Table of Contents

PART I
Item 1.	Business	4
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	21
Item 2.	Properties	21
Item 3.	Legal Proceedings	24
Item 4.	Submission of Matters to a Vote of Security Holders	25

PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26
Item 6.	Selected Financial Data	28
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 8.	Financial Statements and Supplementary Data	56
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	56
Item 9A.	Controls and Procedures	56
Item 9B.	Other Information	58

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	59*
Item 11.	Executive Compensation	59*
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	59*
Item 13.	Certain Relationships and Related Transactions, and Director Independence	59*
Item 14.	Principal Accountant Fees and Services	59*

PART IV
Item 15.	Exhibits and Financial Statement Schedules	60

Index to Exhibits		61

Signatures		64

Index to Financial Statements, Financial Statement Schedules		65

* Portions of the Issuer's Proxy Statement for its 2009 Annual Meeting of Stockholders are incorporated herein by this reference.

The Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), provide a safe harbor for forward-looking statements made by or on behalf of the Company. The Company and its representatives may from time to time make written or oral statements that are “forward-looking”, including statements contained in this report and other filings with the Securities and Exchange Commission (“SEC”) and in our reports to stockholders. In some cases forward-looking statements can be identified by words such as “believe,” “expect,” “anticipate,” “plan,” “potential,” “continue” or similar expressions. Such forward-looking statements include risks and uncertainties and there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements including those contained in Item 1A in this Annual Report on Form 10-K as may be updated from time to time in our future filings with the SEC.

Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, it is not possible to foresee or identify all facts that could have a material effect on the future financial performance of the Company. The forward-looking statements in this report are made on the basis of management’s assumptions and analyses, as of the time the statements are made, in light of their experience and perception of historical conditions, expected future developments and other factors believed to be appropriate under the circumstances.

In addition, certain market data and other statistical information used throughout this report are based on independent industry publications. Although we believe these sources to be reliable, we have not independently verified the information and cannot guarantee the accuracy and completeness of such sources.

Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this Annual Report on Form 10-K and the information incorporated by reference in this report to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.

PART I

On July 31, 2007 (the “Reclassification Date”), we filed an Amended and Restated Certificate of Incorporation which authorized the issuance of two classes of common stock - Class A Common Stock and Class B Common Stock - and increased the Company’s total authorized capital. Stockholders of record on the Reclassification Date received two shares of Class B Common Stock and one share of Class A Common Stock in exchange for each share of existing common stock held as of the Reclassification Date. All shares and per share amounts in this Annual Report on Form 10-K reflect this reclassification.

Item 1. Business.

YTB International, Inc., a Delaware corporation (the “Company”, “YTB” or “We”) is a leader in the travel services business and has operated in the travel services industry for 27 years. We offer an interactive, real-time travel booking engine with access to travel inventories with leading travel industry suppliers to our licensees and to small office and home office entrepreneurs and independent travel agencies. Our revenue stream is comprised primarily of proceeds from initial Internet Business Center (“IBC”) sales, monthly web-hosting fees from our Referring Travel Agents (or Referring Travel Affiliates in Canada, “RTAs”), and commissions on the sale of travel products.

We believe that we are at the forefront of several growing trends: increased consumer spending in the travel industry, the boom in home-based businesses and the growing acceptance of conducting retail business on the Internet. With job security and the ability to spend time with family as ever increasing concerns, the ability to own a home-based business is becoming an increasingly attractive option. As more people use the Internet to become better informed and to save time and money, we believe that online travel planning will continue to make tremendous inroads in the marketplace. In addition, the “baby boomer” generation is starting to retire, which may increase the demand for additional leisure travel. As a result, luxury cruise ship companies and resort builders are gearing up for a new wave of retirees, which we believe will add to the demand for travel-related products and services.

We conduct our business operations primarily through three distinct wholly-owned subsidiaries: (i) YTB Travel Network, Inc., together with its subsidiary YTB Travel Network of Illinois Inc., which licenses and services our RTAs; (ii) YourTravelBiz.com, Inc., which uses a referral marketing system to offer and sell IBCs; and (iii) REZconnect Technologies, Inc., which operates a franchise chain of travel agencies and also acts as a host agency for traditional “brick and mortar” travel companies.

While previously concentrating on the establishment of our “brick and mortar” franchise operations, our management recognized that margins in the travel agency industry are generally shrinking, due in large measure to reductions by airlines in commission rates and to greater competition throughout the industry. To combat these trends and strengthen our competitive position, we sought to bring an advanced technology to the home-based travel and lodging industry by investing in software development and offering new IBC opportunities. All travel arrangements from the IBCs that we host are serviced by the divisions of the Company. As of December 31, 2008, there were 92,383 such online sites in operation.

We were originally incorporated in the State of New York in June 1982 as Travel Network, Ltd., doing business as Global Travel Network. Summary information regarding the development of our business is found below under the heading “Corporate History.”

Our Class A Common Stock is quoted on the Over the Counter Bulletin Board Exchange (“OTC-BB”) under the symbol “YTBLA.OB.” We intend to apply for listing on a national securities exchange, when appropriate, although no assurances can be given in this regard. In 2008, we submitted to a Financial Industry Regulatory Authority (“FINRA”) member firm the requisite paperwork to be filed with FINRA to have our Class A Common Stock quoted on the OTC-BB. Previously, our Class A Common Stock was quoted on the Pink Sheets because we had been delinquent in 2005 and part of 2006 in filing our periodic reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Current Operations

Our three distinct, wholly-owned subsidiary divisions operate as follows:

YTB Travel Network, Inc. (and its subsidiaries)

YTB Travel Network, Inc.’s (together with its domestic and international subsidiaries collectively “YTB Travel ”) business is comprised of arrangements to sell airline tickets, cruise packages and other services, plus travel sales, from the 92,383 RTAs’ IBCs that it hosts. YTB Travel handles travel processing, document distribution and travel commission payments, including tracking transactions for each of the sites. RTAs are educated through our numerous travel training courses. This training is accomplished through a combination of Company conference calls, e-training modules and hands-on certification seminars. RTAs earn transactional compensation from travel purchased from their respective IBCs.

YourTravelBiz.com, Inc. (and its subsidiaries)

YourTravelBiz.com, Inc. together with its domestic and international subsidiaries (collectively “YTB Marketing”) conducts business through the development, training, and support of its sales force. There are currently 8,337 “Independent Marketing Representatives” (each, a “Rep”), who are qualified to participate in the network markerting compensation plan of YTB Marketing. In order to qualify for this compensation, Reps must personally make three IBC sales.

Reps are independent contractors who primarily work from their homes. In addition to earning compensation on personal IBC sales, Reps may also build a sales force from whom they receive override compensation on IBC sales. Reps may utilize a number of methods to sell IBCs including the use of informational meetings and events, local advertising, and one-on-one meetings.

YTB Marketing was created to financially reward Reps for the sale of IBCs in a referral marketing compensation program. YTB Marketing generally charges an initial fee of $449.95 for the setup of an IBC plus $49.95 per month for web-hosting fees.

REZconnect Technologies, Inc.

REZconnect Technologies, Inc. (“REZconnect”) operates a franchise chain of travel agencies and also acts as a host agency for traditional “brick and mortar” travel companies. All of REZconnect’s franchised operations are independently owned and operated. All sales of travel products by REZconnect are made through its independent agencies and franchisees, or through its interactive websites. REZconnect sells and services travel stores within the travel industry. REZconnect operates under the following brands: Travel Network™, Global Travel Network™, Travel Network/Vacation Central™, and Vacation Central™.

Supplier Relationships

We conduct our operations through relationships with various travel suppliers, such as airlines, hotels and automobile rental companies. We serve as a portal and thus have few direct contracts with suppliers.

Segments

We operate in the following two business segments: marketing of IBCs including the development of a sales network (“Marketing”); and sale of travel through IBCs (“Travel”). Our business segments operate primarily in the United States, but also have operations in Canada and are structured for potential additional international growth.

Prior to the second quarter of 2007, we had reported in three operating segments, Marketing, Travel and Technology. The Marketing segment was comprised of the YTB Marketing subsidiary and the Travel segment was comprised of the YTB Travel subsidiary and an applicable portion of the operations of the REZconnect subsidiary, with the remaining portion of REZconnect reported in the Technology segment. During the second quarter of 2007, we collapsed the Technology segment into the Travel segment as the amounts related to Technology were immaterial.

See Note 22 – “Segment Information” to the consolidated financial statements for summarized financial information concerning our reportable segments.

Intellectual Property

We operate our businesses under various trade names including, “YourTravelBiz.com,” “YourTravelBiz™,” “YTB Travel and Cruises™,” “Travel Network™,” “YTB Travel Network™,” “Sunrise Travel Service,” “Global Travel Network™,” “Travel Network Vacation Central™,” “Vacation Central™,” and “YTB.com™,” as well as websites “Bookmytravel.com™,” and “REZconnect.com™.”

We regard our technology and other intellectual property, including our brands, as a critical part of our business. We protect our intellectual property rights through a combination of copyright, trademark, trade secret and confidentiality procedures, which is subject to certain risks. See Item 1A for a description of such risks.

Competition and Customer Base

The travel industry is highly diverse, specialized and one of the most competitive industries in the United States. Much of the travel business is niche oriented and is highly price sensitive. Many of our competitors are much more highly capitalized. One of the principal functions of our share exchange transaction and reincorporation in late 2004 (as described in “Corporate History” below) was to position our Company to be more competitive.

We have the characteristics of both an online travel provider and a “brick and mortar” travel agency, because we offer travel-related products through traditional “brick and mortar” travel agencies and online sites. This unique positioning results in our having few direct competitors. Our competition can be classified into three separate types of companies: online travel providers; retail travel providers; and electronic distributors of travel information and services. Websites such as Travelocity.com™, Priceline.com™, Expedia.com™ and Orbitz.com™ are online retailers of travel, unlike YTB Travel which serves in a facilitator function only. In addition, the YTB Travel target markets serve as direct referrals for our Company’s RTAs. Travelocity, through its subsidiary World Choice Travel, a competitor, is now a revenue-generating preferred supplier for air ticketing, car rental and hotel on our IBCs.

Because of our direct marketing approach and our diverse customer base, we are not dependent on any major customers for a significant portion of our revenues. There are currently other direct network marketing companies specializing in the marketing of online travel businesses similar to YTB Marketing. Our franchise travel agency business is also subject to competition.

Regulatory Framework

Our current and prospective operations within the travel services industry are not restricted to a material extent by any current or proposed governmental regulations, and governmental approval is not required for the conduct of our business (other than ordinary course travel licenses, multilevel distribution company registration, and similar approvals). Similarly, environmental laws do not materially limit or materially impact our operations, and compliance with environmental laws does not impose a material cost on our business. YTB Marketing, whose Reps market the IBCs of YTB Travel, is subject to the various state and federal laws and regulations governing the structure and conduct of network marketing companies.

Laws and regulations in each country in which we operate prevent the use of deceptive or fraudulent practices that have sometimes been inappropriately associated with legitimate direct selling and network marketing activities. These laws include anti-pyramiding, securities, lottery, referral selling, anti-fraud and business opportunity statutes, regulations, and court cases. Illegal schemes, typically referred to as "pyramid," "chain distribution," or "endless chain" schemes, compensate participants primarily or solely for the introduction or enrollment of additional participants into the scheme. Often these schemes are characterized by large up-front entry or sign-up fees, over-priced products of low value, little or no emphasis on the sale or use of products, high-pressure recruiting tactics, and claims of huge and quick financial rewards requiring little or no effort. Generally these laws are directed at ensuring that product sales ultimately are made to consumers and that advancement within sales organizations is based on sales of the enterprise's products, rather than on investments in the organizations or on other criteria or activity that are not related to retail sales. Where required by law, we obtain regulatory approval of our network marketing system, or, where approval is not required or available, the favorable opinion of local counsel as to regulatory compliance.

In addition to federal regulation in the United States, each state has enacted its own "Little FTC Act" to regulate sales and advertising. Occasionally, we receive requests to supply information regarding our network marketing plan to regulatory agencies. Although we have, from time to time, modified our network marketing system to comply with interpretations of various regulatory authorities, we believe that our network marketing program is in compliance with the laws and regulations relating to network marketing activities in our current markets. Nevertheless, we remain subject to the risk that, in one or more of our present or future markets, the marketing system or the conduct of certain Reps or RTAs could be found not to be in compliance with applicable laws and regulations. Failure by a Rep or RTA, or by us, to comply with these laws and regulations could have a material adverse effect on our business in a particular market or in general. Any or all of these factors could adversely affect the way we do business and could affect our ability to attract potential Reps or RTAs, or enter into new markets. In the United States, the Federal Trade Commission (“FTC”) has been active in its enforcement efforts against both pyramid schemes and legitimate network marketing organizations with certain legally problematic components, having instituted several enforcement actions resulting in signed settlement agreements and the payment of large fines. Although, to our knowledge, we have not been the target of an FTC investigation, there can be no assurance that the FTC will not investigate us in the future.

On April 5, 2006, the FTC released a proposed rule, The Business Opportunity Rule. This proposed rule would require pre-sale disclosures for all business opportunities, which might include network marketing compensation plans. The Business Opportunity Rule is currently only a proposed rule. If implemented at all, the rule ultimately may not be implemented in a form that applies to network marketing compensation plans, or it may change significantly before it is implemented. If this proposed rule were adopted as it is currently proposed, it would require us to change some of our current practices regarding pre-sale disclosures. The proposed rule, if enacted in its current form, would likely cause us, as well as most other direct sellers, to be regulated as a seller of business opportunities in the United States. Under the current Business Opportunity Rule, we do not qualify as a seller of a business opportunity because we offer U.S. distributors the opportunity to join our business for $449.95, below the $500 threshold required for a company to be subject to the current rule. The proposed rule would eliminate that threshold. In addition, the proposed rule would require all sellers of business opportunities to deliver written disclosure of certain information to a prospective purchaser seven days prior to the time the prospective purchaser could sign any agreement or make any payment in connection with the business opportunity. The information that a seller of a business opportunity would have to provide all prospective purchasers would include: (1) the seller’s and rep’s identification information, (2) whether an earnings claim is made and, if so, a detailed earnings claim statement with substantiating information and certain representations relating to the earnings of other business opportunity purchasers, (3) legal actions involving deceptive practices or other matters filed against the seller, its affiliates and other related parties and/or the presenting distributor in the last 10 years, (4) whether a cancellation or refund policy is available and, if so, a statement describing the policy, (5) the number of business opportunity purchasers that have canceled within the past two years, and (6) a reference list of the 10 nearest current or past business opportunity purchasers, with personal information available to allow the prospective purchaser to contact a listed purchaser. We, along with the Direct Selling Association ("DSA"), other direct selling companies, and other interested parties have filed comments with the FTC opposing adoption of the proposed rule in its current form and suggesting alternative means to regulate fraudulent business activities without imposing undue burdens on legitimate companies in the direct selling industry. If The Business Opportunity Rule is adopted as proposed, it could negatively impact our business and harm our ability to attract new Reps and RTAs in the United States.

We cannot predict the nature of any future law, regulation, interpretation, or application, nor can we predict what effect additional governmental legislation or regulations, judicial decisions, or administrative orders, when and if promulgated, would have on our business. It is possible that future legal requirements may require that we revise our network marketing program. Such new requirements could have a material adverse effect on our business, results of operations, and financial condition.

Corporate History

We were originally incorporated as a New York corporation in June 1982 as Travel Network, Ltd., doing business as Global Travel Network. In February 1994, we re-incorporated in the State of New Jersey. In 1998, our assets were transferred to Global Travel Network, L.L.C. (“GTN”). GTN was created as a conduit to participate in the franchise Global Travel Network business of Travel Network, Ltd.

In September 1999, Playorena, Inc., a public shell company, acquired the outstanding equity of GTN in exchange for 5,063,379 shares of Playorena’s common stock (including 123,292 shares reserved for issuance upon the exercise of certain warrants previously issued by GTN and 4,931,087 shares issued to equity holders of GTN), representing 94.5% of the issued and outstanding common stock of Playorena, Inc. upon completion of the share exchange. Following the merger with Playorena, Inc., the surviving entity’s name was changed to ETRAVNET.COM, Inc., and its common stock was quoted on the OTC-BB under the symbol “ETRV,” and, subsequently, under the symbol “ETVT.” In August 2001, ETRAVNET.COM, Inc. changed its name to REZconnect Technologies, Inc., and its common stock was thereafter quoted under the symbol “REZT.”

In December 2004, we acquired all of the issued and outstanding stock of YourTravelBiz.com, Inc., then a privately-held Illinois corporation, pursuant to a share exchange transaction. In this transaction the stockholders of YourTravelBiz.com, Inc. received, in exchange for 100% of YourTravelBiz.com, Inc.’s capital stock, 11,522,376 newly issued shares of our capital stock (the “Exchange Stock”). The number of shares of Exchange Stock issued was one share greater than the total number of then-outstanding shares of our stock and consisted of 7,430,000 shares of our common stock and 4,092,376 shares of our Series B Convertible Preferred Stock (“Series B Stock”). The Series B Stock was created and issued because we did not have a sufficient number of authorized and un-issued shares of our common stock available for issuance to the YourTravelBiz.com, Inc. stockholders in the transaction. Each share of Series B Stock was converted into one share of our common stock on January 9, 2005. The issuance of the Exchange Stock was not registered, as the transaction was exempt from registration pursuant to Section 4 (2) of the Securities Act of 1933, as amended.

Effective January 4, 2005, we reincorporated in Delaware, changed our name to YTB International, Inc., and increased the number of authorized shares of our common stock to 50,000,000. A principal result of the share exchange transaction was the creation of our current multiple subsidiary operating structure. As a further result of the share exchange transaction, our trading symbol on the OTC-BB was changed to “YTBL.OB.” When our common stock was removed from quotation on the OTC-BB and began to be quoted on the Pink Sheets in 2006, our trading symbol became “YTBL.PK.” On April 17, 2008, our common stock was once again approved to be listed on the OTC-BB. Commencing on May 19, 2008, our Class A Common Stock trades solely on the OTC-BB under the symbol “YTBLA.OB.”

On July 31, 2007, the Reclassification Date, we filed our Amended and Restated Certificate of Incorporation, previously approved by our stockholders at our 2007 annual meeting of stockholders on June 11, 2007, which authorized the issuance of two classes of common stock - Class A Common Stock (300,000,000 shares authorized) and Class B Common Stock (100,000,000 shares authorized) - and an increase in our total authorized capital. This amendment and restatement enabled a reclassification of our then-existing common stock, par value $0.001 per share (“Old Common Stock”) into Class B Common Stock and an accompanying stock dividend (collectively, the reclassification and the stock dividend, the “Reclassification”) pursuant to which stockholders of record received one share of Class A Common Stock and two shares of Class B Common Stock for each share of Old Common Stock held as of the Reclassification Date.

On August 1, 2007, immediately following the effectiveness of the Reclassification, we announced that the new ticker symbol for our new Class A Common Stock was “YTBLA”. Our Class B Common Stock is convertible into our Class A Common Stock (on a one-share-for-one-share basis). Our Class B Common Stock has experienced very limited and sporadic trading, and as such, no established public trading market exists for our Class B Common Stock.

Employees

As of March 9, 2009, we had a total of 283 full-time employees and 5 part-time employees (which excludes Reps and RTAs, who are independent contractors and not employees). Our employees are not represented by any collective bargaining agreement, and we have never experienced a work stoppage. We believe that we enjoy good relations with our employees.

Recent Milestones and Achievements

During 2008, we were named the 26th largest travel agency in the United States by Travel Weekly for the year ended 2007. Reflecting on our growing prominence in the travel industry, in 2007, YTB Travel’s Chief Executive Officer, Kim Sorensen, was named among The 33 Most Influential People in the Travel Industry. During fiscal 2007, the aggregate value of the retail travel services that have been booked by our RTAs and independent franchisees surpassed $400 million.

Only the commissions paid by travel suppliers are included in our financial results, as we are not the merchant of record for these transactions.

In September 2007, we were admitted as a member company of the DSA, a national trade association of leading firms that manufacture and distribute goods and services sold directly to consumers. We thereby joined the ranks of DSA’s more than 220 active and pending member companies in the United States. Our membership in DSA requires us to maintain certain levels of ethical conduct and service in our marketing and direct sales activities, in conformity with DSA’s Code of Ethics and DSA’s stated mission—“to protect, serve and promote the effectiveness of member companies and the independent business people they represent” and “to ensure that the marketing by member companies of products and/or the direct sales opportunity is conducted with the highest level of business ethics and service to consumers.” Our status with the DSA has continued in place through the date of this report.

Geographical Financial Information

See Note 22 – “Segment Information” to the consolidated financial statements for summarized financial information concerning our geographical financial information.

Seasonality

We experience seasonal fluctuations in the demand for the products and services we offer. The majority of our customers book travel for leisure purposes rather than for business. Gross bookings for leisure travel are generally highest in the first and second calendar quarters as customers plan and book their spring and summer vacations. However, net revenue is generally recognized when the travel takes place and typically lags bookings by several weeks or longer. As a result, our cash receipts are generally highest in the first and second calendar quarters and our net revenue is typically highest in the second and third calendar quarters. Our seasonality may also be affected by fluctuations in the travel products our suppliers make available to us for booking, the continued growth of our international operations or a change in our product mix.

Available Information

More information about us can be found on our website at www.ytbi.com. On this website, we make available free of charge our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished as required by Section 13(a) or 15(d) of the Exchange Act, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

Item 1A. Risk Factors.

References to “us,” “we” and “our” refer to the Company. The following risk factors could adversely affect our business, results of operations and financial condition. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us may also negatively impact us and our travel sales.

There is a substantial doubt about our ability to continue as a going concern.

Our independent registered public accounting firm has issued an opinion on our consolidated financial statements that states that the consolidated financial statements were prepared assuming we will continue as a going concern and further states that our loss from operations and working capital deficiency raise substantial doubt about our ability to continue as a going concern. Our plans concerning these matters are discussed in Note 2 to the accompanying audited consolidated financial statements. Our future is dependent on our ability to execute our plan successfully or otherwise address these matters. If we fail to do so for any reason, we potentially would not be able to continue as a going concern.

Global economic conditions may continue to have an adverse effect on our business and financial performance.

Travel expenditures are sensitive to personal and business discretionary spending levels and tend to decline or grow more slowly during economic downturns, including downturns in any of our major markets. In the second half of 2008, there was a rapid softening of domestic and global economic conditions, and the outlook for 2009 is uncertain. This slowing of the domestic and global economies has increased unemployment and reduced the financial capacity of both corporate and leisure travelers, thereby slowing spending on the services we provide. The continuation, or worsening, of domestic and global economic conditions could continue to adversely affect our businesses and financial performance.

Additionally, disruptions in the credit and other financial markets and economic conditions could, among other things, impair the financial condition of one or more of our travel suppliers, thereby increasing the risk of non-performance by such suppliers. This could, in turn, adversely affect our financial results.

Declines or disruptions in the travel industry could adversely affect our business or financial performance.

Our business and financial performance are affected by the health of the worldwide travel industry, including by decreases in hotel occupancy rates, hotel average daily rates, decreases in airline capacity or rising airline ticket prices, all of which we have recently experienced. Events or weakness specific to the air travel industry that could negatively affect our business also include continued fare increases, travel-related strikes or labor unrest, bankruptcies or liquidations and fuel price volatility. Additionally, our business is sensitive to safety concerns, and thus, our business has in the past and may in the future decline after incidents of actual or threatened terrorism, during periods of political instability or geopolitical conflict in which travelers become concerned about safety issues, as a result of natural disasters such as hurricanes or earthquakes or when travel might involve health-related risks. Such concerns could result in a protracted decrease in demand for our travel services. This decrease in demand, depending on its scope and duration, together with any future issues affecting travel safety, could significantly and adversely affect our business and financial performance over the short and long-term.

As a company that distributes products and services through a network marketing system, we experience constant turnover among our Reps and RTAs. Our failure to establish and maintain Rep and RTA relationships for any reason could negatively impact our sales of products and services and harm our financial condition and operating results.

We conduct marketing activities, book travel and sell related products exclusively through 8,337 independent contractors known as Reps and 92,383 RTAs (such numbers are provided as of December 31, 2008), and we depend upon them directly for substantially all of our marketing activities and travel bookings. To increase our revenue, we must increase the number, and/or the productivity, of our Reps and RTAs. Accordingly, our success depends in significant part upon our ability to attract, retain and motivate a large base of Reps and RTAs. The loss of a significant number of Reps and RTAs, including any key Reps and RTAs, together with Rep down-line sales organizations, could materially and adversely affect sales of our services and our travel bookings and could impair our ability to attract new Reps and RTAs.

Reps and RTAs have highly variable levels of training, skills and capabilities. The turnover rate for our Reps and RTAs, and our operating results, can be adversely impacted if we and our upper-level Rep and RTA leadership do not provide the necessary mentoring, training and business support tools for new Reps and RTAs to become successful salespeople in a short period of time.

Our financial success and business reputation depend, in large part, on our Reps and RTAs, who are not employees and operate as independent contractors.

As a network marketing company, we are dependent upon an independent sales force and we do not have direct control over the marketing of our products. We rely on non-employee, independent Reps and RTAs to market and sell our products and services. Reps and RTAs are independent contractors who market, purchase, and/or sell our products and services to customers. Reps and RTAs typically work on a part-time basis and likely will engage in other business activities, some of which may compete with us. We have a large number of Reps and RTAs and a relatively small corporate staff to implement our marketing programs and to provide training and motivational support to our Reps and RTAs. Our net sales are directly dependent upon the efforts of these non-employee, independent Reps and RTAs. Our ability to maintain and increase sales in the future will depend in large part upon our success in increasing the number of new Reps and RTAs, retaining our existing Reps and RTAs, and in improving the productivity of our Reps and RTAs.

We can provide no assurances that the number of Reps and/or RTAs will increase or remain constant or that their productivity will increase. We experienced a 44.3% decrease in active Reps and a 29.2% decrease in RTAs during 2008. We experienced a 217.6% increase in active Reps and a 220.6% increase in RTAs during 2007. The number of active Reps and RTAs may not increase and could decline in the future. Reps and RTAs may terminate their services at any time, and, like most direct selling companies, we experience a high turnover among new Reps and RTAs from year to year. We cannot accurately predict any fluctuation in the number and productivity of Reps or RTAs because we primarily rely upon existing Reps to: (1) sell IBCs to RTAs; (2) sponsor and train new Reps; and (3) motivate new and existing Reps. Operating results could be adversely affected if our existing and new business strategies and products do not generate sufficient economic incentive or interest to retain existing Reps and to attract new RTAs and Reps.

The loss of a significant Rep or downline sales organization could adversely affect our business. We rely on the successful efforts of our Reps who become leaders within our Compensation Plan. Our Compensation Plan is designed to permit Reps to sponsor new Reps, creating multiple levels in the downline organization. Sponsored Reps are referred to as "downline" Reps within the sponsoring Rep's "downline network." As a result of this network marketing system, Reps develop business relationships with other Reps. The loss of a key Rep or group of Reps, large turnovers or decreases in the size of the Rep force, seasonal or other decreases in sales volume reduction, the costs associated with training new Reps, and other related expenses may adversely affect our business, financial condition, or results of operations. Moreover, our ability to continue to attract and retain Reps and RTAs can be affected by a number of factors, some of which are beyond our control, including:

General business and economic conditions;

Public perceptions about network marketing programs;

High-visibility investigations or legal proceeding against network marketing companies by federal or state authorities or private citizens;

Other competing network marketing organizations entering into the marketplace that may recruit our existing Reps or reduce the potential pool of new Reps; and

Changes to the Compensation Plan required by law or implemented for business reasons that make attracting and retaining Reps more difficult.

There can be no assurance that we will be able to continue to attract and retain Reps or RTAs in sufficient numbers to sustain future growth or to maintain our present growth levels, which could have a material adverse effect on our business, financial condition, or results of operations.

Our revenues are highly dependent on IBC hosting fees received from Affiliates, RTAs, travel agents and agencies.

Fees from hosting and sales of IBCs that we offer to home-based representatives make-up over 75% of our revenues as of December 31, 2008. While our business model is based primarily on IBC hosting of various products and services, we do intend to pursue other sources of revenue to lower this percentage. In the event that we are unable to do so, we will remain dependent on IBC hosting. The majority of our IBC hosting agreements are terminable at will or upon 30 days’ notice. While we are dependent on fees from IBC hosting, no single IBC hosting arrangement accounts for more than 1% of our IBC hosting revenues. In the event of a substantial decrease in the number of IBC hosting arrangements that we enter into or renew, or the fees we are able to charge for such arrangements, our financial condition, results of operations and future growth may be substantially impaired.

Since we cannot exert the same level of influence or control over our Reps and RTAs as we could were they our own employees, our Reps and RTAs could fail to comply with our Rep and RTA Policies and Procedures and Terms and Conditions, which could result in claims against us that could harm our financial condition and operating results.

Our Reps and RTAs are independent contractors and, accordingly, we are not in a position to directly provide the same direction, motivation and oversight as we would if our Reps and RTAs were our own employees. As a result, there can be no assurance that our Reps or RTAs will participate in our marketing strategies or plans, accept our introduction of new services or comply with our respective Rep and RTA Policies and Procedures and Terms and Conditions.

Our Policies and Procedures and Terms and Conditions for our Reps and RTAs differ according to the various legal requirements of each country in which we do business. While our respective Policies and Procedures and Terms and Conditions are designed to govern Rep and RTA conduct and to protect the goodwill associated with our trademarks, they can be difficult to enforce because of the large number of Reps and RTAs and because of our Reps’ and RTAs’ independent status. Violations by our Reps and RTAs of applicable law or of our Policies and Procedures and Terms and Conditions in dealing with customers or other third parties could reflect negatively on our services and operations, and harm our business reputation. In addition, it is possible that a court could hold us civilly or criminally accountable based on vicarious liability because of the actions of our Reps and RTAs. If any of these events occurs, the value of an investment in our common stock could be impaired.

Because our earnings from IBC sales, monthly fees, commissions, training programs and marketing materials have exceeded marketing commissions and travel commissions paid out to our Reps and RTAs in the past, such a trend, if continued, could reflect our Reps’ and RTAs’ inability to achieve profitable results for themselves, which, in turn, could threaten the sustainability of our business model.

Our business model depends, to a significant extent, upon our ability to achieve a profit from the activities carried out by our Reps and RTAs on our behalf and to draw from their affiliation with our Company. If Reps and RTAs are unable to operate their own marketing and/or IBC profitably within the framework of our organization, it could adversely impact Rep and RTA retention and could threaten the sustainability of our business model.

For the 2008 fiscal year, our revenues from IBC sales and monthly web-hosting fees paid by RTAs, along with revenues from training programs held and marketing materials sold to Reps and RTAs, exceeded the marketing commissions and travel commissions that we expended in payments to our Reps and RTAs. If, and to the extent that, this excess reflected in our operating results actually reflects a deficit in the operating results of our Reps and RTAs in their marketing and travel-related activities within the YTB organization, such a deficit, if continued indefinitely, would reflect a negation of the financial incentive for Reps and RTAs to continue in their YTB-related activities on our behalf. Any such negative financial results for our Reps and RTAs would adversely impact our ability to retain them within our organization, which, in turn, would call into question the sustainability of our business model and thereby harm our financial condition and operating results.

Our growth cannot be assured; even if we do experience growth, we cannot assure you that we will grow profitably.

Our business strategy is dependent upon the growth of our business. For us to achieve significant growth, potential Reps and RTAs, consumers and travel suppliers must accept our IBCs as a valuable commercial tool. Travel suppliers will also need to accept or expand their use of our IBCs and to view our IBCs as an efficient and profitable channel of distribution for their travel products.

To a lesser extent, our growth is also dependent on our ability to broaden the appeal of our IBCs to business and other travelers. We have limited experience with corporate travel, and our ability to offer products and services that will attract a significant number of business travelers to use our services is not certain. Consumers who have historically purchased travel products through traditional commercial channels, whether by using local travel agents or by calling suppliers directly, must instead purchase these products on our RTAs’ IBCs. If any of these initiatives are not successful, our growth may be limited and we may be unable to maintain profitability.

Our plans to pursue other opportunities for revenue growth and cost reduction are at an early stage, and we cannot assure you that our plans will be successful or that we will actually proceed with them as described.

If we fail to further penetrate and expand our business in existing markets, the growth in sales of our services, along with our operating results, could be negatively impacted.

The success of our business is to a large extent contingent on our ability to continue to grow by further penetrating existing markets, both domestically and, most recently, internationally. Our ability to further penetrate existing markets in which we compete is subject to numerous factors, many of which are out of our control. Also, our ability to increase market penetration in certain countries may be limited by the finite number of persons in a given country inclined to participate in a network marketing business model. Moreover, our growth will depend upon improved training and other activities that enhance Rep and RTA retention in our markets. As we continue to focus on expanding our existing international operations, these and other risks associated with international operations may increase, which could harm our financial condition and operating results.

Adverse changes or interruptions in our relationships with travel suppliers could affect our access to travel offerings and reduce our revenues.

We rely on various agreements with our airline, hotel and auto suppliers, and these agreements contain terms that could affect our access to travel services and reduce our revenues. Most of the relationships we have are freely terminable by the supplier upon notice. The majority of our agreements with travel suppliers are one year agreements. None of these arrangements are exclusive, and any of our suppliers could enter into, and in some cases may have entered into, similar agreements with our competitors.

We cannot ensure that our arrangements with travel suppliers will remain in effect or that any of these suppliers will continue to supply us with the same level of access to inventory of travel offerings in the future. If our access to inventory is affected, or our ability to obtain inventory on favorable economic terms is diminished, it could have a material adverse effect on our business, financial condition or results of operations.

In addition, our travel suppliers have felt the impact of the global economic recession. For example, several U.S. airlines have implemented capacity reductions and higher fares in the face of higher fuel prices and slower customer demand, and are under increased pressure to reduce their overall distribution costs. As a result, our suppliers could attempt to terminate or renegotiate their agreements with us on more favorable terms to them, which could reduce the revenue we generate from those agreements.

Airline “journey controls” may reduce the number of low-priced connecting itineraries we can present to our customers.

Some carriers currently employ, or may adopt, “journey control logic” designed to enhance the management of airfares and seat availability for connecting itineraries, based on a traveler’s origin and final destination. Our software is capable of accommodating journey control restrictions, but only if the particular airline implements procedures to assure availability of information to our database and update it regularly. If the carrier does not implement these procedures to keep the database updated, then the journey control logic will cause some fare and flight combinations for connecting itineraries to be rejected by the airline. Consumers attempting to book a reservation on one of these itineraries will receive an error message indicating that the desired fare and flight combination is not available, which may affect their perception of the reliability of our service. We believe that our charter associate agreements and, as applicable, supplier link agreements with participating carriers require them to provide availability data on a timely basis to our database on our behalf. If airlines activate journey control restrictions, then our ability to present a large number of low-priced fare and flight combinations on connecting itineraries that can be successfully booked by consumers may be compromised. This could have a material adverse effect on our business and financial results.

A reduction in transaction fees or the elimination of commissions paid by travel suppliers could reduce our revenues.

The minimum transaction fees many of our airline suppliers have agreed to pay to us decrease in amount each year over the term of our charter associate agreements. In recent years, less than approximately 5% of our revenues came from transaction and segment fees paid directly by travel suppliers for airline bookings made by our customers through our online travel service. Where we have charter associate agreements with airline suppliers, these agreements obligate the airline to pay us transaction fees on published fares that are not less than certain agreed-upon floor rates for tickets sold through or on our RTAs’ IBCs. These minimum transaction fees decrease in amount each year and are expected to continue to decline on an annual basis as a percentage of gross revenues, among other reasons, because it is unlikely that any of our charter associate airlines will choose to pay us transaction fees above the minimum levels specified in our contracts. Furthermore, our charter associate agreements have defined durations, and we cannot assure you that our transaction fees will not be reduced or eliminated in the future or will remain competitive with market terms during the duration of the agreements.

Interruptions in service from third parties or transitions to new service providers could impair the quality of our service.

We rely on third-party computer systems and other service providers, including the computerized central reservation systems of the airline, lodging and car rental industries, to make airline ticket, lodging and car rental reservations and credit card verifications and confirmations. Other third parties provide, for instance, our data center, telecommunications access lines and significant computer systems and software licensing, support and maintenance services. In the past, third parties like these have suffered system outages that have adversely affected the ability of their clients to offer travel services or to process booking transactions. Any future interruption in these, or other, third-party services or deterioration in their performance could impair the quality of our service. We cannot be certain of the financial viability of all of the third parties on which we rely. We work with many vendors in the telecommunications industry, including Broadview and Verizon for Internet access. If our arrangements with any of these third parties are terminated or if they were to cease operations, we might not be able to find an alternate provider on a timely basis or on reasonable terms, which could hurt our business.

We rely on relationships with licensors for key components of our software.

We also rely on licensed technology and hire contractors to assist in the development and maintenance of our systems. Continued access to these licensors and contractors on favorable contract terms or access to alternative software licenses and information technology contractors is important to our operations. Adverse changes in any of these relationships could have a material adverse effect on our business, financial condition or results of operations.

We attempt to negotiate favorable pricing, service, confidentiality and intellectual property ownership or licensing terms in our contracts with all of our service providers. These contracts usually have multi-year terms. However, there is no guarantee that these contracts will not terminate and that we will be able to negotiate successor agreements or agreements with alternate service providers on competitive terms. Further, the existing agreements may bind us for a period of time to terms and technology that become obsolete as our industry and our competitors advance their own operations and contracts.

We are involved, and may become involved in the future, in legal proceedings that, if adversely adjudicated or settled, could adversely affect our financial results.

We are and may, in the future, become party to litigation, including, for example, claims relating to advertising, unfair competition and anti-pyramid laws. We are also subject to the risk of private party challenges to the legality of our network marketing program. The multi-level marketing programs of other companies have been successfully challenged in the past. Currently, we are defending against two such cases. The first, now pending in state court in California, involves claims brought by the Attorney General of California alleging violations of Section 17200 of the California Business and Professions Code. The second, now pending in the United States District Court for the Southern District of Illinois, involves claims brought by private plaintiffs on behalf of a putative class alleging violations of the Illinois Consumer Fraud Act. See Item 3 for additional information.

In general, litigation claims can be expensive and time consuming to bring or defend against and could result in settlements or damages that could significantly affect financial results. An adverse judicial determination with respect to our network marketing program, or in proceedings not involving us directly but which challenge the legality of multi-level marketing systems in any market in which we operate, could negatively impact our business. It is not possible to predict the final resolution of the litigation to which we currently are or may in the future become party to, and the impact of certain of these matters on our business, results of operations and financial condition could be material.

Our ongoing activities may require us to seek additional financing, which may not be obtainable or may be unduly onerous or dilutive.

Historically, we have financed operations through operating revenue and the sale of equity securities. Even if we are successful in raising additional capital to meet our working capital requirements, we may nevertheless need to obtain additional financing to fund ongoing operations or to expand our business through such measures as increases in sales and marketing expense, joint ventures, acquisitions or other strategic transactions we deem in the best interests of our Company. We would expect to seek such financing through bank borrowings and/or sales of our equity or debt securities. Particularly in light of existing uncertainty in the capital and credit markets, we can provide no assurance that sufficient financing will be available or desirable, or that our counterparties in any such financings would honor their contractual commitments. In addition, any increases in general interest rates or the weakening in the credit markets could increase our cost of capital. There can be no assurance that we will be able to obtain such financing as and when necessary to meet our operating requirements or expansion plans, if any, or that the terms of any available financing will not be unduly onerous or dilutive to our stockholders.

Failure to expand into, or to succeed in, new international markets will limit our ability to grow sales of our services.

We believe that our ability to achieve future growth is dependent in part on our ability to continue our international expansion efforts. However, there can be no assurance that we would be able to enter new international markets on a timely basis, or that new markets would be profitable. Our ability to capitalize on growth in new international markets and maintain the current level of operations in our existing international markets is exposed to risks associated with our international operations, including:

the possibility that a foreign government might ban or severely restrict our business method of direct selling, or that local civil unrest, political instability or changes in diplomatic or trade relationships might disrupt our operations in an international market;

the possibility that a government authority might impose legal, tax or other financial burdens on our RTAs or Reps, as direct sellers, or to the structure of our operations in various markets; and

the possibility that a government authority might challenge the status of our RTAs or Reps as independent contractors or impose employment or social security taxes on them.

Once we have entered a market, we must adhere to the regulatory and legal requirements of that market. No assurance can be given that we would be able to successfully meet local regulatory requirements or attract local customers. There can be no assurance that we would be able to obtain and retain necessary permits and approvals.

In addition to significant regulatory barriers, we may also encounter problems conducting operations in new markets with different cultures and legal systems from those encountered elsewhere. It is difficult to assess the extent to which our services and sales techniques would be accepted or successful in any given country.

Additionally, in many markets, other network marketing companies already have significant market penetration, the effect of which could be to desensitize the local population to a new opportunity with our Company, or to make it more difficult for us to recruit qualified Reps. There can be no assurance that, even if we are able to commence operations in new foreign countries, there would be a sufficiently large population of potential Reps and RTAs inclined to participate in a network marketing system or travel services opportunity offered by us.

We depend on the integrity and reliability of our information technology infrastructure, and any related inadequacies may result in substantial interruptions to our business.

Our ability to timely provide services to our Reps and RTAs and their customers depends on the integrity of our information technology system. The most important aspect of our information technology infrastructure is the system through which we record and track Rep sales and RTA commissions, volume points, bonuses and other incentives. We have encountered, and may encounter in the future, errors in our software or our enterprise network, or inadequacies in the software and services supplied by our vendors. Any such errors or inadequacies that we may encounter in the future may result in substantial interruptions to our services and may damage our relationships with, or cause us to lose our Reps and RTAs if the errors or inadequacies impair our ability to track sales and pay bonuses and other incentives. Such errors may be expensive or difficult to correct in a timely manner, and we may have little or no control over whether any inadequacies in software or services supplied to us by third parties are corrected, if at all. Despite any precautions, the occurrence of a natural disaster or other unanticipated problems could result in interruptions in services and reduce our revenue and profits, thereby harming our financial condition and operating results.

Rapid technological changes may render our technology obsolete or decrease the attractiveness of our products to our RTAs and consumers.

To remain competitive in the online travel industry, we must continue to enhance and improve the functionality and features of our IBCs. The Internet and the online commerce industry are rapidly changing. In particular, the online travel industry is characterized by increasingly complex systems and infrastructures and new business models. If competitors introduce new products embodying new technologies, or if new industry standards and practices emerge, our existing IBCs, technology and systems may become obsolete. Our future success will depend on our ability to accomplish the following:

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enhance our existing products;

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develop and license new products and technologies that address the increasingly sophisticated and varied needs of our prospective customers and suppliers; and

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respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis.

We may use new technologies ineffectively or we may fail to adapt our IBC transaction processing systems and network infrastructure to consumer requirements or emerging industry standards. If we face material delays in introducing new services, products and enhancements, we may have difficulty enrolling and maintaining our Reps and selling and maintaining our IBCs, and customers and suppliers may forego the use of our products and use those of our competitors.

We may not protect our technology or other intellectual property effectively, which would allow competitors to duplicate our products. This could make it more difficult for us to compete with them.

If our intellectual property is not adequate to provide us with a competitive advantage or to prevent competitors from replicating our products, or if we infringe upon the intellectual property rights of others, our financial condition and results of operations could be harmed. Our success and ability to compete in the online travel industry depends, in part, upon our ability to timely produce innovative products and product enhancements that motivate our Reps and RTAs and their customers. We attempt to protect our products and product enhancements under a combination of trade secret laws, confidentiality procedures and contractual provisions. We rely primarily on trade secret laws and provisions in our contracts to protect our technology. We own, or have licenses to use, the material trademark and trade name rights used in connection with the packaging, marketing and distribution of our products in the markets where those products are sold.

Laws and our actual contractual terms, regarding the protection of our intellectual property may not be sufficient to protect our technology from use or theft by third parties.

We may be unable to prevent third parties from infringing upon or misappropriating our proprietary rights, or from independently developing non-infringing products that are competitive with, equivalent to, and/or superior to our products. We may have legal or contractual rights that we could assert against such illegal use, but monitoring infringement and/or misappropriation of intellectual property can be difficult and expensive, and we may not be able to detect any infringement or misappropriation of our proprietary rights. Even if we do detect infringement or misappropriation of our proprietary rights, litigation to enforce these rights is complex and expensive and could cause us to divert financial and other resources away from our business operations. Further, the laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States.

Any of these events could have a material adverse effect on our business, reputation, results of operations or financial condition.

Our business could be negatively affected by changes in search engine algorithms and dynamics.

We increasingly utilize internet search engines, principally through the purchase of travel-related keywords, to generate traffic to our IBCs. Search engines frequently update and change the logic that determines the placement and display of results of a user’s search, such that the purchased or algorithmic placement of links to our IBCs can be negatively affected. In addition, a significant amount of our business is directed to our own IBCs through our participation in pay-per-click and display advertising campaigns on internet media properties and search engines whose pricing and operating dynamics can experience rapid change, both technically and competitively. If a major search engine changes its algorithms in a manner that negatively affects the search engine ranking, paid or unpaid, of our IBCs or that of our third-party distribution partners, or if competitive dynamics further impact market pricing in a negative manner, our business and financial performance would be adversely affected.

If we do not attract and retain qualified personnel, we may not be able to expand our business.

Our business and financial results depend on the continued service of our key personnel, in particular J. Lloyd Tomer (Chairman of the Board), J. Scott Tomer (Chief Executive Officer) and J. Kim Sorensen (Vice Chairman of the Board). Their relationship with our sales force and their experience and reputation are key factors in our business. The loss of the services of our executive officers or other key personnel could harm our business and financial results. Our success also depends on our ability to hire, train, retain and manage highly skilled employees. We cannot assure you that we will be able to attract and retain a significant number of qualified employees or that we will successfully train and manage the employees we hire.

In the future, we may be responsible for withholding certain taxes relating to our Reps and RTAs, which could harm our financial condition and operating results.

Under current law, our Reps and RTAs in the United States and the other countries in which we operate are treated for income tax purposes as independent contractors and compensation paid to them is not subject to withholding by us. The definition of independent contractor has been challenged in the past and any changes could possibly jeopardize the exempt status enjoyed by direct sellers and negatively impact our recruiting efforts. The network marketing industry has strongly opposed such bills as they relate to direct sellers. States have become increasingly active in this area as well. To date, the status of direct sellers as independent contractors has not been affected. However, there is no assurance that future legislation at the federal or state level, or in countries other than the United States, affecting direct sellers will not be enacted.

The federal, state, provincial, or local taxing authorities in any of the countries where the Company has Reps or RTAs could classify the Reps or RTAs as employees of the Company (as opposed to independent contractors). In the event that local laws and regulations or the interpretation of local laws and regulations change to require us to treat our independent Reps or RTAs as employees, or if our Reps or RTAs are deemed by local regulatory authorities in one or more of the jurisdictions in which we operate to be our employees rather than independent contractors, under existing laws and interpretations, we may be held responsible for a variety of obligations that are imposed upon employers relating to their employees, including social security, unemployment insurance, workers compensation insurance, and related taxes in those jurisdictions, plus any related assessments, interest, and penalties, which could harm our financial condition and operating results. Additionally, an adverse determination by any one taxing authority could influence the decisions of regulatory authorities in other jurisdictions. Any or all of such factors could adversely affect the way the Company does business and could affect the Company's ability to attract potential Reps and RTAs.

Our business is exposed to risks associated with online commerce security and credit card fraud.

Consumer concerns over the security of transactions conducted on the Internet or the privacy of users may inhibit the growth of the Internet and online commerce. To transmit confidential information such as customer credit card numbers securely, we rely on encryption and authentication technology. Unanticipated events or developments could result in a compromise or breach of the systems we use to protect customer transaction data. Furthermore, our servers and those of our service providers may be vulnerable to viruses or other harmful code or activity transmitted over the Internet. While we proactively check for intrusions into our infrastructure, a virus or other harmful activity could cause a service disruption.

In addition, we bear financial risk from products or services purchased with fraudulent credit card data. Although we have implemented anti-fraud measures, a failure to control fraudulent credit card transactions adequately could adversely affect our business.

As a result of our operating history in online commerce and the variability that can be experienced by our operations, we are unable to accurately forecast our revenues.

Our current and future expense levels are based predominantly on our operating plans. We may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues would likely have an adverse effect on our business, operating results and financial condition.

Due to the high level of competition in our industry, we might fail to increase our Rep and RTA base, which could negatively impact our sales of products and services.

In our efforts to attract and retain Reps and RTAs, we compete with other network marketing organizations, including those in the dietary and nutritional supplement, weight management product and personal care and cosmetic product industries. Our competitors include both network marketing companies such as Alticor Inc. (Amway Corp.), Avon Products Inc., Herbalife Ltd., Mary Kay Inc., Melaleuca, Inc., Nature’s Sunshine Products Inc., NuSkin Enterprises Inc. and USANA Health Sciences Inc., as well as “brick and mortar” travel agencies, and online travel providers. Because the industry in which we operate is not particularly capital-intensive or otherwise subject to high barriers to entry, it is relatively easy for new competitors to emerge who will compete with us for our Reps and RTAs and customers. In addition, the fact that our Reps and RTAs may easily enter and exit our network marketing program contributes to the level of competition that we face. An RTA or Rep can enter or exit our network marketing system with relative ease at any time without facing a significant investment or loss of capital because, among other possible factors, (1) there is a low upfront financial cost generally $449.95 for an RTA plus monthly fees, and no upfront fee or monthly fees for a Rep, (2) we do not require any minimal amount of time spent working as a prerequisite to work as a Rep or RTA, (3) we do not insist on any special outside training as a prerequisite to becoming a Rep or RTA, and (4) we do not prohibit a new Rep or RTA from working with another company. Our ability to remain competitive, therefore, depends, in significant part, on our success in recruiting and retaining Reps and RTAs through an attractive compensation plan, the maintenance of an attractive product portfolio and other incentives. We cannot ensure that our programs for recruitment and retention of Reps and RTAs will be successful, and if they are not, our financial condition and operating results would be harmed.

Adverse publicity and negative public perception associated with our services, or network marketing program, or those of similar companies, could harm our financial condition and operating results.

The size of our distribution network and the results of our operations may be significantly affected by the public’s perception of us and similar companies. Our ability to attract and retain Reps and RTAs, and to sustain and enhance sales through our Reps and RTAs can be affected by adverse publicity or negative public perception regarding our industry, our competition, or our business generally. This perception is dependent upon opinions concerning:

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the reliability and quality of our services;

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the safety and quality of similar services provided by other companies;

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regulatory investigations of us, our competitors and our respective services;

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the actions of our current or former sales force;

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our network marketing program; and

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the network marketing business generally.

Adverse publicity concerning any actual or purported failure by us or our Reps or RTAs to comply with applicable laws and regulations regarding service claims and advertising, the regulation of our network marketing program, the licensing of our services for sale in our target markets or other aspects of our business, whether or not resulting in enforcement actions or the imposition of penalties, could have an adverse effect on the reputation of our Company and could negatively affect our ability to attract, motivate and retain Reps and RTAs, which would negatively impact our ability to generate revenue. We cannot ensure that all Reps and RTAs will comply with applicable legal requirements relating to the advertising, labeling, licensing or distribution of our services. There can be no assurance that we will not be subject to adverse publicity or negative public perception in the future or that such adverse publicity will not have a material adverse effect on our business, financial condition, or results of operations.

Our network marketing program could be found not to be in compliance with current or newly adopted laws or regulations in one or more markets, which could prevent us from conducting our business in those markets and harm our financial condition and operating results.

The violation of marketing or advertising laws by Reps in connection with the sale of our products and services, or the promotion of our Compensation Plan, could adversely affect our business. New Reps and RTAs sign a written contract and agree to adhere to the YTB policies and procedures. Although these policies and procedures prohibit Reps and RTAs from making false, misleading and other improper claims regarding products, services, or income potential from the distribution of the products and services, Reps and RTAs may, from time to time, without our knowledge and in violation of our policies, create promotional materials or otherwise provide information that does not accurately describe our marketing program. They also may make statements regarding potential earnings, product or service claims, or other matters in violation of our policies or applicable laws and regulations concerning these matters. These violations may result in legal action against us by regulatory agencies, state attorneys general, or private parties. Legal actions against our Reps, RTAs, or others who are associated with us could lead to increased regulatory scrutiny of our business, including our network marketing system. We take what we believe to be commercially reasonable steps to monitor the activities of our Reps to guard against misrepresentation and other illegal or unethical conduct by Reps and to assure that the terms of our policies and procedures and Compensation Plan are observed. There can be no assurance, however, that our efforts in this regard will be sufficient to accomplish this objective. Adverse publicity resulting from such activities could also make it more difficult for us to attract and retain Reps and RTAs and may have an adverse effect on our business, financial condition, and results of operations.

Network marketing is subject to intense government scrutiny and regulation, including, without limitation, federal and state regulation of marketing practices, and federal and state regulation of the offer and sale of business franchises, business opportunities, and securities. This adds to the expense of doing business and the possibility that changes in the law might adversely affect our ability to sell some of our products in certain markets. Network marketing systems, such as ours, are frequently subject to laws and regulations that are directed at ensuring that product sales are made to consumers of the products and that compensation, recognition, and advancement within the marketing organization are based primarily on the sale of products rather than on investment in the sponsoring company. The FTC has recently been very active in its enforcement of the FTC Act against network marketing or purported network marketing companies, having instituted several enforcement actions resulting in signed agreements and payments of large fines (consumer redress). Although the Company has not been the target of an FTC investigation, there can be no assurance that the FTC will not investigate the Company's activities in the future.

Regulatory authorities in one or more of our present or future markets could determine that our network marketing system does not comply with these laws and regulations or that it is prohibited. Failure to comply with these laws and regulations or such a prohibition could have a material adverse effect on our business, financial condition, or results of operations. Further, we may simply be prohibited from distributing products through a network-marketing channel in some foreign countries, or we may be forced to alter our Compensation Plan.

We are also subject to the risk that new laws or regulations might be implemented or that current laws or regulations might change, which could require us to change or modify the way we conduct our business in certain markets. This could be particularly detrimental to us if we had to change or modify the way we conduct business in markets that represent a significant percentage of our net sales. For example, the FTC released a proposed Business Opportunity Rule on April 5, 2006. The proposed rule, if enacted in its current form, would likely cause us, as well as most other direct sellers, to be regulated as a seller of business opportunities in the United States. Under the current Business Opportunity Rule, we do not qualify as a seller of a business opportunity because we offer U.S. distributors the opportunity to join our business for $449.95, below the $500 threshold required for a company to be subject to the current rule. The proposed rule would eliminate that threshold. In addition, the proposed rule would require all sellers of business opportunities to deliver written disclosure of certain information to a prospective purchaser seven days prior to the time the prospective purchaser could sign any agreement or make any payment in connection with the business opportunity. The information that a seller of a business opportunity would have to provide all prospective purchasers would include: (1) the seller’s and Rep’s identification information, (2) whether an earnings claim is made and, if so, a detailed earnings claim statement with substantiating information and certain representations relating to the earnings of other business opportunity purchasers, (3) legal actions involving deceptive practices or other matters filed against the seller, its affiliates and other related parties and/or the presenting distributor in the last 10 years, (4) whether a cancellation or refund policy is available and, if so, a statement describing the policy, (5) the number of business opportunity purchasers that have canceled within the past two years, and (6) a reference list of the 10 nearest current or past business opportunity purchasers, with personal information available to allow the prospective purchaser to contact a listed purchaser. We, along with the DSA, other direct selling companies, and other interested parties have filed comments with the FTC opposing adoption of the proposed rule in its current form and suggesting alternative means to regulate fraudulent business activities without imposing undue burdens on legitimate companies in the direct selling industry. The Business Opportunity Rule is currently only a proposed rule. If implemented at all, the rule ultimately may not be implemented in a form that applies to network marketing compensation plans, or it may change significantly before it is implemented. If The Business Opportunity Rule is adopted as proposed, it could negatively impact our business and harm our ability to attract new Reps and RTAs in the United States.

Our business may also be affected by other actions of governments to restrict the activities of direct selling companies for various reasons, including the limitation on the ability of direct selling companies to operate through direct sales without the involvement of a traditional retail channel. Foreign governments may also seek to require that non-domestic companies doing or seeking to do business place a certain percentage of ownership of legal entities in the hands of local nationals to protect the commercial interests of its citizens. Customs laws, tariffs, import duties, export quotas and restrictions on repatriation of foreign earnings may negatively affect our Company’s international operations. Governments may seek either to impose taxes on independent sales force members or to classify independent sales force members as employees of direct selling companies with whom they may be associated, triggering employment-related taxes on the part of the direct selling companies. The U.S. government may impose restrictions on our Company’s ability to engage in business in a foreign country in connection with the foreign policy of the United States.

Further, our international operations require us to comply with a number of U.S. and international regulations. For example, we must comply with the Foreign Corrupt Practices Act, or FCPA, which prohibits U.S. companies or their agents and employees from providing anything of value to a foreign official for the purposes of influencing any act or decision of these individuals in their official capacity to help obtain or retain business, direct business to any person or corporate entity or obtain any unfair advantage. Any failure by us to adopt appropriate compliance procedures and ensure that our RTAs and Reps comply with the FCPA and applicable laws and regulations, if necessary, in foreign jurisdictions could result in substantial penalties or restrictions on our ability to conduct business in certain foreign jurisdictions.

Changes in consumer preferences could negatively impact our operating results.

Our business is subject to changing consumer trends and preferences (both on the level of our Reps and RTAs and on the level of consumers to whom our RTAs offer travel services and products). Our continued success depends in part on our ability to anticipate and respond to these changes, and we may not respond in a timely or commercially appropriate manner to such changes. Our failure to accurately predict these trends could negatively impact consumer opinion of our services, which in turn could harm our customer, Rep and RTA relationships and cause the loss of sales. The success of our service offerings and enhancements depends upon a number of factors, including our ability to:

•

accurately anticipate customer needs;

•

innovate and develop new services or service enhancements that meet these needs;

•

successfully commercialize new services or service enhancements in a timely manner;

•

price our services competitively;

•

deliver our services in sufficient volume and in a timely manner; and

•

differentiate our service offerings from those of our competitors.

If we do not introduce new services or make enhancements to meet the changing needs of our customers in a timely manner, some of our services could be rendered obsolete, which could negatively impact our revenues, financial condition and operating results.

Our processing, storage, use and disclosure of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements, differing views of personal privacy rights or security breaches.

In the processing of our traveler transactions, we receive and store a large volume of personally identifiable information. This information is increasingly subject to legislation and regulations in numerous jurisdictions around the world. This government action is typically intended to protect the privacy and security of personal information, including credit card information that is collected, processed and transmitted in or from the governing jurisdiction.

We could be adversely affected if domestic or international legislation or regulations are expanded to require changes in our business practices, or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business.

Travel businesses have also been subjected to investigations, lawsuits and adverse publicity due to allegedly improper disclosure of passenger information. As privacy and data protection have become more sensitive issues, we may also become exposed to potential liabilities as a result of differing views on the privacy of travel data. These and other privacy concerns, including security breaches, could adversely impact our business, financial condition and results of operations.

Risks Related to Ownership of Our Common Stock

The trading price of shares of our Class A Common Stock is likely to be volatile.

The trading price of our Class A Common Stock has been and is likely to be subject to fluctuations. Factors affecting the trading price of our Class A Common Stock may include:

•

fluctuations in our quarterly operating and earnings per share results;

•

material developments with respect to future acquisitions;

•

loss of key personnel, key Reps or key RTAs;

•

announcements of technological innovations or new services by us or our competitors;

•

delays in the development and introduction of new services;

•

our failure to timely address changing customer, RTA or Rep preferences;

•

legislative or regulatory changes;

•

general trends in the industry;

•

recommendations and/or changes in estimates by equity and market research analysts;

•

disputes and/or developments concerning intellectual property, including patents and litigation matters;

•

sales of Class A Common Stock by our existing holders, in particular sales by management;

•

securities class action or other litigation;

•

developments in our relationships with current or future Reps and RTAs, customers or suppliers;

•

general economic conditions, both in the United States and abroad; and

•

regulatory investigations or other litigation matters.

Our Chairman of the Board, together with his family members and affiliates, controls a substantial portion of our combined stockholder voting power, and his interests may be different from yours.

Our Chairman of the Board, J. Lloyd Tomer, together with his family (including his son, our Chief Executive Officer, J. Scott Tomer) and affiliates, has the ability to influence the election and removal of the members of our board of directors and, as a result, to influence the future direction and operations of our Company. As of December 31, 2008, J. Lloyd Tomer, his family and affiliates beneficially owned common stock with voting power constituting approximately 45.8% of the combined voting power of our common stock (after factoring in the relative voting power of our Class A Common Stock and Class B Common Stock). Accordingly, they may significantly influence decisions concerning business opportunities, declaring dividends, issuing additional shares of common stock or other securities and the approval of any merger, consolidation or sale of all or substantially all of our assets. They may make decisions that are adverse to your interests.

Liquidity on the OTC-BB is limited and we may not be able to obtain listing of our Class A Common Stock on a more liquid market.

Commencing on May 19, 2008, our Class A Common Stock trades solely on the OTC-BB under the symbol “YTBLA.OB.” The OTC-BB provides significantly less liquidity than national or regional securities exchanges. Securities traded on the OTC-BB are usually thinly traded, highly volatile, have fewer market makers and are not followed by analysts. Quotes for stocks included on the OTC-BB are not listed in newspapers. Therefore, prices for securities traded solely on the OTC-BB may be difficult to obtain and holders of our securities may be unable to resell their securities at or near their original acquisition price, or at any price. We cannot give any assurance that we will be able to meet, or, if met, maintain, the listing standards of any national or regional securities exchanges.

Our Class A Common Stock has been thinly traded and the public market may provide little or no liquidity for holders of our Class A Common Stock.

Purchasers of our Class A Common Stock may find it difficult to resell their shares at prices quoted in the market or at all. There is currently a limited volume of trading in our Class A Common Stock. Due to the historically low trading price of our Class A Common Stock, many brokerage firms may be unwilling to effect transactions in our Class A Common Stock, particularly because low-priced securities are subject to an SEC rule that imposes additional sales practice requirements on broker-dealers who sell low-priced securities (generally those below $5.00 per share). We cannot predict when or whether investor interest in our Class A Common Stock might lead to an increase in its market price or the development of a more active trading market or how liquid that market might become.

We may issue preferred stock in the future, with rights senior to our common stock.

We have authorized in our certificate of incorporation the issuance of up to five million shares of preferred stock. We may issue shares of preferred stock in one or more new series. Our board of directors may determine the terms of the preferred stock without further action by our stockholders. These terms may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights, and sinking fund provisions. Although we have no present plans to issue shares of preferred stock or to create new series of preferred stock, if we do issue preferred stock, it could affect the rights, or even reduce the value, of our common stock.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

The following table sets forth certain information concerning our principal facilities:

PROPERTY LOCATION	APPROXIMATE AREA IN SQUARE FEET		PRIMARY USES OF PROPERTY	SEGMENT	OWNERSHIP OR LEASE
1901 East Edwardsville Road
Wood River, Illinois		120,000	Corporate headquarters	All	Owned (1)

560 Sylvan Avenue			REZconnect Technologies, Inc.
Englewood Cliffs, New Jersey		2,000	(subsidiary) headquarters	Primarily Travel	Leased (2)

600 Country Club View Drive
2nd Floor
Edwardsville, Illinois		5,000	Administration	All	Leased (3)

#112 Magnolia Drive, Lot #9
Magnolia Commons
Glen Carbon, Illinois		5,500	Administration	All	Leased (4)

1151 Dundas St. West			Sunrise Travel Service retail
Mississauga, Ontario / Canada		618	travel agency	Primarily Travel	Leased (5)

#12 - 15243 91st Avenue
Surrey, British Columbia / Canada		1200	Administration	Primarily Travel	Leased (6)

Purdy's Wharf Tower 1
1959 Upper Water Street
Suite 1700 / 1800
Halifax, Nova Scotia / Canada		N/A	Administration	Primarily Travel	Leased (7)

(1) Subject to mortgage in original principal amount of $2.5 million, mortgage was renewed on July 26, 2008 for an additional 12 month period, which bears interest at a floating rate equal to the prime rate, plus 1.00%. Currently, $2.0 million of principal remains outstanding under such mortgage.

(2) Lease term expires in April 30, 2013.

(3) Lease term expires on October 31, 2010.

(4) Lease term expires on August 15, 2009.

(5) Lease term expires on June 30, 2009.

(6) Lease term expires on January 31, 2009. Month-to-month rental subsequently.

(7) Lease term expires on July 20, 2009.

Owned Real Property

Headquarters Office. Our headquarters office is located at 1901 East Edwardsville Road, Wood River, Illinois 62095. We acquired the 12 acres of land on which our headquarters office is located, including the 100,000 square foot building that houses our headquarters office (collectively, the “Headquarters Property”) for $2.5 million on July 26, 2006. In December 2006, we acquired 1.08 acres of land that included a 20,000 square foot building contiguous to the current facility for cash consideration of $508,693 as part of the future facility plan for our corporate headquarters that we embarked upon back in July 2006. We financed the purchase of the Headquarters Property by borrowing $2.5 million from Meridian Bank, a local bank controlled by two of our directors. This transaction was approved by the independent members of our Board of Directors. The loan is evidenced by a note which was renewed on July 26, 2008, at a current principal sum of $1,995,989, which bears interest at a floating rate equal to the prime rate, plus 1.00% for a period of 12 months. Principal and interest are payable monthly on a 20-year amortization schedule for the next 12 months of the note after which the entire principal will be paid or the note will be refinanced. Although the scheduled balloon principal payment is due July 26, 2009, the note is payable upon demand per the terms of the agreement. However, no demand has been made to date. The note is collateralized by a mortgage on the Headquarters Property dated July 26, 2006, and a Security Agreement dated July 26, 2008. On October 10, 2008, Meridian Bank was closed by the Illinois Department of Financial and Professional Regulation, Division of Banking. Subsequently the Federal Deposit Insurance Corporation (“FDIC”) was named receiver. On February 13, 2009, FirstCity Servicing Corporation as Servicer for FH Partners LLC, Owner, purchased the note previously held by Meridian Bank and subsequently held by the FDIC as receiver. The terms of the note did not change as a result of the purchase because those terms are contractually agreed to in the promissory note with the failed institution.

Besides the completion of $2.5 million in renovation of 20,000 square feet of the building for our current operations, we have completed an additional $5.9 million renovation of 100,000 square feet. When working capital funds are available or if external financing is acquired, we are planning to complete the renovation project at an expected cost of $7.0 to $10.0 million. Currently, our expansion project is on hold given the current economic climate in general and the state of the credit markets.

The chairman and principal shareholder of Meridian Bank, Timothy Kaiser, M.D., is also one of our directors. Another of our directors, Clay Winfield, is also a principal shareholder and director of Meridian Bank. The loan transaction with Meridian Bank was approved by the independent members of our Board of Directors.

Properties Sold. On November 24, 2008, we entered into an agreement to sell 9.9 acres of land for $1.0 million to an unaffiliated third party (the “Buyer”). The Buyer has paid a principal sum of $500,000 and agreed to terms under a promissory note dated November 24, 2008, in connection with the subject agreement to pay the remaining sum of $500,000 within 120 days. The note is collateralized by a mortgage on the subject land up to a maximum amount of $500,000. After closing, according to the subject agreement, the Buyer must apply for and pursue subdividing the 9.9 acres of land into two parcels. If after the successful completion of subdividing the land, the Buyer fails to pay the remaining principal sum of $500,000 as agreed upon under the terms of the promissory note, the Buyer may convey one of the parcels back to the Company. If the land is not successfully subdivided and the Buyer fails to pay the remaining principal sum of $500,000, the Company may exercise any of its rights under such mortgage and promissory note.

On December 16, 2008, we entered into a contract for deed with an unaffiliated third party, (the “Purchaser”), to sell an administrative facility located at One Country Club View Drive, Edwardsville, Illinois, (the “Building One Property”) for the price of $1.5 million. As of the contract date, we received from the Purchaser the sum of $300,000 and will receive the remaining $1.2 million subject to a promissory note signed in connection with the subject contract for deed within 18 months and not later than June 16, 2010.

Properties for Future Expansion. We also own additional real properties that may be used for future expansion generally or for the expansion of our headquarters office facility in particular.

On August 23, 2007, we acquired approximately 12.55 acres of land for a purchase price of $20,000 per acre, or approximately $251,000 which we also paid in cash to the Seller at the closing. We are holding the land parcels for possible future expansion, but have no definitive plans with respect to the use of the land at the current time. The acquisition of the land was financed with general working capital.

In September 2007, we acquired approximately twenty (20) acres of real property for the future purpose of expanding our headquarters office facility. We paid a purchase price equal to $80,000 per acre of land, totaling approximately $1.6 million, which was financed with general working capital.

Leased Real Property

Additional Administrative Facility. In addition to our owned real property, we lease approximately 5,000 square feet of office space (which served as part of our previous headquarters office) at the real property location at 600 Country Club View, Edwardsville, Illinois 62025 (the “Building Two Property”) under a commercial lease agreement (the “Building Two Lease”), dated August 4, 2005, by and between Meridian Land, as lessor, and us, as lessee, which is to expire on October 31, 2010. The rental cost of 600 Country Club View Drive space is $8,000 per month. Subsequent to December 31, 2007, we exercised its option within the stated lease agreement to purchase the property for a cash price of $2.5 million and placed a non-refundable earnest money deposit of $500,000 towards the purchase of this property. To date, no further action has been taken regarding the purchase of the property, and we have continued monthly rental payments according to the original commercial lease agreement.

Meridian Land is controlled by Timothy Kaiser, M.D. and Clay Winfield, each of whom is a member of our Board of Directors.

Magnolia Leased Premises. On August 17, 2007, we entered into a Commercial Lease Agreement (the “Magnolia Lease”), by and between Meridian Land, as lessor, and us, as lessee, covering the approximately 5,500 square feet premises located at #112 Magnolia Drive (Lot #9 Magnolia Commons), Glen Carbon, Illinois 62034 (the “Magnolia Leased Premises”). We intend to utilize the Magnolia Leased Premises as additional office space.

The Magnolia Lease runs for an initial term of 18 months, originally commencing on November 1, 2007 and expiring on April 30, 2009. Rent under the Magnolia Lease has been set at $8,000 per month. Due to construction delays the original lease commencement date was changed to February 15, 2008, while the expiration date was moved to August 15, 2009. In addition to monthly rental payments, we are responsible for utilities and maintenance and must pay all real estate taxes assessed on the property on which the Magnolia Leased Premises are located during the term of the Magnolia Lease, as well as all costs of maintaining any common areas used by us in conjunction with the Magnolia Leased Premises.

Our entry into the Building Two Lease, our exercise of our cash purchase option and entry into a purchase contract with respect to the Building Two Property, and our entry into the Magnolia Lease, were each approved by the independent members of our Board of Directors. See Item 13 and the information incorporated by reference therein.

Sunrise Travel Service Leased Premises. On July 1, 2008, we entered into a Commercial Lease Agreement (the “Sunrise Lease”), by and between Paula Dale Ltd., as lessor, and our Company, as lessee, covering the approximately 618 square feet premises located at 1151 Dundas St. West Mississauga, Ontario/ Canada L5C 1C6 (the “Sunrise Leased Premises”). We intend to utilize the Sunrise Leased Premises as a retail travel agency.

The Sunrise Lease runs for an initial term of 12 months, originally commencing on July 1, 2008 and expiring on June 30, 2009. Rent under the Sunrise Lease has been set at $1,000 per month. In addition to monthly rental payments, we will be responsible for utilities and maintenance and must pay all real estate taxes assessed on the property on which the Sunrise Leased Premises are located during the term of the Sunrise Lease, as well as all costs of maintaining any common areas used by us in conjunction with the Sunrise Leased Premises.

British Columbia Leased Premises. We entered into a Commercial Lease Agreement (the “British Columbia Lease”), on February 1, 2008, by and between Janz & Assoc. Distribution Inc., a corporation organized under the laws of the Province of British Columbia. The subject premise is located at #12 – 15243, 91st Avenue, Surrey, British Columbia, Canada (the “British Columbia Premises”). We intend to utilize the British Columbia Premises as additional office space.

The British Columbia Lease runs for an initial term of 12 months, originally commencing on February 1, 2008 and expiring on January 31, 2009 with an option to renew the lease for one year after expiration of the term of this lease, with all other terms and conditions the same. Rent under the British Columbia Lease which includes common areas, utilities and taxes, has been set at $1,000 per month. The lease also calls for our Company to pay a monthly cleaning service and Goods and Services Tax. To date, a renewal of the British Columbia Lease has not been executed. We are currently renting on a month-to-month basis.

Nova Scotia Agreement. We, as lessee, entered into a services agreement (the “Nova Scotia Agreement”), on July 28, 2008, by and between Purdy’s Wharf Business Centre Ltd., as lessor, having its principal place of business at Purdy’s Wharf Tower 1, 1959 Upper Water Street, Suite 1700, Halifax, Nova Scotia, Canada. The fee under the Nova Scotia Agreement is nominal (less than $1000 per month) with an initial term of 12 months ending on July 20, 2009.

Facility for REZconnect Subsidiary. We also lease office space at 560 Sylvan Avenue, Englewood Cliffs, New Jersey 07632, principally for the operations of our REZconnect subsidiary. Our New Jersey offices consist of approximately 2,000 square feet of leased space. The current monthly rent under our New Jersey lease is $4,000 and such lease expires in April 2013.

Adequacy of Property

All of our owned and leased real properties are in good working condition, and we believe that they are adequate to meet our current operational needs. In addition, we believe that all such properties are adequately covered by insurance.

We began planning a $12.0-$15.0 million project for the renovation of our current headquarters office in late 2007. Please see the description below in Item 7, sub-heading “Liquidity and Capital Resources,” for further discussion of this renovation project and the expenditures that will be incurred in connection therewith.

Real Estate Investment Policies

We do not have any policies in place with respect to investments in (i) real estate or interests in real estate, (ii) real estate mortgages or (iii) securities of or interests in persons primarily engaged in real estate activities. The real estate that we own and lease have been acquired and are leased, as appropriate, to support our operations and for long-term investment purposes.

Item 3. Legal Proceedings.

On August 4, 2008, a civil action was filed against three subsidiaries of our Company and certain of our executive officers in the Superior Court of California, County of Los Angeles, by the California Attorney General. The complaint alleges that the defendants violated California’s unfair competition, anti-pyramid and advertising laws. The complaint was filed after 18 months of dialogue, initiated by us with the Attorney General to discuss the implementation of a new California travel law and its potential effect on our business model. Throughout these discussions, which broadened over time, we have consistently cooperated with the state’s information requests. On December 19, 2008, the California Attorney General amended its complaint to add YTB International, Inc. as an additional defendant. This addition did not otherwise change the nature of the allegations or claims asserted in the litigation. The California Attorney General seeks a permanent injunction preventing the defendants from making any untrue or misleading statements or committing any acts of unfair competition, penalties of at least $15.0 million, and restitution of at least $10.0 million. We believe that we have meritorious defenses and intend to vigorously defend the case.

On August 8, 2008, a complaint seeking to be certified as a class-action was filed against our Company, three Company subsidiaries, and certain executive officers, in the United States District Court, Southern District of Illinois. The complaint alleges that the defendants violated the Illinois Consumer Fraud and Deceptive Business Practices Act. On August 14, 2008, a second, substantively similar, complaint was filed against the same defendants in the United States District Court for the Southern District of Illinois. The two cases have now been consolidated and are proceeding together before the same judge. The plaintiffs have filed a consolidated complaint, seeking damages of over $100.0 million. On February 9, 2009, we filed motions to dismiss the consolidated complaint and those motions are now pending before the Court. We believe we have meritorious defenses and intend to vigorously defend these cases.

After the Illinois class action and California Attorney General suits were filed, we provided notice to various insurance carriers. Our primary Directors and Officers Liability Insurance carrier, Illinois National Insurance Company (an AIG company) (“Illinois National”) agreed to provide coverage for the defense of the cases, subject to a reservation of rights. Because only the executive officers who were sued ("the individual insureds") are covered for this type of lawsuit under the policy and the Company is not, Illinois National agreed to pay a portion of the defense costs incurred in both cases, and in fact it has made some payments toward defense costs.

On January 29, 2009, the California Attorney General sent a letter to our defense counsel, with a copy to Illinois National and three excess insurance carriers, stating that California Insurance Code section 533.5 provides that there shall be no duty for any insurance carrier to defend lawsuits alleging violations of Business and Professional Code Sections 17200 or 17500 in which the Attorney General seeks recovery of a fine, penalty, or restitution. The lawsuit against our Company and its executives is such a lawsuit. After receipt of this letter, counsel for our Company and the individual insureds informed Illinois National's counsel that their position was that the Illinois National policy is governed by Illinois law, and therefore California Insurance Code Section 533.5 does not apply. Counsel for the Company sought Illinois National's assurances that it agreed with this position, though it remains unresolved at the time of the filing of this Form 10-K.

On February 6, 2009, the individual insureds filed a declaratory judgment action in circuit court in Madison County, Illinois, in order to protect their rights under the Illinois National policy. The action seeks a declaration from the court that Illinois National's obligation to advance and reimburse their defense costs in connection with the California Attorney General's lawsuit is not limited by California Insurance Code Section 533.5. The individual insureds have not yet served the complaint in this suit on Illinois National and are in discussions with Illinois National about possible resolution of the matter.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information.

For a history of our trading symbols and the principal markets on which our common stock has been traded in the past, see the description above in Item 1, sub-heading “Corporate History.”

Our Class A Common Stock is currently quoted on the OTC-BB under the symbol “YTBLA.OB” and we intend to at the appropriate time in the future apply for its listing on a national securities exchange, although no assurances can be given in this regard.

Our Class B Common Stock is convertible into our Class A Common Stock (on a one-share-for-one-share basis). Our Class B Common Stock has experienced very limited and sporadic trading, and as such, no established public trading market exists for our Class B Common Stock.

Common Stock Prices

The following table sets forth the high and low bid prices per share of our Class A Common Stock, for the periods indicated, as reported on the OTC-BB. As such, the prices reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. All prices relating to periods prior to the July 31, 2007 Reclassification Date have been given retroactive effect to the three-for-one stock split that resulted from the Reclassification.

	High		Low
Fiscal year ended December 31, 2008
First quarter	$	2.10	$	0.60
Second quarter		4.19		1.13
Third quarter		1.90		0.49
Fourth quarter		0.61		0.19

Fiscal year ended December 31, 2007
First quarter	$	5.62	$	1.03
Second quarter		1.87		1.32
Third quarter		2.83		1.87
Fourth quarter		2.00		0.96

At March 9, 2009, the closing price per share of our Class A Common Stock, as reported by the OTC-BB was $.20.

Shareholders

As of March 9, 2009, we had 360 shareholders of record of our Class A Common Stock and Class B Common Stock.

Dividend Policy

We have neither declared nor paid a cash dividend on any class of our common stock since we became a publicly traded company. At this time, it remains the policy of our Board of Directors to retain all available funds to finance the development and growth of our business. The payment of cash dividends in the future will be dependent upon our earnings and financial requirements.

Performance Graph

The following graph shows the total stockholder return through December 31, 2008 of an investment of $100 in cash on December 31, 2003 for YTB International, Inc. common stock and an investment of $100 in cash on December 31, 2003 for (i) the NASDAQ Market Index and (ii) the Hemscott Group Index. The Hemscott Group Index is an index of stocks representing Internet Information Providers. Historic stock performance is not necessarily indicative of future stock price performance. All values assume reinvestment of the full amount of all dividends and are calculated as of the last day of each month:

Item 6. Selected Financial Data.

The selected financial data set forth below should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations and consolidated financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K. The statements of operations and cash flows data for the years ended December 31, 2008, 2007 and 2006 and the balance sheet data as of December 31, 2008 and 2007 have been derived from audited consolidated financial statements for the Company included elsewhere in this Annual Report on Form 10-K. The consolidated statements of operations and cash flows data for the years ended December 31, 2005 and 2004 and the balance sheet data as of December 31, 2006, 2005 and 2004 have been derived from audited consolidated financial statements that are not included in this Annual Report on Form 10-K. The 2004 merger of the Company (formerly REZconnect Technologies, Inc. (“REZ”)) and YourTravelBiz.com, Inc. (“YTB.com”) was accounted for as a purchase business combination with the Company deemed the acquirer. The historical results are not necessarily indicative of the results of operations to be expected in the future.

Dollars in thousands except per share data	For the Fiscal Years Ended December 31,
	2008			2007			2006			2005			2004*
Statements of Operations and Cash Flows Data:
Net revenues		162,547			141,285			50,897			21,593		3,193

Income (loss) from operations		(4,121	)		3,013			(6,053	)		(5,881	)	(2,184	)

Net income (loss)		(4,475	)		3,209			(5,976	)		(8,453	)	(2,193	)

Net income (loss) per share - Basic		(0.04	)		0.03			(0.07	)		(0.34	)	(0.18	)

Net income (loss) per share - Diluted		(0.04	)		0.03			(0.07	)		(0.34	)	(0.18	)

Net cash (used in) provided by operating activities		7,422			12,022			159			108		(299	)
Net cash (used in) provided by investing activities		(7,915	)		(9,417	)		(558	)		(3,590	)	192
Net cash (used in) provided by financing activities		(13	)		(874	)		169			3,687		84
Cash purchases of property and equipment		(9,337	)		(9,169	)		(3,155	)		(430	)	(12	)

* This tabular information reflects the Company’s results of operations and cash flows for the year ended December 31, 2004 and YTB.com’s post-merger results of operations and cash flows for the period December 8 through December 31, 2004.

Dollars in thousands	As of the Fiscal Years Ended December 31,
	2008			2007			2006			2005			2004
Balance Sheets Data:
Cash and cash equivalents		1,203			1,731			-			230			26

Current assets		17,779			40,770			17,991			8,423			2,197

Total assets		43,086			62,894			28,890			13,838			8,134

Current liabilities		26,942			44,418			30,637			10,478			2,983

Long-term obligations		951			1,168			270			292			394

Retained earnings (deficit)		(23,683	)		(19,208	)		(22,312	)		(16,336	)		(7,883	)

Stockholders' equity		15,193			17,308			(2,016	)		3,068			4,757

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Basis of Presentation

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying consolidated financial statements which have been prepared assuming that we will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, our pending litigation, loss from operations and working capital deficiency raise substantial doubt about our ability to continue as a going concern. Management’s plans concerning these matters are also discussed in Note 2 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Executive Overview

We are a leading provider of Internet-based travel related services and operate primarily through our three subsidiaries: YTB Marketing, YTB Travel and REZconnect.

YTB Marketing establishes IBCs and compensates its Reps via a multilevel marketing commission structure.

YTB Travel contracts with the online travel businesses, provides online booking systems, fulfills travel orders and pays travel commissions.

REZconnect operates as a travel vendor relationship management company and offers franchises to “brick and mortar” travel agencies. All of REZconnect’s franchised operations are independently owned and operated. All sales of travel products by REZconnect are made through its independent agencies and franchisees, or through its interactive websites.

We offer our customers a reliable source of travel products and services through our relationships with selected travel providers, including major airlines, cruise lines, hotels and car rental agencies, as well as wholesale travel providers. We offer our customers the ability to make reservations on over 400 airlines, at more than 80,000 hotels and with most major car rental companies, cruise lines and tour package operators.

Our multi-segment operating model provides us with a competitive advantage because few travel related companies have expertise in both travel and marketing. We have been able to obtain more favorable pricing terms with our vendors as a result of economies of scale. In addition, more favorable commission rates are able to be realized based on the larger volume.

We also benefit from the synergies among our operating segments. YTB Marketing markets IBCs on behalf of YTB Travel. YTB Marketing has a unique business model and strategy of creating a network of commissioned Reps who exclusively market the IBCs of YTB Travel. A purchaser of an IBC from YTB Travel is known as an RTA. Each RTA generally pays $449.95 for the purchase of an IBC, plus the first month’s IBC web-hosting fee of $49.95. The monthly fee continues for as long as the RTA operates his/her IBC. YTB Travel retains a percentage of the travel commissions generated by the RTAs. While certain of our competitors focus their promotion efforts on the customer, typically spending from 15% to 37% of their revenues on advertising, we spend less than 1% of our net revenues on advertising.

We believe marketing of YTB Marketing’s IBCs on behalf of YTB Travel will not be significantly affected by the seasonality of the travel business, or a decline in travel, since the $49.95 monthly fee is a primary source of our revenue. Also, typical online travel merchants sell a commodity (travel), which does not engender strong customer loyalty. By contrast, each RTA develops personal relationships with his or her customers, who book travel through the RTA’s own IBC, thereby creating a significant advantage for YTB compared to the major online travel companies. The cost to book a trip through an RTA IBC is usually nearly identical to booking a trip through a major online travel company. The RTAs’ IBCs provide access to more than 40 booking engines, including World Choice Travel (a subsidiary of Travelocity.com™), Hotels.com, Apple Vacations, Collette Vacations, Perry Golf, Travel Guard, Pleasant Holidays, Travel Impressions, Carnival Cruise Line, Princess Cruise Line and more.

As of December 31, 2008, there are 92,383 RTA IBCs in operation and numerous registered travel agents, which include franchisees and independent travel agents, using the Vacation Central travel portal site. Site owners are also permitted to solicit organizations and associations for travel sales.

YTB Travel is our travel management subsidiary that processes travel sales and service bookings (reservations) generated by 92,383 independent RTAs through YTB Travel. In addition, YTB Travel negotiates deals with over 200 preferred vendors, and receives commissions based on the volume of business that it produces. The fulfillment is offered through interactive, real time booking engines and access to preferred deals with leading travel industry suppliers. Over 80 preferred suppliers are represented in our online store, while the balance are accessed through traditional offline channels. The emerging market shift to the Internet for travel services, combined with the personal marketing effort of our RTAs, presents the growth opportunity for sales of products and services. Future revenue growth should accelerate as more RTAs are added to the system, and as each goes through the various training programs that YTB Travel provides. RTA IBCs are available for use 24 hours, 7 days a week.

REZconnect generates revenue through registered travel agents and 34 active franchised travel agencies. REZconnect offers consumer driven websites which provide strong content and travel booking ability with 55 booking engines incorporated into one site, covering virtually all aspects of the travel industry.

Our revenues derive primarily from IBC sales, monthly IBC web-hosting fees and commissions paid by travel providers. In addition, certain travel suppliers pay performance-based compensation known as “override commissions” or “overrides.”

Commission revenues, net of allowances for cancellations, are recognized based on the departure date of travel.

Overrides are recognized on an accrual basis based on prior year's experience adjusted for current year volumes.

Franchise fees are recognized when all material services and conditions required have been performed and the ability to collect the franchise fee is relatively assured. We generally defer recognition of franchise fees until such amounts have been collected from the franchisee.

Franchise service fees are recognized on an accrual basis as earned.

Revenue from the sale of IBCs is deferred and recognized ratably as revenue over a 12-month period, which represents the average lifespan during which an RTA remains an RTA with our Company.

The commission rates paid by travel suppliers, in addition to overrides, are determined by individual travel suppliers and are subject to change. Historically, typical standard base commission rates paid by travel suppliers have been approximately 10% to 12% for hotel reservations, 5% to 10% for car rentals, 10% to 18% for cruises and vacation packages and a nominal service fee for airline tickets. During the past several years, leisure vendors (including tour operators, cruise lines, hotel and car packagers) have not reduced their commission levels but in fact have offered YTB Travel incentive commissions above the standard compensation for its volume business. YTB Travel expects that its average commission rate from online transaction revenues will increase due to a higher proportion of non-commodity product sales and an increase in higher profit negotiated preferred supplier contracts. Each RTA pays a monthly web-hosting fee of $49.95 to us, and can earn transactional compensation from travel purchased from his or her IBC. There can be no assurance that travel suppliers will not reduce commission rates paid to YTB Travel or eliminate such commissions entirely, which could, individually or in the aggregate, have a material adverse effect on our business, operating results and financial condition.

In order to expand our potential revenue base internationally, in early 2008 we expanded our services into Canada, the Bahamas, and Bermuda. YTB Bahamas commenced operations on January 11, 2008, and YTB Canada and YTB Bermuda commenced operations on February 8, 2008. As a result of this international expansion, individuals living in these countries can now sell travel through IBCs that they license from us, and, similarly, our Reps who are located there can market IBCs to others in the U.S., Puerto Rico, the Bahamas, Bermuda and Canada.

It should be noted that while only the commissions arising from our RTAs’ booking of travel services are reflected as a component of our revenues in our financial statements, we also keep track of the aggregate retail value of all travel services that are booked by our RTAs (which directly impacts our commission revenues). The value of such travel services increased 83.7% in 2007 to over $414 million from approximately $225 million in 2006. Comparable data for 2008 sales (retail value) has not yet been reported to us by our travel vendors.

Trends

The travel industry, including offline agencies, online agencies and suppliers of travel products and services, has been characterized by intense competition, as well as rapid and significant change. In addition, global economic and financial market conditions worsened in the second half of 2008, creating uncertainty for travelers and suppliers. This macroeconomic downturn pressured discretionary spending on travel and advertising. We cannot predict the magnitude or duration of the downturn, but we do not anticipate any improvement in the short-term.

The airline sector in particular has historically experienced significant turmoil. Most recently, U.S. airlines have reduced their cost structures and seating capacity, increased fares and assessed charges for items such as baggage as a result of the overcapacity, financial losses and extreme volatility in oil prices.

The Company is generally negatively affected by reduced seating capacities as there is less air supply available through our IBCs, and in turn less opportunity to facilitate hotel rooms, car rental and other services on behalf of air travelers. Carriers have announced incremental capacity reductions in 2009, which will continue to impact our opportunity to sell other travel products.

Fare increases, fuel surcharges and other fees may negatively impact traveler demand with no corresponding increase in our remuneration as our air revenue is tied principally to ticket volumes, not prices. The exception will be situations in which we can negotiate a commission for the sale of an airline ticket. We expect to have several of the popular U.S. low cost carriers under contract this year.

Airline carriers have responded to the current industry conditions by aggressively reducing costs in every aspect of their operations, including decreasing distribution costs. Due to the weakening economy, we may encounter additional pressure on air remuneration as certain supply agreements renew in 2009 and beyond as well as potential pressure on air booking fees due to actions by some of our competitors and increased traveler sensitivity to fees in the current environment.

In 2008, the hotel sector experienced declining occupancy rates. In 2008, our hotel remuneration was adversely impacted as a result of lower fees and more competitive hotel pricing. Industry sources expect these trends to continue in 2009, which with the general weakening economy and negative airline trends, create challenges to our hotel business, which has comprised a significant portion of our revenue. However, we believe that our new resort focus products will help offset some of these negative effects. We have entered into contracts with feature resorts that boost our margins substantially in exchange for our marketing focus on a particular resort in a particular area. We expect to have most of the major markets with resort coverage by year end.

Results of Operations

The following tables sets forth, for the periods indicated, the percentage relationship of certain items from our consolidated statement of operations to our total revenues:

Dollars in thousands	2008						2007						Variance
	Year Ended December 31,			% of Net Revenues			Year Ended December 31,			% of Net Revenues			Increase (Decrease)			Inc.(Decr.) %
NET REVENUES
Internet business center sales and monthly fees	$	122,361			75.3	%	$	103,218			73.1	%	$	19,143			18.5	%
Travel commissions and services		27,907			17.2	%		20,659			14.6	%		7,248			35.1	%
Training programs and marketing materials		9,621			5.9	%		15,402			10.9	%		(5,781	)		(37.5	)%
Other		2,658			1.6	%		2,006			1.4	%		652			32.5	%

Total net revenues		162,547			100.0	%		141,285			100.0	%		21,262			15.0	%

OPERATING EXPENSES
Marketing commissions		80,172			49.3	%		80,540			57.0	%		(368	)		(0.5	)%
Travel commissions		19,972			12.3	%		13,427			9.5	%		6,545			48.7	%
Depreciation and amortization		2,531			1.6	%		1,152			0.8	%		1,379			119.7	%
Training programs and marketing materials		11,329			7.0	%		8,795			6.2	%		2,534			28.8	%
General and administrative		52,664			32.3	%		34,358			24.4	%		18,306			53.3	%

Total operating expenses		166,668			102.5	%		138,272			97.9	%		28,396			20.5	%

INCOME (LOSS) FROM OPERATIONS		(4,121	)		(2.5	)%		3,013			2.1	%		(7,134	)		(236.8	)%

OTHER INCOME (EXPENSE)
Interest and dividend income		234			0.1	%		447			0.3	%		(213	)		(47.7	)%
Interest expense		(85	)		(0.1	)%		(38	)		0.0	%		(47	)		123.7	%
Foreign currency translation loss		(58	)		0.0	%		-			0.0	%		(58	)		n/m	*

Total other income (expense)		91			0.0	%		409			0.3	%		(318	)		(77.8	)%

INCOME (LOSS) BEFORE INCOME TAX PROVISION		(4,030	)		(2.5	)%		3,422			2.4	%		(7,452	)		(217.8	)%

INCOME TAX PROVISION		445			0.3	%		213			0.1	%		232			109	%

NET INCOME (LOSS)	$	(4,475	)		(2.8	)%	$	3,209			2.3	%	$	(7,684	)		(239.5	)%

* not meaningful

Dollars in thousands	2007						2006						Variance
	Year Ended December 31,			% of Net Revenues			Year Ended December 31,			% of Net Revenues			Increase (Decrease)		Inc.(Decr.) %
NET REVENUES
Internet business center sales and monthly fees	$	103,218			73.1	%	$	36,698			72.1	%	$	66,520		181.3	%
Travel commissions and services		20,659			14.6	%		7,364			14.5	%		13,295		180.5	%
Training programs and marketing materials		15,402			10.9	%		6,266			12.3	%		9,136		145.8	%
Other		2,006			1.4	%		569			1.1	%		1,437		252.5	%

Total net revenues		141,285			100.0	%		50,897			100.0	%		90,388		177.6	%

OPERATING EXPENSES
Marketing commissions		80,540			57.0	%		30,846			60.6	%		49,694		161.1	%
Travel commissions		13,427			9.5	%		4,893			9.6	%		8,534		174.4	%
Depreciation and amortization		1,152			0.8	%		408			0.8	%		744		182.4	%
Training programs and marketing materials		8,795			6.2	%		4,455			8.8	%		4,340		97.4	%
General and administrative		34,358			24.4	%		16,348			32.1	%		18,010		110.2	%

Total operating expenses		138,272			97.9	%		56,950			111.9	%		81,322		142.8	%

INCOME (LOSS) FROM OPERATIONS		3,013			2.1	%		(6,053	)		(11.9	)%		9,066		(149.8	)%

OTHER INCOME (EXPENSE)
Interest and dividend income		447			0.3	%		170			0.3	%		277		162.9	%
Interest expense		(38	)		0.0	%		(93	)		(0.1	)%		55		(59.1	)%

Total other income (expense)		409			0.3	%		77			0.2	%		332		431.2	%

INCOME (LOSS) BEFORE INCOME TAX PROVISION		3,422			2.4	%		(5,976	)		-11.7	%		9,398		(157.3	)%

INCOME TAX PROVISION		213			0.1	%		-			0.0	%		213		n/m

NET INCOME (LOSS)	$	3,209			2.3	%	$	(5,976	)		(11.7	)%	$	9,185		(153.7	)%

YTB INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

NOTE 14 - BENEFIT PLANS

The Company maintains a 401(k) benefit plan for its United States’ employees. Substantially all U.S. employees are eligible to elect coverage under the plan which provides for Company matching contributions based on employee contributions up to certain plan limits. In addition, discretionary contributions are made by the Company and are dependent on the length of service of each employee. The Company’s expense associated with the matching and discretionary components of the plan for the years ended December 31, 2008, 2007 and 2006 was $400,000, $337,000 and $160,000, respectively, and is included in the accompanying consolidated statements of operations in general and administrative expense.

NOTE 15 - FINANCING ARRANGEMENTS

Short-Term Debt

On July 26, 2006, the Company purchased 12 acres of land which included a 100,000 square foot building (the “Property”) for $2.5 million to house its new corporate headquarters in Wood River, Illinois. The Company financed the purchase of the Property by issuing a note (the “Note”) in the amount of $2.5 million bearing interest at a rate of Prime less 0.50%, floating daily, from Meridian Bank, a local bank controlled by two of our directors. The Note required interest only monthly payments for the first two years of the Note after which the entire principal was to be paid or the Note was to be refinanced. The Note was collateralized by the first mortgage on the Property and a $500,000 Certificate of Deposit. The Certificate of Deposit was released on January 8, 2008, after the Company made $625,000 of improvements to the Property, but it was used by the Company to reduce the principal amount owed under the Note. On July 26, 2008, the Company renewed the Note for the principal sum of $2.0 million, the outstanding balance as of that date (the “Note Renewal”). The Note Renewal bears interest at the rate of Prime plus 1.0%, floating daily, and is collateralized by the first mortgage on the Property. Principal and interest payments of $14,000 are due monthly based upon a 20-year amortization for the first year of the Note after which the entire principal will be paid or the Note will be refinanced. Although the scheduled balloon principal payment is due July 26, 2009, the Note Renewal is payable upon demand per the terms of the agreement; however, no demand has been made to date. There are no other restrictive covenants included in the Note Renewal.

On October 10, 2008, Meridian Bank was closed by the Illinois Department of Financial and Professional Regulation, Division of Banking. Subsequently the FDIC was named Receiver. The terms of the Company’s Note did not change under the terms of the loan contract because they are contractually agreed to in the promissory note with the failed institution.

The outstanding loan balance at December 31, 2008 and 2007 is $2.0 million and $2.5 million, respectively. See Note 21 – “Related Party Transactions” for additional information.

Long-Term Debt

On January 11, 2002, as a result of a decrease in demand for travel related services due to the events of September 11, 2001, the Company borrowed $324,000 from the United States Small Business Administration (“SBA”) under its disaster relief program. Payments were to have initially commenced in January 2003. However, the SBA extended the commencement date into November 2003. The loan was repayable via a monthly installment of $3,000, including interest at 4% per annum, through October 2017. The loan was guaranteed by the President of the REZconnect subsidiary. On December 27, 2006, the Company, upon approval from its Board of Directors, guaranteed the debt, thereby allowing for the release of the guarantee by the President of the REZconnect subsidiary. The outstanding loan balance as of December 31, 2007 was $242,000, of which current maturities of $22,000 was included in other current liabilities on the consolidated balance sheet. The loan was paid off during the fourth quarter of 2008.

F24

YTB INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

NOTE 16 – BUSINESS COMBINATIONS

Proposed Business Acquisition

On November 28, 2007, the Company signed a letter of intent and made a deposit of $311,000 in connection with a proposed acquisition of a business which is included in Other Assets, Net as of December 31, 2007. The Company had also previously advanced the potential target company $45,000 which was reserved as of December 31, 2007. During 2008, the Company reached an agreement on the termination of the proposed acquisition and, consequently, as of December 31, 2008, the total deposit and advance of $356,000 have been written off.

Acquisition of Travel Agency for Canadian Operations

On February 8, 2008, the Company completed the acquisition of the assets of Sunrise Travel Service (“Sunrise”), a travel agency located in Ontario, Canada, for $149,000. As there were no material identifiable assets in Sunrise, the purchase price was recorded to goodwill in the first quarter of 2008. During the fourth quarter of 2008, the Company reassessed the value of the goodwill recorded for this purchase and has determined it to have no value given current economic conditions. The acquisition is expected to provide the Company with additional markets as part of its new Canadian operations: leisure, honeymoon, and corporate travel. However, due to losses from operations and uncertainties surrounding the current global economic downturn, the Company recorded an impairment loss of $149,000 during the fourth quarter of 2008 to write off the goodwill previously recorded. Travel commission revenues generated by Sunrise totaled $105,000 for the year ended December 31, 2008.

NOTE 17 – FAIR VALUE DISCLOSURES

Fair Value Measurements.

The Company’s financial assets and liabilities, which include long-term investments, recorded at fair value have been categorized based upon a fair value hierarchy in accordance with SFAS No. 157. See Note 3, "Summary of Significant Accounting Policies" for a discussion of the Company’s policies regarding this hierarchy.

Assets Measured at Fair Value on a Recurring Basis

The Company’s assets carried at fair value on a recurring basis are investments in auction rate securities as described in Note 8, "Long-term Investments". As of December 31, 2007, the entire $1.0 million in securities were classified within level 3 and during 2008 were reclassified from level 3 to level 2 as a result of the investment bank’s subsequent offer to purchase such securities. On October 1, 2008, the Company received an offer from the investment bank holding its ARS to purchase 100% of the Company’s outstanding ARS portfolio at par value of $1.0 million, which the Company accepted. The settlement date for this transaction was October 7, 2008 and the Company received the funds on that day. Therefore, there was no balance in long-term investments as of December 31, 2008.

When determination is made to classify a financial instrument within level 2, the determination is based upon quoted market prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly for substantially the full term of the financial statement. The estimated fair value during 2008 at level 2 was based upon information provided by the investment bank, through which the Company holds such securities, e.g. the offer to purchase.

Assets Measured at Fair Value on a Nonrecurring Basis

Dollars in thousands	Fair Value Measurements Using
December 31, 2008	Quoted Prices in Active Markets for		Significant
Description	Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses)

Long-lived assets held for sale	$	-	$	844	$	-	$	(366	)
Goodwill		-		-		-		(149	)

TOTAL	$	-	$	844	$	-	$	(515	)

In accordance with the provisions of SFAS No. 144, long-lived assets held for sale with a carrying amount of $1.2 million were written down to their fair value of $900,000, less cost to sell of $56,000 (or $844,000), resulting in a loss of $366,000, which was included in earnings for the period.

In accordance with the provisions of SFAS No. 142, goodwill of our subsidiary Sunrise Travel with a carrying amount of $149,000 was written down to its fair value of $0, resulting in an impairment charge of $149,000, which was included in earnings for the period.

NOTE 18 - COMMON STOCK RECLASSIFICATION

On July 31, 2007, the Reclassification Date, the Company filed its Amended and Restated Certificate of Incorporation, previously approved by the Company’s stockholders at the Company’s annual meeting of stockholders on June 11, 2007, which authorized the issuance of two classes of common stock - Class A Common Stock and Class B Common Stock - and an increase in the Company’s total authorized capital. This amendment and restatement enabled a reclassification of the Company’s old common stock, par value $0.001 per share (“Old Common Stock”) and an accompanying stock split (collectively, the “Reclassification”) pursuant to which stockholders of record received one share of Class A Common Stock and two shares of Class B Common Stock for each share of Old Common Stock held as of the Reclassification Date.

Shares of Class B Common Stock are convertible into shares of Class A Common Stock at any time, on a one-for-one basis. Shares of Class B Common Stock automatically convert into shares of Class A Common Stock upon sale or other disposition (except for transfers among related entities, transfers to trusts for the benefit of the transferring holder of the Class B Common Stock, bona fide pledges under financing arrangements and similar transfers). Under the Company’s Amended and Restated Certificate of Incorporation, each share of Class A Common Stock and each share of Class B Common Stock are equal with respect to the right to receive dividends declared by the Company’s Board of Directors in its discretion from time to time from funds legally available therefore, whether in cash, stock or property. Each holder of shares of Class A Common Stock shall be entitled to one-tenth (1/10) vote for each share of Class A Common Stock held and each holder of shares of Class B Common Stock shall be entitled to one vote for each share of Class B Common Stock held.

All shares and per share amounts in this Annual Report on Form 10-K reflect this Reclassification.

The Company announced on August 1, 2007, immediately following the effectiveness of the Reclassification, that the new ticker symbol for the new Class A Common Stock was “YTBLA.OB”. There is no symbol for the Class B Common Stock, as that security does not trade.

F25

YTB INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

NOTE 19 - SHARE-BASED PAYMENTS

Stock Options

As of December 31, 2008, the Company had a stock-based employee compensation plan and a stock-based Sales Director bonus plan.

2004 Stock Option and Restricted Stock Plan. The Company’s stock-based employee compensation plan, the 2004 Stock Option and Restricted Stock Plan (the “2004 Plan”) was approved by the Company’s stockholders in December 2004. The 2004 Plan is administered by the compensation committee of the Company’s Board of Directors which determines the employees, officers, directors and consultants subject to receive awards and the terms and conditions of these awards. The purpose of the 2004 Plan is to make available to the Company’s key employees and directors certain compensatory arrangements related to the growth in the value of the Company’s stock so as to generate an increased incentive to contribute to the Company’s financial success and prosperity; to attract and retain exceptionally qualified individuals whose efforts can affect the Company’s financial growth and prosperity; and align in general the interests of the Company’s employees and directors with the interest of its stockholders. Following the Reclassification Date, as amended and restated, the 2004 Plan authorizes 15,000,000 shares of common stock for issuance. All restricted stock awards and all shares of stock issuable upon exercise of options that are granted after the Reclassification Date shall consist of Class A Common Stock. As of December 31, 2008, 11,296,034 shares of Class A Common Stock remain available for future grants under the 2004 Plan.

On April 24, 2006, the Company’s Board of Directors granted 750,000 options under the 2004 Plan to certain employees, members of the Board of Directors and two outside consultants, 75,000 of which were unexercised and forfeited September 30, 2006. These stock options vest in equal increments on the anniversary date over the next five years following the grant and expire six years from the date of grant. After the stock option award was granted, the Board of Directors modified the stock option award to add a sixth year to the term and such options were re-valued. The modification did not materially impact the value of the awards. The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2006: risk-free interest rate of 4.90%; expected life of 6.0 years; dividend yield of 0% and expected volatility of 75%. The expected average life represents the period of time that options granted are expected to be outstanding giving consideration to vesting schedules, historical exercise and forfeiture patterns. The expected dividend yield is based on historical information and management’s plan. Expected volatility is based on analysis of historical volatilities of companies which are considered YTB’s peer group. The Company adjusts share-based compensation on a quarterly basis for changes to the estimate of expected equity awarded for forfeitures based on a review of recent forfeiture activity and expected future employee turnover. The effect of forfeiture adjustments in 2008 and 2007 has been insignificant thus far.

On January 1, 2008, the Company’s Board of Directors granted an incentive stock option to purchase 300,000 shares of the Company’s Class A Common Stock to each of two officers of the Company pursuant to employment agreements entered into with such officers effective as of such date. These stock options vest in five equal installments of 60,000 shares on the effective date of the employment agreements (January 1, 2008) and the first four anniversaries thereof and expire ten years from the date of grant. The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for these grants: risk-free interest rate of 3.58%; expected life of 6.0 years; dividend yield of 0% and expected volatility of 58.91%. The expected average life represents the period of time that options granted are expected to be outstanding giving consideration to vesting schedules, historical exercise and forfeiture patterns. The expected dividend yield is based on historical information and management’s plan. Since the Company had insufficient historical data available over the six-year expected life term, expected volatility is based on the Company’s peer group historical volatility as measured for the expected term of the grant. The Company adjusts share-based compensation on a quarterly basis for changes to the estimate of expected equity awarded for forfeitures based on a review of recent forfeiture activity and expected future employee turnover. The effect of forfeiture adjustments in 2008 has been insignificant thus far.

F26

YTB INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

On June 16, 2008, the Company’s Board of Directors granted incentive and non-qualified stock options to purchase 279,640 and 120,360 shares, respectively, of the Company’s Class A Common Stock to two employees of the Company. These stock options vest in three equal installments, the first of which vests on the grant date and the remaining on the next two anniversaries thereof and expire three years from the date of grant. The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for these grants: risk-free interest rate of 3.02%; expected life of 2.0 years; dividend yield of 0% and expected volatility of 127.92%. The expected average life represents the period of time that options granted are expected to be outstanding giving consideration to vesting schedules, historical exercise and forfeiture patterns. The expected dividend yield is based on historical information and management’s plan. Since the Company had sufficient historical data available, expected volatility is based on the Company’s historical volatility as measured for the expected term of the grant. The Company adjusts share-based compensation on a quarterly basis for changes to the estimate of expected equity awarded for forfeitures based on a review of recent forfeiture activity and expected future employee turnover. The effect of forfeiture adjustments in 2008 has been insignificant thus far.

The Company recognized $407,000, $42,000 and $198,000 in compensation expense for stock options granted under the 2004 Plan for the years ended December 31, 2008, 2007 and 2006, respectively. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company re-evaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different than what was recorded in the current period. Unrecognized expense related to future service on existing stock options granted under the 2004 Plan as of December 31, 2008, 2007 and 2006 is $459,000, $57,000 and $99,000, respectively.

Restricted Stock Awards

Effective as of April 25, 2008, pursuant to its authority under its charter, the Compensation Committee of the Company’s Board of Directors approved a new policy that governs the compensation of the non-employee members of the Company’s Board of Directors. Under the new policy, each non-employee director will receive (i) a one-time restricted stock award valued at $40,000 (“At Election Award”) upon election to the Company’s Board of Directors and (ii) annual compensation, consisting of (A) a $30,000 cash and (B) a restricted stock award valued at $30,000 (“Annual Award”). In the case of the Company’s then current non-employee directors, which does not include the two newest members of the Company’s Board of Directors, in addition to the At Election Award (since the Company did not provide compensation for their agreement to serve), they also received a one-time catch-up restricted stock award (“Catch-up Award”) valued at between $81,000 and $163,000, depending upon length of service. This Catch-up Award compensated those then existing non-employee directors for their service on the Company’s Board of Directors for the entire period of time during which the Company lacked a market-level non-employee director compensation policy.

The restricted stock award component of the Company’s ongoing non-employee director compensation will be granted on an annual basis during the May 17th - May 30th window following the filing of the Company’s quarterly report on Form 10-Q for its first fiscal quarter and will consist of shares of the Company’s Class A Common Stock having a grant-date fair market value of $30,000 (based on the market price of the Company’s Class A Common Stock as of such date), vesting entirely on the first anniversary of the grant date. The At Election Award grants for non-employee directors upon election to the Board of Directors and the Catch-up Award grants to then existing non-employee directors consisted of shares of Class A Common Stock valued at fair market value as of the grant date. While the At Election Award grants will vest over a period of four years, the Catch-up Award grants to the Company’s then existing non-employee directors will vest over eighteen months.

On May 23, 2008, the Company’s Board of Directors granted restricted stock awards as part of three separate grants - the At Election Award, the Annual Award and the Catch-up Award, totaling 812,206 shares of the Company’s Class A Common Stock - to its non-employee directors pursuant to the new policy referred to above, of which 92,075 shares were forfeited September 3, 2008 and 24,391 were forfeited on December 31, 2008. The At Election Award consisted of 195,128 shares which vest over a period of four years beginning on the first grant date anniversary; the Annual Award consisted of 109,758 shares which vest entirely on the first anniversary of the grant date; and the Catch-up Award consisted of 507,320 shares, half of which vest in six months and the remainder vest one year later. The Company calculated the cost for the restricted stock grants by using the fair market value of the Company’s common stock on the grant date, the number of shares issued, and an estimate of shares that will not vest due to forfeitures.

F27

YTB INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

The Company calculated the number of shares issued under the restricted stock grants by using the total amount of compensation to be received under the new policy divided by the fair market value of the Company’s Class A Common Stock on the grant date. The Company will recognize amortization of the fair value of the awards over the vesting period of each award. The effect of estimated forfeitures was insignificant in the calculation of the amortization.

Due to the resignations of two members of the Company’s Board of Directors during 2008, the Company recorded a recovery of prior expense of $20,000 related to an actual forfeiture which was higher than the estimated impact of forfeitures.

On February 11, 2008, the Company’s Board of Directors granted restricted stock awards to each of two RTAs of the Company for prior provision of services. The first RTA accepted the award on July 11, 2008 (the “Measurement Date One”). The second RTA accepted the award on October 14, 2008 (the “Measurement Date Two”). The awards each consisted of 150,000 shares of the Company’s Class A Common Stock of which 50,000 shares vested immediately on the Measurement Date One and the Measurement Date Two, respectively, and 100,000 shares which vest equally on the first and second anniversaries of the Measurement Date One and the Measurement Date Two, respectively. The Company calculated the cost for the restricted stock grants by using the fair market value of the Company’s Class A Common Stock on the Measurement Date One and the Measurement Date Two, respectively, the number of shares issued and an estimate of shares that will not vest due to forfeitures. The effect of estimated forfeitures was insignificant in the calculation of the amortization.

For the year ended December 31, 2008, the Company recorded $739,000 as net compensation expense related to the amortization of the restricted stock awards issued under the 2004 Plan. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company re-evaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different than what was recorded in the current period. As of December 31, 2008, there was approximately $700,000 of unrecognized compensation expense related to the 666,777 shares of restricted stock, which the Company expects to recognize over the next 3.40 years.

2007 Sales Director Bonus Plan. The stock-based Sales Director bonus plan (the “2007 Sales Director Bonus Plan”) is a bonus plan under which achievement-based unit awards are granted on a semi-annual basis to Sales Directors who excel in their performance on behalf of the Company and its wholly owned operating subsidiaries. Each award under the 2007 Sales Director Bonus Plan consists of discounted stock options exercisable to purchase shares of the Company’s Class A Common Stock. The options have an exercise price equal to fifty percent (50%) of the fair market value of the Class A Common Stock on the close of business on the business day immediately preceding the grant date. The 2007 Sales Director Bonus Plan was approved by the Company’s Board of Directors on February 19, 2007 and subsequently approved by the Company’s stockholders at the Company’s annual meeting of stockholders held on June 11, 2007.

F28

Delaware		20-2181181
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Class A Common Stock, par value $0.001 per share		Class B Common Stock, par value $0.001 per share
(Title of class)		(Title of class)

Year	Beginning Balance Active RTAs		New RTAs		Deactivations		Ending Balance Active RTAs		Weighted Average Active RTAs

2008		131,802		74,402		113,821		92,383		122,910

2007		59,736		134,946		62,880		131,802		103,219

2006		22,000		58,985		21,249		59,736		38,297

	§	Consulting fees increased $546,000 primarily due to warrants given for marketing services provided.
	§	Stock option expense increased $365,000 to $407,000 in 2008. Restricted stock expense increased $739,000 in 2008. See Note 19 – “Share-Based Payments” for a discussion of 2008 grants.

	§	We incurred $366,000 of impairment charges associated with writing down the jet to its net realizable value of $844,000.
	§	We recorded a loss of $408,000 on the sale of assets; a loss of $416,000 on the sale of the Building One Property, a gain of $120,000 on the sale of land in Wood River, and a loss of $94,000 related to the disposal of machinery, hardware, and vehicles.

Dollars in thousands	Year ended							% change			% change
	2008		2007		2006			2008 vs 2007			2007 vs 2006
NET REVENUES
Internet business center sales and monthly fees	$	122,361	$	103,218	$	36,698			18.5	%		181.3	%
Training programs and marketing materials		9,319		14,964		6,059			(37.7	)%		147.0	%
Other		1,955		1,027		133			90.4	%		672.2	%

Total net revenues		133,635		119,209		42,890			12.1	%		177.9	%

OPERATING EXPENSES
Marketing commissions		80,172		80,540		30,846			(0.5	)%		161.1	%
Depreciation and amortization		1,386		860		315			61.2	%		173.0	%
Training programs and marketing materials		10,307		7,970		3,831			29.3	%		108.0	%
General and administrative		37,014		28,709		11,191			28.9	%		156.5	%

Total operating expenses		128,879		118,079		46,183			9.1	%		155.7	%

INCOME (LOSS) FROM OPERATIONS		4,756		1,130		(3,293	)		320.9	%		(134.3	)%

	§	Printing decreased $1.5 million due to a decrease in RTAs resulting in decreased shipping of brochures and marketing materials.
	§	Allocation from parent increased $2.4 million due to the change in the allocation method and variances in the following allocable parent expenses: salaries and benefits, legal fees, contract labor, consulting fees and accounting fees.

	§	Convention expense increased $876,000 due to increased attendance at the convention.
	§	Allocation from parent increased $2.3 million due to the change in the allocation method and variances in the following allocable parent expenses: salaries and benefits, legal fees, contract labor, consulting fees and accounting fees.

Dollars in thousands	PAYMENTS DUE BY PERIOD
	Total		2009		2010-11		2012-13		2014 & Beyond
Contractual obligations (1):

Short-term debt	$	1,973	$	1,973	$	-	$	-	$	-
Long-term debt		-		-		-		-		-
Operating leases		579		299		210		70		-
Purchase obligations for
materials and services (2)		3,381		1,594		1,510		277		-

TOTAL	$	5,933	$	3,866	$	1,720	$	347	$	-

/s/ John D. Clagg		/s/ J. Scott Tomer
John D. Clagg		J. Scott Tomer
Chief Financial Officer		Chief Executive Officer
March 16, 2009		March 16, 2009

YTB International, Inc.
(Registrant)

March 16, 2009		/s/ J. Scott Tomer
		J. Scott Tomer
		Chief Executive Officer and Director

March 16, 2009		/s/ John D. Clagg
		John D. Clagg
		Chief Financial Officer

March 16, 2009		/s/ J. Scott Tomer
		J. Scott Tomer, Director and Chief Executive Officer
		(principal executive officer)

March 16, 2009		/s/ J. Lloyd Tomer
		J. Lloyd Tomer, Chairman of the Board of Directors

March 16, 2009		/s/ J. Kim Sorensen
		J. Kim Sorensen, Director and Vice Chairman

March 16, 2009		/s/ Harold Kestenbaum
		Harold Kestenbaum, Director

March 16, 2009		/s/ Clay Winfield
		Clay Winfield, Director

March 16, 2009		/s/ Lou Brock
		Lou Brock, Director

March 16, 2009		/s/ Andrew Wilder
		Andrew Wilder, Director

March 16, 2009		/s/ Timothy Kaiser
		Timothy Kaiser, Director

March 16, 2009		/s/ Paul Hemings
		Paul Hemings, Director

March 16, 2009		/s/ John D. Clagg
		John D. Clagg, Chief Financial Officer and Treasurer
		(principal financial and accounting officer)

March 16, 2009		/s/ Andrew F. Cauthen
		Andrew F. Cauthen, Secretary, President and Chief
		Operating Officer

(1) Financial Statements

Report of Independent Registered Public Accounting Firm, Financial Statements		F1

Report of Independent Registered Public Accounting Firm, Internal Control Over Financial Reporting		F2-F3

Consolidated Balance Sheets as of December 31, 2008 and 2007		F4

Consolidated Statements of Operations for the Years Ended December 31, 2008, 2007 and 2006		F5

Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the Years Ended December 31, 2008, 2007 and 2006		F6

Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006		F7-F8

Notes to Consolidated Financial Statements		F9-F49

(2) Financial Statement Schedules

Schedule II - Consolidated Valuation and Qualifying Accounts		F50

Dollars in thousands, except share and per share data	December 31, 2008			December 31, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	1,203		$	1,731
Restricted cash		1,667			2,268
Short-term investments		251			-
Available-for-sale securities		-			27
Accounts receivable (less allowance for doubtful accounts of $7 in 2008 and $6 in 2007)		2,680			2,662
Notes receivable (less allowance for uncollectible notes of $562 in 2008 and $45 in 2007)		458			2,042
Inventory		1,335			4,903
Prepaid marketing commissions and advances (less allowance for uncollectible advances of $162 in 2008 and $73 in 2007)		8,991			25,081
Assets held for sale		844			-
Other prepaid expenses and current assets, net		350			2,056

Total current assets		17,779			40,770

Long-term investments		-			1,000
Property and equipment, net		18,728			15,433
Intangible assets, net		2,322			2,395
Goodwill		2,979			2,979
Other assets		1,278			317

TOTAL ASSETS	$	43,086		$	62,894

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Accounts payable	$	2,446		$	67
Accrued marketing commissions		2,148			3,494
Accrued travel commissions		1,784			1,692
Other accrued expenses		4,219			4,445
Deferred revenue		13,505			31,143
Short-term debt		1,973			2,500
Other current liabilities		867			1,077

Total current liabilities		26,942			44,418

Other long-term liabilities:
Long-term debt, less current maturities		-			220
Deferred tax liability		755			755
Other income tax liabilities		185			182
Other liabilities		11			11

Total other long-term liabilities		951			1,168

TOTAL LIABILITIES		27,893			45,586

Commitments and Contingencies (Notes 2, 23 and 25)
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, 5,000,000 authorized, none issued and outstanding at December 31, 2008 and 2007		-			-
Class A Common stock, $.001 par value, 300,000,000 shares authorized; 69,379,259 and 51,144,275 shares issued and outstanding at December 31, 2008 and December 31, 2007, respectively.		69			51
Class B Common Stock, $.001 par value, 100,000,000 shares authorized; 34,413,682 and 46,453,644 shares issued and outstanding at December 31, 2008 and December 31, 2007, respectively; convertible into Class A shares on a one-for-one basis		34			46
Additional paid-in capital		38,843			36,419
Accumulated other comprehensive loss		(70	)		-
Retained earnings (deficit)		(23,683	)		(19,208	)

TOTAL STOCKHOLDERS' EQUITY		15,193			17,308

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	43,086		$	62,894


Dollars in thousands, except share and	Preferred				Common Stock															Accumulated						Total
per share data	Stock				Class A						Class B						Additional			Other			Retained			Stockholders'
	Shares		Amount		Shares			Amount			Shares			Amount			Paid-in Capital			Comprehensive Loss			Earnings (Deficit)			Equity (Deficit)

Balance at January 1, 2006		-	$	-		27,336,260		$	27			54,672,520		$	55		$	19,322		$	-		$	(16,336	)	$	3,068

Settlement of Convertible debt derivative with common shares		-		-		200,000			-			400,000			-			400			-			-			400

Common shares issued for services		-		-		184,194			-			368,388			-			294			-			-			294

Common shares surrendered for cashless option exercise		-		-		(150,000	)		-			(300,000	)		-			(300	)		-			-			(300	)

Common shares issued for cashless option exercise		-		-		300,000			-			600,000			1			299			-			-			300

Stock option compensation		-		-		-			-			-			-			198			-			-			198

Net loss		-		-		-			-			-			-			-			-			(5,976	)		(5,976	)

Rounding difference		-		-		-			1			-			-			(1	)		-			-			-

Balance at December 31, 2006		-	$	-		27,870,454		$	28			55,740,908		$	56		$	20,212		$	-		$	(22,312	)	$	(2,016	)

Exchange Class B Shares for Class A shares		-		-		18,593,930			19			(18,593,930	)		(19	)		-			-			-			-

Adoption of FIN 48 cumulative effect adjustment		-		-		-			-			-			-			-			-			(105	)		(105	)

Common shares issued for restricted stock grant		-		-		3,112,901			3			6,225,802			6			9,641			-			-			9,650

Amortization of restricted stock		-		-		-			-			-			-			5,066			-			-			5,066

Shares issued for services		-		-		10,000			-			20,000			-			45			-			-			45

Common shares issued for options exercised		-		-		436,558			-			820,000			1			411			-			-			412

Exercise of common stock warrants		-		-		1,120,432			1			2,240,864			2			913			-			-			916

Stock option compensation		-		-		-			-			-			-			131			-			-			131

Net income		-		-		-			-			-			-			-			-			3,209			3,209

Balance at December 31, 2007		-	$	-		51,144,275		$	51			46,453,644		$	46		$	36,419		$	-		$	(19,208	)	$	17,308

Exchange Class B Shares for Class A shares		-		-		15,585,537			16			(15,585,537	)		(16	)		-			-			-			-

Common shares issued for restricted stock grant		-		-		1,954,775			2			3,251,618			3			(5	)		-			-			-

Amortization of restricted stock		-		-		-			-			-			-			739			-			-			739

Shares issued for services		-		-		500,000			1			-			-			509			-			-			510

Common shares issued for options exercised		-		-		49,361			-			3,333			-			2			-			-			2

Exercise of common stock warrants		-		-		145,311			-			290,624			-			254			-			-			254

Stock option compensation		-		-		-			-			-			-			925			-			-			925

Net Loss		-		-		-			-			-			-			-			-			(4,475	)		(4,475	)
Foreign currency translation adjustment																					(70	)					(70	)
Total comprehensive loss		-		-		-			-			-			-			-			-						(4,545	)

Rounding difference		-		-		-			(1	)		-			1			-			-			-			-

Balance at December 31, 2008		-	$	-		69,379,259		$	69			34,413,682		$	34		$	38,843		$	(70	)	$	(23,683	)	$	15,193

Asset Category		Useful Life
Building and building improvements		15 - 30 years
Vehicles		5 years
Equipment including computer hardware and software		3 - 5 years
Furniture and fixtures		2 - 5 years
Leasehold improvements		2 years *

* Based on the term of the underlying lease

Dollars in thousands	At December 31, 2008						At December 31, 2007
			Accumulated						Accumulated
	Cost		Amortization		Net		Cost		Amortization		Net
Amortized intangible assets (1)
Non-compete agreement	$	360	$	209	$	151	$	360	$	158	$	202
RTA agreements		690		690		-		690		690		-
Vendor agreements		220		89		131		220		67		153
Total amortized intangible assets		1,270		988		282		1,270		915		355

Unamortized intangible assets
Domain names		2,040		-		2,040		2,040		-		2,040
Total unamortized intangible assets		2,040		-		2,040		2,040		-		2,040
Total	$	3,310	$	988	$	2,322	$	3,310	$	915	$	2,395

Estimated Amortization

2009	$	73
2010		73
2011		70
2012		22
2013		22
2014 and thereafter		22
	$	282

Dollars in thousands	Marketing		Travel		Parent			Total

Balance as of December 31, 2006	$	-	$	-	$	2,224		$	2,224
Tax adjustment (1)		-		-		755			755
Balance as of December 31, 2007	$	-	$	-	$	2,979		$	2,979
Acquisition of Sunrise Travel Service		-		-		149			149
Impairment of Sunrise Travel Service		-		-		(149	)		(149	)
Balance as of December 31, 2008	$	-	$	-	$	2,979		$	2,979

	Shares			Weighted Average Exercise Price		Weighted Average Fair Value		Weighted Average Remaining Life (Years)
Options outstanding, beginning of year		785,841		$	0.46	$	0.34
Granted		2,149,425			0.94		0.80
Forfeited		(46,947	)		0.71		0.97
Expired		-			-		-
Exercised		(68,492	)		0.52		0.54
Options outstanding, end of year		2,819,827		$	0.82	$	0.68		3.43

Options exercisable, end of year		854,935		$	0.80	$	0.60		2.56

	Options Outstanding						Options Exercisable
			Weighted
			Average		Weighted				Weighted
	Number		Remaining		Average		Number		Average
Range of Exercise Prices	Outstanding		Life (Years)		Exercise Price		Outstanding		Exercise Price
$0.40 - $1.00		1,819,827		1.80	$	0.54		601,600	$	0.54
$1.01 - $1.67		1,000,000		6.39		1.32		253,335		1.40

Total		2,819,827		3.43	$	0.82		854,935	$	0.80

			Weighted
			average
	Restricted		grant-date
	shares		fair value
Non-vested at beginning of 2008		19,611,324	$	1.03
Granted		1,112,206		1.45
Vested		5,231,794		1.06
Forfeited		192,678		1.40
Non-vested at December 31, 2008		15,299,058	$	1.05

Year Ended
December 31, 2007	Marketing		Travel		Parent			Total

External and inter-segment revenue	$	119,209	$	22,076	$	-		$	141,285
Net income (loss)		1,495		3,532		(1,818	)		3,209
Assets		47,530		8,749		6,615			62,894
Depreciation and amortization		860		15		277			1,152
Capital expenditures		2,567		311		8,017			10,895

Year Ended
December 31, 2006	Marketing			Travel		Parent			Total

External and inter-segment revenue	$	42,890		$	8,007	$	-		$	50,897
Net income (loss)		(3,277	)		1,768		(4,467	)		(5,976	)
Assets		17,106			1,125		10,659			28,890
Depreciation and amortization		315			-		93			408
Capital expenditures		1,270			-		4,624			5,894

GEOGRAPHIC FINANCIAL INFORMATION:

NET REVENUES:
Dollars in thousands	Years Ended December 31,
	2008		2007		2006

United States	$	158,503	$	141,285	$	50,897
Canada		4,044		-		-
	$	162,547	$	141,285	$	50,897

LONG-LIVED ASSETS:
	2008		2007		2006

United States	$	25,040	$	22,014	$	-
Canada		267		110		-
	$	25,307	$	22,124	$	-

	As of December 31,
Dollars in thousands	2008			2007

Deferred tax assets
Allowance for doubtful accounts	$	210		$	85
Depreciation		-			38
Accrued vacation		153			104
Accrued expenses		284			114
Interest receivable reserve		80			-
Capital losses		107			9
Accrued compensation		589			632
Impairment loss		333			-
Inventory reserve		844			-
Contributions carryover		10			33
Alternative minimum tax deposit		62			50
Share-based payments		472			1,923
Capital organizational costs		47			47
Foreign tax credit carryforward		253			-
Net operating loss carryforward		5,413			3,890
		8,857			6,925
Deferred tax liabilities
Intangible assets		(1,262	)		(1,262	)
Depreciation and amortization		(187	)		-
		(1,449	)		(1,262	)
Net deferred tax asset before valuation allowance		7,408			5,663

Less valuation allowance		(8,163	)		(6,418	)

Net deferred tax liability	$	(755	)	$	(755	)

Federal deferred tax liability	$	(662	)	$	(662	)
State deferred tax liability		(93	)		(93	)

Net deferred tax liability	$	(755	)	$	(755	)

	Unrecognized Tax Benefits
Dollars in thousands	Years Ended December 31,
	2008			2007
Balance at beginning of period	$	1,398		$	2,001
Tax positions related to the current period:
Gross increases		19			87
Gross decreases		-			-
Tax positions related to prior periods:
Gross increases		29			84
Gross decreases		-			(761	)
Settlements		(44	)		(10	)
Lapse of statute of limitations		-			(3	)

Balance at December 31,	$	1,402		$	1,398

Dollars in thousands									Vehicle		Sublease
Year ending			RezConnect		Canadian		Wal-Mart		and Office		Rental		Net Rental
December 31,	IL Office		NJ Office		Locations		Locations		Equipment		Income		Expense

2009	$	176	$	49	$	10	$	32	$	68	$	36	$	299
2010		84		50		-		-		21		-		155
2011		-		51		-		-		4		-		55
2012		-		52		-		-		-		-		52
2013		-		18		-		-		-		-		18
2014 and beyond		-		-		-		-		-		-		-

Total	$	260	$	220	$	10	$	32	$	93	$	36	$	579

Dollars in thousands	As Previously Presented			Adjustment			As Restated

For the year ended Decemeber 31, 2007:

Restricted cash-collateral used as reserves for credit card processing	$	-		$	(1,018	)	$	(1,018	)
Net cash provided by operating activities		13,040			(1,018	)		12,022
Restricted cash-collateral for reserve for credit card processing		(1,768	)		(1,768	)		-
Reduction in restricted cash for credit card processing - CD release		750			750			-
Rounding		-			(1	)		-
Net cash used in financing activities	$	(1,893	)	$	(1,019	)	$	(874	)

For the year ended Decemeber 31, 2006:

Restricted cash collateral for credit card processing	$	-		$	(750	)	$	(750	)
Rounding					1
Net cash provided by operating activities		908			(749	)		159
Restricted cash-collateral for outstanding note and reserve for credit card processing		(1,250	)		(1,250	)		-
Reduction in restricted cash-collateral for outstanding note		-			500			500
Rounding		-			1			-
Net cash provided by (used in) financing activities	$	(580	)	$	(749	)	$	169

Dollars in thousands, except share and per share data	Year Ended December 31, 2008
	First			Second			Third		Fourth
	Quarter			Quarter			Quarter		Quarter
Net revenues	$	42,728		$	44,774		$	42,876	$	32,169
Income (loss) from operations		(3,463	)		(215	)		327		(770	)
Net income (loss)		(3,518	)		(200	)		288		(1,045	)
Net income (loss) per share:
Basic	$	(0.03	)	$	-		$	-	$	(0.01	)
Diluted		(0.03	)		-			-		(0.01	)
Weighted average shares outstanding:
Basic		102,858,468			103,183,276			103,438,235		103,629,200
Diluted		102,858,468			103,183,276			110,080,692		103,629,200

	Year Ended December 31, 2007
	First			Second		Third		Fourth
	Quarter			Quarter		Quarter		Quarter
Net revenues	$	24,049		$	32,000	$	39,869	$	45,367
Income (loss) from operations		(2,224	)		1,542		2,188		1,507
Net Income (loss)		(2,177	)		1,672		2,149		1,565
Net income (loss) per share:
Basic	$	(0.02	)	$	0.02	$	0.02	$	0.02
Diluted		(0.02	)		0.02		0.02		0.01
Weighted average shares outstanding:
Basic		94,309,323			96,529,578		97,209,960		97,552,636
Diluted		94,309,323			105,887,781		110,801,031		106,303,998

Dollars in thousands						Deductions
			Additions						Reclass to
	Balance at		charged to			Write-offs,			acquisition			Deferred			Balance
	beginning		costs and			net of			of business			tax asset,			at end of
Description	of period		expenses			recoveries			reserve			net			period

2008
Allowance for doubtful accounts	$	6	$	2		$	(1	)	$	-		$	-		$	7
Inventory reserve		-		3,024			-			-			-			3,024
Notes receivable reserve		45		562			-			(45	)		-			562
Interest receivable reserve		156		109			(48	)		-			-			217
Advance reserve		73		295			(206	)		-			-			162
Deferred tax assets
- valuation allowance		6,418		1,745			-			-			-			8,163

2007
Allowance for doubtful accounts	$	7	$	-		$	(1	)	$	-		$	-		$	6
Notes receivable reserve		-		45			-			-			-			45
Interest receivable reserve		-		156			-			-			-			156
Advance reserve		-		73			-			-			-			73
Deferred tax assets
- valuation allowance		8,041		(1,116	)		-			-			(507	)		6,418

2006
Allowance for doubtful accounts	$	25	$	5		$	(23	)	$	-		$	-		$	7
Deferred tax assets
- valuation allowance		7,661		380			-			-			-			8,041