UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549        FORM 10-Q

(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                  (I.R.S. Employer        Identification No.)

                                                                   or        organization                                   

1801N.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 alargeaccelerated 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 May 1, 2009, the number of shares outstanding of the registrant's common stock, $0.0001 par value was 17,261,777.

 

 

                                                                          PAGE  

| Part  I.                             | Financial Information                                                                      |   |
|------------------------------------------------|--------------------------------------------------------------------------------------------|--------|
| Item 1                                    | Financial Statements (Unaudited)                                                           |   |
|                                           | Condensed Consolidated Balance Sheets                                                      | 3      |
|                                           | Condensed Consolidated Statements of Operations                                            | 4      |
|                                           | Condensed Consolidated Statements of Cash Flows                                            | 5      |
|                                           | Notes to Consolidated Financial Statements                                                 | 6      |
| Item 2                                    | Management’s Discussion and Analysis of Financial Condition and Results of Operation | 16     |
| Item 4T.                                  | Controls and Procedures                                                                    | 21     |
| Part II                                   | Other Information                                                                          |   |
| Item 1                                    | Legal Proceedings                                                                          | 21     |
| Item 2                                    | Unregistered Sales of Equity Securities and Use of Proceeds                                | 22     |
| Item 3                                    | Default upon Senior Notes                                                                  | 22     |
| Item 4                                    | Submission of Matters to a Vote of Securities Holders                                      | 22     |
| Item 5                                    | Other Information                                                                          | 23     |
| Item 6                                    | Exhibits                                                                                   | 23     |
|   Exhibit 31.1 – Certification |                                                                                       |
|   Exhibit 31.2 – Certification |                                                                                       |
|   Exhibit 32.1 – Certification |                                                                                       |
|   Exhibit 32.2 – Certification |                                                                                       |
|                                           |                                                                                       |   |

2

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| ONLINE VACATION CENTER HOLDINGS CORP.                                                                                                    |   |        |   |         |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|--------|--------------|
| CONDENSED CONSOLIDATED BALANCE SHEETS                                                                                                    |   |        |   |         |
|                                                                                                                                     |   |        |   |         |
|                                                                                                                                     |   |        |   |         |
|                                                                                                                                     |   | March 31,   |   | December 31, |
|                                                                                                                                     |   | 2009        |   | 2008         |
|                                                                                                                                     |   | (Unaudited) |   | (Audited)    |
| 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                                                                                                                  |   |        |   | 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                                                                                                                                 |   | 1,754,279   |   | 1,754,279    |
| Other assets                                                                                                                             |   | 51,718      |   | 58,306       |
| Total Assets                                                                                                                             |   | $ 6,754,472 |   | $ 6,822,711  |
|                                                                                                                                     |   |        |   |         |
| 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                                                                                                               |   | 4,426,891   |   | 4,392,963    |
| Accumulated deficit                                                                                                                      |   | (375,015)   |   | (905,243)    |
| Treasury stock at cost; 373,699 shares                                                                                                   |   | (192,101)   |   | (25,628)     |
| Total Stockholders' Equity                                                                                                               |   | 3,861,501   |   | 3,463,817    |
|                                                                                                                                     |   |        |   |         |
| Total Liabilities and Stockholders' Equity                                                                                               |        | $ 6,754,472 |   | $ 6,822,711  |
|                                                                                                                                     |   |        |   |         |
| The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.                    3 |

----

| ONLINE VACATION CENTER HOLDINGS CORP.                                                                               |   |                                                                              |   |                             |
|---------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|----------------------------------|
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                                                     |   |                                                                              |   |                             |
| (UNAUDITED)                                                                                                         |   |                                                                              |   |                             |
|                                                                                                                |   |    For the Three Months  Ended March 31,            |
|                                                                                                                |   | 2009                                                                              |   | 2008                             |
|                                                                                                                |   |                                                                              |   |                             |
| 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                                                                           |   | -                                                                                 |   | (119,274)                        |
|                                                                                                                |   |                                                                              |   |                             |
| NET INCOME (LOSS)                                                                                                   |   | $    530,228                                                       |   | $(296,681)                       |
|                                                                                                                |   |                                                                              |   |                             |
| EARNINGS PER SHARE - Basic                                                                                          |   |                                                                              |   |                             |
| Income (Loss) from continuing operations                                                                            |   | $         0.03                            |   | $     (0.01) |
| (Loss) from discontinued operations                                                                                 |   | $              - |   | $     (0.01) |
| Net Income (Loss)                                                                                                   |   | $         0.03                            |   | $     (0.02) |
|                                                                                                                |   |                                                                              |   |                             |
| 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                                                                                 |   | $              - |   | $     (0.01) |
| Net Income (Loss)                                                                                                   |   | $         0.03                            |   | $     (0.02) |
|                                                                                                                |   |                                                                              |   |                             |
| 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. |   |                                                                              |   |                             |

 

4

 

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| ONLINE VACATION CENTER HOLDINGS CORP.                                                                                                                                             |   |   |   |   |                                                                                                                                |   |                                                                                                      |   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------|--------|--------|
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                                                                                   |   |   |   |   |                                                                                                                                |   |                                                                                                      |   |   |
| (UNAUDITED)                                                                                                                                                                       |   |   |   |   |                                                                                                                                |   |                                                                                                      |   |   |
|                                                                                                                                                                              |   |   |   |   | For the Three Months Ended                                                                                                          |   |                                                                                                      |
|                                                                                                                                                                              |   |   |   |   | March 31,                                                                                                                           |   | March 31,                                                                                                 |   |   |
|                                                                                                                                                                              |   |   |   |   | 2009                                                                                                                                |   | 2008                                                                                                      |   |   |
| Cash flows from continuing operating activities:                                                                                                                                  |   |   |   |   |                                                                                                                                |   |                                                                                                      |   |   |
|     Net income/(loss)                                                                                                                                              |   |   |   |   | $        530,228                                                                                 |   | $    (296,681)                                                                             |   |   |
|         Loss from discontinued operations, net of tax                                                                                          |   |        |   |   | -                                                                                                                                   |   | (119,274)                                                                                                 |   |   |
|         Income/(Loss) from continuing operations                                                                                               |   |   |   |   | 530,228                                                                                                                             |   | (177,407)                                                                                                 |   |   |
|     Adjustments to reconcile to net cash inflow from operating activities:                                                                                         |        |   |   |   |                                                                                                                                |   |                                                                                                      |   |   |
|         Depreciation and amortization                                                                                                               |   |        |   |   | 119,838                                                                                                                             |   | 87,098                                                                                                    |   |   |
|         Stock based compensation expense                                                                                                       |   |   |   |   | 33,929                                                                                                                              |   | 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                                                                                                                                         |   |   |   |   | 883,436                                                                                                                             |   | 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                                                                                                                                     |   |   |   |   | 483,940                                                                                                                             |   | (98,894)                                                                                                  |   |   |
|                                                                                                                                                                              |   |   |   |   |                                                                                                                                |   |                                                                                                      |   |   |
| Cash at the beginning of the period                                                                                                                                               |   |   |   |   | 1,693,447                                                                                                                           |   | 1,189,042                                                                                                 |   |   |
| Cash at the end of the period                                                                                                                                                     |   |   |   |   | $       2,177,387                                                                                     |        | $   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 |   |   |   |   |  

$                     - |   |  

$   1,406,250                                                                           |   |   |
| The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

5                                                            |

 

----

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

6

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Phoenix by the Company, Mr. Todd was the owner, sole member, and President of Phoenix. The Company acquired Phoenix from Mr.Todd on August 31, 2006 for 1,450,000shares of the Company’s common stock.

 

The Company recorded the sale of Phoenix at its fair value, as defined by Statement of Financial Accounting Standards No. 157, Fair Value Measurements, (“FAS 157”) and Accounting Principles Board Opinion No. 29, Accounting for Nonmonetary        Transactions (“APB 29”).APB 29 states, “If neither the fair value of a nonmonetary asset transferred nor the fair value of a nonmonetary asset received in exchange is determined within reasonable limits, the recorded amount of the nonmonetary asset transferred from the enterprise may be the only available measure of the transaction”. The Company 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 and a loss of $58,382 was recognized.         

In order to value the disposition, the Company reviewed the valuation techniques listed in FAS 157, paragraph 18:market approach, income approach, and cost approach. The Company also        reviewed the different levels of inputs to valuation techniques as defined in FAS 157, paragraphs 22 through 30. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets. Level 2 inputs are quoted prices for identical or similar assets in markets that are not active, that is, markets in which there are few transactions for the asset, the prices are not current, or price quotations vary substantially either over time or among market makers. Adjustments to        Level 2 inputs will vary depending on factors specific to the asset. Those factors include the volume and level of activity in the markets within which the inputs are observed. An adjustment that is significant to the fair value measurement in its entirety might render the measurement a Level 3 measurement, depending on the level in the fair value hierarchy within which the inputs used to determine the adjustment fall. Level 3 inputs are unobservable inputs for the asset. Unobservable        inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset at the measurement date.                 The Company had difficulty with the valuation of Phoenix as it is a unique business: Phoenix has no employees, is operated as a sole proprietorship, and has no tangible assets (the Company’s investment in Phoenix was initially allocated to intangible assets and goodwill). Its competitors are dissimilar and would not be representative of Phoenix’s value. The Company could not find a Level 1 input as there were no quoted prices in active markets for an identical asset. The        Company then looked for Level 2 inputs, however, there were no quoted prices for similar assets in active markets nor identical assets in inactive markets. As stated previously, Phoenix is very different from its competitors and valuing it based on comparable values of other similar businesses was not representative of its value. This negated the market approach and the cost approach as valuation techniques. The Company then attempted to use an income approach by using present value        techniques or an expected cash flow approach to value Phoenix. The Company’s briefownership of Phoenix coupled with its poor results during this time (as compared to its history of profitability before the Company’s ownership) made this valuation technique a poor measure of Phoenix. Therefore, the Company could not determine within reasonable limits the value of Phoenix.                 Paragraph 18 of APB 29 states, “The Board concludes that in general accounting for nonmonetary transactions should be based on the fair values of the assets involved which is the same basis as that used in monetary transactions. Thus, the cost of a nonmonetary asset acquired in exchange for another nonmonetary asset is the fair value of the asset surrendered to obtain it, and a gain or loss should be recognized on the exchange. The fair value of the asset received should be used        to measure the 

7

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

cost if it is more clearly evident than the fair value of the asset surrendered”. The Company concluded that the value of the Company’s stock was “more clearly evident than the fair value of the asset surrendered”, in this case,        Phoenix. The Company then tried to value the Company’s stock.                 At the time of the disposition, the Company’s stock rarely traded. It traded eight days out of twenty in the month of March for a total of 9,300 shares. The last trade before the transaction was on March 28th and the next trade was on April 8th. On March 31st, the disposition date, the bid was $0.30 and the ask was $1.05. The Company determined that the stock no longer had an active market and therefore was not a Level 1 input. In reviewing the adjustments needed to determine the        stock’s value, the Company concluded that the adjustments needed to the price of the stock would be so significant given its lack of market activity and pricing spread that it would render the measurement a Level 3 measurement.                 Paragraph C21c of FAS 157 allows a practicability exception to the requirement to measure fair value if fair value is not reasonably determinable. This is further discussed in paragraph 26 of APB 29, “Fair value should be regarded as not determinable within reasonable limits if major uncertainties exist about the realizability of the value that would be assigned to an asset received in a nonmonetary transaction account for at fair value. An exchange involving parties with        essentially opposing interests is not considered a prerequisite to determining a fair value of a nonmonetary asset transferred; nor does an exchange insure that a fair value for accounting purposes can be ascertained within reasonable limits. If neither the fair value of a nonmonetary asset transferred nor the fair value of a nonmonetary asset received in exchange is determined within reasonable limits, the recorded amount of the nonmonetary asset transferred from the enterprise may be        the only available measure of the transaction”. As discussed previously, the Company concluded that the value of their stock was a Level 3 measurement, an unobservable input. In determining what value should be given to this input, the Company concluded that it could not determine the value within reasonable limits. Accordingly, the Company concluded that the sale of Phoenix would be recorded using the asset’s recorded value.

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      |
| Revenues                          | $ 107,569                                                    |
| Loss before income taxes          | $   98,503                                              |
| Loss on sale of Phoenix           | 58,382                                                            |
| Income tax benefit                | 37,611                                                            |
| Loss from discontinued operations | $ 119,274                                                    |

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 

 

8

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

|  | 3.      | 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 

9

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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. 

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; and |
|--|----------------------------------------|------------------------------------------------------------------------------------------------------------------|

|  | ·      | Determines 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 

10

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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. 

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 

11

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

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. 

|  | 4.      | EARNINGS PER SHARE |
|--|----------------------------------|--------------------|

 

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

equity awards vest resulting in the issuance of common stockor conversion of notes into shares of common stockthat could share in the earnings of the Company. This calculation is not done for periods in a loss position as this would be antidilutive.The information related to basic and diluted earnings per share is as follows:

 

|                                                                                              |              Quarter Ended March 31, |
|---------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------|
|                                                                                              |       2009                                     |      2008     |
| 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                                                                 | $           --                            | $ (119,274) |
|                                                                                              |                                                                                             |   |
| Net income (loss)                                                                                 | $ 530,228                                                                                   | $ (296,681) |
|                                                                                              |                                                                                             |   |
| 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                                                                                 |   (0.01) |
| Net income (loss)                                                                                 | $ 0.03                                                                                      | $ (0.02) |
|                                                                                              |                                                                                             |   |
| Diluted                                                                                           |                                                                                             |   |
| Continuing operations                                                                             | $ 0.03                                                                                      | $ (0.01) |
| Discontinued operations                                                                           |   0.00                                                                                 |   (0.01) |
| Net income (loss)                                                                                 | $0.03                                                                                            | $(0.02) |

|  | 5.      | TREASURY STOCK |
|--|----------------------------------|----------------|

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

|  | 6.      | 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.

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                                                                |

Compensation cost recognized for the quarters ended March31, 2009and 2008was $18,359and $52,958, respectively. 

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.

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.

 

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ONLINE VACATION CENTER HOLDINGSCORP AND SUBSIDIARIESNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

|  | 7.      | COMMITMENTS AND CONTINGENCIES |
|--|----------------------------------|-------------------------------|

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.

8. SUBSEQUENT EVENT         

On May 5, 2009, the Company entered into an agreement with Reginald Flosse to purchase 150,000 shares of the Company’s common stock at a purchase price of $0.50 per share. The purchase price was paid from the Company's working capital. Reginald Flosse is an affiliate of the Company and holds more than 10% of the Company's        issued and outstanding stock. This repurchase transaction is not part of the Company’s previously announced repurchase program.

 

 

 

 

 

 

 

 

 

 

 

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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 includes 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 are 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 for the year ended December 31, 2008filed with the Securities and Exchange Commission (“SEC”)on March 27, 2009and 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 providinga 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, |
|--|----------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ·      | Dunhill Vacations, Inc., the publisher of three travel newsletters, "Top Travel Values", "Spotlight", and "TRAVELFLASH", and |
|--|----------------------------------------|------------------------------------------------------------------------------------------------------------------------------|

|  | ·      | 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. |
|--|----------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Wegenerate revenues from:         

|  | ·      | commissions on cruises |
|--|----------------------------------------|------------------------|

|  | ·      | commissions on other travel related products |
|--|----------------------------------------|----------------------------------------------|

|  | ·      | commissions on travel insurance |
|--|----------------------------------------|---------------------------------|

|  | ·      | advertising and marketing services provided to travel suppliers |
|--|----------------------------------------|-----------------------------------------------------------------|

 

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Wecurrently market ourservices by:         

|  | ·      | producing travel-related publications for consumers |
|--|----------------------------------------|-----------------------------------------------------|

|  | ·      | telemarketing to ourexisting customer base |
|--|----------------------------------------|--------------------------------------------|

|  | ·      | direct mailing to ourexisting customer base as well as targeted prospects |
|--|----------------------------------------|---------------------------------------------------------------------------|

|  | ·      | sending emailsto ouropt in subscription base |
|--|----------------------------------------|----------------------------------------------|

Operating expenses include those items necessary to advertise ourservices, produce ourmarketing materials, maintain and staff ourtravel reservation and fulfillment center including technological enhancements, payroll, commissions and benefits, telephone, ticket delivery and general and administrative expenses including rent and computer maintenance fees.

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.

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.

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 

17

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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 PhoenixInternational Publishing, LLC (“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 $58,382. 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.

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                |
| Revenues                                | $    107,569                          |
| Operating (loss)                        | $   (98,805)                          |
| (Loss) on sale of Phoenix               | $   (58,382)                          |
| Net (loss) from discontinued operations | $ (119,274)                                     |

As a result of the foregoing, our net incomewas $530,228for the first quarter of 2009compared witha net loss of $296,681for the first quarter of 2008.

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Liquidity and Capital Resources

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 $883,436and $186,149inthe        first quarter of 2009and 2008, respectively. The increase of $697,287was primarily attributable to anincreaseinincome from continuing        operations of $707,635, an increase in non-cash operating items of $134,693in 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 repurchaseprogram authorized by our Board of Directors in August 2008, which wasamended in March        2009and a private transaction with 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. 

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 $375,015at 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 Annual Report on Form 10-Kfor the year ended December 31, 2008filed        with the SEC on March 27, 2009, in 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.

 

 

 

 

 

 

 

 

 

 

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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 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 March31, 2009under the supervision of and with the participation of our management, including our principal 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, our principal 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 chief 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.

PART II.   OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

     None.

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ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information with respect to Company purchases made of Online Vacation CenterHoldings Corp. common stock during the firstquarter of the 2009fiscal year: 

|  

 

 

 

 

 

 

 

Period                                        |  

 

 

 

 

(a) Total Number of Shares Purchased |  

 

 

 

 

(b) Average Price Paid

per Share | (c) Total Number of Shares (or Units) Purchased as Part of a Publicly Announced Plan or Program (1) |  

 

(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or

      Programs       |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------|---------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| January1, 2009 –                    January 31, 2009                                                                                                                                                                                                                                                       |      --                                             | $       --                                  |      --                                                                    | $174,372                                                                                                                                                                                                 |
| February 1, 2009 –                    February 28, 2009                                                                                                                                                                                                                                                    | 69,309                                                                       | $0.510                                                                    | 69,309                                                                                              | $ 139,009                                                                                                                                                                                                |
| March 1, 2009 –                    March 31, 2009                                                                                                                                                                                                                                                          |  

260,000(2)                                                           |  

$0.504                                                            |  

10,000                                                                                      |  

$ 283,904                                                                                                                                                                                        |
| Total                                                                                                                                                                                                                                                                                                            | 329,309                                                                      |   $  0.506                                                      |     79,309                                                                           | $238,904                                                                                                                                                                                                 |

                                                  

|  | (1)       | 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 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. |
|--|-----------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (2)      | On March 2, 2009 the Company announced that its Board of Directors authorized the repurchase of an additional $150,000 of the Company’s common stock to be funded from available working capital under the same terms and conditions as the August 1, 2008 announcement. |
|--|-----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (3)      | On March 23, 2009 the Company entered into an agreement with a 10% beneficial shareholder and an unrelated additional shareholder to purchase 150,000 shares and 100,000 shares, respectively, of the Company’s common stock at $0.50 per share. This repurchase transaction is not part of the Company’s previously announced repurchase program. |
|--|-----------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

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

No matter was submitted to the vote of security holders during the first quarter of fiscal 2009.

 

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ITEM 5.     OTHER INFORMATION                      None.

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: May7, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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