SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-QSB

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

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT OF 1934
         FOR THE QUARTERLY PERIOD ENDED March 31, 2001

                                    000-30835
                             ----------------------
                              (Commission File No.)

                   AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
                 (Name of Small Business Issuer in Its Charter)

               NEVADA                                    86-0885559
-----------------------------------------   -----------------------------------
      (STATE OF INCORPORATION)             (I.R.S. EMPLOYER IDENTIFICATION NO.)

   100 SECOND AVENUE SOUTH, SUITE 1100S
   ST. PETERSBURG, FLORIDA                               33701-4301
-----------------------------------------   -----------------------------------
 (Address of principal executive offices)                (Zip Code)

                                 (727) 896-1513
                                ----------------
                           (ISSUER'S TELEPHONE NUMBER)

CHECK  WHETHER THE ISSUER (1) FILED ALL REPORTS  REQUIRED TO BE FILED BY SECTION
13 OR 15 (D) OF THE  EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH SHORTER
PERIOD  THAT THE ISSUER WAS  REQUIRED  TO FILE SUCH  REPORTS),  AND (2) HAS BEEN
SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.

[X]  YES                            [ ]  NO

NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF May 3, 2001: 32,897,173


TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT:

[ ]  YES                            [X]  NO

<PAGE>

                   AFFINITY INTERNATIONAL TRAVEL SYSTEMS INC.
                                   FORM 10-QSB

PART I FINANCIAL INFORMATION

ITEM 1 Financial Statements

     Condensed Consolidated Balance Sheets at March 31, 2001 (unaudited)
           and June 30, 2000..................................................3

     Condensed Consolidated Statement of operations for the three and nine
           months ended March 31, 2001 and March 31, 2000 (unaudited).........4

     Condensed Consolidated Statements of Cash Flows for the nine months
           ended March 31, 2001 and March 31, 2000(unaudited).................5


ITEM 2. Management's Discussion and Analysis of Financial
          Condition of Results of Operations..................................9

PART II OTHER INFORMATION....................................................15

ITEM 1. Legal Proceedings....................................................15

ITEM 2. Changes in Securities and Use of Proceeds............................15

ITEM 3. Defaults Upon Senior Securities......................................16

ITEM 4. Submission of Matters to a Vote of Security Holders..................16

ITEM 5. Other Information....................................................16

ITEM 6. Exhibits and Reports on Form 8-K.....................................16

SIGNATURES...................................................................17

                                       2
<PAGE>
<TABLE>
<CAPTION>
          Affinity International Travel Systems, Inc. and Subsidiaries
                      Condensed Consolidated Balance Sheets

                                                                       (UNAUDITED)
                                                                     March 31, 2001            June 30, 2000
                                                                    -----------------          -------------
ASSETS
<S>                                                                     <C>                         <C>
CURRENT:
   Cash and cash equivalents                                            $       200                 $39,526
   Restricted certificates of deposit                                       162,346                  40,269
   Accounts receivable                                                       70,568                  62,354
   Prepaid accommodations                                                   140,629                 127,466
                                                                        -----------             -----------
TOTAL CURRENT ASSETS                                                        373,743                 269,615
                                                                        -----------             -----------

RESTRICTED CERTIFICATES OF DEPOSIT                                               --                 120,000
PROPERTY AND EQUIPMENT, net of accumulated
     depreciation of $715,298 and $375,454,
     respectively                                                         1,509,080               1,437,457
GOODWILL, net of accumulated amortization
     of $7,658 and $99,516, respectively                                     20,900                  52,262
DEPOSITS                                                                    507,386                 205,231
PREPAID FEES                                                                     --               1,040,000
OTHER ASSETS                                                                 13,433                  13,433
                                                                        -----------             -----------
                  TOTAL ASSETS                                          $ 2,424,542             $ 3,137,998
                                                                        ===========             ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
   Accounts payable                                                     $ 3,830,668             $ 1,997,937
   Accrued expenses                                                       2,050,296               1,460,090
   Deferred revenue                                                         439,725                 416,566
   Due to customers                                                           8,808                   9,821
   Current portion of capital lease obligations                               5,656                  11,780
   Convertible debentures                                                        --                 309,867
                                                                        -----------             -----------
        TOTAL CURRENT LIABILITIES                                         6,335,153               4,206,061
CAPITAL LEASE OBLIGATIONS, LESS CURRENT PORTION                               7,077                  12,515
                                                                       ------------              ----------
TOTAL LIABILITIES                                                         6,342,230               4,218,576
                                                                        -----------             -----------
COMMON STOCK SUBJECT TO RESCISSION                                        5,613,000               5,613,000

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
   Common stock, $.001 par value, shares authorized
    100,000,000 issued and outstanding 29,712,175 and
    20,796,408                                                               22,943                  14,027
   Convertible preferred stock, $.001 par value,
    shares authorized 100,000,000, issued and
    outstanding -0-
   Additional paid-in capital                                            26,155,410              22,060,911
   Accumulated deficit                                                  (35,709,041)            (28,768,516)
                                                                        -----------             -----------
        TOTAL STOCKHOLDERS' DEFICIT                                      (9,530,688)             (6,693,578)
                                                                        -----------             -----------
        TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                     $ 2,424,542             $ 3,137,998
                                                                        ===========             ===========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>
<TABLE>
<CAPTION>
             Affinity International Travel Systems, Inc. and Subsidiaries
              Condensed Consolidated Statements of Operations (UNAUDITED)

                                                       For the three months               For the nine months
                                                          ended March 31,                   ended March 31,
                                                        2001            2000            2001              2000
                                                    ----------       -----------     ------------      ------------
<S>                                                 <C>              <C>             <C>               <C>
NET SALES                                           $  422,034       $   693,928     $  2,645,720      $  2,749,729
COST OF SALES                                          299,878           501,344        2,102,550         1,802,520
                                                   -----------       -----------     ------------      ------------
Gross profit                                           122,156           192,584          543,170           947,209
                                                   -----------       -----------     ------------      ------------

OPERATING EXPENSES:
   Selling, general and administrative               1,602,946           780,134        2,668,962         1,793,103
   Salaries and wages                                  423,446           536,728        1,310,875         2,477,488
   Consulting fees                                     417,074            42,425          541,835            67,948
   Consulting fees to related party                      2,340            40,018           40,500           120,018
   Rent                                                 90,982            55,004          253,999           213,623
                                                   -----------       -----------     ------------      ------------
TOTAL OPERATING EXPENSES                             2,536,788         1,454,309        4,816,171         4,672,180
                                                   -----------       -----------     ------------      ------------
Operating loss                                      (2,414,632)       (1,261,725)      (4,273,001)       (3,724,971)

OTHER INCOME (EXPENSE):
   Interest income                                       2,174             3,979            6,891            16,290
   Interest expense                                   (167,026)         (169,856)        (552,056)         (509,662)
   Interest expense to related party                        --                --          (15,975)               --
   Gain (loss) on sale or disposal
     of assets                                              --                --          (29,975)           75,000
   Finance charges to related party                       (282)       (7,964,500)      (2,258,172)      (10,431,000)
   Other, net                                               --            (5,170)           5,000           (68,750)
                                                   -----------       -----------     ------------      ------------

TOTAL OTHER INCOME (EXPENSE)                          (165,134)       (8,135,547)      (2,844,287)      (10,918,122)
                                                   -----------       -----------     ------------      ------------

NET LOSS BEFORE EXTRAORDINARY ITEM                  (2,579,766)       (9,397,272)      (7,117,288)      (14,643,093)

EXTRAORDINARY ITEM
   Gain on extinguishment of debt
     from related party (net of $0
     tax expense)                                           --                --          176,763                --
                                                   -----------       -----------     ------------      ------------
NET LOSS                                           $(2,579,766)      $(9,397,272)    $ (6,940,525)     $(14,643,093)
                                                   ===========       ===========     ============      ============

NET LOSS PER COMMON SHARE BEFORE
EXTRAORDINARY ITEM, BASIC AND DILUTED              $      (.09)      $      (.64)    $       (.28)     $      (1.06)

EXTRAORDINARY GAIN PER COMMON SHARE,
BASIC AND DILUTED                                  $        --       $        --     $        .01      $         --
                                                   -----------       -----------     ------------      ------------
NET LOSS PER COMMON SHARE, BASIC
AND DILUTED                                        $      (.09)      $      (.64)    $       (.27)     $      (1.06)
                                                   ===========       ===========     ============      ============

WEIGHTED AVERAGE SHARES OUTSTANDING,
  BASIC AND DILUTED                                 29,077,340        14,575,980       25,571,877        13,756,542
                                                   ===========       ===========     ============      ============
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>
<TABLE>
<CAPTION>
             Affinity International Travel Systems, Inc. and Subsidiaries
                    Condensed Consolidated Statements of Cash Flows
                    For the Nine Months Ended March 31 (UNAUDITED)

                                                                                            2001            2000
                                                                                      -----------       -----------
<S>                                                                                   <C>               <C>
Cash flows provided by (used for) operating activities                                $  (326,244)      $(2,193,549)

Cash flows used for investing activities                                                 (666,081)       (1,168,693)

Cash flows provided by financing activities                                               952,999         2,820,577
                                                                                      -----------       -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS                                                 (39,326)         (541,665)

CASH and CASH EQUIVALENTS, beginning of period                                             39,526         1,119,796
                                                                                      -----------       -----------
CASH and CASH EQUIVALENTS, end of period                                              $       200       $   578,131
                                                                                      ===========       ===========

Supplemental Cash Flow information:
      Stock issued for conversion of debentures                                         $ 350,000          $ 25,000
      Stock issued for settlement of accounts payable                                   $  21,000                --
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. FINANCIAL STATEMENT PRESENTATION

The  unaudited   condensed   consolidated   financial   statements  of  Affinity
International Travel Systems, Inc. ("Affinity  International",  "Company", "we",
or "us") have been prepared by the Company in accordance with generally accepted
accounting   principles  for  interim  financial   information  and  within  the
guidelines  to  Form  10-QSB.  The  financial  statements  do  not  include  all
information and notes required by generally accepted  accounting  principles for
complete financial  statements.  These condensed  consolidated interim financial
statements  should be read in conjunction with the Company's  audited  financial
statements  as of and for the year ended June 30,  2000,  and the related  notes
included  in the  Company's  Annual  Report on Form  10-KSB.  In the  opinion of
management,  all  adjustments,   consisting  of  normal  recurring  adjustments,
financing charges on warrants and an extraordinary gain on the extinguishment of
debt, considered necessary for a fair presentation, have been included.

The results of operations  and cash flows for the three and/or nine months ended
March 31, 2001 are not  necessarily  indicative of the results of operations and
cash flows expected for the year ending June 30, 2001.

The Company's consolidated financial statements are presented on a going concern
basis,  which  contemplates  the  realization  of  assets  and  satisfaction  of
liabilities in the normal course of business. However, the Company has sustained
recurring  operating  losses since its inception  and, at March 31, 2001,  has a
working capital deficit of approximately  $5,961,000 and a stockholders' deficit
of  approximately  $9,531,000.  The  Company  must  continue  to obtain  outside
financing to meet working capital requirements and investments in infrastructure
and Website development. An inability to raise such financing raises substantial
doubt  about  the  Company's  ability  to  continue  as  a  going  concern.  The
consolidated  financial statements do not include any adjustments to reflect the
possible future effects on the  recoverability  and  classification of assets or
the amounts and  classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.

2. COMMON STOCK SUBJECT TO RESCISSION

From July 1998 to January  1999,  we sold an aggregate  of  6,768,572  shares of
common stock in reliance upon the exemption from registration  contained in Rule
504 of Regulation D, including  shares issued in the acquisition of SunStyle (an
acquisition that was treated as a reverse acquisition for accounting  purposes).
Those sales may have been in violation of Rule 504 of Regulation D. Accordingly,
stockholders  who purchased  shares in those  transactions  may have  rescission
rights  against  us;  that is,  such  persons may have the right to compel us to
repurchase  the shares for an amount equal in general to the purchase price paid
plus interest.

Although  there is no  definitive  answer as to whether we violated Rule 504, we
have  reclassified  amounts  previously  recorded  as  stockholders'  equity  to
mezzanine  capital on our balance sheet. The recorded value of shares subject to
rescission  is  $5,613,000  as of March 31,  2001 and June 30,  2000,  excluding
related  accrued  interest  expense.  The  recission  liability  and the related
accrued  interest are reported  our balance  sheet under the line items  "Common
Stock Subject to Rescission" and "Accrued Expenses", respectively.

Until the rescission issue is completely resolved,  we have recorded the maximum
potential  known effect as of March 31,  2001.  During the three and nine months
ended March 31, 2001 there was $168,000 and $504,000,  respectively,  charged to
interest  expense related to the common stock subject to rescission.  During the
three and nine  months  ended March 31, 2000 there was  $168,000  and  $504,000,
respectively, charged to interest expense related to the common stock subject to
rescission.  The cumulative  amount of accrued  interest expense related to this
issue is $1,810,000 and is included in accrued expenses at March 31, 2001.

                                       6
<PAGE>

Although there can be no assurance that the rescission issue will be resolved in
our favor, a favorable outcome,  or the expiration of the statute of limitation,
would result in the reversal of all, or part of, the accrued  interest in future
periods.

3. PREPAID FEES

Prior to the current  quarter  ended March 31, 2001,  prepaid fees  consisted of
amounts relating to an agreement with Juno Online Services, Inc. ("Juno") for us
to provide travel packages and services via their Website. Beginning in December
2000,  the amount  included in prepaid fees related to this  agreement was being
amortized  over a  12-month  period  following  the  completion  of the  Website
integration  with Juno. The prepaid balance was created through advance payments
of  $415,000  in cash and  issuance  of common  stock  valued at  $625,000.  The
agreement requires three additional payments of $315,000 beginning 90 days after
the  completed  integration.  In February 2001 we notified Juno that we believed
they were not in compliance  with the terms of the  agreement.  On March 1, 2001
Juno filed a lawsuit in the United States District Court,  Southern  District of
New York claiming  non-payment  of  outstanding  fees that we agreed to pay (see
Note 10 - Legal  proceedings).  As a result of these current  activities we have
charged the total unamortized  balance of these fees to administrative  expenses
during the three months ended March 31, 2001.

4. EXTRAORDINARY ITEM

The gain on extinguishment of debt from related party of approximately  $177,000
in the  nine  months  ended  March  31,  2001,  consists  of the  settlement  of
approximately  $195,000 in notes  payable and accrued  interest and fees owed to
Schoemann  Venture Capital,  LLC, which was retired in full by a cash payment of
approximately $18,000.

5. INCOME TAXES

The Company  accounts for income taxes using the  liability  method.  Under this
method,  deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities. We recorded
a valuation  allowance for all Federal and state  deferred tax assets to present
such amounts at estimated  realizable  value.  The Company does not consider the
realization  of such amounts to be more likely than not, due to the  uncertainty
related to the  Company's  ability to generate  assets  through  future  taxable
income.

6. EQUITY TRANSACTIONS

A convertible  debenture was  converted  into 558,734  shares of common stock in
settlement  of $364,839  in notes  outstanding  and accrued  interest in the six
months ended December 31, 2000.

During the nine months ended March 31, 2001, the Company entered agreements with
third parties who would  provide  investor  relation  services in exchange for a
total of 175,000 shares of common stock, issued 80,000 shares of common stock to
employees,  issued  warrants in  settlement of services and issued 69,294 common
stock  warrants and 173,232 shares of common stock as part of the offering costs
of certain  transactions.  The total value of services paid through the issuance
of common stock or warrants was $141,513.

During  the nine  months  ended  March 31,  2001,  the  Company  sold a total of
3,678,801  shares  of its  common  stock for net  proceeds  of  $764,560,  after
commissions  of $75,580.  In connection  with certain  offerings,  83,093 common
stock   warrants  were  issued  with  an  exercise  price  of  $.23  per  share,
approximately  125% of the common stock market value at the  agreement  date and
3,750  common  stock  warrants  were issued  with an exercise  price of $.40 per
share,  approximately  200% of the common stock  market  value at the  agreement
date.

                                       7
<PAGE>

7. FINANCING AGREEMENT

In October 2000, the Company  entered into an agreement with an investment  firm
to  facilitate  the  securing  of outside  financing.  In  connection  with this
agreement a stock subscription agreement was executed under which the investment
firm advanced us approximately $245,000. During the three months ended March 31,
2001,  the Company and the  investment  firm  mutually  agreed to terminate  the
subscription  agreement.  The funds  advanced are recorded as  liabilities as of
March 31, 2001.  Since no services were  provided and the agreement  terminated,
there was no  consideration  given as part of the  agreement  and  therefore  no
expense incurred.

8. LEGAL PROCEEDINGS

On  September  20,  2000,  the  Company  filed a civil  action  suit  against  a
contractor  hired to perform work on the FarAway.com  Website.  The suit alleges
that the contractor  failed to deliver the work in a timely and suitable  manner
and the Company is seeking a  rescission  of the  contract  or a  judgement  for
breach of contract.  The  contractor's $1 million  countersuit in North Carolina
was dismissed,  and was followed with a counterclaim in the State of Florida for
$689,000 alleging breach of contract. The Company believes that the counterclaim
is without merit.

On March 1, 2001, the company was sued by Juno Online  Services,  Inc.  alleging
that we  failed  to pay  outstanding  invoices  and  marketing  service  fees of
$945,000.  The  Company  disputes  contract  performance  by Juno.  The  Company
believes that the claim is without merit.

We are not aware of any pending legal proceedings  against us other than the two
discussed above that,  individually  or in the aggregate,  would have a material
adverse effect on our business,  results of operations,  financial  condition or
cash flow.

9. RECENT ACCOUNTING PRONOUNCEMENTS

During the fourth quarter of 1999, the Securities and Exchange Commission issued
Staff  Accounting  Bulletin  (SAB) No. 101  "Revenue  Recognition  in  Financial
Statements".  The provisions of SAB No. 101 and subsequently issued guidance are
required  to be  adopted no later  than the  fourth  quarter of the fiscal  year
beginning after December 15, 1999.  Management believes that SAB No 101 will not
materially alter the Company's revenue recognition methods.

In March 2000, the Financial  Accounting  Standards Board issued  Interpretation
No.  44  (FIN  44),   Accounting  for  Certain   Transactions   Involving  Stock
Compensation,  an  Interpretation  of APB Opinion No. 25. FIN 44  clarifies  the
application of Opinion No. 25 for (a) the definition of employee for purposes of
applying  Opinion  No.  25,  (b) the  criteria  for  determining  whether a plan
qualifies as a non-compensatory plan, (C) the accounting consequences of various
modifications  to the  previously  fixed  stock  option  or  award,  and (d) the
accounting  for  an  exchange  of  stock  compensation   awards  in  a  business
combination.  FIN 44 was effective  July 2, 2000. The adoption of FIN 44 did not
have a  material  effect on the  Company's  financial  position  or  results  of
operations.

10. EQUITY LINE OF CREDIT

On January 29,  2001,  the Company  entered  into an Equity  Financing  Facility
agreement (the "Agreement") with Ailouros Ltd, an institutional money management
fund, to provide up to $10 million of financing over a three-year period through
the periodic sales of the Company's  common stock.  The Company may access funds
under this  Agreement  after a  registration  statement  for common  stock to be
issued under this  Agreement has been declared  effective by the  Securities and
Exchange Commission and for a 36-month period thereafter. During the term of the
Agreement,  the  Company  may  sell up to  $1,500,000  of  common  stock  during
sequential  90-day  periods,   subject  to  certain  trading  volume  and  price
requirements.  There is no  assurance  that the  Company  will be able to access
funds available through the Facility, due to the market price and trading volume
requirements  for the  Company's  common  stock.  The price per share for common
stock sold under this  Agreement  is equal to 88% of the three lowest bid prices
for the common stock over a 7-day trading period immediately preceding the sale.

                                       8
<PAGE>

The Company was assisted in structuring  the  transaction  by Comergent  Capital
Ltd.  ("Comergent").  In exchange for  Ailouros's  commitment to provide the $10
million  Equity  Financing  Facility and for the  assistance of  Comergent,  the
Company issued 500,000 warrants to each of them with an exercise price of $.3125
per share.  These  warrants  were  valued at  $380,000  using the Black  Scholes
Valuation  Model and charged to  consulting  fees during the three  months ended
March 31,  2001.  If the  Company  does not obtain at least $5 million of equity
financing  over the  3-year  period  of the  agreement,  an  additional  500,000
warrants at an exercise price of $.3125 will be issued to Ailouros.

ITEM 2 MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS
OF OPERATIONS

FORWARD LOOKING INFORMATION

This  quarterly  report on Form  10-QSB may contain  forward-looking  statements
within the meaning of Section 27A of the  Securities  Act and Section 21E of the
Exchange Act and is subject to the  relevant  safe  harbors  created.  The words
"plan," "intend,"  "anticipate"  "project," estimate," "expect," "may," "might,"
"believe,"  "potential,"  "could," "should," "would", and similar statements are
intended  to be  among  the  statements  that  are  forward-looking  statements.
Investors  are  cautioned   that   forward-looking   statements  are  inherently
uncertain.  Actual  performance and results of operations may differ  materially
from those projected or suggested in the  forward-looking  statements due to the
to certain risks and uncertainties,  including,  without limitation, the ability
of the Company to obtain adequate financing to continue its current  operations;
the ability of the Company to  successfully  enter into strategic  relationships
and  agreements  with  additional  suppliers and  marketers;  the ability of the
Company  to retain and  possibly  increase  its  employees;  the  ability of the
Company to continue as a going  concern;  risks  associated  with the  Company's
ability to continue as a going concern;  risks associated with the Company's Web
site, www.FarAway.com;  the Company's history of operating losses; dependence on
senior management;  risks inherent in the travel and internet industries and the
Company's ability to manage anticipated growth. The  forward-looking  statements
contained  in this  report  should not be regarded  as a  representation  by the
Company,  or any other person,  that the objectives or plans of the Company will
be achieved.  The Company  cautions  readers not to place undue  reliance on the
forward-looking statements.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2001 ("2001")  COMPARED WITH THE THREE MONTHS ENDED
MARCH 31, 2000 ("2000")

REVENUE

Total  revenue of $422,000 for the three  months  ended March 31, 2001  consists
primarily of revenue from  wholesale  operations,  and is a decrease of $272,000
(39.2%)  from the prior year  period.  For the three months ended March 31, 2000
total revenue of $694,000 included $64,000 of retail commissions.  The reduction
in retail  commissions  between the three  months ended March 31, 2001 and March
31, 2000 is the result of the sale of our Prestige retail  operation in December
1999.  Comparable  wholesale  revenues in the three  months ended March 31, 2001
were  $416,000 a decrease of $190,000  (31.3%) from $606,000 in the three months
ended March 31, 2000. The majority of the wholesale revenue decrease is a result
of the  discontinuation of reservations from the termination of the agreement to
provide product and services to Travel  Navigator.  As of January 3, 2001 Travel
navigator was not renewed as a contractor  for Yahoo Travel.  A small portion of
the decrease can be attributed to the discontinuance of fulfillment for Juno and
the  website  down  time  in  March  of  2001   associated  with  the  Company's
installation  of the new  FarAway.com  website  and  testing of its new  instant
vacation quote software. Although we do not expect a material improvement in the
next fiscal  quarter,  the Company  believes  that new search  engine  marketing
programs being  implemented  will show results in approximately 90 days and will
replace the loss of revenue from Travel Navigator.

                                       9
<PAGE>

GROSS PROFIT

Gross profit of $122,000 for the three months ended March 31, 2001 is a decrease
of $70,000  (36.6%) from the prior year,  due to the  reduction in the amount of
retail  travel  operations.  Gross  profit of $193,000 in the three months ended
March 31, 2000, included retail revenue commissions earned, as noted above.

The gross profit  percentage  of 28.9% for the three months ended March 31, 2001
increased  from 27.8% in the prior year  three-month  period.  This increase was
directly  related  to the  reduction  of retail  operations,  which  record  net
commissions as revenue,  with relatively minimal cost of sales. At present,  the
Company expects to continue to produce future gross profit margins comparable to
the three  months ended March 31, 2001.  However,  future gross  margins for our
wholesale business could be adversely  affected by revenue sharing  arrangements
or promotions used to increase revenue.

The decrease in retail revenue and related gross profit was primarily the result
of the sale of our Prestige retail operation in December 1999.

OPERATING EXPENSES

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

Selling,  general and  administrative  expenses ("SG&A") were $ 1,603,000 in the
three months ended March 31, 2001, an increase of $823,000 from the three months
ended March 31,  2000.  This  increase is the result of fully  expensing to SG&A
$859,000 of fee expenses for our Juno Online Services,  Inc.  ("Juno")  business
partnership.  We are currently in dispute with Juno  concerning  their  contract
performance.  There were no expenses  related to Juno in the three  months ended
March 31, 2000.

SALARIES AND WAGES

Salaries and wages of $423,000 decreased $113,000 (21.1%) from the third quarter
of 2000,  primarily as a result of the  reduction in senior  management  and the
closing of the work force in our  Atlanta  operations  center that was closed at
year-end June 30, 2000.

CONSULTING FEES AND RENT

Consulting  fees of $417,000 in the three months ended March 31, 2001  increased
$375,000  from the three  months  ended March 31, 2000 due to the  valuation  of
warrants issued in connection with an equity line of credit.

Consulting  fees to related  party of $2,000 in the three months ended March 31,
2001  decreased  $38,000  (94.2%)  from the prior  year  period  and  consist of
agreements with a significant  stockholder for investment and financial  related
assistance.

Rent of $91,000 for the three months ended March 31, 2001 increased $36,000 from
the prior year amount of $55,000 in the three months ended March 31, 2000.  This
increase is primarily due to a sublease entered into with  Transaction  Tracking
Technologies for additional space adjacent to the Company's primary facility.

OTHER INCOME AND EXPENSE

Interest expense includes $168,000 in accrued interest related to rescission for
the three months ended March 31, 2001 and is  comparable  to the expense for the
three months ended March 31, 2000.

Finance  charges of  $7,965,000 in the three months ended March 31, 2000 consist
of $7,140,000  charged for the re-pricing of common stock warrants in connection
with a financing  transaction  and $825,000 for the issuance of common stock for
failure  to  meet  certain   provisions  of  certain  financing  and  consulting
agreements.

                                       10
<PAGE>

INCOME TAXES

The Company  accounts for income taxes using the  liability  method.  Under this
method,  deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities. We recorded
a valuation  allowance for all Federal and state  deferred tax assets to present
such amounts at estimated  realizable  value.  The Company does not consider the
realization  of such amounts to be more likely than not, due to the  uncertainty
related to the  Company's  ability to generate  assets  through  future  taxable
income.

NINE MONTHS ENDED MARCH 31, 2001 ("2001") COMPARED WITH NINE MONTHS ENDED
MARCH 31, 2000 ("2000")

REVENUE

Total revenue of $2,646,000  decreased $104,000 (3.8%) for the nine months ended
March 31, 2001  compared to  $2,750,000 in the nine months ended March 31, 2000.
Revenue in the nine  months  ended  March 31,  2001  included  $85,000 of retail
commissions,  while  the prior  year nine  months  included  $886,000  of retail
commissions.  The decrease is due primarily to our Prestige  retail  operations,
which were sold in December 1999.  Comparable wholesale revenues were $2,518,000
for the nine months ended March 31, 2000,  an increase of $736,000 or 41.3% from
the prior year.

GROSS PROFIT

Gross  profit of  $543,000 in the nine months  ended March 31,  2001,  decreased
$404,000  (42.7%)  from the nine  months  ended  March 31,  2000.  Gross  profit
percentage of 20.5% decreased from gross profit  percentage of 34.4% in the nine
months March 31, 2000.  The decrease in both gross profit dollars and percentage
is due to the  inclusion  of $886,000 in retail  commissions  in the nine months
ended March 31,  2000 for which  there are  relatively  low  offsetting  cost of
goods.

OPERATING EXPENSES

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

Selling,  general and  administrative  expenses ("SG&A") were $2,669,000 in the
nine months ended March 31, 2001,  an increase of $876,000  from the nine months
ended March 31, 2000. This increase is the result of fully expensing  during the
current  quarter to SG&A $859,000 of fee expenses for our Juno Online  Services,
Inc.  business  partnership.  We are  currently in dispute with Juno  concerning
their contract  performance.  There were no expenses related to Juno in the nine
months ended March 31, 2000.

SALARIES AND WAGES

Salaries  and Wages of  $1,311,000  in the nine  months  ended  March  31,  2001
decreased  $1,167,000  (47.1%) from  $2,477,000  in the same period of the prior
year. The decrease is primarily  related to a $750,000  charge for stock options
granted at below market  prices in the prior year.  Other  decreases in salaries
and wages from the  reduction  of retail  operations  were  partially  offset by
$67,000  of expense  for the  issuance  of common  stock to  employees  and some
personnel increases to support the growth of the wholesale business.

CONSULTING FEES AND RENT

Consulting  fees of $542,000 in the nine months ended March 31, 2001,  increased
$474,000 from the same period of the prior year. The increase in consulting fees
in the nine  months  ended March 31,  2001 is due to the  valuation  of warrants
issued in connection with an equity line of credit.

                                       11
<PAGE>

Consultant fees to a related party of $41,000 in the nine months ended March 31,
2001  decreased  $80,000  (66.3%)  from the prior  year  period  and  consist of
agreements with a significant  stockholder for investment and financial  related
assistance.

Rent of $254,000 in the nine months  ended  March 31,  2001,  increased  $40,000
(18.9%) from the same prior year period,  with increases in primary office space
exceeding decreases from reductions in retail operations.

OTHER INCOME AND EXPENSE

Interest  expense  includes  primarily  interest being accrued related to common
stock subject to rescission which totaled $504,000 in both the nine months ended
March 31, 2001 and 2000.

Finance  charges of  $2,258,000  in the nine months  ended March 31, 2001 relate
primarily  to  the  repricing  of  warrants  in  August  2000  to a  significant
shareholder.  Finance  charges of $10,431,000 in the nine months ended March 31,
2000 consist of $9,222,000 for the issuance of new common stock warrants and the
repricing  of existing  common  stock  warrants in  connection  with a financing
transaction  and $1,209,000  related to the issuance of common stock for failure
to meet certain provisions of certain financing and consulting agreements.

INCOME TAXES

The Company  accounts for income taxes using the  liability  method.  Under this
method,  deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities. We recorded
a valuation  allowance for all Federal and state  deferred tax assets to present
such amounts at estimated  realizable  value.  The Company does not consider the
realization  or such amounts to be more likely than not, due to the  uncertainty
related to the  Company's  ability to generate  assets  through  future  taxable
income.

EXTRAORDINARY ITEM

Gain on extinguishment of debt from related party of $177,000 in the nine months
ended March 31, 2001,  consists of the  settlement  of $195,000 in notes payable
and accrued interest and fees owed to Schoemann Venture Capital,  LLC, which was
retired in full by a cash payment of $18,000.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31,  2001 we had a working  capital  deficit  of  $5,961,000,  total
stockholders'   deficit  of  $9,531,000   and  a  total  of  29,712,175   shares
outstanding.

For the three  months ended March 31, 2001 we had net losses of  $2,580,000  and
$6,941,000  for the  respective  three and nine months ended March 31, 2001. The
nine months  ended  March 31, 2001  included  $2,253,000  in non-cash  financing
charges  and  $380,000  of non-cash  consulting  fees  related to the new equity
facility.

During the nine month period ended March 31, 2001, our principal  source of cash
was $953,000 provided from financing activities,  including $765,000 in proceeds
from the sale of common  stock and  $200,000  in proceeds  from the  exercise of
common stock warrants.

We have been  experiencing  and expect to  continue  to  experience  significant
negative cash flow. For the nine months ended March 31, 2001 our operations used
$326,000 in cash primarily through an increase of $1,833,000 in accounts payable
and a $590,000  increase in accrued  expenses offset by a net loss of $2,200,000
reduced by non-cash charges. The Company's investing activities used $666,000 in
cash,  including  $362,000  used for  fixed  asset  purchases  and  $302,000  in
additional deposits.

We have no line of credit or loans for  working  capital and we have relied upon
proceeds from the sale of our equity  securities and debentures to fund negative
cash flow from

                                      12
<PAGE>

operations and to fund our capital expenditures related to the implementation of
our Internet business strategy.  The newly established Equity Financing Facility
is expected to be utilized  for  obtaining  up to $10 million  over a three-year
period.  The  Company  may  access  funds  under  this  Facility  only  after  a
registration  statement  covering common stock to be issued under this Facility,
has been declared effective by the Securities and Exchange  Commission and for a
36-month period thereafter.  There is no assurance that the Company will be able
to access funds available through the Facility,  due to certain market price and
trading volume requirements for the Company's common stock (see note 10 of notes
to financial statements).

From July 1998 to January  1999,  we sold an aggregate  of  6,768,572  shares of
common stock in reliance upon the exemption from registration  contained in Rule
504 of Regulation D, including  shares issued in the acquisition of SunStyle (an
acquisition that was treated as a reverse acquisition for accounting  purposes).
Those sales may have been in violation of Rule 504 of Regulation D. Accordingly,
stockholders  who purchased  shares in those  transactions  may have  rescission
rights  against  us;  that is,  such  persons may have the right to compel us to
repurchase  the shares for an amount equal in general to the purchase price paid
plus  interest.  If all or a portion of the  purchasers  of the common  stock in
those  transactions  exercise  any  rescission  right  they may have,  we may be
subject to substantial liability,  in which case, there would be a severe impact
on our financial condition and ability to continue as a going concern. We do not
have  sufficient cash reserves to repurchase the shares of our common stock that
are  subject  to  possible  rescission.  While we  believe  that the issue  will
eventually be resolved in our favor with minimal financial effect, if any, there
is no  assurance  that  this will  occur.  In  addition,  our  ability  to raise
additional capital may be severely  restricted,  as investors may be hesitant to
invest in us because of this potential liability. Our inability to raise capital
when needed  would have an adverse  effect on our ability to continue as a going
concern.

Although  there is no  definitive  answer as to whether we violated Rule 504, we
have  reclassified  amounts  previously  recorded  as  stockholders'  equity  to
mezzanine capital on our balance sheet. The recorded amount of shares subject to
rescission  is  $5,613,000  as of March  31,  2001 and 2000,  excluding  related
accrued interest which has been charged to interest expense. We believe that our
total  exposure to the  rescission,  if any,  will be much less than the maximum
indicated since  approximately  5,394,000 shares, or 80% of the amounts isolated
as potentially subject to rescission are owned by 3 significant shareholders, or
shareholder  groups (owners of more than 5% of our common stock). One portion of
this  amount or  2,850,000  shares (42% of the  amounts  potentially  subject to
rescission)  are owned by Daniel G. Brandano,  Jr. our Chairman,  CEO and one of
our directors, and/or Joan Brandano our Secretary and one of our directors.

Until the rescission issue is completely resolved,  we have recorded the maximum
potential known effect as of March 31, 2001.  Accrued  interest of $1,810,000 is
recorded  as part of  accrued  expenses  at  March  31,  2001.  The  Company  is
evaluating  whether to address  this issue with the SEC or allow the  Statute of
Limitations  to expire.  Although  there can be no assurance that the rescission
issue will be resolved in our favor,  a favorable  decision  would result in the
reversal of all or part of the accrued interest in future periods.

We expect net losses and  negative  cash flow to  continue  for the  foreseeable
future and  anticipate our losses and the use of cash will increase from current
levels because we expect to incur significant  expenses and capital expenditures
related to:

o        brand development, advertising, marketing and promotional activities,
         including product discounts and revenue sharing agreements;
o        continued development of our Web site, transaction-processing systems,
         fulfillment capabilities and network infrastructure, most of which are
         capital expenditures;
o        expansion of our supplier/distributor relationships;
o        expansion of our order fulfillment infrastructure;
o        expansion of our product offerings and Web site content; and
o        employment of additional personnel as our business expands

With  our  intended  increase  in  expenditures  on  marketing  and  promotional
activities,  there  are  no  assurances  these  efforts  will  be  effective  in
attracting  customers to our

                                       13
<PAGE>

on-line method of shopping for travel products and services via our Web site. In
addition,  we may be obligated  to pay  commissions,  based on a  percentage  of
revenue,  to companies with whom we have online marketing  relationships.  These
costs will increase as our revenues increase. If we do achieve profitability, we
cannot be certain that we will be able to sustain or increase profitability on a
quarterly or annual basis in the future.

Our ability to achieve profitability depends on our ability to secure additional
financing, to generate and sustain substantially higher revenues and control the
growth in operating costs.

We anticipate  incurring  capital  expenditures  of  approximately  $1.0 million
during  fiscal  2001,  dependent on our ability to obtain  access to  additional
funding or positive cash flow from  operations,  to complete the  development of
travel  booking  engines  and the primary  Website,  and other  improvements  in
software and technology.

In order to fund our operations and continue the  implementation of our Internet
business  strategy,  we  anticipate  the need to raise at least $1.0  million in
additional  capital  during the fiscal  year ending June 30, 2001 and a total of
$3.0 million  December 31, 2001.  For the nine months  ending March 31, 2001, we
have raised $765,000  through the private sale of the Company's common stock and
$200,000  in  proceeds  from the  exercise  of common  stock  warrants.  We will
continue to need to raise a portion of the remaining capital immediately to fund
negative cash flow from operations and fund capital  expenditures related to the
implementation of our Internet business  strategy.  If we raise additional funds
through the issuance of equity or debt  securities,  those  securities  may have
rights senior to those of our current  stockholders,  and our  stockholders  may
experience additional dilution.

We cannot be  certain  that  additional  financing  will be  available  to us on
favorable terms when required, or at all. There can be no assurance that we will
be able to successfully secure the anticipated  financing which is necessary for
the  implementation  of our Internet business  strategy,  complete our plans for
growing revenue through existing projects, support our working capital needs and
to provide available capital for potential  acquisitions.  Our failure to obtain
sufficient  additional funds, either through additional  financing or continuing
operations,  would have a material  adverse effect on our business and financial
condition,  our ability to implement our Internet  business  strategies  and our
ability to continue our operations.

Our  auditor's  report on our financial  statements  for the year ended June 30,
2000 and  included in our Form 10-KSB,  indicated  that  certain  factors  raise
substantial doubt about our ability to continue as a going concern.  Our ability
to continue as a going concern is contingent upon the following:

o        We may be subject to substantial  liability in connection with sales of
         our common  stock which may have been made in  violation of Rule 504 of
         Regulation  D, and our  ability  to  raise  additional  capital  may be
         severely  restricted,  as  investors  may be  hesitant  to invest in us
         because of this potential liability.

o        Anticipated additional periods of negative cash flow, regardless of any
         potential  liability  in violation  of Rule 504 of  Regulation  D, will
         require us to continue to raise  additional  capital.  Any reduction or
         delay in our ability to raise capital could  severely delay our planned
         technology  investments,  and would  adversely  affect our  operations,
         since we do not  anticipate  generating  sufficient  cash from existing
         operations to internally finance our business for the next 12 months.

o        We cannot  assure you that we will be able to  generate  positive  cash
         flow internally or raise  sufficient  funds to continue our operations.
         Our  failure  to raise  sufficient  additional  funds,  either  through
         additional  financing or  continuing  operations,  will have a material
         adverse  effect on our  business  and  financial  condition  and on our
         ability to continue as a going concern.

Our consolidated  financial statements do not include any adjustments to reflect
the possible future effects on the  recoverability  and classification of assets
or the  amounts  and  classification  of  liabilities  that may result  from our
possible inability to continue our operations.

                                       14
<PAGE>

PART II  OTHER INFORMATION

ITEM 1. Legal proceedings

Affinity   International   Travel  Systems,   Inc.  v.  Information   Architects
Corporation  ("IAC"),  Circuit  Court of the Sixth  Judicial  Circuit in and for
Pinellas County Civil division,  Case No. 00-6491-CI-19.  On September 20, 2000,
we filed a civil action suit against IAC, a contractor  hired to perform work on
the FarAway.com Web site. We have alleged that IAC failed to deliver the work in
a timely and  suitable  manner,  and we are seeking  rescission  of the contract
and/or to obtain a declaratory judgment for breach of contract.

Information  Architects  Corporation v. Affinity  International  Travel Systems,
Inc., United States District Court Western District of North Carolina, Charlotte
Division, Case No. 3:00CV474-H. On September 22, 2000, IAC filed suit against us
separately in North Carolina alleging breach of the contract discussed above and
seeking  damages  in excess of  $1,000,000.  IAC's  action in the State of North
Carolina was  dismissed;  however,  IAC has  counterclaimed  for $689,000 in the
State of Florida action alleging breach of contract.

Juno Online  Services,  Inc. v. Affinity  International  Travel  Systems,  Inc.,
United States  District  Court Southern  District of New York,  Case No. 01 CIV.
1821 (GEL). On March 1, 2001, Juno filed suit against us alleging that we failed
to pay outstanding invoices and marketing service fees of $945,000.

We are not aware of any pending legal proceedings against us other than the ones
discussed above that,  individually  or in the aggregate,  would have a material
adverse effect on our business,  results of operations,  financial  condition or
cash  flow.  Also we may in the  future be party to  litigation  arising  in the
course of our business.  These claims, even if not meritorious,  could result in
the expenditure of significant financial and managerial resources.

ITEM 2. Changes in Securities and Use of Proceeds

RECENT SALE OF UNREGISTERED SECURITIES

Set forth below, in chronological order, is information regarding the numbers of
shares of common stock sold, the number of options and warrants  granted and the
principal  amount  of debt  instruments  issued  by us from  October  1, 2000 to
December 31, 2000 and the consideration received by us for such shares, options,
warrants and debt instruments. None of these securities was registered under the
Securities  Act. In our  opinion,  all offers and sales of our  securities  were
exempt from registration by virtue of Section 4(2) of the Securities Act and the
rules promulgated therewith.  All purchasers of our securities represented their
intention to acquire our securities for investment  purposes only and not with a
view to or for sale in connection  with any  distribution  thereof.  Appropriate
legends were affixed to the certificates  representing the securities  issued in
such  transactions.  All  purchasers of our  securities  had adequate  access to
information  about us and were "accredited  investors" as defined in Section 501
of  Regulation  D  promulgated  under the  Securities  Act.  Except as otherwise
indicated, no sales or issuance of securities involved the use of an underwriter
and no commissions were paid in connection with the sale of any securities.

In  November  2000,  the  Company  issued  3,500  shares of its common  stock to
employees with a market value of $2,000, at the time of issuance.

In December  2000,  16,375 shares of common stock were issued for  settlement of
accrued interest payable. The market value of the common stock was $15,000.

                                       15
<PAGE>

On December 1, 2000 the Company entered into an agreement with a third party who
would provide investor relations services over a twelve-month period for a total
of 150,000  shares of common stock.  The market value of the common stock at the
agreement date was $.1875 per share.

On December 1, 2000 the Company entered into an agreement with a third party who
would provide investor  relations services over a three-month period for a total
of 25,000  shares of common  stock.  The market value of the common stock at the
agreement date was $.1875 per share.

On December  13, 2000 the Company  sold  617,600  shares of its common stock for
proceeds of $92,640 or an average  price of $.15,  per share.  Also, on December
13, 2000 the Company  sold  213,333  shares of its common  stock for proceeds of
$32,000  or an  average  price of $.15  per  share.  In  connection  with  these
offerings,  commissions  of  $15,580  are to be paid,  and 83,093  common  stock
warrants were issued at an exercise price of $.23 per share,  which expire three
years from the date of grant.

On December  21, 2000 the Company  sold  555,555  shares of its common stock for
proceeds of $100,000 or an average price of $.18 per share, prior to commissions
of $10,000.

On January 19,  2001 the Company  sold  625,000  shares of its common  stock for
proceeds of $125,000 or an average price of $.20 per share, prior to commissions
of approximately $7,500.

On February 8, 2001 the Company  sold  1,096,439  shares of its common stock for
proceeds of $189,404 or an average price of $.17 per share, prior to commissions
of approximately $10,000.

On February 8, 2001 69,294  common  stock  warrants  and  approximately  173,232
shares of common  stock  were  issued as part of the  offering  costs of certain
transactions.

ITEM 3.  Defaults Upon Senior Securities

                  none

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

                  none

ITEM 5.  Other Information

                  none

ITEM 6.  Exhibits and Reports on Form 8-K

On February 2, 2000, the Company filed a Form 8-K regarding the completion of an
Equity Financing Facility with Ailouros Ltd., an institutional  money management
fund.  The Facility  provides up to $10 million of  financing  over a three-year
period  through the periodic sales of the Company's  common stock.  The Facility
requires an effective registration statement being filed with the Securities and
Exchange  Commission,  and certain trading volume and price  requirements  along
with other conditions.

                                       16
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 and 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                     Dated: May 21, 2001

                                     AFFINITY INTERNATIONAL TRAVEL SYSTEMS, INC.
                                     -------------------------------------------
                                                     (Registrant)

                                     By: /s/ Daniel G. Brandano, Jr.
                                         ----------------------------
                                         Daniel G. Brandano, Jr.
                                         Chief Executive Officer


                                       17