YTB International reported a net loss from operations for the first quarter of 2009 of $1.9 million. In its first-quarter report to the Securities and Exchange Commission (SEC), YTB said that negative current economic conditions and other factors have led to a fall off in the number of active Travel Site Owners (TSOs) in YTB. Net revenues totaled $21.8 million in the first quarter of 2009 compared to $42.7 million in the first quarter of 2008.
YTB said the number of active TSOs has declined during the quarter ending March 31 by a net loss of 18,582 to 73,801 active TSOs from the 92,383 reported as of December 31, 2008. TSOs were formerly known as Referring Travel Agents (RTAs), most of whom work from their homes.
“The Company is also defending against two cases challenging the legality of its network marketing program," YTB said in its report to the SEC. "Litigation claims can be expensive and time consuming to bring and defend against and could result in settlements or damages that could significantly affect financial results.
“The Company’s loss from operations, declining active TSO count, working capital deficiency, uncertainties surrounding the Company’s pending litigation, and the general downturn in the economy raise substantial doubt about the Company’s ability to continue as a going concern,” the report continued.
YTB said it had taken action to ensure that the company will survive, including a consultant to provide recommendations to the Board on cost structure, compliance and other matters to improve overall profitability.
“Management has instituted a cost reduction program that included a reduction in labor and fringe costs, as well as reductions of discretionary expenditures in the operating structure of the organization," the report states. "The reductions in labor and fringe were approximately $1.1 million for the full year 2008 results and approximately $800,000 for the three months ended March 31, 2009.”
YTB is also seeking to raise additional capital and is also evaluating the sale of certain non-core assets and additional programs to raise new capital for future operations. “Management believes these factors will contribute toward achieving profitability," the report reads. "However, there can be no assurance that the Company will be successful in achieving its objectives.”
YTB noted that on April 6, 2009, the company reached a tentative settlement agreement with the State of California in connection with the civil action taken by the State. The company also reached a tentative agreement with its insurance carriers regarding their coverage for the defense of the cases, the terms of which are dependent upon a final settlement with the State of California.
YTB also said that on February 9, 2009, the company filed motions to dismiss the class action lawsuit in Illinois. Subsequent to the end of the first quarter, the motions to dismiss were fully briefed, and the Court has set a hearing for June 1, YTB said it believes that it has meritorious defenses against the legal proceedings and intends to vigorously defend itself, it warned that if YTB is “unsuccessful in its defense against the claims, the result would likely have a material adverse effect on its liquidity, financial condition, and results of operations.”