Internet travel services provider YTB International, Inc. — which has recruited around 700 members to its multi-level marketing network in Bermuda — reported a second-quarter net loss of nearly $200,000 on Friday.

The company put the loss down to spending on infrastructure to keep pace with its rapid growth.

Revenue for the second quarter increased by 36.5 percent to $44.8 million, compared to $32.8 million for the second quarter last year.

The net loss of $199,577 for the April through June period compared to net income of $1.7 million in the same period in 2007. But it was an improvement on the $3.5 million net loss that YTB suffered in the first quarter of this year.

The financial results comes a week after California Attorney General Edmund Brown filed a lawsuit to shut down YTB.

"YourTravelBiz.com operates a gigantic pyramid scheme that is immensely profitable to a few individuals on top and a complete rip-off for most everyone else," Mr. Brown said.

He added that the lawsuit "seeks to shut down the company's unlawful operation before more people are exploited by the scam".

YTB said the allegations were without merit and vowed to vigorously defend itself in court.

The company operates in Bermuda, the US, Puerto Rico, the Bahamas and Canada. It works by representatives (Referring Travel Affiliates) selling flights, holidays and car rental services, through YTB websites. Former Opposition Leader Wayne Furbert is YTB's leading advocate in Bermuda.

In YTB's earnings statement, the company's chief executive officer Scott Tomer said: "Our company has experienced dramatic growth over the last 12 months, and we have witnessed an equally dramatic growth in the revenues achieved during that period.

"Like many rapidly growing companies, we have had to increase our spending to ensure that we have the proper infrastructure in place to support this growth, and to ensure that the quality of services that we provide does not suffer.

"We have worked to narrow our net loss on a sequential basis, and are committed to identifying areas for cost savings and improved efficiencies within our business."

YTB said the loss in the second quarter was primarily attributable to a change in the mix of marketing commissions, increased costs associated with infrastructure growth, as well as costs associated with the ongoing implementation of new business strategies.