YTB’s Quarterly financial report came out on Friday. During this years Convention, Scott Tomer announced a Q2 profit on earnings before income taxes. He was correct, as YTB did post a $1.2 million net income from continuing operations. What he may or may not have known until after the Convention however was a $2.6 million in contract termination costs for the disposal of REZconnect, which resulted in a “discontinued operations” line item resulting in a loss of $2.8 million total dropping the $1.2 million profit into a $1.5 million loss overall for the quarter. The current portion of the $2.6 million liability balance is $608,000 and is required to be shown in our SEC filing based on future commitments.

REZconnect has been somewhat of a sore spot in years past. Micheal Brent had been selling off shares like it was candy. Rumors surrounding the subsidiary also pointed to a net loss in revenue for the entire company for years. This was the first time the subsidiary had been broken out to show it’s contribution. REZconnect operations reported net revenues of $869,000 and a loss from operations of $463,000. The Board of Directors made a strategic decision about the REZconnect business model, which they stated was serving primarily brick and mortar travel agencies, and felt it was not compatible with YTB’s current and future plans.

“As a result, the Company expects to realize cash savings of $2.4 million over the next 5.5 years based upon the cash payments to be made under the employment severance agreement versus the cash payments that would have been required under the original employment contracts.  Thus, while the Company has recognized significant expenses in the current period, the cash savings in the coming 5.5 years will serve to contribute a significant savings in terms of liquidity, helping to strengthen the Company’s position.”

In this current economic climate companies need to cut dead wood. While I have not seen, nor do I really care to see what others will be saying about YTB’s financial condition, I’m willing to bet you that they’ll be pointing to the huge loss in revenue over the last year do to the pyramid crumbling. While they will most certainly be pointing YTB’s “business model” as the cause of the loss in revenue, you should take a look at other company revenues to compare what they’re doing in this current economic climate. Royal Caribbean’s revenue (and profit margins) have declined significantly, resulting from large profits plummeting to significant losses over the last four quarters.

People are not spending in this current economic climate. Period.

It should be noted that the hemorrhaging of our RTA’s has slowed significantly in part due to the California settlement. While there was an enormous amount of speculation over California winning it’s argument of a gigantic pyramid scheme and successfully shutting the company down, the truth (as always) finally came to light. In addition, the “ungainly monster of 39 pages and 133 paragraphs” that was submitted as a class action law suit was also thrown out by the courts. Current RTA’s are just now starting to realize what I’ve known all along.

If you’d like to read my analysis of what our critics actually know about MLM and YTB in general, I invite you to read my e-book entitled “What the Critics Know About YTB“.

To further illustrate my point, I did take note of a couple of things in the notes section that critics were speculating (as they always do) about YTB’s financial condition and what the company would and would not be able to do.

Once Scott mentioned “profits from continued operations” our second payment for the California settlement was brought up. Some wondered if we happened to skip that payment in order to show profits. It should be pointed out that it was in fact paid and half of the settlement money is behind the company. Payment of $250,000 was paid as scheduled before the June 30 quarter ending.

In March, YTB’s credit card processor increased it’s reserve requirements, resulting in a $2.7 million balance to be held in reserve. While it was speculated that YTB would not be able to acquire the funds necessary to obtain the balance, that request was also achieved during this quarter. This too is now behind the company.

One of the funniest twists found in the financial statement that I doubt you will find anywhere but here is the saga of the proposed Conference Center that was envisioned by YTB to be built on land the company currently owns. Back in November, YTB sold a 9.9 acre out parcel of the 59 acres it owns to an undisclosed buyer. In late July, we found out through the media and the blogs that the buyer plans to build a Holiday Inn Express and a Country Kitchen gas station on the land that has been purchased. When news came out that the Wood River City Council voted to approve a funding agreement with Aventurs Development LLC. nobody bothered to check if the land in question had in fact been paid for.

“In addition to other consideration, the Company received a $500,000 promissory note dated November 24, 2008 as proceeds for the sale of land situated in Madison County, Illinois, which was non-interest bearing so long as there was no event of default thereunder.  Principal and other amounts under the note, collateralized by the related land sold, was due and payable on March 24, 2009.  On April 22, 2009, the Company sent a notice of default under the promissory note and mortgage to the purchaser because the purchaser failed to satisfy all obligations under the note within 120 days.  The notice required the purchaser to cure such non-payment within five business days of receipt of the notice, as required by the mortgage.  On May 6, 2009, the Company filed a complaint for foreclosure in Madison County, Illinois Circuit Court under the terms of the promissory note and mortgage because the purchaser failed to cure the non-payment within the required five business days.  On June 2, 2009, a notice of foreclosure was recorded against the land.”

Of course, like everything else that backfires on our critics for drawing conclusions based on what he reads and hears on the internet without checking actual facts, mums going to be the word on this. Instead, they’ll continue to focus on yours truly and the gross error I made when I didn’t check my source. As I’ve learned over the weekend, thanks to many comments, e-mails, and phone calls, it’s much better to surrender defeat in cases such as this in order to move on and get back on track.

Lastly, it should be noted that the company has made significant advances in curbing it’s spending and keeping an eye on the bottom line. Those of us who were at this years Convention saw evidence of that. With the current details listed in the notes section of the quarterly report just filed, we see more documentation of YTB doing what it needs to do in order to survive. Many of the hard choices made in prior months have proven to be significant, and while time will tell if the elimination of REZconnect will help YTB’s bottom line, the future looks to be significantly better than a single number found at the bottom our financial report.

A major key in YTB’s survival and prominence in the industry is educating those who may be looking for opportunities as the country starts to come out of the current economic condition. With YTB’s new tools and upgrades just announced at Convention, it may prove to be significant in showing the company’s strength instead of weakness.

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When YTB first started back in February of 2001 all the Founders had was a goal of being the largest seller of travel in the industry. They didn’t have their first RTA, they didn’t have a travel partner, they didn’t even have a booking engine, nor did they have their first travel sale. A bold statement from three guys who had no experience in the travel industry.

What YTB found was a company called REZConnect who came into the picture in 2002. Michael Brent, the President of REZconnect made an agreement to provide travel web site hosting for YourTravelBiz.com. By 2004 the partnership looked to be successful and the two companies merged and changed its name to YTB International, Inc.

All systems were a go and beginning in 2005 YTB started it enormous growth from 8000 RTA’s to 138,000 in 2007.

Once control was placed in the hands of YTB, a series of events happened that started the exit of both Michael and Derek Brent. On November 22, 2006, each of the members of the Brent Group resigned from their position as a member of the Board of Directors with the Company. Michael Brent also resigned from his position as President, and Derek Brent as Secretary of the Company. Along with the resignation both agreed to grant an irrevocable proxy to Lloyd Tomer (Coach) , Scott Tomer and Kim Sorensen with respect to all shares of the Company’s Common Stock or other capital stock of the Company now owned by the Brent Group.

The Founders of YTB were now in control.

Soon thereafter, Michael Brent started to sell his shares of stock. While this has been a bone that critics like to gnaw on with questions about why “executives” are selling, none of them ever considered that the direction of the company was no longer in Michael Brent’s control, and never would be. He built REZConnect and it was more than likely time to cash in on what he built. To this day, Michael Brent remains the largest single share holder in the company, yet has no voice in the day to day operations of YTB, or it’s direction.

For the last two and a half years, REZConnect has been sitting in New Jersey doing their own thing, and minding their own Vacation Central business without input or direction concerning YTB. They have however, remained the YTB payroll, and they have appeared on all press releases as a “wholly-owned subsidiary” of YTB International, Inc.

The last part of the REZConnect relationship, partnership if you will, with YTB was announced Tuesday in an 8K which stated an Employment Severance Agreement by and between REZConnect Technologies, Inc., formerly a wholly-owned subsidiary of YTB, and Michael and Derek Brent, former Chief Executive Officer and President of REZConnect.

I’ve seen a statement or two about this being another “fire sale” of sorts to generate revenue because YTB is in financial trouble. I’m not sure how returning a $275,000 certificate of deposit can be deemed a “sale”, but as we’ve seen so many times before, critics will grasp at any mud they think of that might stick.

Based on what I know about this relationship and have verified with other sources close to either YTB and the Brents, this is an end to a five year plan. REZConnect has not had an active role in the operation of the YTB booking engine for some time. Furthermore, YTB is looking to curb its expenses and there is solid speculation that the severance was initiated by our Board of Directors, 3 of which are brand new members, with an eye on YTB’s bottom line. We also can’t discount the possible role of Co-CEO Robert Van Patten who now oversees administrative, accounting and corporate governance issues for YTB.

It was time to make this break. Personally, (and this is only my opinion) this break was long overdue.

Don’t get me wrong, REZConnect served a very powerful role for YTB at a time when we didn’t have the foundation or the relationships that we do now. (That comes with proving yourself as a top travel seller.) Because YTB reinvested into itself (which showed up as losses in “income”) the company acquired assets such as land, technology, and office space to house the entire company. Today, YTB is standing very much on its own.

The issue I have are the morons who keep pointing to Michael Brent’s stock sales with questions about “What does he know that you don’t?” None of the idiots who ask that question have taken the time to read the notes found on every one of those forms. If they did, they would realize how dumb they sound to someone who takes the time to read the form in full to realize that the stock represents a monetary value only, and not a sign of anything to come. Of course we can’t discount the fact that some of these dolts do in fact know about the irrevocable proxy, but are betting that those who find their questions on forums and blogs won’t take the time to investigate on their own, which could result in more mud drying and sticking for them.

Even with their employment being terminated, the terms of the severance package are very favorable for the Brent’s, as it should be. Ownership of the stock remains with them, and their #2 Rep position with the company also remains. (Because of the Bill of Rights in place to protect all Reps.) What this does for YTB is eliminate administrative costs in regards to salary, insurance, health and medical benefits as well as participation in the Company’s profit-sharing, incentive bonus and pension plans.

There have been a number of positive changes in the last few months. A Co-CEO, new Board Members, industry awards, recognition as a top seller of travel, moving forward with our franchise model, and a settlement over some very ugly accusations. This is another positive change, if for nothing else than to put an end to those silly questions about what Michael Brent knows that we don’t.

All the best to the Brent Group, and REZConnect. And thank you for seeing what many would not or could not when YTB was young and unproven.

PS - If you're involved with YTB, sign up for our FREE Newsletter. As a Website Owner or Website Seller, we'll keep you up to date with all the latest news, acquisitions, and developments with YTB.

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