-K




                                       37
<PAGE>   38


                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

            (Registrant)  Grand Adventures Tour & Travel Publishing Corporation
                          ------------------------------------------------------
                 By       /s/ Joseph S. Juba
                          ------------------------------------------------------
                          Joseph S. Juba, President/Chief Operating Officer

             Date         April 14, 2000
                          --------------

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

             By     /s/ Robert R. Roe
                    -----------------------------------------------------------
                    Robert R. Roe, Chief Financial Officer

             Date   April 14, 2000
                    --------------

             By     /s/ Matthew O'Hayer
                    -----------------------------------------------------------
                    Matthew O'Hayer, Chairman of the Board and Chief
                    Executive Officer

             Date   April 14, 2000
                    --------------

             By     /s/  Robert Sandner
                    -----------------------------------------------------------
                    Robert Sandner, Director

             Date   April 14, 2000
                    --------------

             By     /s/  Robert Rader
                    -----------------------------------------------------------
                    Robert Rader, Director

             Date   April 14, 2000
                    --------------

             By     /s/ Duane K. Boyd, Jr.
                    -----------------------------------------------------------

             Date   April 14, 2000
                    --------------




                                       38
<PAGE>   39




                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT
NUMBER                             DESCRIPTION
------                             -----------
<S>                      <C>

10.05                    1998 Non-qualifying Incentive Plan

27.1                     Financial Data Schedule
</TABLE>