UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549        FORM 10-Q/A

Amendment No. 1 

(Mark One)

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

For the quarterly period ended March 31, 2009

or

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from                                                      to                                        

Commission file number: 0-32137

                     Online Vacation Center Holdings Corp.              

(Exact name of registrant as specified in its charter)

| Florida                                                      |  | 65-0701352                                  |  |
|--------------------------------------------------------------|--|--------------------------------------------------|--|
| State or other jurisdiction of incorporation or organization |  |   (I.R.S. Employer Identification No.) |  |

1801 N.W.66thAvenue,Suite102, Plantation,Florida 33313    

          (Address of principal executive offices) (Zip Code)

                                 (954) 377-6400                         

Registrant’s telephone number including area code

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

     Indicate by check mark whether the registrant has electronically submitted and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes [ ]     No [ ]

     Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]                                                                    Accelerated filer        [  ]

Non-accelerated filer [  ] (Do not check if a smaller reporting company)    Smaller reporting company [X]

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  [  ]  Yes   [X]   No

At June30, 2009, the number of shares outstanding of the registrant's common stock, $0.0001 par value was 16,303,688.

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Online Vacation Center Holdings Corp.        Form 10-Q/A        Introductory Note

This Amendment No. 1 to the quarterly report on Form 10-Q/A (“Form10-Q/A”) is being filed to amend the Company’s quarterly report on Form 10-Q for the period ended March31, 2009, which was originally filed on May 7, 2009(“Original Form10-Q”). 

The purpose of this Form 10-Q/A is to restate our consolidated financial statements for the fiscal year ended December 31, 2008 (“fiscal 2008”), which are included in our Original Form 10-Q. Management and the Audit Committee of our Board of Directors concluded that the Company’s 2008 financial statements should be restated due to an error relating to the accounting for its disposition of Phoenix        International Publishing LLC ("Phoenix") in March 2008, in connection with its response to a comment letter received from the U.S. Securities and Exchange Commission regarding the Company’s Annual Report on Form 10-K for fiscal 2008. Our management and the Audit Committee of our Board of Directors decided to change the accounting treatment for the disposition of Phoenix in our consolidated financial statements for fiscal 2008 so that the methodology utilized in determining the        fair value of the Company’s common stock at disposition was consistent with the methodology utilized in determining the fair value of the Company’s common stock at the time of Phoenix’s acquisition by the Company. In addition, we are revising our presentation and accounting treatment of convertible notes issued in conjunction with previous acquisitions to eliminate the value ascribed to the conversion feature of the notes.As result of these adjustments, both our 2008 loss from discontinued operations and our net loss for the quarter ended March 31, 2008 were understated by $681,250. In addition, our accumulated deficit as of March 31, 2008 was understated by $681,250, our additional paid in capital as of March 31, 2008 was understated by $624,826 and our goodwill as of March 31, 2008was overstated by $56,424. Finally, our loss per share from discontinued        operations; both basic and diluted were overstated by $0.03 and our net loss per share; both basic and diluted were overstated by $0.03. There was no impact on net cash used in operating activities, the net decrease in cash and equivalents for the quarterended March 31, 2008 or the balance of cashand equivalents as of March 31, 2008. Please see Note 2, Restatement and Revisions to our consolidated financial        statements for the three months ended March 31, 2009 contained in Part I, Item 1 – Financial Statement for further information relating to the Restatement.

In addition to this Form 10-Q/A, we are simultaneously filing an amendment to our Form 10-K for the fiscal year ended December 31, 2008and will restate 2008 quarterly data on Form 10-Q for the second and third        quarters of 2009.This Form 10-Q/A amends and restatesItems 1, 2,and 4Tof Part 1 as applicable and Item 6 of Part II.

This Form 10-Q/A does not reflect events occurring after the filing of the Original Form 10-Q, other than the Restatement for the matter discussed above. Other events or circumstances occurring after May 7, 2009, the original filing date of the Original 10-Q or other disclosures        necessary to reflect subsequent events have been or will be addressed in other reports filed with the SEC subsequent to the date of the Original 10-Q. Accordingly, this Form 10-Q/A should be read in conjunction with our periodic filings, including any amendments to those filings, as well as any Current Reports on Form 8-K filed with the SEC, subsequent to May 7, 2009, the original filing date of our Original 10-Q.

 

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| Part  I.                             | Financial Information                                                                       |  PAGE |
|------------------------------------------------|---------------------------------------------------------------------------------------------|------------|
| Item 1                                    | Financial Statements (Unaudited)                                                            |       |
|                                           | Condensed Consolidated Balance Sheets                                                       | 4          |
|                                           | Condensed Consolidated Statements of Operations                                             | 5          |
|                                           | Condensed Consolidated Statements of Cash Flows                                             | 6          |
|                                           | Notes to Consolidated Financial Statements                                                  | 7          |
| Item 2                                    | Management’s Discussion and Analysis of Financial Condition

and Results of Operation |  

19 |
|  Item 4(t)                                | Controls and Procedures                                                                     |  25   |
| Part II                                        |                                                                                        |       |
| Item 6                                    | Exhibits                                                                                    | 25         |
|   Exhibit 31.1 – Certification |                                                                                        |
|   Exhibit 31.2 – Certification |                                                                                        |
|   Exhibit 32.1 – Certification |                                                                                        |
|   Exhibit 32.2 – Certification |                                                                                        |
|                                           |                                                                                        |       |

3

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| ONLINE VACATION CENTER HOLDINGS CORP.                                                                               |   |        |   |                                |
|---------------------------------------------------------------------------------------------------------------------|--------|-------------|--------|-------------------------------------|
| CONDENSED CONSOLIDATED BALANCE SHEETS                                                                               |   |        |   |                                |
|                                                                                                                |   | March 31,   |   | December 31,                        |
|                                                                                                                |   | 2009        |   | 2008                                |
|                                                                                                                |   | (Restated)  |   | (Restated)                          |
| ASSETS                                                                                                              |   |        |   |                                |
| CURRENT ASSETS                                                                                                      |   |        |   |                                |
| Cash and cash equivalents                                                                                           |   | $ 2,177,387 |   | $     1,693,447 |
| Accounts receivable, net                                                                                            |   | 938,545     |   | 1,236,109                           |
| Deposits and prepaid items                                                                                          |   | 472,758     |   | 733,000                             |
| Deferred tax asset, net                                                                                             |   | -0-    |   | 27,672                              |
| Total Current Assets                                                                                                |   | 3,588,690   |   | 3,690,228                           |
|                                                                                                                |   |        |   |                                |
| Restricted cash                                                                                                     |   | 63,000      |   | 63,000                              |
| Property and equipment, net                                                                                         |   | 131,759     |   | 140,285                             |
| Deferred tax asset, net                                                                                             |   | 27,210      |   | -                                   |
| Intangible assets, net                                                                                              |   | 1,137,816   |   | 1,116,613                           |
| Goodwill                                                                                                            |   | 1,697,855   |   | 1,697,855                           |
| Other assets                                                                                                        |   | 51,718      |   | 58,306                              |
| Total Assets                                                                                                        |   | $ 6,698,048 |   | $     6,766,287 |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                |   |        |   |                                |
| CURRENT LIABILITIES                                                                                                 |   |        |   |                                |
| Accounts payable and accrued liabilities                                                                            |   | $ 1,236,302 |   | $     1,041,608 |
| Deferred revenue                                                                                                    |   | 1,396,949   |   | 1,989,929                           |
| Notes payable and capital lease obligations, current portion                                                        |   | 114,327     |   | 120,287                             |
| Total Current Liabilities                                                                                           |   | 2,747,578   |   | 3,151,824                           |
|                                                                                                                |   |        |   |                                |
| Notes payable and capital lease obligations                                                                         |   | 32,358      |   | 131,609                             |
|                                                                                                                |   |        |   |                                |
| Deferred tax liability                                                                                              |   | 113,035     |   | 75,461                              |
|                                                                                                                |   |        |   |                                |
| Total Liabilities                                                                                                   |   | 2,892,971   |   | 3,358,894                           |
| COMMITMENTS AND CONTINGENCIES                                                                                       |   |        |   |                                |
| STOCKHOLDERS' EQUITY                                                                                                |   |        |   |                                |
| Preferred stock, 1,000,000 shares authorized at                                                                     |   |        |   |                                |
| $.0001 par value; 0 shares issued and outstanding                                                                   |   | -           |   | -                                   |
| Common stock, 80,000,000 shares authorized at                                                                       |   |        |   |                                |
| $.0001 par value; 17,261,777 and 17,252,777 shares                                                                  |   |        |   |                                |
| issued and outstanding                                                                                              |   | 1,726       |   | 1,725                               |
| Additional paid-in capital                                                                                          |   | 5,051,717   |   | 5,017,789                           |
| Accumulated deficit                                                                                                 |   | (1,056,265) |   | (1,586,493)                         |
| Treasury stock at cost; 373,699 shares and 44,300 shares                                                            |   | (192,101)   |   | (25,628)                            |
| Total Stockholders' Equity                                                                                          |   | 3,805,077   |   | 3,407,393                           |
|                                                                                                                |   |        |   |                                |
| Total Liabilities and Stockholders' Equity                                                                          |        | $ 6,698,048 |   | $     6,766,287 |
| The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements. |   |        |   |                                |

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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| ONLINE VACATION CENTER HOLDINGS CORP.                                                                               |    |                                             |        |    |            |   |
|---------------------------------------------------------------------------------------------------------------------|---------|--------------------------------------------------|--------|---------|-----------------|--------|
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                                                     |    |                                             |        |    |            |   |
| (UNAUDITED)                                                                                                         |    |                                             |        |    |            |   |
|                                                                                                                |    | For the Three Months Ended March 31,   |   |
|                                                                                                                |    | 2009                                             |        |    | 2008            |   |
|                                                                                                                |    |                                             |        |    | (Restated)      |   |
| NET REVENUES                                                                                                        |  $ |  2,824,743                                  |        |  $ |  2,255,824 |   |
|                                                                                                                |    |                                             |        |    |            |   |
| OPERATING EXPENSES:                                                                                                 |    |                                             |        |    |            |   |
|    Selling and marketing                                                                                  |    | 680,433                                          |        |    | 987,899         |   |
|    General and administrative                                                                             |    | 1,142,317                                        |        |    | 1,416,182       |   |
|    Depreciation and amortization                                                                          |    | 119,838                                          |        |    | 87,098          |   |
|                                                                                                                |    |                                             |        |    |            |   |
| OPERATING INCOME (LOSS)                                                                                             |    | 882,155                                          |        |    | (235,355)       |   |
|                                                                                                                |    |                                             |        |    |            |   |
| Interest income (expense), net                                                                                      |    | 1,876                                            |        |    | (18,694)        |   |
|                                                                                                                |    |                                             |        |    |            |   |
| Income (loss) from continuing operations before provision                                                           |    |                                             |        |    |            |   |
|   (benefit) for income taxes                                                                                   |    | 884,031                                          |        |    | (254,049)       |   |
|                                                                                                                |    |                                             |        |    |            |   |
| Provision (benefit) for income taxes                                                                                |    | 353,803                                          |        |    | (76,642)        |   |
|                                                                                                                |    |                                             |        |    |            |   |
| Income (loss) from continuing operations                                                                            |    | 530,228                                          |        |    | (177,407)       |   |
|                                                                                                                |    |                                             |        |    |            |   |
| DISCONTINUED OPERATIONS:                                                                                            |    |                                             |        |    |            |   |
|                                                                                                                |    |                                             |        |    |            |   |
| Loss from discontinued operations of Phoenix                                                                        |    |                                             |        |    |            |   |
|   International Publishing, LLC, net of tax                                                                    |    | -                                                |        |    | (800,524)       |   |
|                                                                                                                |    |                                             |        |    |            |   |
| NET INCOME (LOSS )                                                                                             |  $ |  530,228                                    |        |  $ |  (977,931) |   |
|                                                                                                                |    |                                             |        |    |            |   |
| EARNINGS PER SHARE - Basic                                                                                          |    |                                             |        |    |            |   |
| Income (Loss) from continuing operations                                                                            |  $ |  0.03                                       |        |  $ |  (0.01)    |   |
| (Loss) from discontinued operations                                                                                 |  $ |  -                                          |        |  $ |  (0.04)    |   |
| Net Income (Loss)                                                                                                   |  $ |  0.03                                       |        |  $ |  (0.05)    |   |
|                                                                                                                |    |                                             |        |    |            |   |
| Weighted average shares outstanding - Basic                                                                         |    | 17,257,406                                       |        |    | 18,496,845      |   |
|                                                                                                                |    |                                             |        |    |            |   |
| EARNINGS PER SHARE - Diluted                                                                                        |    |                                             |        |    |            |   |
| Income (Loss) from continuing operations                                                                            |  $ |  0.03                                       |        |  $ |  (0.01)    |   |
| (Loss) from discontinued operations                                                                                 |  $ |  -                                          |        |  $ |  (0.04)    |   |
| Net Income (Loss)                                                                                                   |  $ |  0.03                                       |        |  $ |  (0.05)    |   |
|                                                                                                                |    |                                             |        |    |            |   |
| Weighted average shares outstanding - Diluted                                                                       |    | 17,257,406                                       |        |    | 18,496,845      |   |
| The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements. |    |                                             |        |    |            |   |

| ONLINE VACATION CENTER HOLDINGS CORP.                                                                               |   |                                                                                                                                                                  |   |                                                                                                                              |
|---------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------|
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                     |   |                                                                                                                                                                  |   |                                                                                                                              |
| (UNAUDITED)                                                                                                         |   |                                                                                                                                                                  |   |                                                                                                                              |
|                                                                                                                |   | For the Three Months Ended                                                                                                                                  |
|                                                                                                                |   | March 31,                                                                                                                                                             |   | March 31,                                                                                                                         |
|                                                                                                                |   | 2009                                                                                                                                                                  |   | 2008                                                                                                                              |
|                                                                                                                |   |                                                                                                                                                                  |   | (Restated)                                                                                                                        |
| Cash flows from continuing operating activities:                                                                    |   |                                                                                                                                                                  |   |                                                                                                                              |
|    Net income/(loss)                                                                                      |   | $                530,229                                                                   |   | $        (977,931)                                                                             |
|        Loss from discontinued operations, net of tax                                  |   | -                                                                                                                                                                     |   | (800,524)                                                                                                                         |
|        Income/(Loss) from continuing operations                                  |   | 530,229                                                                                                                                                               |   | (177,407)                                                                                                                         |
|    Adjustments to reconcile to net cash inflow from operating activities:                                 |   |                                                                                                                                                                  |   |                                                                                                                              |
|        Depreciation and amortization                                             |   | 119,838                                                                                                                                                               |   | 87,098                                                                                                                            |
|        Stock based compensation expense                                          |   | 90,353                                                                                                                                                                |   | 69,208                                                                                                                            |
|        Imputed interest expense                                                  |   | 1,472                                                                                                                                                                 |   | 16,490                                                                                                                            |
|    Deferred income tax expense /(benefit)                                                            |   | 38,036                                                                                                                                                                |   | (114,214)                                                                                                                         |
|    Decrease in accounts receivable                                                                   |   | 297,564                                                                                                                                                               |   | 131,196                                                                                                                           |
|    (Increase)/Decrease in deposits and prepaid items                                                 |   | 260,655                                                                                                                                                               |   | (111,344)                                                                                                                         |
|    Increase in accounts payable and accrued liabilities                                              |   | 194,694                                                                                                                                                               |   | 265,968                                                                                                                           |
|    Increase/(Decrease) in deferred revenue                                                           |   | (592,980)                                                                                                                                                             |   | 19,154                                                                                                                            |
| Net cash provided by operating activities                                                                           |   | 939,861                                                                                                                                                               |   | 186,149                                                                                                                           |
|                                                                                                                |   |                                                                                                                                                                  |   |                                                                                                                              |
| Cash flows from continuing investing activites:                                                                     |   |                                                                                                                                                                  |   |                                                                                                                              |
|    Capital expenditures                                                                              |   | (21,360)                                                                                                                                                              |   | (9,920)                                                                                                                           |
|    Increase in intangible assets                                                                          |   | (111,155)                                                                                                                                                             |   | (118,211)                                                                                                                         |
|    Decrease in restricted cash                                                                       |   | -                                                                                                                                                                     |   | 108                                                                                                                               |
|    Increase in receivable upon disposition of discontinued operation                                 |   | -                                                                                                                                                                     |   | (100,000)                                                                                                                         |
|    Repayment of note receivable                                                                      |   | 6,175                                                                                                                                                                 |   | -                                                                                                                                 |
|    Cash paid upon disposition of discontinued operation                                              |   | -                                                                                                                                                                     |   | (4,932)                                                                                                                           |
| Cash used in investing activities                                                                                   |   | (126,340)                                                                                                                                                             |   | (232,955)                                                                                                                         |
|                                                                                                                |   |                                                                                                                                                                  |   |                                                                                                                              |
| Cash flows from continuing financing activites:                                                                     |   |                                                                                                                                                                  |   |                                                                                                                              |
|    Purchase of treasury stock under approved repurchase plan                                              |   | (91,473)                                                                                                                                                              |   | -                                                                                                                                 |
|    Purchase of treasury stock                                                                   |   | (75,000)                                                                                                                                                              |   | -                                                                                                                                 |
|    Payments under capital lease obligations                                                          |   | (6,683)                                                                                                                                                               |   | -                                                                                                                                 |
|    Repayment of note payable                                                                         |   | (100,000)                                                                                                                                                             |   | (100,000)                                                                                                                         |
| Cash used in financing activities                                                                                   |   | (273,156)                                                                                                                                                             |   | (100,000)                                                                                                                         |
|                                                                                                                |   |                                                                                                                                                                  |   |                                                                                                                              |
| Discontinued Operations                                                                                             |   |                                                                                                                                                                  |   |                                                                                                                              |
| Cash provided by operating activities                                                                          |   | -                                                                                                                                                                     |   | 47,912                                                                                                                            |
| Cash provided by discontinued operations                                                                            |   | -                                                                                                                                                                     |   | 47,912                                                                                                                            |
|                                                                                                                |   |                                                                                                                                                                  |   |                                                                                                                              |
| Increase (Decrease) in cash during the period                                                                       |   | 540,365                                                                                                                                                               |   | (98,894)                                                                                                                          |
|                                                                                                                |   |                                                                                                                                                                  |   |                                                                                                                              |
| Cash at the beginning of the period                                                                                 |   | 1,693,447                                                                                                                                                             |   | 1,189,042                                                                                                                         |
|                                                                                                                |   |                                                                                                                                                                  |   |                                                                                                                              |
| Cash at the end of the period                                                                                       |   | $              2,233,812                                                                             |   | $       1,090,148                                                                                   |
|                                                                                                                |   |                                                                                                                                                                  |   |                                                                                                                              |
| Supplemental information:                                                                                           |   |                                                                                                                                                                  |   |                                                                                                                              |
|    Cash paid for interest                                                                            |   | $                        737                       |   | $                      - |
|    Cash paid for taxes                                                                               |   | $                   10,400                                                  |   | $              1,136                                             |
|    Common stock received in conjunction with disposition of                                          |   |                                                                                                                                                                  |   |                                                                                                                              |
|        discontinued operation                                                    |   | $                            - |   | $          725,000                                                                   |
| The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements. |   |                                                                                                                                                                  |   |                                                                                                                              |

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

|  | 1.      | BASIS OF PRESENTATION |
|--|----------------------------------|-----------------------|

The results of operations for the three months ended March 31, 2009are not necessarily indicative of annual results. The Company manages its business as one reportable segment.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. For the Company, key estimates include allowance for doubtful accounts, the        fair value of goodwill and intangible assets, asset lives used in computing depreciation and amortization, including amortization of intangible assets, and accounting for income taxes, contingencies and litigation. While the Company believes that such estimates are fair when considered in conjunction with the condensed consolidated financial position and results of operations taken as a whole, actual results could differ from those estimates and such differences may be material to the        financial statements.

|  | 2.      | RESTATEMENTS AND REVISIONS |
|--|----------------------------------|----------------------------|

Management and the Audit Committee of its Board of Directors concluded that the Company’s 2008 financial statements should be restated due to an error relating to the accounting for its disposition of Phoenix International Publishing LLC ("Phoenix") in March 2008, in connection with its response to a comment letter received from the U.S. Securities and Exchange Commission regarding the Company’s Annual Report on Form 10-K for fiscal 2008. Management and        the Audit Committee of its Board of Directors decided to change the accounting treatment for the disposition of Phoenix in our consolidated financial statements for fiscal 2008 so that the methodology utilized in determining the fair value of the Company’s common stock at disposition was consistent with the methodology utilized in determining the fair value of the Company’s common stock at the time of Phoenix’s acquisition by the Company.

7

ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Phoenix error was the result of a lack of consistency of methodology in determining the fair value of the shares of common stock of the Company received in consideration for the disposition of Phoenix with the methodology utilized in determining the fair value of the shares of common stock of the Company issued when Phoenix was acquired. The Company had determined the fair value of the Phoenix net assets acquired in August 2006 based on the market (fair) value of        a share of the Company’s common stock, $1.125, for each of the 1,450,000 shares of common stock issued in connection with the acquisition. This was calculated by using the then trading price of the Company’s common shares of $1.50, discounted by 25% due to restrictions on their transfer and limited marketability. Upon the disposition of Phoenix in March 2008, the Company computed its loss on disposition of $58,382 based on the difference of the value of the 1,250,000 shares        of the Company’s common stock received based on the value per share at time of acquisition, $1.125, and the fair value of the net assets of Phoenix at the time of disposition. As discussed in our original 10-K, at that time, the Company believed that it could not determine fair value of either the asset transferred (Phoenix) or the asset received (shares of the Company’s common stock), and therefore recorded cost was used to record the sale. The Company’s management        and the Audit Committee of the Board of Directors with consideration to a comment letter received from the SEC has now determined that the use of the market value of the Company’s shares of common stock at the time of acquisition to compute the loss upon disposition of Phoenix was inappropriate. The computation should have been based on the market (fair) value per share at the time of disposition in March 2008, $0.58, a Level 1 input within the fair value hierarchy in accordance        with Statement of Financial Accounting Standards No. 157- Fair Value Measurements, of the 1,250,000 shares of the Company’s common stock received resulting in a loss of $739,632. For tax purposes, the transaction was treated as split-off with no resulting tax consequences.In addition, the Company is revising the accounting treatment for the conversion feature associated with the convertible debt issued in conjunction with the acquisitions of Thoroughbred Travel LLC and La Fern Inc. (“Notes”) in 2006. Value was assigned to the conversion feature of the Notes which resulted in an increase in goodwill and additional paid-in capital whereas no conversion feature value should have been assigned to the Notes.Inaddition to this Amendment No. 1on Form 10-Q/A, the Company will filean amendment to its Form 10-K for fiscal 2008, which will include the restated financial statements for fiscal 2008 and will restate 2008 quarterly data on Form 10-Q for the second and third quarters of 2009.

8

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As a result of theseadjustments, both the Company’sloss from discontinued operations and itsnet loss for the quarter ended March 31, 2008 were understated by $681,250. In addition, the Company’saccumulated deficit as of March 31, 2009and December 31, 2008 was understated by $681,250, additional paid in capital as of March 31, 2009and December 31, 2008was understated by $624,826 and goodwill as of March 31, 2009and December 31, 2008was overstated by $56,424.        Finally, the Company’sloss per share from discontinued operations; both basic and diluted were overstated by $0.03and net income per share; both basic and diluted were overstated by $0.03for the quarter ended March 31, 2008. There was no impact on net cash used in operating activities, the net decrease in cash and equivalents for the quarterended March31, 2008 or the balance of cashand equivalents as of March31, 2008. 

The effects of the restatement on the consolidated balance sheet as of March31, 2009are summarized in the following table:

| **CONSOLIDATED BALANCE SHEET**                 |
|------------------------------------------------|
|                                           | **              ****March****31, 200****9****                                 ** |
|                                           | As Originally

   Reported     |  

Adjustments |        As      

  Restated    |
| **ASSETS**                                     |   |   |   |
| Total Current Assets                           | $  3,588,690  | $               --  | $  3,588,690  |
| Restricted cash                                | 63,000  |       --  | 63,000  |
| Property and equipment, net                    | 131,759  |       --  | 131,759  |
| Deferred tax asset, net                        | 27,210  |       --  | 27,210  |
| Intangible assets, net                         | 1,137,816  |             --  | 1,137,816  |
| Goodwill                                       | 1,754,279  | (    56,424) | 1,697,854  |
| Other assets                                   |       51,718  |               --  |       51,718  |
| Total Assets                                   | $  6,754,472  | $ (    56,424) | $  6,698,048  |
|                                           |   |   |   |
| **LIABILITIES AND STOCKHOLDER’S EQUITY** |   |   |   |
| TOTAL LIABILITIES                              | $  2,892,971  | $               --  | $  2,892,971  |
|                                           |   |   |   |
| **STOCKHOLDERS' EQUITY**                       |   |   |   |
| Preferred stock                                |       --  |       --  |       --  |
| Common stock                                   | 1,726  |       --  | 1,726  |
| Additional paid-in capital                     | 4,426,891  | 624,826  | 5,051,717  |
| Accumulated deficit                            | 375,015  | (681,250) | (1,056,265) |
| Treasury stock                                 |        25,628  |              --  |        25,628  |
| **TOTAL STOCKHOLDERS****’****EQUITY**    |   3,861,501  |     (56,424) |   3,805,077  |
| **TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY** | $  6,754,472  | $    (56,424) | $  6,698,048  |

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

9

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The effects of the restatement on the consolidated balance sheet as of December 31, 2008 are summarized in the following table:

| **CONSOLIDATED BALANCE SHEET**                 |
|------------------------------------------------|
|                                           | **              December 31, 2008             ** |
|                                           | As Originally

   Reported     |  

Adjustments |        As    

  Restated    |
| **ASSETS**                                     |   |   |   |
| Total Current Assets                           | $  3,690,228  | $            --  | $  3,690,228  |
| Restricted cash                                | 63,000  |       --  | 63,000  |
| Property and equipment, net                    | 140,285  |       --  | 140,285  |
| Intangible assets, net                         | 1,116,613  |             --  | 1,116,613  |
| Goodwill                                       | 1,754,279  | (    56,424) | 1,697,854  |
| Other assets                                   |       58,306  |               --  |       58,306  |
| Total Assets                                   | $  6,822,711  | $ (    56,424) | $  6,766,287  |
| **LIABILITIES AND STOCKHOLDER’S EQUITY** |   |   |   |
| TOTAL LIABILITIES                              | $  3,358,894  |          $          --       | $  3,358,894  |
|                                           |   |   |   |
| **STOCKHOLDERS' EQUITY**                       |   |   |   |
| Preferred stock                                |       --  |       --  |       --  |
| Common stock                                   | 1,725  |       --  | 1,725  |
| Additional paid-in capital                     | 4,392,963  | 624,826  | 5,017,789  |
| Accumulated deficit                            | (905,243) | (681,250) | (1,586,493) |
| Treasury stock                                 |        25,628  |              --  |        25,628  |
| **TOTAL STOCKHOLDERS****’****EQUITY**    |   3,463,817  |     (56,424) |   3,407,393  |
| **TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY** | $  6,822,711  | $    (56,424) | $  6,766,287  |

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

The effects of the restatement on the consolidated statement of operations for the three months ended March31, 2008 are summarized in the following table:

| **CONSOLIDATED STATEMENT OF OPERATIONS**                                                                 |
|----------------------------------------------------------------------------------------------------------|
|                                                                                                     | ** **** ****  ****Three Months****Ended****March****31, 2008****      ** |
|                                                                                                     | As Originally                       Reported     |  

Adjustment |        As                            Restated    |
| Lossfrom continuing operations                                                                           | $  (177,407) | $             --  | $  (177,407) |
| Discontinued operations:                                                                                 |   |   |   |
| Loss from discontinued operations of Phoenix                    International Publishing LLC, net of tax |  

 (119,274) |  

 (681,250) |  

 (800,524) |
| Net (loss)                                                                                               | $  (296,681) | $  (681,250) | $  (977,931) |
|                                                                                                     |   |   |   |
| Earnings/(Loss) per share – basic and diluted                                                      |   |   |   |
| (Loss) from continuing operations                                                                        | $        (0.01) | $              --  | $        (0.01) |
| Loss from discontinued operations                                                                        |  (0.01) |  (0.03) |  (0.04) |
| Net (loss)                                                                                               | $        (0.02) | $        (0.03) | $        (0.05) |

 

 

 

 

 

 

 

 

         

10

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

|  | 3.      | DISPOSITION |
|--|----------------------------------|-------------|

In November2007, the Company’s Board of Directors granted the Company the authority to sell PhoenixInternational        Publishing LLC (“Phoenix”), apublisher of consumer magazines and guides about travel to the U.S. and Canada.On March 31, 2008, the Company completed thesale of Phoenix to Simon Todd(“Mr.        Todd”), pursuant to the terms of an acquisition agreement (“Acquisition Agreement”),dated March 31, 2008, by and among the Company, Phoenix, and Mr. Todd. Pursuant to the AcquisitionAgreement, the Companyreceived 1,250,000 shares of the Company’s common        stock from Mr. Todd at closing. The AcquisitionAgreementprovides for, among other matters, contingent consideration from Mr. Todd in the event thatcertain thresholds of profitability, as defined, are attained within three years from the date of disposition or sale of Phoenix by        Mr. Todd to a third party for an amount in excess of a defined amount for a period of three years from March 31, 2008.The amount of contingent consideration, if any, can not be determined as the likelihood of such future events giving rise to such contingent consideration can not be ascertained nor the effects estimated.Upon execution of the        AcquisitionAgreement, Mr. Todd resigned as Vice President of the Company. Prior to the acquisitionof Phoenix by the Company, Mr. Todd was the owner, sole member, and President ofPhoenix. The Company acquired Phoenix from Mr.Todd on August 31, 2006 for 1,450,000shares of the Company’s common stock.The Company valued the 1,250,000 shares of the Company’s common stock based on the market (fair) value, $0.58, at the time of the transaction, a Level 1 input within the fair value hierarchy in accordance with Statement of Financial Accounting Standards No. 157- Fair Value Measurements and recorded a loss upon disposition of Phoenix, based upon the fair value of the net assets of Phoenix of $1,461,932, of $739,632.

For tax purposes, the transaction was treated as split-off with no resulting tax consequences. The Company retired the 1,250,000 shares of its common stock received as of March 31, 2008.         

The results of operations and cash flows of Phoenix has been removed from the results of continuing operationsand have been accounted for as discontinued operations. 

|                              | For the three months ended March 31, 2008 |  |
|-----------------------------------|-------------------------------------------|--|
|                              | (Restated)                                |
| Revenues

                   | $ 107,569                       |
|                                   |                                           |
| Loss before income taxes          | $   98,503                 |
| Loss on sale of Phoenix           | 739,632                              |
| Income tax benefit                |  37,611                         |
| Loss from discontinued operations | $ 800,524                       |

In conjunction with the Acquisition Agreement, Phoenix is obligated to pay its pre-disposition intercompany debt balance to the Company of $100,000 in forty consecutivemonthly payments of $2,500 commencing on October 1, 2008. The series of forty monthly payments of $2,500 has been discounted, using        the Company’s estimated incremental borrowing rate of 6.5% and the aggregate related unamortized imputed interest of $13,498as of March 31, 2008 has been offset against the face value of the receivable and a corresponding interest expenserecorded. Thecurrent portion of this receivable from Phoenix, $25,724, has been classified as deposits and prepaid items and the        remaining balance of $51,718asother assets as of March 31, 2009.

11

 

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)
|  | 4.      | RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS |
|--|----------------------------------|-------------------------------------------|

Fair Value Measurements

In September 2006, the Financial Accounting Standards Board (“FASB”)issued Statement of Financial Accounting Standards(“SFAS”)No. 157, Fair Value Measurements, (“FAS 157”). This Standard        defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements.In February 2008, the FASB issued FASB Staff Position (“FSP”)FAS157-2 that delayed, by one year, the effective date of FAS157 for the majority of non-financial        assets and non-financial liabilities. The Company’s adoption of FAS 157for certain assets and liabilities, which were not included in FSP FAS157-2, as of January 1, 2008,didnot have a material impact on the Company’s financial position, results of operations or cash flowsas of and for the        year ended December 31 ,2008 except as discussed in Note 2.Cash equivalents and restricted cash are carried at cost which approximates fair value.We adopted the provisions of FSP FAS157-2as of January 1, 2009. Items to which the deferral under FSP FAS 157-2 applied include nonrecurring fair value        measurements of nonfinancial assets and nonfinancial liabilities, or recurring fair value measurements of nonfinancial assets and nonfinancial liabilities, which are not disclosed at fair value in the consolidated financial statements. We did not have nonfinancial assets or nonfinancial liabilities covered by the provisions of FAS No.157 which required remeasurement upon adoption or during the three months ended March31, 2009, and therefore there        was no impact of adoption on our financial position, results of operations, or cash flows.

In October 2008 the FASB issued FSP FASNo.157-3, Determining the Fair Value of a Financial Asset When The Market for That Asset Is Not Active, (“FSPFAS 157-3”)to clarify the application of the provisions of FAS157 in an inactive market and how an entity would determine fair value in an inactive market. FSPFAS 157-3 waseffective immediately. The application of the provisions of FSPFAS 157-3 did not materially affect our results of operations or financial condition as of and for the periods ended        December31, 2008. 

In April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume or Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”). FSP FAS 157-4 provides additional guidance for estimating fair        value in accordance with SFAS No.157 when the volume and level of activity for the asset or liability have significantly decreased and requires that companies provide interim and annual disclosures of the inputs and valuation technique(s) used to measure fair value. FSP FAS 157-4 is effective for interim and annual reporting periods ending after June15, 2009 and is to be applied prospectively. The Company does not expect the adoption of FSP FAS 157-4 to have a significant impact on its        financial statements. 

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments.” FSP FAS 115-2 and FAS 124-2 amends the other-than-temporary impairment guidance to improve the presentation and disclosure of other-than-temporary impairments on debt and equity        securities in the financial statements. FSP FAS 115-2 and FAS 124-2 is effective for interim and annual reporting periods ending after June15, 2009. The Company does not expect the adoption of FSP FAS 115-2 and FAS 124-2 to have a significant impact on its financial statements. 

12

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” FSP FAS 107-1 and APB 28-1 requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as            well as in annual financial statements. FSP FAS 107-1 and APB 28-1 is effective for interim and annual reporting periods ending after June15, 2009. The adoption of FSP 107-1 and APB 28-1 will have no impact on the Company’s financial statements. 

Accounting for Defined Benefit Pension and Other Postretirement Plans

In September 2006 the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB SFAS Nos. 87, 88, 106 and 132(R), (“FAS 158”). This Standard requires recognition of the funded status of a benefit plan in the statement of        financial position. The Standard also requires recognition in other comprehensive income certain gains and losses that arise during the period but are deferred under pension accounting rules, as well as modifies the timing of reporting and adds certain disclosures. FAS 158 provides recognition and disclosure elements to be effective as of the end of the fiscal year after December 15, 2006 and measurement elements to be effective for fiscal years ending after December 15, 2008. The        Company adopted the provisions of FASNo.158as of January1, 2009. The adoption did not have a material impact on the condensed consolidated financial statements. 

Business Combinations          

In December2007, the FASB issued SFAS No. 141(R), ‘‘Business Combinations’’ (‘‘FAS 141(R)’’). FAS 141(R) establishes principles and requirements for how an        acquirer in a business combination: 

|  | ·    | Recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree |
|--|----------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · 

·    | Recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; andDetermines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. |
|--|--------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

        FAS 141(R) is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company adopted the provisions of FAS 141(R)as of January1, 2009. The adoption did not have a material impact on the condensed consolidated financial statements. 

Noncontrolling Interest in Consolidated Financial Statements          

In December2007, the FASB issued SFAS No. 160, ‘‘Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51’’ (‘‘FAS 160’’). FAS 160 amends ARB 51 to establish        accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It also amends certain of ARB 51’s consolidation procedures for consistency with the requirements of FAS 141(R). FAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December15,2008.        The Company adopted the provisions of FAS 160as of January1, 2009. The adoption did not have a material impact on the condensed consolidated financial statements. 

13

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Accounting for Collaborative Arrangements 

In December2007, the Emerging Issues Task Force (“EITF”) met and ratified EITF No.07-01, Accounting for Collaborative Arrangements(“EITF 07-01”), in order to define collaborative arrangements and to establish reporting requirements for        transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties. This EITF is effective for financial statements issued for fiscal years beginning after December15, 2008, and interim periods within those fiscal years. This EITF is to be applied retrospectively to all prior periods presented for all collaborative arrangements existing as of the effective date. The Company adopted the provisions of EITF 07-01as of January1, 2009. The adoption did not have a material impact on the condensed consolidated financial statements.

Determination of the Useful Life of Intangible Assets

In April 2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of Intangible Assets,”(“FSP FAS 142-3”), which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of intangible assets under FAS 142 “Goodwill and Other        Intangible Assets”. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under FAS 142 and the period of the expected cash flows used to measure the fair value of the asset under FAS 141 (revised 2007) “Business Combinations” and other U.S. generally accepted accounting principles. We adopted the provisions FSP FAS 142-3 on January 1, 2009. As the provisions of FSP FAS 142-3 are applied prospectively, there was        no impact of adoption on our financial position, results of operations, or cash flows

Disclosure about Derivative Instruments and Hedging Activities         

In March 2008, the FASB issued FAS No. 161, Disclosure about Derivative Instruments and Hedging Activities*,*an amendment of FASB Statement No. 133, (“FAS 161”). This Statement requires that objectives for using derivative instruments be        disclosed in terms of underlying risk and accounting designation. The Company is required to adopt FAS 161 on January 1, 2009. We adopted the provisions FAS 161 on January 1, 2009. As we do not engage in any hedging activities nor utilize derivatives, the adoption of FAS No.161 did not have an impact on our financial position, results of operations, or cash flows.

Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)

In May 2008, the FASB issued FSPNo. APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" The FSP, which clarifies the accounting for convertible debt instruments that may be settled in cash (including partial cash        settlement) upon conversion(“FSP APB 141”). The FSP requires issuers to account separately for the liability and equity components of certain convertible debt instruments in a manner that reflects the issuer's nonconvertible debt (unsecured debt) borrowing rate when interest cost is recognized. The FSP requires bifurcation of a component of the debt, classification of that component in equity and the accretion of the resulting discount        on the debt to be recognized as part of interest expense in our consolidated statement of operations. The FSP requires retrospective application to the terms of instruments as they existed for all periods presented. The Company adopted the provisions of FSP APB 141as of January1, 2009. The adoption did not have a material impact on the condensed consolidated financial statements.

14

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities

In June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 clarified that all outstanding unvested share-based payment awards that contain rights to nonforfeitable        dividends participate in undistributed earnings with common shareholders. Awards of this nature are considered participating securities and the two-class method of computing basic and diluted earnings per share must be applied. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008. The Company adopted the provisions of FSP EITF 03-6-1 as of January1, 2009. The adoption did not have a material impact on the condensed        consolidated financial statements.         

Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity’s Own Stock          

In June 2008, the FASB ratified EITF Issue No. 07-5, “Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity’s Own Stock” (EITF 07-5). EITF 07-5 provides that an entity should use a two step approach to evaluate whether an equity-linked financial instrument (or embedded        feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. It also clarifies on the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning after December 15, 2008. The Company adopted the provisions of EITF 07-5 as of January1, 2009. The adoption did not        have a material impact on the condensed consolidated financial statements.

A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would        be material to the Company’s consolidated financial statements. 

15

 

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

|  | 5.      | EARNINGS PER SHARE |
|--|----------------------------------|--------------------|

Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity        awards vest resulting in the issuance of common stockor conversion of notes into shares of the Company’s common stockthat could increase the number of shares outstanding and lower the earnings per share of the Company’s common stock. This calculation is not done for periods in a loss position as this would be antidilutive.As of March 31, 2009, there were no stock        options or stock awards that would have been included in the computation of diluted earnings per share that could potentially dilute basic earnings per share in the future. The information related to basic and diluted earnings per share is as follows:

|                                                                                       | Quarter Ended March 31,                                                    |
|--------------------------------------------------------------------------------------------|----------------------------------------------------------------------------|
|                                                                                       |       2009               |      2008     |
|                                                                                       |                                                                       | (Restated) |
| Numerator:                                                                                 |                                                                       |   |
| Continuing operations:                                                                     |                                                                       |   |
| Income (loss)from continuing operations                                                    | $  530,228                                                            | $ (177,407) |
| Effect of dilutive convertible debt                                                        |             -- |             --  |
| Total                                                                                      | $  530,228                                                            | $ (177,407) |
|                                                                                       |                                                                       |   |
| Discontinued operations                                                                    |                                                                       |   |
| Loss from discontinued operations                                                          | $           --      | $ (800,524) |
|                                                                                       |                                                                       |   |
| Net income (loss)                                                                          | $  530,228                                                            | $ (977,931) |
|                                                                                       |                                                                       |   |
| Denominator:                                                                               |                                                                       |   |
| Weighted average number of shares outstanding – basic                    And diluted | 17,257,406                                                            | 18,496,845  |
|                                                                                            |                                                                       |   |
| EPS:                                                                                       |                                                                       |   |
| Basic:                                                                                     |                                                                       |   |
| Continuing operations                                                                      | $ 0.03                                                                | $ (0.01) |
| Discontinued operations                                                                    |   0.00                                                           |   (0.04) |
| Net income (loss)                                                                          | $ 0.03                                                                | $ (0.05) |
|                                                                                       |                                                                       |   |
| Diluted                                                                                    |                                                                       |   |
| Continuing operations                                                                      | $ 0.03                                                                | $ (0.01) |
| Discontinued operations                                                                    |   0.00                                                           |   (0.04) |
| Net income (loss)                                                                          | $ 0.03                                                                | $ (0.05) |

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

|  | 6.      | TREASURY STOCK |
|--|----------------------------------|----------------|

On August 1, 2008, the Company announced that its Board of Directors had approved a program to repurchase of up to $200,000 of the Company's common stock to be funded from available working capital and subject to the applicable rules and regulations of the Securities and Exchange Commission and other applicable legal requirements. The        program will not extend 

 

16 

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

beyond June 30, 2009, does not require the Company to acquire a specific number of shares and may be suspended from time to time or discontinued. On March 2, 2009, the Company announced that its Board of Directors had approved a program to repurchase of up to an additional $150,000 of the Company's common stock to be funded from        available working capital and subject to the applicable rules and regulations of the Securities and Exchange Commission and other applicable legal requirements. The program will not extend beyond June 30, 2009, does not require the Company to acquire a specific number of shares and may be suspended from time to time or discontinued. As of March 2, 2009 the Company had purchased 123,609 shares of its common stock in the open market at a cost of $66,096 in conjunction with the        program.        On March 23, 2009 the Company entered into an agreement with two shareholders to purchase 150,000 shares and 100,000 shares, respectively, of the Company’s common stock at $0.50 per share at an aggregate cost of $125,000. This repurchase transaction is not part of the Company’s previously announced repurchase program.

|  | 7.      | STOCK BASED COMPENSATION |
|--|----------------------------------|--------------------------|

In conjunction with the Share Exchange Agreement, the Company's Board of Directors amended its 2005 Management and Director Equity Incentive and Compensation Plan (the “Plan”). This Plan provides for the grants of stock options, restricted stock, performance-based and other equity-based incentive awards to directors,        officers and key employees. Under this Plan, stock options must be granted at an option price that is greater than or equal to the market price of the stock on the date of the grant. If an employee owns 10% or more of the Company’s outstanding common stock, the option price must be at least 110% of the market price on the date of the grant. Options granted under this Plan become exercisable in accordance with the terms of the grant as determined by a committee of the        Company’s Board of Directors. All options granted expire no more than 10years following the date of grant.All stock option grants currently outstanding vested either on the date of grant or will vest two years from the date of grant, provided that the individual is continuously employed with the Company. All outstanding restricted stock grants vest 20% upon grant and ratably over the successive four years,        subject to continued employment with the Company.

Nostock options were granted during the three months ended March 31, 2009.

A summary of the activity in our Plan for the quarterended March31, 2009is presented below:

|                                     |  

Shares                                                                        | Weighted Average

   Exercise Price    |
|------------------------------------------|---------------------------------------------------------------------------------------|----------------------------------------------------------------------|
| Options outstanding at December 31, 2008 | 2,447,400                                                                             | $ 1.39                                           |
| Granted                                  | -                                                                                     | 0.00                                                                 |
| Canceled                                 | 5,000                                                                                 | 3.02                                                                 |
| Exercised                                |               - | 0.00                                                                 |
| Options outstanding at March 31, 2009    | 2,442,400                                                                             | $ 1.39                                           |

As of March 31, 2009, there was approximately $39,185of total stock-based compensation expense not yet recognized relating to non-vested awards granted under our option plan as calculated under SFAS 123R. This expense is net of estimated forfeitures and is expected to be recognized over a        weighted-average period of approximately 10months. The number of non-exercisable shares was 472,400shares of common stock at March 31, 2009.At March31, 2009, 1,970,000 shares of common stock at weighted average strike price of $1.36per share were exercisable.

17

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

For the quarterended March31, 2009, 9,000 restricted shares were granted to employees and directors under the Plan. Compensation expense for the quartersended March31, 2009and 2008related to the restricted share grantswas $15,570and $16,250, respectively.

|  | 8.      | COMMITMENTS AND CONTINGENCIES |
|--|----------------------------------|-------------------------------|

The Company is involved from time to time in various legal claims and actions arising in the ordinary course of business.While from time to time claims are asserted that may make demands for sums of money, The Company doesnot believe that the resolution of any        of these matters, either individually or in the aggregate, will materially affect itsfinancial position, cash flows or the results of itsoperations.         

On January 1, 2008, the Company entered into employment contracts with sixemployees.The contracts are each for a term of one year with an aggregate compensation commitment of $665,000. One contract providesfor incentives in        the event that certain annual targets are attained.

|  | 9.      | SUBSEQUENT EVENTS |
|--|----------------------------------|-------------------|

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

Forward Looking Statements                  This Quarterly Report on Form 10-Q/Aincludes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding guidance, industry prospects or future results of operations or financial position, made in this Quarterly Report on Form 10-Q/Aare forward-looking. We use words such as        anticipates, believes, expects, future, intends, and similar expressions to identify forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Actual results could differ materially for a variety of reasons, including, those risks described in our Annual Report on Form 10-K, as amended(collectively, the “2008 10-K”) for the year ended December 31, 2008filed with the Securities and Exchange Commission (“SEC”)on March 27, 2009, March 31, 2009and July XX, 2009 and the risks discussed in other SEC filings. These risks and uncertainties, as well as other risks anduncertainties,could cause our actual results to differ significantly from        management’s expectations. The forward-looking statements included in this report reflect the beliefs of our management on the date of this report. We undertake no obligation to update publicly any forward-looking statements for any reason.

Overview

We arefocused on internally growing and developingourgroupof diversified vacation marketing companieswith a range of products that can be cross-sold to an extensive customer base and providea high degree of personalized service to help consumers research, plan and purchase a vacation.                   We provide vacation marketing services through eightwholly owned subsidiaries. Our portfolio of travel companies includes:

|  | ·      | Online Vacation Center,Inc., a full service vacation seller focused on serving the affluent retiree market. Historically, this subsidiary has been the core business, accounting for the majority of                    revenue and net income through the sale of high margin cruise packages. This business is now integrated with our other travel companies, Curves Travel, the licensed travel management company of Curves International, Inc., La Fern, Inc., operating as eLeisureLink.com and focusing on land-based vacations, and Cruises for Less, our home-based selling group, |
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|  | ·      | Dunhill Vacations, Inc., the publisher of three travel newsletters, "Top Travel Values", "Spotlight", and "TRAVELFLASH", and |
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|  | ·      | La Tours and Cruises, Inc. and Thoroughbred Travel, LLC, our Houston travel agencies operating as "West University Travel / Journeys Unlimited", focused on providing luxury personal travel products such as cruises, European tours and all-inclusive vacations. |
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Wegenerate revenues from:

|  | ·      | commissions on cruises |
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|  | ·      | commissions on other travel related products |
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|  | ·      | commissions on travel insurance |
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|  | ·      | advertising and marketing services provided to travel suppliers |
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Wecurrently market ourservices by:  

|  | ·      | producing travel-related publications for consumers |
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|  | ·      | telemarketing toourexisting customer base |
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|  | ·      | direct mailing to our existing customer base as well as targeted prospects |
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|  | ·      | sending emailsto ouropt in subscription base |
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All references in this QuarterlyReport to the "Company", "we" or "our" refer to Online Vacation Center Holdings Corp. and our subsidiaries unless otherwise noted. Our main telephone number is 954-377-6400 and our        web site is located at www.onlinevacationcenter.com. The content on our web site is not incorporated by reference into this filing.

Restatement

The purpose of this Form 10-Q/A is to restate (“Restatement”) our consolidated financial statements for the fiscal year ended December 31, 2008 (“fiscal 2008”), which are included in our Original 10-Q. Management and the Audit Committee of our Board of Directors concluded that the Company’s 2008 financial statements should be restated due to an error relating to the accounting for its disposition of Phoenix        International Publishing LLC ("Phoenix") in March 2008, in connection with its response to a comment letter received from the U.S. Securities and Exchange Commission regarding the Company’s Annual Report on Form 10-K for fiscal 2008. Our management and the Audit Committee of our Board of Directors decided to change the accounting treatment for the disposition of Phoenix in our consolidated financial statements for fiscal 2008 so that the methodology utilized in determining the        fair value of the Company’s common stock at disposition was consistent with the methodology utilized in determining the fair value of the Company’s common stock at the time of Phoenix’s acquisition by the Company. In addition, we are revising our presentation and accounting treatment of convertible notes issued in conjunction with previous acquisitions to eliminate the value ascribed to the conversion feature of the notes. Please see Note 2, Restatement and Revisions        to our financial statements for the quarter ended March 31, 2009 contained in Item 1 of Part 1 of this 10-Q/A and Note 3, Restatement and Revisions to our audited consolidated financial statements for fiscal 2008 for further information relating to the Restatement. These changes have been incorporated into Management’s Discussion and Analysis of Financial Condition and Results of Operations below.        Results of Operations

Three MonthsEnded March 31, 2009Compared to Three MonthsEnded March 31, 2008

Continuing operations:

Revenues increased by $568,919or 25.2% to $2,824,743for the three monthsended March 31, 2009(“the first quarter of 2009”)compared with$2,255,824for the three monthsended March 31, 2008(“the first quarter of 2008”). The increase is attributable to anincrease in commission revenueand publishingrevenue.

 

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Sellingand marketing expenses decreased by $307,466or 31.1% to $680,433for        the first quarter of 2009compared with $987,899for the first quarter of 2007. The decrease is primarily attributable to a reduction in marketing materials costs.Sellingand marketing expenses primarily consist of sales staff compensation and costs to produce marketing materials.

General and administrative expenses decreased by $273,865or 19.3% to $1,142,317for the first quarter of 2009compared with $1,416,182for the first quarter of 2008. The decrease is primarilyattributable to a reduction in management and non sales staff compensation and fees for professional services.General and administrative        expensesprimarily include management and non sales staffcompensation, professional services, and occupancycosts.

Depreciation and amortization expense for the first quarter of 2009was $119,838compared with $87,098for the first quarter of 2008. Amortization expense increased by $35,693during the first quarter of 2009,resulting froman increase in the amortization expense of the Dunhill subscriber list.

InterestIncome/ (Expense) increased from expense of $18,694for the first quarter of 2008to incomeof $1,876for the first quarter of 2009. The first quarter of 2008expense was primarily attributable to the imputed interest associated with the receivable from Phoenix payable over 40 months andless interest income earned on lower cash balances at the bank coupled with declining interest rates.The income in the first quarter of 2009represents the excess of interest income earned on our cash balances at the bank over the interest expense on the debt issued by us in conjunction        with our acquisition of La Tours and Cruises, Incand our capital lease obligation.

Our incomebefore provisionfor income taxes was $884,031in the first quarter of 2009compared withour lossbefore        benefitfor income taxes of $254,049in the first quarter of 2008. These results are primarilyattributable to theincrease in revenues,a decrease in selling and marketing expenses and general and administrative expenses,an increase in interest income offset by an        increase inamortization expenses associated with the Dunhill subscriber list.

The provision for income taxes increased from a benefit of $76,642for the first quarter of 2008compared withtax expenseof $353,803for the first quarter of 2009. The decrease is directly related to anincrease in results from operations whereby income before income taxes for the first quarter of 2009was $884,031whereas the loss before income taxes for the first quarter of 2008was $254,049.The taxrate in the first quarter of 2009was 40.0%primarily as a result of the effects of non-tax deductible itemsand the benefitrate in the first quarter of 2008was30.2%.

As a result of the foregoing, our net incomefrom continuing operations was $530,228for the first quarter of 2009compared witha net lossfrom continuing operations of $177,407forthe first        quarter of 2008.

Discontinued Operations          

We acquired Phoenix, aUnited Kingdom publisher of consumermagazines and guides about travel to the U.S. and Canada, on August 31, 2006for 1,450,000 shares of our common stockfrom Simon Todd(“Mr. Todd”).In November 2007, the Company's Board of Directors granted the Company the authority to sell Phoenix.On March31, 2008,wesold Phoenix to Mr. Todd, the former owner of Phoenix, in exchange for 1,250,000 shares of ourcommon stockwhich were owned by Mr. Todd. We recorded the sale of Phoenix at its fair value, as defined by Statement of Financial Accounting Standards No. 157, Fair Value Measurements, resulting in alossof $739,632. For tax purposes, the transaction was treated as split-off with no resulting tax        consequences. Weretired the 1,250,000 shares of ourcommon stock received from Mr. Todd in the sale transaction as of March 31, 2008.

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The results of operations and cashflows of Phoenix havebeen removed from the results of continuing operations as of March31, 2008. The results of operations ofPhoenix forthe first quarter of 2008areas follows:

|                                    | For the                     Quarter Ended   March 31, 2008    |
|-----------------------------------------|--------------------------------------------------------------------------------------------------|
|                                    |   

(Restated)                                                                         |
| Revenues                                | $      107,569                                                          |
| Operating (loss)                        | $     (98,805)                                                               |
| (Loss) on sale of Phoenix               | $   (739,632)                                                                     |
| Net (loss) from discontinued operations | $   (800,524)                                                                          |

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As a result of the foregoing, our net incomewas $530,228for the first quarter of 2009compared witha net loss of $977,931for the first quarter of 2008.

Cash at March 31, 2009was $2,177,387compared withcash of $1,693,447at December 31, 2008. The primary source of our liquidity and capital resources has come from our operations.           

Cash flows provided by operating activities were $939,861and $186,149inthe        first quarter of 2009and 2008, respectively. The increase of $753,712was primarily attributable to anincreaseinincome from continuing        operations of $707,636, an increase in non-cash operating items of $191,117in 2009offset by anincrease in cash used forworking capital items of $145,041in 2009.

Cash flows used in investing activities decreased to $126,340in the first quarter of 2009 compared with $232,955during the first quarter of 2008.        The primary decrease in cash out flows related to the pre-disposition intercompany balance receivable from Phoenix totaling $100,000during the first quarter of 2008.

Cash flows used in financing activities increased to $273,156 inthe first quarter of 2009 compared with $100,000in the first quarter of        2008.The primary increase in cash outflows was due to the Company’s purchase of its commonstock under a stock repurchaseprogram authorized by our Board of Directors in August 2008, which wasamended in        March 2009and private repurchase transactions outside of the publicly announced stock repurchase programwith existing shareholders aggregating $166,473, and the payment under a capital lease obligation for new telephone equipment. 

Cash flows provided by discontinued operations, solely from operating activitieswere$47,912 in the first quarter of 2008. There were no        discontinued operations in the first quarter of 2009.

At March31, 2009, we had working capital of $841,112 compared withworking capitalof $538,404 at December 31, 2008, anincrease of $302,708. We had an accumulated deficit of $1,056,265at March 31, 2009, a decrease of $530,228.

Management believes that the existing cash and cash expected to be provided by operating activities will be sufficient to fund the short term capital and liquidity needs of our operations. We may need to sell equity or debt securities or obtain credit lines from financial institutions        to meet our longer-term liquidity and capital requirements. We can not provide any assurances that we will be able to obtain additional capital or financing in amounts or on terms acceptable to us, if at all or on a timely basis.          

We have historically been heavily dependent on our relationships with fivemajor cruise lines: Celebrity Cruises, Princess Cruises, Norwegian Cruise Line,Azamara Cruises and Royal Caribbean Cruise Line. We also depend on third party service providers for processing certain fulfillment services.

Seasonality and Inflation                  The domestic and international leisure travel industry is seasonal. Our results have been subject to quarterly fluctuations caused primarily by the seasonal variations in the travel industry. Leisure travel net revenues and net income are generally lower in the third quarter. We expectseasonality to continue in the future. We do not expect inflation to materially affect our revenues and net income.          

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Critical Accounting Policies          

We prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. As such, management is required to make certain estimates, judgments and assumptions that it believes are reasonable based on the information available. These estimates and assumptions affect the        reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods presented. A more extensivelist of significant accounting policies and a description of accounting policies that are considered critical may be found in our 2008 Annual Reportin the Notes to the Consolidated Financial Statements, Note 2, and the Critical Accounting        Policies section. The significant accounting policies which management believes are the most critical to aid in fully understanding and evaluating our reported financial results include revenue recognition, intangible asset testing and income taxes.

Revenue Recognition                  We recognize revenue in accordance with Staff Accounting Bulletin (SAB) No. 104 "Revenue Recognition in Financial Statements", which states that revenue is realized or realizable and earned when all of the following criteria are met: persuasive evidence of an arrangement exists, services have been rendered, the seller's price to the buyer is fixed or determinable, and collectibility is reasonably assured. Vacation travel sales transactions are billed to customers at the time of booking,        however, commission revenue is not recognized in the accompanying consolidated financial statements until the customers' travel occurs. Advertising revenue is recognized upon distribution of the marketing publication.         Emerging Issues Task Force (EITF) Issue No. 99-19, "Reporting Revenue Gross as a Principal versus Net as an Agent", discusses the weighing of the relevant qualitative factors regarding our status as a primary obligor and the extent of our pricing latitude. Based upon our evaluation of vacation travel sales transactions and in accordance with the various indicators identified in EITF Issue No. 99-19, our vacation travel        suppliers assume the majority of the business risks such as providing the service and the risk of unsold travel packages. As such, all vacation travel sales transactions are recorded at the net amount, which is the amount charged to the customer less the amount to be paid to the supplier. The method of net revenue presentation does not impact operating profit, net income, earnings per share or cash flows.        Intangible Asset Testing                  Absent any circumstances that warrant testing at another time, we test for goodwill and non-amortizing intangible asset impairment as part of our year-end closing process. Our goodwill testing consists of comparing the estimated fair values of each of our operating entities to their carrying amounts, including recorded goodwill. We estimate the fair value of our reporting unit by discounting its projected future cash flow. Developing future cash flow projections requires us to make        significant assumptions and estimates regarding the sales, gross margin and operating expenses of our reporting unit, as well as economic conditions and the impact of planned business or operational strategies. Should future results or economic events cause a change 

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in our projected cash flows, or should our operating plans or business model change, future determinations of fair value may not support the carrying amount of our unit, and the related goodwill would need to be written down to an amount considered recoverable. Any such write down        would be included in the operating expenses. While we make reasoned estimates of future performance, actual results below these expectations, or changes in business direction can result in additional impairment charges in future periods.ITEM 4(T). – CONTROLS AND PROCEDURES        As of March 31, 2009 under the supervision of and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this report (the “Evaluation Date”). Based upon the evaluation and in        consideration of the Restatement described herein, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of the Evaluation Date. Disclosure controls are controls and procedures designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized and reported within the time periods specified in the        SEC’s rules and forms. Disclosure controls include controls and procedures designed to reasonably ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

        In connection with this evaluation, our management identified no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 6.     EXHIBITS  

Exhibit        No.                                          Exhibit Description                                              

31.1     Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+

31.2     Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+

32.1     Certification by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+

32.2     Certification by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+

                  

+          Filed herewith

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SIGNATURES

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

              ONLINE VACATION CENTER HOLDINGS CORP.

              /S/ Edward B.        Rudner                         

                   Chief Executive Officer, President, 

                      Chief Financial Officer and Director

Date: August 14, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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