Pastor Brewer
515-277-6462
YTB Launch
The YTB companies offer two unique and powerful opportunities, that of referring travel
agent or "RTA" and that of independent marketing representative or "REP". The travel agent
opportunity has an initial fee under $500 and a monthly license fee of $49.95. There is no
fee or travel agency purchase required to be a REP. You may choose to participate in one or
both opportunities.
YTB brings you the perfect opportunity to transform your life by combining the powerful
information handling capability of the Internet with the world’s most dynamic product –
travel - and the personal touch of independent, home based business people. YTB has joined
these three trends together in a flawless combination. By utilizing our simple strategies
and proven techniques we can show you how to leverage your time to generate a residual
income 24 hours a day, 7 days a week. The elements of honesty, morality, and "being in the
right place at the right time" are all in place today at YTB - and we plan to revolutionize
the travel industry. Come join us as we change the way the world travels!
J. Lloyd Tomer, Founder, Chairman of the Board, YTB International, Inc.
After spending thirteen years in the ministry, in January 1981 Lloyd “Coach” Tomer became an
agent of the A. L. Williams Company (now known as Primerica Financial Services). He achieved
the level of Senior National Sales Director in 1985 and maintained that position through
2001. While at A. L. Williams the JLT Group built a successful sales organization numbering
in the thousands, whose combined life insurance sales were measured in the billions, with
assets under management of $750 million. He retired after accomplishing his goal of helping
his team members achieve financial independence. In 2001 Lloyd co-founded YourTravelBiz.com
and is now mentoring a new group of leaders who will set the standards for excellence in the
referral marketing industry.
J. Scott Tomer, Founder, CEO YTB International, Inc.
Scott Tomer was Lloyd Tomer’s first recruit in the A.L. Williams Company with the
responsibility of field support and training for a sales force numbering over 2,000. He
became a National Sales Director before leaving in 1992. Scott and his father have worked
together on many projects; their goal is to use what they learned and build a great and
profitable company that delivers a product with great value to the customer, and compensates
its sales force in direct proportion to their efforts with no income limits. Scott states,
“My job is to protect this company so it will be here for you and your family for
generations to come. Our name says it all: this is “YOUR" TravelBiz.com!
J. Kim Sorensen, Founder, President, YTB Travel Network
Kim Sorensen had an extensive business background before joining the JLT Group in 1981. He
had owned businesses and managed a multi-million dollar real estate complex in Springfield,
IL. He rose to the position of Senior Vice President with A. L. Williams. Kim is the person
who first realized the awesome potential of combining internet travel and referral
marketing. He made the decision to move to the St. Louis area to help Lloyd with whatever
was needed to grow YourTravelBiz.com, providing technical and management support. He
designed and implemented many programs that are still being used today. The Rep and Travel
websites, marketing materials, operations, and the YTB Travel Network have benefited from
his leadership. His vision helped turn the dream of YourTravelBiz.com into the reality it is
today.
YTB Investors
Current Operations YTB International, Inc. provides Internet-based travel booking services
for travel agencies and home-based independent representatives in the United States, Puerto
Rico, and the US Virgin Islands. It operates through three subsidiaries: YourTravelBiz.com,
Inc., YTB Travel Network, Inc., and REZconnect Technologies, Inc.
The three distinct, wholly-owned subsidiary divisions operate as follows:
YourTravelBiz.com, Inc. (and subsidiaries)YourTravelBiz.com, Inc. (“YTB Marketing”) conducts
business through recruitment, enrollment, training, and support of its sales force. There
are currently approximately 254,864 (as of 9/30/07) independent contractors, known as
Independent Marketing Representatives (each, an “IMR”), who are responsible for selling
on-line travel agencies to RTAs, most of whom work from their homes. IMRs are compensated
via a multilevel marketing commission structure. An IMR might utilize a number of methods
for attracting new RTAs, including the use of informational meetings and events, newspaper
advertising, and one-on-one meetings with individuals seeking a home-based business
enterprise.
YTB Marketing was created to market travel agency websites to RTAs in a referral marketing
program that incentivizes IMRs to sell on-line travel agencies. RTAs are also independent
contractors and are provided with training materials and onsite training at various
locations throughout the United States. YTB Marketing charges an initial license feel of
$449.95 plus $49.95 per month, on a month-to-month basis, for RTAs to own and operate an
online travel site, and YTB Travel (as defined below) can also earn additional transactional
compensation from travel purchased off each website.
YTB Travel Network, Inc. (and its subsidiaries)YTB Travel Network, Inc. (together with its
subsidiary YTB Travel Network of Illinois, Inc., collectively, “YTB Travel”) business is
comprised of arrangements to sell airline tickets, cruise packages and other services, plus
travel sales, from the approximately 120,948 (as of 9/30/07) RTAs’ web sites which it hosts.
YTB Travel handles travel processing, document distribution and travel commission payments,
including tracking transactions for each of the sites. RTAs are schooled through travel
training courses. This training is accomplished through a combination of company conference
calls, e-training modules and hands-on certification seminars.
REZconnect Technologies, Inc. REZconnect Technologies, Inc. (“Technologies”) includes a
“brick and mortar” travel franchise system and provides YTB technology software and services
to the travel industry. Technologies builds reservation systems using proprietary
applications for suppliers within the travel industry. Technologies sells and services
travel stores within the travel industry and includes RezCity.com, an online city guide and
travel store. Technologies operates under the following brands: Travel Network, Global
Travel Network and Travel Network/Vacation Central. The Technologies’ consumer driven
websites provide strong content and booking ability, with over 60 booking engines
incorporated into any one site, covering all aspects of the travel industry.
YTB International Partners with Shanghai Spring International Travel Service for Exclusive
2008 Olympic Tour Packages
Alliance May Provide More Tours Than Any Other Travel Agencies
WOOD RIVER, Ill., Dec. 12 /PRNewswire-FirstCall/ -- YTB International, Inc. (OTC Pink
Sheets: YTBLA) ('YTB' or the 'Company'), a provider of Internet-based travel booking
services for travel agencies and home-based independent representatives in the United
States, today announced an exclusive partnership with Shanghai Spring International Travel
Service to market and sell tour packages to the 2008 Summer Olympics in Beijing, China. The
packages will be available from YTB beginning on or before January 11, 2008.
In an effort to provide more tours to China for the 2008 Olympics than any other travel
agency, YTB and Shanghai Spring International Travel Service, the largest privately owned
travel agency in China, will offer exclusive 7 to 11 day tour packages and tickets for the
Summer Olympics in August 2008. Through this strategic partnership, YTB's Referring Travel
Agents (RTAs) are positioned to benefit from Shanghai Spring International Travel Service's
dominant position within the Chinese market, and pass these savings on to their customers.
YTB's customers will recognize value not only in terms of cost savings, but also in terms of
the exclusive access to sold out events, attractions, and hotel accommodations.
'We are excited by our partnership agreement with Shanghai Spring International Travel
Service, and welcome the challenge to become the largest tour provider to the 2008 Summer
Olympics. Our RTAs have the resources needed to rise to this challenge, and we are confident
that we will be able to provide our customers with the most professional service at the most
competitive rates,' stated J. Kim Sorensen, President and CEO of YTB Travel Network. 'The
Olympics remain the preeminent sporting event of our time, and serve as a major draw for
travelers around the world to visit new destinations, and to enjoy live competitive sports.
We look forward to providing our customers the opportunity to partake in history, as China
holds its first Olympics.'
The YTB and Shanghai Spring International Travel Service Tours will include round trip air
to and from China via Los Angeles, Four Star accommodations including tips, baggage fees and
taxes, daily meals, guided local tours, and admission from two to four Olympic events based
on package and event preference. In addition, the YTB and Shanghai Spring International
Travel Tours will also include safety insurance for visitors to China.
Shanghai Spring International Travel Service was founded in 1981 and started Spring Airlines
in 2004, and currently operates eight aircraft traveling to 28 destinations in China and
will be adding nine new airplanes to the fleet by 2009. The company is currently the only
travel agency that owns and operates an airline in Asia.
'We chose YTB International because we wanted to work with the best Internet travel agency
in the U.S. and one that would have access to thousands of potential customers,' said Jenny
Hu, Deputy General Manager of Shanghai Spring Tours. 'YTB's high standards and great
reputation, combined with their innovative business model, made partnering with them an easy
decision.'
Shanghai Spring has successfully purchased event tickets more than six times the number of
any other purchasing agent or travel provider worldwide. In addition, Shanghai Spring has
also reserved more hotel accommodations than any other agency to date.
To get more information on YTB's Olympic packages, e-mail travelinquiries@ytb.com.
About YTB International
Recognized as the 35th largest seller of travel in the U.S. in 2006 by Travel Weekly, YTB
International, Inc. provides Internet-based travel booking services for travel agencies and
home-based independent representatives in the United States, Puerto Rico, and the US Virgin
Islands. It operates through three subsidiaries: YourTravelBiz.com, Inc., YTB Travel
Network, Inc., and REZconnect Technologies, Inc. YourTravelBiz.com division focuses on
marketing online travel agencies through a nationwide network of independent business
people, known as 'Reps.' YTB Travel Network division establishes and maintains travel vendor
relationships, books travel transactions of online travel agents (RTAs, now numbering over
135,000), collects travel commissions and pays sales commissions. Each RTA sells travel
through a personalized Internet-based travel website. The REZconnect Technologies division
builds online reservation systems for suppliers within the travel industry. For more
information, visit http://www.ytbi.com/investor.
About Shanghai Spring International Travel Service
Founded in 1981, Shanghai Spring International Travel Service has been engaged in diverse
business activities, including travel, hotel, flight, conference & exhibition, sports &
games, real estate, trade and transportation, etc. Spring International Travel Service is
the first ICCA (International Conference & Congress Association) member in China. Spring
International was appointed as the General Ticket Agency of 2004 F1 Shanghai Grand Prix of
China. Persistent and concerted efforts by its more than 3,000 staff members (including tour
guides) coupled with entrepreneurship have made it possible for Shanghai Spring
International Travel Service to increase its asset value and sales revenue at an annual rate
of 30% to 50% in the past years. Since 1994, Shanghai Spring International Travel Service
has been doing so well in domestic tours that it has been commended as the No.1 travel
agency in domestic tours in the country by China National Tourism Administration for 13
consecutive years. Shanghai Spring International Travel Service has established a network of
branch offices in 33 major Chinese cities and 55 retail outlets in Shanghai and the
surrounding areas, totally linked up by Internet. Seven overseas branch offices have started
doing business in other countries around the world, with the U.S. being the most promising
market with the announcement of YTB uniting as their exclusive U.S. partner.
Statements about the Company's future expectations, including future revenues and earnings,
and all other statements in this press release other than historical facts are
'forward-looking statements' within the meaning of Section 27A of the Securities Act of
1933, Section 21E of the Securities Exchange of 1934, and as that term is defined in the
Private Litigation Reform Act of 1995. Such forward-looking statements involve risks and
uncertainties and are subject to change at any time, and the Company's actual results could
differ materially from expected results. The Company undertakes no obligation to update
forward-looking statements to reflect subsequently occurring events or circumstances. Media
Contact:
Greg Wilson
Levick Strategic Communications for YTB International, Inc.
Investor Contact:
Garth Russell / Yemi Rose
KCSA Worldwide for YTB International, Inc.
SOURCE YTB International
Source: PR Newswire (December 12, 2007 - 4:56 PM EST) News by QuoteMediawww.quotemedia.com
Legal Proceedings
The Company is involved in legal proceedings incurred in the normal course of
business. In the opinion of the Company's legal counsel, there were no
proceedings as of December 31, 2004 or 2003 where the results of which would
have a material effect on the financial position of the Company if adversely
decided.
Employment Agreement
During 2000, the Company entered into a five-year employment agreement with its
Chief Executive Officer ("CEO"). Pursuant to this agreement, the CEO is paid an
annual base salary of $200,000, with an increase of 6% per year, plus a bonus
incentive equal to 10% of all initial franchise fees earned by the Company. This
agreement was cancelled upon the Company's merger with YTB on December 8, 2004
(see Note 1), at such time a new five-year employment agreement with the CEO was
executed (see Note 14). According to the new agreement, the CEO is paid an
annual base salary of $240,000, with an increase of 6% per year. In addition,
the agreement provides the CEO with certain rights in the event of a change in
control of the Company.
Contingencies
During December 2004, the Company entered into an agreement with an investor to
raise an additional $2,000,000 of capital with a condition to subordinate its
SBA loan of approximately $300,000 to YTB. Such loan was executed and
subordinated on February 7, 2005. The Company is contingently liable under the
terms of this agreement for the approximate maximum amount of $278,000 in 2005
if the quoted market price of its stock falls below a specified minimum amount.
Such maximum contingent liability would approximate $667,000 per year in years
2006 and beyond, should such stock price fall below the specified minimum.
See independent auditors' report
(F16)
REZCONNECT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 7 - STOCK OPTIONS
The number of stock options outstanding as of December 31, 2004 and 2003 was
475,000, with a weighted-average exercise price of $1.08. No options were
granted, exercised, forfeited or canceled during the years ended December 31,
2004 or 2003.
A summary of stock options outstanding and exercisable as of December 31, 2004
are as follows:
--------------------------------------------------------------------------------
Options Outstanding Options Exercisable
--------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Exercise Number Average Average Number Average
Price Outstanding Remaining Life Exercise Price Exercisable Exercise Price
--------------------------------------------------------------------------------
$1.00 410,000 5 Years $1.00 351,000 $1.00
$2.00 65,000 5 Years $2.00 45,000 $2.00
The fair value of the options granted for the year ended December 31, 2004 was
estimated using the Black-Scholes option pricing model based on the following
weighted-average assumptions:
Risk free interest rate 5.00%
Expected volatility 100.00%
Expected remaining lives 2
Expected dividend yield -0-
Merger-related items
Former members of a limited liability company that was a predecessor to the
Company were previously entitled to preferential distributions of $258,000. The
Company issued approximately 1,172,000 shares of its common stock in April 2003
in payment of these preferential distributions.
NOTE 8 - INCOME TAXES
As a result of the Company's operating losses in 2004 and 2003, and loss
carryforwards available in 2004, there is no provision for current income taxes.
In addition, Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes, requires a valuation allowance to reduce any deferred tax assets
to their net realizable amounts if, based on the weight of evidence, it is more
likely than not that all or some portion of such deferred tax assets will not be
realized. As of December 31, 2004 and 2003, the Company is uncertain if it will
realize any future tax benefit of its deferred tax assets. Accordingly, a full
valuation allowance has been established as a reserve against the Company's
deferred tax assets and, therefore, no deferred income tax credits have been
recognized in the statements of operations for the years ended December 31, 2004
and 2003.
See independent auditors' report
(F17)
REZCONNECT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 9 - RELATED PARTY TRANSACTIONS
During the years ended December 31, 2004 and 2003, the Company incurred
consulting fee expenses for services provided by an entity owned by the
Company's chief executive officer, a significant shareholder of the Company.
These fees totaled approximately $23,000 and $60,000 for the year ended December
31, 2004 and 2003. Under a new employment agreement reached in December 2004,
such consulting fees have been eliminated.
NOTE 10 - SEGMENT INFORMATION
The Company operates in the following three business segments: providing and
selling management services within the travel industry, including franchising
activities; developing and commercializing internet-based technology programs;
and online travel store services. Although the Company operates franchises in
eight foreign countries, revenue is generated from just three of the countries.
Such revenue generated from these three foreign countries amounts to an
insignificant and immaterial portion of the overall total revenue of the
Company. Accordingly, Company management considers it impracticable to report
such geographic information.
Summarized financial information concerning the Company's reportable segments is
shown in the following tables. The "other" column includes corporate items not
specifically allocated to the segments.
---------------------------- --------------------------- --------------------- ----------------- ---------------- ------------------
Year Ended Franchise and Travel- Internet-Based Online Travel
December 31, 2004 Related Management Technology Programs Store Services Other Total
Services
---------------------------- --------------------------- --------------------- ----------------- ---------------- ------------------
External and inter-
segment revenue $ 2,870,924 $ 302,938 $ 507,508 $ 57,140 $ 3,738,510
---------------------------- --------------------------- --------------------- ----------------- ---------------- ------------------
Segment profit (loss) $ (626,737) $ (98,669) $ 469,509 $ (32,413) $ (248,530)
---------------------------- --------------------------- --------------------- ----------------- ---------------- ------------------
Total assets $ 15,461,948 $ 4,239,319 $ 1,081,952 $ 73,121 $ 20,856,340
---------------------------- --------------------------- --------------------- ----------------- ---------------- ------------------
Capital expenditures - - $ 35,947 - $ 35,947
---------------------------- --------------------------- --------------------- ----------------- ---------------- ------------------
Depreciation and
amortization $ (41,667) - $ (38,714) $ (5,788) $ (86,169)
---------------------------- --------------------------- --------------------- ----------------- ---------------- ------------------
Investment income, net - - - $ 29,638 $ 29,638
---------------------------- --------------------------- --------------------- ----------------- ---------------- ------------------
---------------------------- --------------------- ------------------ ----------------- ------------------ ---------------
Franchise and Internet-Based
Year Ended Travel- Related Technology Online Travel
December 31, 2003 Management Programs Store Services Other Total
Services
---------------------------- --------------------- ------------------ ----------------- ------------------ ---------------
External and inter-
segment revenue $ 2,031,755 $ - $ 282,471 $ 85,862 $ 2,400,088
---------------------------- --------------------- ------------------ ----------------- ------------------ ---------------
Segment profit (loss) $ (230,262) $ (1,125,167) $ 247,946 $ - $ (1,107,483)
---------------------------- --------------------- ------------------ ----------------- ------------------ ---------------
Total assets $ 963,311 $ - $ 127,469 $ 794,853 $ 1,885,633
---------------------------- --------------------- ------------------ ----------------- ------------------ ---------------
Capital expenditures - - $ 297,827 - $ 297,827
---------------------------- --------------------- ------------------ ----------------- ------------------ ---------------
Depreciation, amortization
and impairment of capi-
talized software costs - $ (1,125,167) $ (34,526) - $ (1,159,693)
---------------------------- --------------------- ------------------ ----------------- ------------------ ---------------
Investment income, net - - - $ 4,112 $ 4,112
---------------------------- --------------------- ------------------ ----------------- ------------------ ---------------
See independent auditors' report
(F18)
REZCONNECT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 11 - BUSINESS COMBINATION
As described more fully in Note 1, a business combination structured as a
statutory merger took place between the Company and YourTravelBiz.com, Inc.
("YTB") on December 8, 2004. This merger was accounted for by the Company under
the "purchase method", as prescribed by Statement of Financial Accounting
Standards ("SFAS") No. 141, Business Combinations. In exchange for all of the
outstanding common stock of YTB, the Company issued common stock (valued at
$9,838,493) and Series B convertible preferred stock (valued at $5,418,952), or
a total value of $15,257,445, to the stockholders of YTB. The total cost of this
acquisition was allocated based upon the estimated fair values of the
identifiable assets acquired and the fair values of the liabilities assumed at
the date of acquisition. The recorded cost of the acquisition was based mainly
on the number of sales representatives on hand at the time of contract
negotiations during August 2004; financial projections of YTB, prepared and
provided by YTB management; and on the estimated value of the Company's software
development regarding two franchise systems, in addition to other intangible
assets.
The total cost of this acquisition exceeded the fair value of the net assets
acquired and liabilities assumed by $9,436,118, which was recorded as
"goodwill". In accordance with SFAS No. 142, goodwill resulting from this
acquisition has been recognized, but will not be amortized. This value
representing goodwill will instead be tested for impairment on an annual basis.
Following is a summary of the allocated cost of the Company's acquisition of
YTB:
Asset
(Liability)
Property and equipment $ 73,121
Computer software 9,097
Intangible assets (other than goodwill) 6,500,000
Goodwill 9,436,118
Short-term debt (102,342)
Accounts payable and accrued expenses (658,549)
Net assets acquired $ 15,257,445
--------------------------------------------------------------------------------
Management's primary reasons for acquiring YTB include the long-lasting business
relationship between the two companies, with YTB being the primary customer of
the Company. Other factors include management's belief that there is a larger
growth potential as a combined company than as separate entities, among other
reasons because of the referral marketing component that marketing contributes.
More specifically, the merger is expected to increase travel market share in the
retail sale of travel and travel-related services, a development that is
unlikely using the prior brick and mortar agency business model. By acquiring
marketing and combining the respective existing travel agency businesses of YTB
and the Company, the merged entity provides both a new source of travel booking
agencies plus an additional revenue source in the initial and ongoing monthly
fees paid by the RTAs..
See independent auditors' report
(F19)
REZCONNECT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 11 - BUSINESS COMBINATION (CONTINUED)
The estimated fair value of the identifiable assets acquired totaled $6,582,218.
Goodwill was recognized in the amount of $9,436,118. Of the $6,500,000 of
identifiable intangible assets acquired, $3,500,000 was assigned to trade names;
$1,500,000 to internet domain names; $1,500,000 to RTA sales agreements. Of
these, only the RTA sales agreements (each of which having an estimated useful
life of thirty-six months) are subject to amortization. With respect to the
acquired intangible assets not subject to amortization, tests for impairment
will be made on an annual basis. As of December 31, 2004, the gross carrying
amount and accumulated amortization of the RTA sales agreements ("agreements")
was $1,500,000 and $41,667, respectively; amortization expense for the period
December 8, 2004 (the date of acquisition) to December 31, 2004 totaled $41,667.
Amortization expense of the agreements for the fiscal years ending December 31,
2005 and 2006 is estimated to be $500,000 in each of those years. The cost of
the agreements will be fully amortized by November 30, 2007.
With respect to the acquired intangible assets recognized as assets apart from
goodwill that are not subject to amortization, the respective gross carrying
amounts as of December 31, 2004 are as follows: trade names - $3,500,000;
internet domain names - $1,500,000. These intangibles have indefinite legal
lives. As such, they are expected to contribute indefinitely to the Company's
cash flows. No impairment losses have been recognized on these unamortized
intangible assets.
The $9,436,118 of goodwill was assigned to the Company's business segments as
follows: $7,022,105 to Franchise and Travel-Related Management Services;
$1,172,679 to Internet-Based Technology Programs; and $1,241,334 to Online
Travel Store Services.
The basis and method for determining the total acquisition cost of $15,257,445
included the following factors:
o YTB's customer-base and related revenue stream.
o YTB's operating system.
o The number of representatives on YTB's sales force and related sales
agreements.
o The estimated value of YTB, based primarily on the above-listed factors, in
comparison to the market value of the Company.
The cost of goodwill and all identifiable intangible assets acquired to be
amortized and deducted for tax purposes for the year ended December 31, 2004 is
expected to be $88,534, which is based on current tax law that mandates use of
the straight-line method over a period of 15 years for such assets. The annual
amortization deduction for tax purposes is expected to be $1,062,408 each year
thereafter, until each asset is fully amortized.
SFAS No. 141 requires the identification of the acquiring entity in a business
combination. In this transaction effected through the exchange of equity
interests, the Company (i.e., Rezconnect Technologies, Inc.) has been identified
as the acquiring entity. Following are among the most pertinent facts and
circumstances considered in the identification of the Company as the "acquiring
entity" which, moreover, provides the rationale for the position taken that this
transaction does not constitute a "reverse acquisition" as addressed in SFAS No.
141:
See independent auditors' report
(F20)
REZCONNECT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 11 - BUSINESS COMBINATION (CONTINUED)
o Day-to-day control continues to reside in the Company with its Chief
Executive Officer ("CEO") at the parent company level (acknowledging that
each operating subsidiary has its own Board of Directors and, accordingly,
a degree of operational autonomy)..
o The Company's asset value constitutes more than 50% of the resulting total
assets of the combined entity.
o The CEO of the Company has convened and conducted each meeting of The Board
of Directors that has occurred both before and after the merger.
o The CEO of the Company continues to often be the sole signatory on filings
with the Securities and Exchange Commission (SEC) and other documents.
o The CEO of the Company initiated and structured the merger with YTB.
o Most funding and structuring initiatives continue to reside with the
Company's CEO.
o The Company has provided funding to YTB prior to the merger.
o The SEC reporting address and day-to-day operations emanate from the
Company's New Jersey headquarters.
NOTE 12 - ACTIVITY OF ENTITY ACQUIRED IN BUSINESS COMBINATION
Included in the accounts of the Company for the year ended December 31, 2004 is
the income and expense activity of YourTravelBiz.com, Inc. ("YTB"), the entity
acquired via the statutory merger described in Note 1, from the date of
acquisition (December 8, 2004) to December 31, 2004. Following is a summary of
such activity:
Net revenue $ 357,507
Total operating expenses (except depreciation and amortization) (394,648)
Total other income and expenses (net) (3,039)
Net loss of YTB included in the accounts of the Company $ (40,180)
--------------------------------------------------------------------------------
NOTE 13 - PRIOR PERIOD ADJUSTMENT
Reclassification adjustments, reflected in the statement of changes in
stockholders' equity, have been made to the following beginning equity account
balances at January 1, 2004:
Increase in value of common stock issued $ 418
Increase in amount of additional paid-in capital 134,522
Further decrease in accumulated deficit balance (134,940)
-------------
Net equity effect $ -0-
=============
See independent auditors' report
(F21)
REZCONNECT TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 14 - SUBSEQUENT EVENTS
As more fully described in Note 1, subsequent to the December 8, 2004 merger
between the Company and YourTravelBiz.com, Inc., the assets of this combined
entity were assigned to three newly-formed, wholly-owned subsidiary corporations
on January 4, 2005. Further, on January 4, 2005, the Company re-incorporated in
the State of Delaware by means of a downstream merger with YTB International,
Inc. Concurrent with this re-incorporation, the Company changed its name from
Rezconnect Technologies, Inc. to YTB International, Inc. and increased the
number of its authorized common shares to 50,000,000 on that same date. As a
consequence of this Delaware merger and associated re-incorporation, YTB
International, Inc. became the successor to the Company and its three
subsidiaries on January 4, 2005. (See Note 1).
Also during January 2005, a total of $2,000,000 was received from a prospective
investor. This amount was initially deposited into an escrow fund on behalf of
YTB International, Inc. (YTBL), pursuant to a funds escrow agreement by and
between the YTBL investor, the prospective investor, and the fund's escrow
agent. The funds were subsequently released to the Company also during January
2005.
As described in Note 1, each share of the 4,092,376 shares of the Company's
Series B convertible preferred stock was converted into one share of common
stock as of January 9, 2005.
Following the merger with YTB on December 8, 2004, the Company entered into
long-term employment agreements with J. Lloyd Tomer (its Chairman), Michael Y.
Brent (its CEO), Kim Sorensen (its President), Derek Brent (its Secretary) and
J. Scott Tomer (its Treasurer), collectively the "Senior Executives". Such
agreements became effective on January 1, 2005 and expire December 31, 2009.
Each Senior Executive is subject to confidentiality, non-raid and non-compete
provisions. Mr. Brent's prior 2004 employment agreement was cancelled and
superseded in the context of putting in place these nearly identical employment
agreements with senior management (see Note 6). Each Senior Executive, so long
as they continue to be employed by the Company, will be paid, directly or
indirectly, a combination of (i) a base salary, and (ii) stock options and/or
warrants, as so determined by the Board of Directors, acting as a Compensation
Committee, based on the Company's financial performance. Each Senior Executive
will continue to be subject to their respective confidentiality covenants and,
for 3 years, their non-compete covenants. Additionally, the estate of each
Senior Executive will receive a death benefit in an amount equal to one year's
salary.
See independent auditors' report
(F22)
REZCONNECT TECHNOLOGIES, INC.
SUPPLEMENTARY INFORMATION
SCHEDULES OF GENERAL AND ADMINISTRATIVE EXPENSES
YEARS ENDED DECEMBER 31, 2004 AND 2003
2004 2003
General and administrative salaries $ 651,464 $ 420,146
Payroll taxes 53,706 31,633
Auto expense 22,350 -
Bad debts 4,018 19,154
Bank fees and service charges 6,692 2,120
Consultant fees 13,865 88,259
Credit card fees 11,719 -
Dues and subscriptions 57,434 23,646
Employee benefits 6,255 -
Equipment lease 6,261 -
Miscellaneous 4,373 2,022
Office rent 47,138 43,792
Travel and entertainment 113,075 76,471
Office supplies and expenses 32,887 24,525
Printing 9,756 15,838
Postage and delivery 33,821 12,118
Insurance 67,240 32,676
Professional fees 67,853 63,633
Training and recruitment 5,056 10,000
Telephone 22,943 18,043
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES $ 1,237,906 $ 884,076
--------------------------------------------------------------------------------
See independent auditors' report and notes to financial statements
(F23)
REZCONNECT TECHNOLOGIES, INC.
PRO FORMA FINANCIAL INFORMATION
YEARS ENDED DECEMBER 31, 2004 AND 2003
(UNAUDITED)
REZCONNECT TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2004 AND 2003
(UNAUDITED)
INTRODUCTION TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On December 8, 2004, Rezconnect Technologies, Inc. (the "Company") acquired 100%
of the outstanding common shares from the stockholders of YourTravelBiz.com,
Inc. ("YTB") in a business combination structured as a statutory merger. This
acquisition was effected through an exchange of equity interests at a recorded
cost of $15,257,445 to the Company. Rezconnect Technologies, Inc. was identified
as the acquiring entity. The Company exchanged 7,430,000 shares of its common
stock and 4,092,376 shares of its Series B convertible preferred stock for all
of the outstanding common stock of YTB.
The following unaudited pro forma consolidated statements of operations for the
years ended December 31, 2004 and 2003 give effect to the Company's acquisition
of YTB and reflects the results of YTB's operations as if the acquisition had
occurred and been completed as of January 1, 2004 and 2003, respectively.
The acquisition of YTB was accounted for by the Company under the "purchase
method", as prescribed by Statement of Financial Accounting Standards ("SFAS")
No. 141, Business Combinations. The total cost of this acquisition exceeded the
fair value of the identifiable net assets acquired and liabilities assumed by
$9,436,118, which was recorded as "goodwill". In accordance with SFAS No. 142,
goodwill resulting from this acquisition has been recognized as an asset, but
will not be amortized. Instead, the recorded value of goodwill will be tested
for impairment on an annual basis. Of the $6,500,000 of identifiable intangible
assets acquired, $3,500,000 was assigned to trade names; $1,500,000 to internet
domain names; and $1,500,000 to RTA sales agreements. Of these, only the sales
agreements (each of such agreements having an estimated useful life of
thirty-six months) are subject to amortization. With respect to the acquired
intangible assets not subject to amortization, tests for impairment will be made
on an annual basis.
Following is a summary of the allocated cost of the Company's acquisition of
YTB:
Asset
(Liability)
Property and equipment $ 73,121
Computer software 9,097
Intangible assets (other than goodwill) 6,500,000
Goodwill 9,436,118
Short-term debt (102,342)
Accounts payable and accrued expenses (658,549)
Net assets acquired $ 15,257,445
--------------------------------------------------------------------------------
The unaudited pro forma consolidated statement of operations for the years ended
December 31, 2004 and 2003 do not represent the results of operations of the
Company for any future date or period. Actual future results could be materially
different from these pro forma results. These unaudited pro forma financial
statements should be read in conjunction with the audited financial statements
of the Company and management's related discussion and analysis of financial
condition and results of operations included in Form 10-K for the year ended
December 31, 2004.
See notes to pro forma financial statements
(F24)
REZCONNECT TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2004
(UNAUDITED)
Rezconnect
Technologies, YourTravel- Pro forma Pro forma
Inc. Biz.com, Inc. Adjustments Consolidated
-------------- --------------------------------------------------
Franchise fees $ 97,506 $ - $ - $ 97,506
Franchise service and other fees 716,801 - - 716,801
Travel products and services 2,056,617 - - 2,056,617
Online travel income 507,508 - (244,000)(e) 263,508
Advertising and other 2,571 - - 2,571
New RTA sales 84,656 1,206,348 - 1,291,004
Monthly maintenance fees 248,092 3,535,302 - 3,783,394
Printing and administrative service fees 54,569 777,614 - 832,183
-------------- --------------- ------------- ------------
3,768,320 5,519,264 (244,000) 9,043,584
Less: returns and allowances 29,810 424,795 - 454,605
-------------- --------------- ------------- ------------
3,738,510 5,094,469 (244,000) 8,588,979
Commissions 1,521,145 2,867,199 - 4,388,344
Cost of travel services and products 930,519 - - 930,519
Depreciation and amortization 86,169 92,660 382,696 (a) 561,525
Franchise services and products 153,035 - - 153,035
Marketing and selling 103,418 - - 103,418
General and administrative 1,237,906 2,756,542 (244,000)(e) 3,750,448
-------------- --------------- ------------- ------------
4,032,192 5,716,401 138,696 9,887,289
-------------- --------------- ------------- ------------
(293,682) (621,932) (382,696) (1,298,310)
Loss from sales of short-term investments (8,458) - - (8,458)
Interest and dividend income 38,096 7,261 - 45,357
Interest expense (22,596) (50,562) - (73,158)
-------------- --------------- ------------- ------------
7,042 (43,301) - (36,259)
-------------- --------------- ------------- ------------
(286,640) (665,233) (382,696) (1,334,569)
1,670 - - 1,670
-------------- --------------- ------------- ------------
$ (288,310) $ (665,233) $ (382,696) $ (1,336,239)
============== =============== ============= ============
$ (1,336,239)
============
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING 22,634,652
============
BASIC AND DILUTED LOSS PER SHARE $ (0.06)
============
See notes to pro forma consolidated financial statements
(F25)
REZCONNECT TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2003
(UNAUDITED)
Rezconnect
Technologies, YourTravel- Pro forma Pro forma
Inc. Biz.com, Inc. Adjustments Consolidated
-------------- --------------- -------------- --------------
REVENUE
Franchise fees $ 115,280 $ - $ - $ 115,280
Franchise service and other fees 569,545 - - 569,545
Travel products and services 1,346,930 - - 1,346,930
Online travel income 282,471 - (122,000)(e) 160,471
Advertising and other 85,862 - - 85,862
New RTA sales - 551,849 - 551,849
Monthly maintenance fees - 1,797,478 - 1,797,478
Printing and administrative service fees - 133,216 - 133,216
-------------- -------------- ------------ ------------
GROSS REVENUE 2,400,088 2,482,543 (122,000) 4,760,631
Less: returns and allowances - 151,094 - 151,094
-------------- -------------- ------------ ------------
NET REVENUE 2,400,088 2,331,449 (122,000) 4,609,537
OPERATING EXPENSES
Commissions 906,235 808,264 - 1,714,499
Cost of travel services and products 526,141 - - 526,141
Depreciation and amortization 376,486 98,753 418,270 (a) 893,509
Marketing and selling 31,535 27,549 - 59,084
General and administrative 884,076 1,610,328 (122,000)(e) 2,372,404
Impairment of capitalized software costs 783,207 - - 783,207
-------------- -------------- ------------ ------------
TOTAL OPERATING EXPENSES 3,507,680 2,544,894 296,270 6,348,844
-------------- -------------- ------------ ------------
LOSS FROM OPERATIONS (1,107,592) (213,445) (418,270) (1,739,307)
OTHER INCOME (EXPENSES)
Loss from sales of short-term investments (14,113) - - (14,113)
Interest and dividend income 18,225 6,672 - 24,897
Interest expense (1,885) (196,692) - (198,577)
-------------- -------------- ------------ ------------
TOTAL OTHER INCOME (EXPENSES) 2,227 (190,020) - (187,793)
-------------- -------------- ------------ ------------
LOSS BEFORE INCOME TAXES (1,105,365) (403,465) (418,270) (1,927,100)
INCOME TAX (BENEFIT)
Current 2,118 - - 2,118
Deferred - (137,005) - (137,005)
-------------- -------------- ------------ ------------
TOTAL INCOME TAX (BENEFIT) 2,118 (137,005) - (134,887)
-------------- -------------- ------------ ------------
NET LOSS $ (1,107,483) $ (266,460) $ (418,270) $ (1,792,213)
============== ============== ============ ============
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (1,792,213)
============
LOSS PER SHARE:
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING 22,101,959
============
BASIC AND DILUTED LOSS PER SHARE $ (0.08)
============
See notes to pro forma consolidated financial statements
(F26)
REZCONNECT TECHNOLOGIES, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
PRO FORMA FINANCIAL STATEMENT ADJUSTMENTS
YEARS ENDED DECEMBER 31, 2004 AND 2003
(UNAUDITED)
The accounts of YourTravelBiz.com, Inc. ("YTB") include its income and expense
activity for the pre-merger period January 1, 2003 through December 7, 2004. The
activity of YTB from the date of acquisition (December 8, 2004) through December
31, 2004 is included in the 2004 pro forma results of operations of Rezconnect
Technologies, Inc.
1. The following pro forma adjustments summarize the adjustments made to
the pro forma statements of operations for the years ended December 31,
2004 and 2003:
(a) The 2004 and 2003 depreciation and amortization adjustments reflect
these expenses as if the acquisition of YTB had occurred and been
completed as of January 1, 2004 and 2003, respectively. Depreciation
and amortization are computed via the straight-line method over the
following estimated useful lives of the related assets:
Vehicles and equipment 5 to 7 years
Furniture and fixtures 7 years
Computer software and RTA sales agreements 3 years
Allocation of the purchase price of all tangible assets acquired
is as follows:
Allocated Allocated
Asset Percentage Amount
Vehicles 59% $ 48,508
Equipment 20% 16,444
Furniture and fixtures 10% 8,222
Computer software 11% 9,044
Total 100% $ 82,218
--------------------------------------------------------------------------------
Charges to 2004 and 2003 depreciation and amortization expense as
if the acquisition of YourTravelBiz.com, Inc. had occurred and
been completed as of January 1, 2004 and 2003, respectively, are
as follows:
Estimated Depreciation/
Useful Life Amortization
Asset (years) Expense
Vehicles and equipment 5 to 7 $ 12,833
Furniture and fixtures 7 1,175
Computer software 3 3,015
RTA Sales agreements 3 500,000
Total $ 517,023
--------------------------------------------------------------------------------
See notes to pro forma financial statements
(F27)
REZCONNECT TECHNOLOGIES, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
PRO FORMA FINANCIAL STATEMENT ADJUSTMENTS
YEARS ENDED DECEMBER 31, 2004 AND 2003
(UNAUDITED)
(a) Depreciation and amortization adjustments (continued)
2004 2003
--------- ---------
Depreciation and amortization expense as if the acquisition
of YourTravelBiz.com, Inc. had occurred and been completed
as of January 1 (as calculated on the preceding page) $ 517,023 $ 517,023
Less: amount recorded by YourTravelBiz.com, Inc. (92,660) (98,753)
Less: amount recorded by Rezconnect Technologies, Inc. (41,667) ( -0- )
--------- ---------
Total depreciation and amortization adjustments $ 382,696 $ 418,270
======= =======
(b) Revenue adjustments
Following is a composition of the total revenue of
YourTravelBiz.com, Inc. for the period December 8, 2004 to
December 31, 2004 that is included in the 2004 pro forma results
of operations of Rezconnect Technologies, Inc.:
New RTA sales $ 84,656
Monthly maintenance fees 248,092
Printing and administrative service fees 54,569
387,317
Less: returns and allowances (29,810)
Total revenue adjustments - 2004 $ 357,507
--------------------------------------------------------------------------------
(c) Operating expense adjustments
Following represents operating expenses (other than depreciation
and amortization) of YourTravelBiz.com, Inc. for the period
December 8, 2004 to December 31, 2004 that are included in the
2004 pro forma results of operations of Rezconnect Technologies,
Inc.:
Commissions $ 201,207
General and administrative 193,441
Total other operating expense adjustments $ 394,648
--------------------------------------------------------------------------------
See notes to pro forma financial statements
(F28)
REZCONNECT TECHNOLOGIES, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
PRO FORMA FINANCIAL STATEMENT ADJUSTMENTS
YEARS ENDED DECEMBER 31, 2004 AND 2003
(UNAUDITED)
(d) Other income and expense adjustments
The following represents other (non-operational) items of income
and expense of YourTravelBiz.com, Inc. for the period December 8,
2004 to December 31, 2004 that are included in the 2004 pro forma
results of operations of Rezconnect Technologies, Inc.:
Investment income $ 509
Interest expense (3,548)
Total other income and expense adjustments $ (3,039)
--------------------------------------------------------------------------------
(e) Eliminating adjustments
Online travel income of Rezconnect Technologies, Inc., and the
corresponding administrative expense of YourTravelBiz.com, Inc.,
has been eliminated in pro forma consolidation to adjust for the
income earned and the related expense incurred between the two
entities. This amount totaled $244,000 and $122,000 in 2004 and
2003, respectively. A service contract exists between the two
entities whereby the Company provides travel website hosting to
YTB, at a fee of $5.00 per website per month.
2. Recurring expenses
Commission costs are incurred and paid monthly based on a
pre-determined formula based on a percentage of sales. These costs are
capitalized and charged to expense over a period of thirty-six months,
in proportion to the related revenue recognized.
The Company assumed a lease of its acquiree for copy machines under
non-cancelable operating leases expiring in various periods through
December 31, 2006. The lease payments are approximately $659.50 per
month.
3. Income taxes
As a result of the Company's and the acquiree's year 2004 and 2003
operating losses and loss carryforwards available in 2004 and 2003,
there is no provision for current income taxes. In addition, Statement
of Financial Accounting Standards No. 109, Accounting for Income
Taxes, requires a valuation allowance to reduce any deferred tax
assets to their net realizable amounts if, based on the weight of
evidence, it is more likely than not that all or some portion of such
deferred tax assets will not be realized. As of December 31, 2004 and
2003, the Company is uncertain if it will realize any future tax
benefit of its deferred tax assets. Accordingly, a full valuation
allowance has been established as a reserve against the Company's
deferred tax assets and, therefore, no deferred income tax credits
have been recognized in the Company's pro forma statements of
operations for the years ended December 31, 2004 and 2003.
See notes to pro forma financial statements
(F29)
REZCONNECT TECHNOLOGIES, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
PRO FORMA FINANCIAL STATEMENT ADJUSTMENTS
YEARS ENDED DECEMBER 31, 2004 AND 2003
(UNAUDITED)
4. Earnings (loss) per share
Basic earnings (loss) per share is based on the weighted-average
number of common shares outstanding. Diluted earnings (loss) per share
assumes that outstanding common shares are increased by common shares
issuable upon the exercise of stock options and warrants, and by the
conversion of preferred stock, where such exercise or conversion would
be dilutive. For the years ended December 31, 2004 and 2003, the
effects any assumed exercise of stock options and warrants on the 2004
and 2003 loss per share would be anti-dilutive and, therefore, are not
included in the calculation of the Company's basic loss per share for
the years ended December 31, 2004 and 2003.
However, the 4,092,376 shares of the Company's Series B convertible
preferred stock that were issued on December 8, 2004 (and subsequently
converted into common shares on January 9, 2005) are considered to be
common stock equivalents on the date of original issuance.
Accordingly, all 4,092,376 shares of the Company's Series B
convertible preferred stock are included in the calculation of the
Company's pro forma weighted-average number of common shares
outstanding as of January 1, 2004 and 2003, and also in the
calculation of the pro forma loss per common share for the years ended
December 31, 2004 and 2003. As such, the pro forma weighted-average
number of common shares used in the calculation of the 2004 and 2003
pro forma loss per common share is 22,634,652 and 22,101,959,
respectively.
5. Employment agreements
Revised employment agreements, becoming effective on January 1, 2005,
were entered into with senior management. The effects of these revised
agreements with the Company executives are immaterial to pro forma
presentation.
See notes to pro forma financial statements
(F30)
YTB INTERNATIONAL, INC.
(FORMERLY REZCONNECT TECHNOLOGIES, INC.)
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY INFORMATION
THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(UNAUDITED)
YTB INTERNATIONAL, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(UNAUDITED)
Page(s)
Independent Registered Public Accounting Firm's Review Report F1
Financial Statements
Consolidated Balance Sheets F2 - F3
Consolidated Statements of Operations F4
Consolidated Statements of Changes in Stockholders' Equity F5
Consolidated Statements of Cash Flows F6
Notes to Financial Statements F7 - F22
Independent Registered Public Accounting Firm's Report
on Supplementary Information F23
Supplementary Information
Consolidated Schedules of General and Administrative Expenses F24
