OpTree

YTB released their second quarter financials, the news, while not all bad, is -as you can expect, less than spectacular. The online travel agency that has been under heavy fire lately from the California Attorney General, and several former distributors, said that it lost $199,500 in the quarter that ended June 30th, compared to a profit of $1.67 million a year ago. Net loss for the six months ended June 30, 2008 was $3.7 million, or $0.04 per diluted share, compared to a net loss of $0.5 million, or $0.01 per diluted share, for the same period of 2007.  Not a good sign.

Some good news for YTB- they saw a significant increase in their revenue for last year. According to SEC filings, they had a revenue increase to $44.8 million which is a 37% percent increase over the $32.8 million a year earlier. The company also has some very loyal independent agents. Thousands of YTB agents met earlier this month at the company’s annual convention and defended the travel company as a legitimate operation that has empowered thousands to start and run their own businesses.

Scott Tomer, Chief Executive Officer of YTB, commented on the second quarter results, stating, “Our Company has experienced dramatic growth over the last 12 months, and we have witnessed an equally dramatic growth in the revenues achieved during that period. Like many rapidly growing companies, we have had to increase our spending to ensure that we have the proper infrastructure in place to support this growth, and to ensure that the quality of services that we provide does not suffer. We have worked to narrow our net loss on a sequential basis, and are committed to identifying areas for cost savings and improved efficiencies within our business.”

YTB has also finally released an official claim in regards to the California lawsuit, saying, “The complaint was filed after 18 months of dialogue, initiated by the company with the attorney general to discuss the implementation of a new California law’s potential effect on the company’s business model,” YTB said in its filing. “Throughout these discussions, which broadened over time, the company has consistently cooperated with the state’s information requests and provided detailed evidence in face-to-face meetings explaining how and why the company’s business model is in full compliance with California law. The parties recently came to a standstill and the Aug. 4 complaint is a result of this standstill. The company believes it has meritorious defenses to the claims, intends to advocate its position aggressively and believes it will ultimately prevail in the case.”

To decipher what that can mean, the State Attorney General was probably asking for information from YTB to disprove the allegations against them and our guess is that YTB was unable to provide sufficient info.  It is not a good sign at all when you get to a standstill with a high power government agency.  The government will make inquiries and requests for information to either support or disprove allegations against a company/person.  If you are unable (or unwilling) to provide such information or agree that you have acted in a way that could be or was detrimental to parties involved, you end up in a standstill.  It is never a wise decision to end up in a standstill with the government since they have nothing but time and unlimited resources to pursue their objectives.

Stay tuned, this one may be coming to end sooner than we all may expect.

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