**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**










**Form 10-K** **SB/A**


**(Amendment
      No. 6)**


**x ANNUAL
      REPORT UNDER
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**




For
      the
      fiscal year ended December 31, 2004




**or**




**o TRANSITION
      REPORT
      UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**




For
      the
      transition period from __________ to __________




**Commission
      File No. 0-18412**






**REZconnect
      Technologies, Inc.**


**(now
      known as YTB International, Inc.)**


(Name
      of
      small business issuer in its charter)




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








**560
      Sylvan Avenue**


**Englewood
      Cliffs, New Jersey 07632**


(Address
      of principal executive offices) (zip code)





Issuer’s
      telephone number: (201) 567-8500





Securities
      Registered pursuant to Section 12(b) of the Act: None




Securities
      Registered pursuant to Section 12(g) of the Act:




Common
      Stock, $.001 per share


(Title
      of
      Class)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports) and (2) has been subject
      to such filing requirements for the past 90 days. Yes £ No S




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB o.




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes £ No S




State
      issuer’s revenues for its most recent fiscal year: $3,192,692.




The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold of the registrant as of September 30, 2006 was approximately
      $27,552,651.




State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date. As of September 30, 2006, there were
      29,133,195 shares of Common Stock, par value $.001 per share
      outstanding.




DOCUMENTS
      INCORPORATED BY REFERENCE: None.




Transitional
      Small Business Disclosure Format (check one) Yes £ No S .








Table
      of
      Contents




PART
                IItem
                1.
            
            Description
                of Business
            
            2Item
                2.
            
            Description
                of Property
            
            4Item
                3.
            
            Legal
                Proceedings
            
            4Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            5PART
                IIItem
                5.
            
            Market
                for Common Equity and Related Stockholder Matters
            
            5Item
                6.
            
            Management’s
                Discussion and Analysis or Plan of Operation
            
            6Item
                7.
            
            Financial
                Statements
            
            12Item
                8.
            
            Changes
                In and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            12Item
                8A.
            
            Controls
                and Procedures
            
            13Item
                8B.
            
            Other
                Information
            
            16PART
                IIIItem
                9.
            
            Directors,
                Executive Officers, Promoters and Control Persons; Compliance With
                Section
                16(a) of the Exchange Act
            
            16Item
                10.
            
            Executive
                Compensation
            
            18Item
                11.
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            20PART
                IVItem
                12.
            
            Certain
                Relationships and Related Transactions
            
            21Item
                13.
            
            Exhibits
            
            22Item
                14.
            
            Principal
                Accountant Fees and Services
            
            22










EXPLANATORY
      NOTE





YTB
      International, Inc. (formerly REZconnect Technologies, Inc., the “former
      REZconnect”) ( “YTB” or the “Company”) is filing this Amendment No. 6 to Form
      10-KSB for the year ended December 31, 2004 to reflect the restatement of its
      audited consolidated financial statements for the years ended December 31,
      2004
      and December 31, 2003. The restatements arose from actions taken by the Company
      when it became aware of the lack of independence with the Company’s former
      independent accounting firm. On January 6, 2006, the Company self-reported
      to
      the staff of the United States Securities and Exchange Commission ( the “SEC”)
      (the “Staff”) that it became aware that the Company’s previous independent
      accounting firm, Dischino & Associates, P.C. (“Dischino”) had provided
      prohibited services and appeared to have not followed the standards of the
      Public Company Accounting Oversight Board (“PCAOB”). On January 19, 2006, the
      Company initiated an internal inquiry into those accounting-related matters
      which the Company disclosed in the Current Report on Form 8-K filed with the
      SEC
      on January 19, 2006. Based on the findings of the inquiry, on February 6, 2006,
      the Company’s management and the Audit Committee of the Company’s Board of
      Directors concluded that the Company needed to restate certain of the Company’s
      financial statements and that the financial statements for the years ended
      December 31, 2004 and 2003 included in the Company’s Annual Report on Form
      10-KSB/A No. 5 for the year ended December 31, 2004 and the financial statements
      included in the Company’s Quarterly Reports on Form 10-Q for the quarters ended
      March 31, 2004, June 30, 2004, September 30, 2004, March 31, 2005, June 30,
      2005
      and September 30, 2005 could not be relied upon.





During
      February 2006, the Company began the restatement of the affected years’ and
      quarters’ financial statements. During
      the course of the review of 2003 and 2004 annual and quarterly reports, certain
      other errors were discovered, resulting from a lack of proper internal controls
      and procedures. These findings and the related restatement impact are described
      fully in Item 8A of this document as well as Note 14 in the accompanying Notes
      to Consolidated Financial Statements.





The
      Company’s Chief Executive Officer and Chief Financial Officer have considered
      the errors giving rise to this restatement and have determined that the errors
      resulted, in part, from a finding of material weaknesses in the Company’s
      internal disclosure controls and procedures. This conclusion was discussed
      and
      concurred with by both the Audit Committee and UHY LLP, the Company’s current
      independent registered public accounting firm. The deficient controls and
      procedures resulted in the improper selection and application of generally
      accepted accounting principles, most notably the improper application of
      purchase accounting in the merger of the Company and YTB Inc. which is more
      fully discussed in Notes 1 and 3 in the accompanying Notes to Consolidated
      Financial Statements, improper recognition of revenue and expenses primarily
      related to the accounting treatment for the sale of the Company’s online travel
      stores, improper recording of share-based transactions and the improper
      development of accounting estimates. The
      Company has and is continuing to initiate policies and procedures designed
      to
      enhance internal controls related to financial reporting and
      disclosure.





Accordingly,
      the Company is filing this amendment to its Form 10-KSB for the year ended
      December 31, 2004 for the purpose of:





·
            amending
                and restated Item 6 “Management’s Discussion and Analysis or Plan of
                Operation”;


·
            amending
                and restating Item 7 “Financial Statements”;


·
            amending
                and restating Item 8A “Controls and Procedures” and


·
            amending
                and restating Item 13 “Exhibits and Reports on Form
                8-K”.





**Additionally,
      this Form 10-K/A does not purport to provide a general update or discussion
      of
      any other developments at the**  **Company
      subsequent to the original filing, unless specifically stated otherwise in
      this
      report.**





As
      a
      result of this restatement, updated certifications pursuant to Section 302
      and
      Section 906 of the Sarbanes-Oxley Act of 2002 have been re-filed and included
      as
      exhibits to this amended Form 10-KSB.





1


**PART
      I**





**ITEM
      1.****DESCRIPTION
      OF BUSINESS.**





YTB
      International, Inc. (formerly REZconnect Technologies, Inc. (the “former
      REZconnect”)) (the “Company”) is a leading internet provider of online travel
      stores for travel agencies and home-based representatives using the Company’s
      services and technology. The Company is a travel management company using
      technology and the Internet for the Company’s franchise chain and the online
      retail travel stores. The Company has developed products and services offered,
      and intend to further grow its product line. The Company believes it can
      continue to grow the Company’s overall revenues and profitability. On December
      8, 2004, the Company merged with and into YourTravelBiz.com, Inc. (“YTB, Inc.”)
      as more fully discussed below. For the period from December 8, 2004 to December
      31, 2004, the Company operated with three operating groups.





**The
      Business as of December 31, 2004**





The
      Company is a leader in the travel services business and has operated in this
      industry for 23 years. The Company offers an interactive, real-time travel
      booking engine, with access to preferred deals with leading travel industry
      suppliers, to its licensees and to small office-home office agencies,
      independent travel agencies and high traffic web sites. The Company’s revenue
      stream is comprised of initial license fees as each online travel agency is
      sold, monthly license fees from its licensed travel agencies and commissions
      on
      the sale of travel products.





Management
      has 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 travel industry. To combat these
      trends and strengthen its competitive position, the Company has sought to bring
      advanced technologies to the travel industry by investing in software
      development and offering online travel agency licenses.





The
      Company believes it is at the forefront of several growing trends: the
      increasing consumer spending in the travel, the boom in home-based businesses
      and the growing acceptance of conducting retail business on the internet. With
      the “baby boomer” population approaching retirement age, the demand for leisure
      travel options will continue to grow. Luxury cruise ship companies and resort
      builders are gearing up for a wave of retirees. With job insecurity, as well
      as
      an ability to spend time with the family becoming ever-increasing concerns,
      the
      Company believes the ability to own a home-based business is becoming an even
      more attractive option. Finally, the Company believes online travel planning
      will continue to make tremendous inroads in the marketplace as more people
      use
      the Internet to become better informed and to save time and money.





All
      travel arrangements from the online sites are serviced by YTB Travel. YTB Travel
      currently hosts approximately 8,400 **** sites.





**Overview**





The
      Company was originally incorporated under the laws of the State of New York
      in
      June 1982 as Travel Network, Ltd. and did business as Global Travel Network.
      On
      February 1, 1994, the Company re-incorporated under the laws of the State of
      New
      Jersey (at which time the New York Corporation was merged with and into the
      New
      Jersey Corporation). The assets of this corporation were transferred to Global
      Travel Network, L.L.C. (“GTN”) in 1998. GTN was created as a conduit to
      participate in the franchise Global Travel Network business of Travel Network,
      Ltd. Global Travel Network was merged into a New York Company called Playorena,
      Inc., which was a publicly traded corporation trading on NASDAQ Bulletin
      Boards.





On
      September 17, 1999, Playorena, Inc. acquired 100% of 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)
      representing 94.5% of the issued and outstanding common stock of Playorena
      upon
      completion of the share exchange. Prior to that time, Playorena operated as
      a
      public shell seeking the acquisition of, or merger with, an existing company.
      Following the Playorena, Inc. share exchange and merger, the Company changed
      its
      name to ETRAVNET.COM, Inc. On August 29, 2002, the Company changed its name
      to
      REZconnect Technologies, Inc.





On
      December 8, 2004, YTB, Inc. and the former REZconnect merged and effected a
      share exchange. YTB, Inc., a client of the former REZconnect, was engaged in
      referral marketing, whereby for a monthly web-site maintenance fee, YTB, Inc.’s
      referring travel agent (“RTAs”) were provided with an interactive web site
      offering travel-related products and services which allowed them to sell those
      products and services to the general public. The former REZconnect negotiated
      with all vendors, hosted the web sites, and collected all revenues on behalf
      of
      YTB, Inc. and its RTAs. RTAs with a web site are paid a commission on all travel
      sales made through their respective web sites.


2




In
      the
      share exchange and associated merger between the former REZconnect and YTB,
      Inc., the stockholders of YTB, Inc. received, in exchange for 100% of YTB,
      Inc.’s capital stock, 11,522,376 newly issued shares of the former REZconnect’s
      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
      the Company and consisted of 7,430,000 shares of common stock and 4,092,376
      shares of Series B Convertible Preferred Stock of the Company (“Series B
      Stock”). The Series B Stock was issued because the Company did not have a
      sufficient number of authorized and unissued common shares available for
      issuance. In connection with its reincorporation under Delaware law, the Company
      increased the authorized shares of common stock and each share of Series B
      Stock
      was converted into one share of common stock of the Company, subject to
      adjustment, as of 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.





Effective
      January 4, 2005, the Company reincorporated under the laws of the State of
      Delaware, changed its name to YTB International, Inc. and increased its
      authorized common shares to 50,000,000, with the preferred remaining at
      5,000,000 authorized. Simultaneous with the Company’s reincorporation, each of
      the operating groups, REZconnect Technologies, Inc. (“Technologies”); YTB Travel
      Network, Inc. (“YTB Travel”); and YourTravelBiz.com, Inc. (“YTB Marketing”),
      became a distinct, wholly-owned subsidiary. Technologies is a franchisor of
      traditional “brick and mortar” travel agencies, as well as Internet-based
      travel-related services and technology offering proprietary reservation systems
      for the travel and entertainment industry. YTB Travel licenses and services
      online, licensed Referring Travel Agencies (RTAs). YTB Marketing uses a referral
      marketing system to offer and sell licenses for online travel agencies.





The
      Company is publicly traded and quoted on the Over-The-Counter Bulletin Board
      under the symbol YTBL.OB.





**Operations
      as of December 31, 2004, the Date of this Report**





***REZconnect
      Technologies, Inc. (“Technologies”)***





Technologies’
      (an operating division of the Company for the period December 8-31, 2004)
      business includes a travel franchise system. It also includes developing
      technology software and services to the travel industry. Technologies’ builds
      reservation systems using proprietary applications for suppliers within the
      travel industry. Technologies also builds travel stores within the travel
      industry which includes REZcity.com, an online city guide and travel
      store.





Technologies’
      traditional travel agency franchise agreements generally have 15 year terms
      and
      are renewable.





***YTB
      Travel Network, Inc. (“YTB Travel”)***





YTB
      Travel’s (an operating division of the Company for the period December 8-31,
      2004) business is comprised of arrangements to sell airline tickets, cruise
      packages and other services plus the travel sales from approximately 8,400
      web
      sites including travel processing, document distribution, commission payments
      and tracking the transaction for each of the sites.





In
      November 2002 (pre-merger), YTB Marketing entered into an agreement with Genesis
      Consulting of Hixon, Tennessee for initial and ongoing computer programming
      services, data storage and management services. The agreement with Genesis
      Consulting was for a period of 2 years and provided for unlimited automatic
      contract extensions of 60-days. The services provided by Genesis Consulting
      relate to data input and storage, and data management. Computer programming,
      data receipt and storage and data management regarding travel and travel related
      customer orders are managed exclusively by YTB Travel at its Illinois business
      operations site.





3


***YourTravelBiz.com
      (“YTB Marketing”)***





YTB
      Marketing (an operating division of the Company for the period December 8-31,
      2004) conducts business through recruitment, enrollment, training and support
      of
      its sales force. There are currently over 8,400 individuals, known as
      independent marketing representatives (each, an “IMR”), who are responsible for
      enrolling referring travel agents (each, an “RTA”), most of whom work from their
      homes. An IMR might utilize a number of methods of attracting new RTAs: at
      informational meetings and events, through newspaper advertising and one-on-one
      meeting with individuals seeking a home based business enterprise. Recruitment
      is accomplished through assistance of their Power Team leader, company
      conference calls and training modules. A Power Team Leader is an IMR who has
      accomplished a high income level by virtue of individual and group sales
      production.





YTB
      Marketing was created to market travel agency web sites to RTAs in a Referral
      Marketing program that gives incentives to IMRs for bringing RTAs into the
      YTB
      Travel system to earn travel commissions from their site and to enjoy travel
      benefits and potential advantages with owning their own business. RTAs are
      independent and are provided with training materials and training at various
      locations throughout the United States.





**Competition**





The
      travel industry is highly diverse and specialized. In fact, it is one of the
      most competitive industries in the United States. Much of the travel business
      is
      niche oriented, highly price sensitive, and many companies are much more highly
      capitalized. One of the principal functions of the recent share exchange, merger
      and reincorporation was affected in order to make the combined company
      significantly more competitive.





The
      Company has the characteristics of both an online travel provider and a “brick
      and mortar” travel agency. The Company relies on selling the Company’s
      travel-related products primarily through online sites. The Company’s buying
      power and low acquisition costs differentiate us from the Company’s competitors.
      This unique positioning results in having few direct competitors. The Company’s
      competition can be classified into three separate types of companies: the online
      travel providers, retail travel providers and electronic distributors of travel
      information and services.





The
      Company believes that it currently has few direct competitors. Web sites such
      as
      Travelocity.com, Priceline.com, Expedia.com and Orbitz.com, are retailers of
      travel online, unlike YTB Travel which is serving a facilitator function only.
      In addition, the YTB Travel target markets are direct referrals for the
      Company’s RTAs. YTB Travel’s travel agency servicing business is subject to
      competition.





To
      the
      Company’s knowledge, there are currently no other direct network marketing
      companies specializing in the travel online business similar to YTB Marketing.
      Hence, while there are travel site marketing companies in existence, the Company
      does not believe they are direct competitors of YTB Marketing.





**Employees**





As
      of
      December 31, 2004, the Company had a total of 42 employees (full-time
      equivalents). Prior to the December 8, 2004 merger, Technologies’ had 12
      employees and YTB, Inc. consisted of 30 employees.





**ITEM
      2.****DESCRIPTION
      OF PROPERTY.**





The
      Company leases its executive offices at 560 Sylvan Avenue, Englewood, NJ 07632
      and an additional 300 square feet of office space in San Juan, Puerto Rico.
      The
      Company’s New Jersey offices consist of approximately 2,000 sq. ft. of leased
      space in an office building in Englewood Cliffs, New Jersey. The lease expires
      in April 2008. The Company also has office space in Alton, Illinois that houses
      the operations of YourTravelBiz.com, Inc. All travel agency locations are owned
      or leased directly by the licensees of such agencies.





**ITEM
      3.****LEGAL
      PROCEEDINGS.**





None.





4


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





None.








**PART
      II**





**ITEM
      5.****MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND****SMALL
      BUSINESS ISSUERS PURCHASE OF EQUITY SECURITIES.**





**Common
      Stock Prices**





Beginning
      January 25, 2005, the Company’s common stock has been quoted on OTC Bulletin
      Board under the common stock symbol YTBL.OB.” Prior thereto, it was traded under
      the symbol “REZT” from August 29, 2001 to January 24, 2005, “ETRV” from
      September 17, 1999 to December 19, 1999, “ETVT” from December 20, 1999 to August
      28, 2001. Prior to December 20, 1999, it traded under the symbol
“PLEX.”





The
      following table sets forth the high and low closing share prices per share
      for
      the periods indicated:





High
            
            LowFiscal
                year ended December 31, 2004First
                quarter
            
            $
            0.32
            
            $
            0.21Second
                quarter
            
            
            0.25
            
            
            0.12Third
                quarter
            
            
            1.85
            
            
            0.16Fourth
                quarter
            
            
            1.78
            
            
            1.15Fiscal
                year ended December 31, 2003First
                quarter
            
            $
            0.85
            
            $
            0.51Second
                quarter
            
            
            0.65
            
            
            0.50Third
                quarter
            
            
            0.62
            
            
            0.51Fourth
                quarter
            
            
            0.55
            
            
            0.32





At
      December 31, 2004, the closing price per share for the Company’s common stock,
      as reported by NASDAQ was $1.30.





**Dividend
      Policy**





The
      Company has neither declared nor paid a cash dividend on the Company’s common
      stock since the Company became a publicly traded company. It is the policy
      of
      the Board of Directors to retain all available funds to finance the development
      and growth of the Company’s business. The payment of cash dividends in the
      future will be dependent upon the Company’s earnings and financial
      requirements.





**Shareholders**





As
      of
      December 31, 2004, the Company had 203 common shareholders of record and 13
      preferred shareholders of record.





**Recent
      Sales of Unregistered Securities**





None.





5


**ITEM
      6.****MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.**





The
      Company is an internet provider of online travel stores for travel agencies
      and
      home-based representatives using its services and technology. As described
      elsewhere in this report, YTB International, Inc. became the successor to the
      former REZconnect following the December 8, 2004 merger and the Company’s
      subsequent reincorporation under the laws of the State of Delaware on January
      4,
      2005. For the period of this report, the Company operated as 3 operating groups
      (respectively Technologies, Booking and Marketing). Post- reincorporation,
      the
      operating groups became three distinct wholly owned subsidiaries consisting
      of
      YourTravelBiz.com, Inc., REZconnect Technologies Inc., and YTB Travel Network,
      Inc.





The
      Company operates under various trade names, including Your Travel Biz,
      YTBnet.com Travel Network, Global Travel Network, Travel Network Vacation
      Central, YourTravelBiz.com, YTBnet.com and the following web sites:
      Bookmytravel.com, REZconnect.com, RezCity.com, YTBnet.com, YTB.com and
      YTBtravel.com. The former REZconnect’s operations were comprised of three
      operating groups.





The
      first
      operating group is an extension of its travel franchise system. The extension
      is
      marketed as REZcity.com, an online local city guide and online travel store.





The
      second includes the Company’s technology section, which builds reservation
      systems using proprietary applications for suppliers within the travel industry;
      builds online travel stores for consumers of travel agents, as well as Super
      Sites for Travel Agents to book their clients travel and oversees and processes
      travel bookings from the web sites. The travel web sites have the ability to
      book individual and group travel. The fulfillment is offered through
      interactive, real time booking engines and access to preferred deals with
      leading travel industry suppliers. The emerging market shift to internet for
      travel services presents the opportunity for advancement of products and
      services by referral relationships. The former REZconnect has signed contracts
      with numerous consortium groups to build online super sites for their agent
      base. Contracts that have been signed include: Hickory Leisure, InteleTravel,
      OSSN, ARTA, GTM and the IT Group.





The
      third
      operating group is a referral marketing group that provides support services
      through recruitment, enrollment, initial training, and support of its sales
      force for the approximately 8,400 representatives that are currently in the
      system.





The
      Company is a full-service provider of discount travel products and services
      to
      the leisure and small business traveler. The Company offers its customers a
      reliable source of travel products and services through the Company’s agreements
      with selected travel providers, including major airlines, cruise lines, hotels
      and car rental agencies, as well as wholesale travel providers. In addition,
      the
      Company offers its customers the ability to make reservations on over 400
      airlines, at more than 35,000 hotels and with most major car rental companies,
      cruise lines and tour package operators. The Company’s consumer driven web sites
      provide strong content and book-ability with over 60 booking engines
      incorporated into one site, covering all aspects of the travel industry. Sites
      are available for use 24 hours, 7 days a week, allowing travel agents the
      ability to personally follow-up with the online consumer and provide customer
      service.





In-house
      sales personnel have generally handled marketing of franchisees. All of the
      Company’s franchised operations are independently owned and operated. REZcity
      operates two company-owned travel agencies. All sales of travel products by
      REZcity are made through its franchisees or through its interactive web site.
      Operational expenses consist of franchise system sales and support personnel,
      executive management and minimal administrative personnel.





**Overview**





The
      Company’s revenues to date are predominately comprised of initial web site
      license fees and franchise service fees, commissions paid by travel providers
      and the retail value of travel agency related sales plus online hosting fees
      for
      web sites. In addition, certain travel suppliers pay performance-based
      compensation known as “override commissions” or “overrides.” Commission revenues
      and gross retail sales, net of allowances for cancellations, are recognized
      generally based on the expected date of travel. Overrides are recognized on
      an
      accrual basis once the amount has been confirmed with the travel supplier.
      Franchise fees are recognized when all material services and conditions required
      have been performed and the likelihood of collection of the franchise fee is
      relatively assured. The Company generally defers recognition of franchise fees
      until such amounts have been collected from the franchisee. Franchise service
      fees are recognized on the accrual basis as earned. Online travel income from
      online travel store sales is deferred and recognized ratably as income over
      a
      12-month period which is the average life of an RTA.





With
      respect to travel services, revenues are generated by transactions with
      customers who make offers to purchase tickets supplied by participating vendors.
      Because the Company is the merchant of record in these transactions, revenue
      for
      these services includes the total amount billed to the
      customer.


6





The
      commission rates paid by travel suppliers in addition to overrides are
      determined by individual travel suppliers and are subject to change. Commission
      rates paid by travel suppliers have been approximately 10% for hotel
      reservations, 5-10% for car rentals, and 10-15% for cruises and vacation
      packages. Airline tickets are a non-commissionable item and revenues are earned
      from service fees, which range from $4 to $15 per ticket. Based on the past
      several years, leisure vendors (including tour operators, cruise lines and
      hotel
      and car packagers) have not reduced their commission levels but in fact have
      offered the Company incentive commissions above the standard compensation for
      its volume business. YTB Travel expects that its weighted average commission
      of
      online transaction revenues will increase due to the fact that its leisure
      bookings are much greater as a percentage of total sales than airline ticketing,
      the later offering the Company lower commissions. 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 the Company’s business, operating
      results and financial condition.





The
      Company typically charges $49.95 per month, on a non-contract basis, to own
      and
      operate an online travel site. Currently, there are approximately 2,500 consumer
      web sites in operation. Site owners are permitted to solicit other organizations
      and associations to clone travel sites allowing for site owners to earn more
      revenue. The fee associated with a travel site clone is $25 per site,
      monthly.





The
      Company’s brick and mortar franchisor, Travel Network and Global Travel Network,
      charges fees ranging from $3,000 to $29,900 for domestic franchises and from
      $50,000 to $350,000 for individual international territories. Yearly service
      fees range from $2,000 to $9,000 per location.





The
      Company believes it is at the forefront of several growing trends: the increase
      in consumer spending in the travel industry, the boom in home-based businesses
      and the growing acceptance of conducting retail business on the internet. With
      the “baby boomer” population approaching retirement age, the Company believes
      that the demand for leisure travel options will continue to grow. Luxury cruise
      ship companies and resort builders are already gearing up for this wave of
      retirees. Secondly, with job security, as well as an ability to spend time
      with
      the family, an ever-increasing concern, the Company believes the ability to
      own
      a home-based business is becoming an even more attractive option. Finally,
      the
      Company believes online travel planning will continue to make tremendous inroads
      in the marketplace as more people use the Internet to become better informed
      and
      save time and money.





7


**Results
      of Operations**





The
      following table sets forth, for the periods indicated, the percentage
      relationship of certain items from the Company’s consolidated statement of
      operations to total revenues:





Year
                Ended
              December
                31,
              2004
            
            Year
                Ended
              December
                31,
              2003Net
                RevenuesOnline
                travel store sales and monthly fees
            
            
            28.9
            %
            
            13.2
            %Travel
                commissions and services
            
            
            51.1
            %
            
            48.8
            %Franchise
                service and other fees
            
            
            19.8
            %
            
            37.5
            %Other
            
            
            0.2
            %
            
            0.5
            %TOTAL
                NET REVENUES
            
            
            100.0
            %
            
            100.0
            %OPERATING
                  EXPENSESMarketing
                commissions
            
            
            8.7
            %
            
            0.0
            %Travel
                commissions
            
            
            39.5
            %
            
            39.5
            %Franchise
                services and products
            
            
            6.1
            %
            
            11.5
            %Depreciation
                and amortization
            
            
            14.9
            %
            
            19.8
            %General
                and administrative
            
            
            99.2
            %
            
            65.8
            %TOTAL
                OPERATING EXPENSES
            
            
            168.4
            %
            
            136.6
            %LOSS
                FROM OPERATIONS
            
            
            (68.4
            %)
            
            (36.6
            %)OTHER
                  INCOME (EXPENSES)Interest
                and dividend income
            
            
            0.8
            %
            
            0.8
            %Interest
                expense
            
            
            (1.1
            %)
            
            (1.3
            %)TOTAL
                OTHER EXPENSES
            
            
            (0.3
            %)
            
            (0.5
            %)NET
                LOSS
            
            
            (68.7
            %)
            
            (37.1
            %)





**Revenues**





Online
      travel stores sales and monthly fees increased $638,031 from 2003 to 2004
      largely as a result of the YTB, Inc. merger. This is an increase of 224.4%
      with
      regard to 2003. Franchise service fees declined by ($175,559) largely as a
      result of the decline in brick and mortar sales. This was a 21.7% decrease
      from
      2003 to 2004. This was attributable to more licenses in the system. The
      Company’s franchise agreements require franchisees to pay monthly franchise fees
      or hosting fees, which have annual scheduled increases. Individual franchise
      arrangements can provide REZconnect with annual fees ranging from $3,000 to
      $9,000 for Travel Network. In addition, each franchise agreement has a provision
      for an increase in the Company’s service fee based on year-over-year change in
      the consumer price index.





Travel
      Agency Commissions increased by approximately $578,631 from 2003 to 2004, an
      increase of approximately 54.9%. The increase is attributable to an increase
      in
      the number of licensed online agencies utilizing the Company as their travel
      provider in 2004. The increase in online agencies is also largely due to the
      merger with YTB, Inc.




8




**Operating
      Expenses**





Commissions
      increased by $408,863 or 47.9% in 2004 as compared to 2003. The increase
      primarily related to the recognition of marketing commissions as a result of
      the
      merger with YTB, Inc.





There
      were no significant changes in commissions and startup fees paid on the accounts
      receivable of the franchisees.





The
      general and administrative expenses increased by $1,749,141 or 123.3% from
      2003
      to 2004. The increase in general and administrative expense in 2004 is
      attributable to the merger with YTB, Inc. and to the issuance of stock as
      compensation to one of the officers of the former REZconnect.





**Variability
      of Results**





The
      Company’s travel products and services gross bookings have increased from 2003
      to 2004 due to increases in the number of licensed web sites including
      additional franchises derived from REZcity.com and an increase in products
      and
      services sold to travel agencies utilizing the Company’s unique private label
      agent only web-based booking site. Cost of travel revenues have similarly
      increased from 2003 to 2004.





As
      a
      result of the Company’s operating history in online commerce and the variability
      that can be experienced by the Company’s franchising operations, the Company is
      unable to accurately forecast its revenues. The Company’s current and future
      expense levels are based predominantly on its operating plans. The Company
      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 the Company’s business, operating results and
      financial condition. Further, the Company currently intends to substantially
      increase its operating expenses to develop and offer new and expanded travel
      services, to fund increased sales and marketing and customer service operations,
      and, to develop its technology and transaction processing systems. To the extent
      such expenses precede or are not subsequently followed by increased revenues,
      the Company’s operating results will fluctuate and anticipated net losses in a
      given period may be greater than expected.





The
      Company expects to experience fluctuations in its future quarterly operating
      results due to a variety of other factors, many of which are outside the
      Company’s control. Factors that may adversely affect the Company’s quarterly
      operating results include, but are not limited to (i) the Company’s ability to
      retain existing customers, attract new customers at a steady rate and maintain
      customer satisfaction, (ii) changes in inventory availability from third party
      suppliers or commission rates paid by travel suppliers, (iii) the announcement
      or introduction of new or enhanced sites, services and products by the Company
      or its competitors, (iv) general economic conditions specific to the Internet,
      online commerce or the travel industry, (v) the level of use of online services
      and consumer acceptance of the Internet and commercial online services for
      the
      purchase of consumer products and services such as those offered by the Company,
      (vi) the Company’s ability to upgrade and develop its systems and infrastructure
      and to attract new personnel in a timely and effective manner, (vii) the level
      of traffic on the Company’s online sites, (viii) technical difficulties, system
      downtime or Internet brownouts, (ix) the amount and timing of operating costs
      and capital expenditures relating to expansion of the Company’s business,
      operations and infrastructure, (x) governmental regulation and (xi) unforeseen
      events affecting the travel industry, including terrorist activities similar
      to
      September 11 and the conflict with Iraq.





In
      addition, the Company expects that it will experience seasonal fluctuations
      in
      the travel industry, internet and commercial online service usage and
      advertising expenditures. The Company anticipates that travel bookings will
      typically increase during the first and second quarter in anticipation of summer
      travel and will typically decline during the third quarter. Internet and
      commercial online service usage and the rate of growth of such usage may be
      expected typically to decline during the summer. Depending on the extent to
      which the Internet and commercial online services are accepted as an advertising
      medium, seasonality in the level of advertising expenditures could become more
      pronounced for Internet-based advertising.





Due
      to
      the foregoing factors, quarterly revenues and operating results are difficult
      to
      forecast, and the Company believes that period-to-period comparisons of its
      operating results will not necessarily be meaningful and should not be relied
      upon as an indication of future performance. It is likely that the Company’s
      future quarterly operating results from time to time will not meet the
      expectations of security analysts or investors. In such event, the price of
      the
      Company’s common stock would likely be materially and adversely
      affected.





The
      Company anticipates that the material effects on its operations as a result
      of
      the merger with YTB, Inc. will be a significant increase in RTAs and membership
      revenue, as well as a commensurate increase in relates commission
      expense.


9


**Liquidity
      and Capital Resources**





Cash
      consumed by operating activities in 2004 was $298,942, as compared to cash
      provided by operating activities of $8,747 in 2003.





Cash
      provided by investing activities was $192,954 in 2004, as compared to cash
      consumed by investing activities of $20,615 in 2003.





Cash
      provided by financing activities was $84,389 in 2004, as compared to cash
      consumed by financing activities was $3,330 in 2003. As of December 31, 2004,
      the Company had approximately $25,719 in cash and $528,311 in short-term
      investments.





The
      Company believes that cash and short term investments on hand at December 31,
      2004 and its cash flow from operations and 2005 funding will be sufficient
      to
      meet its obligations on a timely basis for the next 12 months. That conclusion
      is reinforced because the consolidated Company has minimal debt service;
      development costs incurred in prior years are expected to decline as will its
      cash requirements since it expects greater revenues and income from YTB, Inc.
      operations in 2005. The proceeds received from the sale of a convertible note
      which occurred in January 2005 of $2,000,000 and from a private placement to
      investors in February 2005 of $960,000 will further bolster the Company’s
      liquidity position.





**Critical
      Accounting Policies and Estimates**





The
      Company’s financial statements and accompanying notes are prepared in accordance
      with accounting principles generally accepted in the United States. The
      preparation of financial statements requires the Company to estimate the effect
      of various matters that are inherently uncertain as of the date of the financial
      statements. Each of these required estimates varies in regard to the level
      of
      judgment involved and its potential impact on the Company’s reported financial
      results. Estimates are deemed critical when a different estimate could have
      reasonably been used or where changes in the estimate are reasonably likely
      to
      occur from period to period, and would materially impact the Company’s financial
      condition, changes in financial condition or results of operations. The
      Company’s significant accounting policies are discussed in Note 1 in the
      accompanying Notes to Consolidated Financial Statements. Critical accounting
      estimates for the Company include revenue recognition, impairment of goodwill
      and realization of deferred tax assets and are discussed in the following
      paragraphs.





Revenue
      Recognition






A
      summary
      of the Company’s revenue recognition policies, as they relate to the specific
      revenue streams, is as follows:




*Online
      travel store sales and monthly fees*





The
      Company generates revenue from the selling of on-line travel agencies, and
      from
      providing training and ongoing maintenance services to the new business owners
      of such on-line travel agencies, i.e. RTA(s). The Company determined that its
      initial sale of the online travel store was deemed to fall under the SEC’s Staff
      Accounting Bulletin No. 4, “Revenue Recognition” (“SAB 104”) and Emerging Issues
      Task Force 00-21 (“EITF 00-21”), “Accounting for Revenue Arrangements with
      Multiple Deliverables”. SAB 104 and EITF 00-21 require the initial sales price,
      including all up-front fees received from new RTA sales, to be amortized over
      the expected useful life of referring travel agent (“RTA”). The calculation of
      the expected useful life was based upon a review of the sales for each month
      and
      the length of time each RTA continues with the Company. The Company then applied
      a weighted average to the calculations. Likewise, the commission paid in
      connection with the negotiations to sell the business would be amortized over
      the same period. Any excess of expense to acquire the business over the proceeds
      received, is recognized immediately and not amortized. Monthly maintenance
      fees
      are recognized in the month the services are provided. The Company reviews
      the
      underlying calculations of the expected useful life of the RTA
      annually.




*Travel
      commissions and services*





Commissions
      and incentives earned from travel sales are recognized as revenue when the
      related travel has been completed by the customer. Commissions earned where
      the
      Company acts in the capacity of a wholesaler are recorded at their gross amount.
      The cost of such revenue is recorded separately as an operating
      expense.




10


*Franchise
      service fees and other fees*





The
      Company is a franchisor of traditional “brick and mortar” travel agencies. The
      initial franchise fee related to the sale of these travel agencies is due upon
      execution of a franchise agreement with the franchisee. The initial franchise
      fee is deferred and subsequently recognized as revenue when all material
      conditions prior to the opening of a franchised business have been satisfied.
      Fees paid are non-refundable once a site location has been
      selected.





*Other
      revenue*





Sales
      revenues from sales aids and miscellaneous promotional and marketing materials
      are recognized when the related merchandise is shipped to the
      customer.




Intangible
      assets, net





Intangible
      assets are amortized using the straight-line method over their estimated period
      of benefit, ranging from one to ten years. The Company periodically evaluates
      the recoverability of intangible assets and takes into account events or
      circumstances that warrant revised estimates of useful lives or that indicate
      that impairment exists. No impairment of intangible assets was identified during
      any of the periods presented.




Goodwill





In
      accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142,
“Goodwill and Other Intangible Assets,” (“SFAS 142”), the Company assesses
      goodwill for impairment annually during the fourth quarter, or more frequently,
      if an event occurs or circumstances change that more likely than not reduce
      the
      fair values of reporting units below their carrying values. The impairment
      test
      requires the Company to estimate the fair value of the Company’s reporting
      units. If the carrying value of the reporting unit exceeds the fair value,
      the
      goodwill of the reporting unit is potentially impaired and the Company proceeds
      to step two of the impairment analysis. In step two of the analysis, the Company
      will record an impairment loss equal to the excess of the carrying value of
      the
      reporting unit’s goodwill over its implied fair value should such a circumstance
      arise.





Income
      taxes





SFAS
      109,
“Accounting for Income Taxes *”,* establishes financial accounting and reporting standards for the effect of
      income taxes. The Company provides deferred income tax assets and liabilities
      based on the estimated future tax effects of differences between the financial
      and tax bases of assets and liabilities based on currently enacted tax laws.
      The
      Company assesses temporary differences that result from differing treatments
      of
      certain items for tax and accounting purposes. These differences result in
      deferred tax assets and liabilities, which are shown on our consolidated balance
      sheet. The Company must assess the likelihood that deferred tax assets will
      be
      realized. To the extent the Company believes that realization is not likely,
      a
      valuation allowance is established. When a valuation allowance is established
      or
      increased in an accounting period, a corresponding tax expense is recorded
      in
      our consolidated statement of operations. Judgment is required in assessing
      the
      future tax consequences of events that have been recognized in the Company’s
      financial statements or tax returns. Fluctuations in the actual outcome of
      these
      future tax consequences could materially impact the Company’s financial position
      or its results of operations.


Expense
        recognition of commission costs
  The
        Company incurs commission costs that are directly related to the origination
        of
        new RTA sales; sales which result in the deferral of revenue. Such incremental
        direct commission costs are capitalized in accordance with Financial Accounting
        Standards Board (“FASB”) Technical Bulletin No. 90-1 (“FTB 90-1”). In addition,
        the Company has elected to account for such commission costs in accordance
        with
        Securities and Exchange Commission Staff Accounting Bulletin (“SAB") 104 and FTB
        90-1, by deferring and charging such costs to expense in proportion to the
        related revenue recognized, over the same deferral period of twelve
        months.
  Marketing
        compensation plan
  The
        Company offers a compensation plan to its sales representatives under an
        arrangement that pays the representatives direct sales commissions, override
        compensation (if qualified) and other bonus incentives based on the amounts
        attributable to each representative’s sales, or enrolled referrals. Direct sales
        commissions are paid on a weekly basis, based upon the amount of the previous
        week’s sales. Residual commissions are paid on a monthly basis for active
        representatives, following the month earned. Bonuses are earned by maintaining
        a
        minimum number of personal enrollments. Commission costs are capitalized
        and
        recognized as expense in proportion to the related revenue recognized, over
        a
        period of twelve months.




The
      Company has made certain other estimates that, while not involving the same
      degree of judgment, are important to understanding the Company’s financial
      statements. These estimates are in the areas of assessing recoverability of
      long-lived assets and in establishing reserves in connection with its accounts
      receivable. On an ongoing basis, management evaluates its estimates and
      judgments in these areas based on its substantial historical experience and
      other relevant factors. Management’s estimates as of the date of the financial
      statements reflect its best judgment giving consideration to all currently
      available facts and circumstances. As such, these estimates may require
      adjustment in the future, as additional facts become known or as circumstances
      change.





The
      Company’s management has discussed the development and selection of these
      critical accounting policies with the Audit Committee of the Company’s Board of
      Directors and the Audit Committee has reviewed the Company’s disclosure relating
      to it in this Management Discussion and Analysis of Financial Condition and
      Results of Operations.


11


**New
        Accounting Pronouncements**


SFAS
      No.
      123R, “Share-Based Payment” requires that a public entity measure the cost of
      equity based service awards based on the grant-date fair value of the award.
      That cost will be recognized over the period during which an employee is
      required to provide service in exchange for the award or the vesting period.
      No
      compensation cost is recognized for equity instruments for which employees
      do
      not render the requisite service. A public entity will initially measure the
      cost of liability based service awards based on current fair value. The fair
      value of those awards will be re-measured subsequently at each reporting date
      through the settlement date. Changes in fair value during the requisite period
      will be recognized as compensation cost over the period. The Company is required
      to adopt SFAS No. 123R on January 1, 2006. Although there will be no impact
      on
      the Company’s cash flows, the adoption of SFAS No. 123R will have significant
      impact on its operating results.





The
      Company currently plans to adopt SFAS No. 123R using the modified prospective
      method. At December 31, 2004, the unvested option expense is approximately
      $260,000 and is expected to be expensed over the next 2.18 years. The Company
      is
      currently assessing the impact of the adoption of SFAS No. 123R on its
      compensation strategies.





The
      Company does not believe that there are any other new accounting pronouncements
      that the Company is required to adopt that are likely to have at least some
      effect on the Company’s future financial statements.





**Forward-Looking
      Statements**





All
      statements other than statements of historical fact included in this annual
      report, including without limitation statements regarding the Company’s
      financial position, business strategy and the plans and objectives of the
      Company’s management for future operations are forward-looking statements. When
      used in this annual report, words such as “anticipate,” “believe,” “estimate,”
“expect,” “intend,” and similar expressions, as they relate to the Company or
      its management, identify forward-looking statements. Such forward-looking
      statements are based on the beliefs of the Company’s management, as well as
      assumptions made by and information currently available to the Company’s
      management. Actual results could differ materially from those contemplated
      by
      the forward-looking statements as a result of certain factors, including but
      not
      limited to, business and economic conditions, competitive factors and pricing
      pressures, capacity and supply constraints. Such statements reflect the views
      of
      the Company with respect to future events and are subject to these and other
      risks, uncertainties and assumptions relating to the operations, results of
      operations, growth strategy and liquidity of the Company. Readers are cautioned
      not to place undue reliance on these forward-looking statements. The Company
      does not undertake any obligation to release publicly any revisions to these
      forward-looking statements to reflect future events or circumstances or to
      reflect the occurrence of unanticipated events.





**ITEM
      7.****FINANCIAL
      STATEMENTS OF THE COMPANY.**





Consolidated
      financial statements prepared in accordance with Regulation S-X, provided
      elsewhere in this annual report, are incorporated by reference into this Item
      7.





**ITEM
      8.****CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE.**





In
      September 2005, Dischino & Associates, P.C. (“Dischino”) and the Company
      mutually agreed that Dischino would not continue to act as the Company’s
      independent auditor following Dischino’s review for the quarter ended September
      30, 2005. Based on the recommendation of the Company’s Audit Committee, the
      Board of Directors of the Company at a meeting held on December 22, 2005
      approved the engagement of UHY LLP (“UHY”) as the Company’s independent
      registered public accounting firm for the fiscal year ending December 31, 2005.
      On January 4, 2006, arrangements were finalized with UHY. Prior to its
      appointment, the Company did not consult with UHY regarding matters or events
      set forth in Items 304(a) (2) (i) and (ii) of Regulation S-B promulgated by
      the
      U.S. Securities and Exchange Commission.




12


The
      reports of Dischino on the Company’s financial statements for each of the two
      fiscal years ended December 31, 2004 and 2003 did not contain an adverse opinion
      or a disclaimer of opinion and were not qualified or modified as to uncertainty,
      audit scope, or accounting principles. In connection with the audits of the
      Company’s financial statements for each of the two fiscal years ended December
      31, 2004 and 2003, and through January 4, 2006, there were no disagreements
      with
      Dischino on any matter of accounting principles or practices, financial
      statement disclosure, or auditing scope or procedure, which, if not resolved
      to
      the satisfaction of Dischino, would have caused Dischino to make reference
      to
      the matter in its reports.




During
      each of the two fiscal years ended December 31, 2004 and 2003, and through
      January 4, 2006, no information is required to be reported under Item
      304(a)(1)(iv)(B) of Regulation S-B.




**ITEM
      8A.****CONTROLS
      AND PROCEDURES.**





a.  Evaluation
      of disclosure controls and procedures.





The
      Company maintains disclosure controls and procedures designed to ensure that
      information required to be disclosed in the reports that the Company files
      or
      submits under the Securities Exchange Act of 1934, is recorded, processed,
      summarized and reported within the time period specified in the rules and forms
      of the SEC. In connection with the Form 10-KSB/A No. 5 for the fiscal year
      ended
      December 31, 2004 previously filed by the Company, as required under Rule
      13a-15(e) of the Exchange Act, the Company's management, including its Chief
      Executive Officer and Chief Financial Officer, conducted an evaluation of the
      effectiveness of the Company's disclosure controls and procedures. Based on
      that
      evaluation, the Company's Chief Executive Officer and Chief Financial Officer
      concluded that the Company's disclosure controls and procedures were effective
      as of December 31, 2004.





On
      January 6, 2006, the Company self-reported to the staff of the SEC (the “Staff”)
      that it became aware that the Company’s previous independent accounting firm,
      Dischino and Associates, P.C., had provided prohibited services and appeared
      to
      have not followed the standards of the Public Company Accounting Oversight
      Board. On January 19, 2006, the Company initiated an internal inquiry into
      those
      accounting-related matters which the Company disclosed in the Current Report
      on
      Form 8-K filed with the SEC on January 19, 2006. Based on the findings of the
      inquiry, on February 6, 2006, the Company’s management and the Audit Committee
      of the Company’s Board of Directors concluded that the Company needed to restate
      certain of the Company’s financial statements and that the financial statements
      included in the Company’s Annual Report on Form 10-KSB/A No. 5 for the year
      ended December 31, 2004 and the financial statements included in the Company’s
      Quarterly Reports on Form 10-Q for the quarters ended March 31, 2004, June
      30,
      2004, September 30, 2004, March 31, 2005, June 30, 2005 and September 30, 2005
      could not be relied upon.





As
      a
      result of the notification of non-reliance filed, the Company began its
      restatement of the affected years’ and quarters’ financial statements. The
      Company believes that the restatements resulted from the record retention
      deficiencies and lack of internal controls over financial reporting. However,
      the Company is taking numerous steps to tighten controls and strengthen internal
      control policies and procedures.





In
      addition, during the restatement process, the Company also discovered other
      matters giving rise to adjustments. These matters are with regard to
      insufficient personnel resources and technical accounting expertise within
      the
      accounting function to affect a timely financial close process. In conjunction
      with this effort, the Company conducted an in-depth review of the application
      of
      accounting principles and system of internal controls. As a result of this
      investigation, the Company identified numerous material weaknesses in its
      internal controls and improper application of accounting principles. A material
      weakness is a significant deficiency, or combination of significant
      deficiencies, that results in more than a remote likelihood that a material
      misstatement of the annual or interim financial statements will not be prevented
      or detected. The Company has quantified the errors caused by these deficiencies
      and has prepared restated financial statements and disclosures to correct the
      identified errors.





The
      restatements are described in more detail in Note 13 in the accompanying Notes
      to Consolidated Financial Statements. Internal controls over financial
      reporting, including the application of accounting policies and principles,
      are
      within the scope of disclosure controls. Therefore, management has concluded
      that there were material weaknesses in the Company’s disclosure controls as of
      December 31, 2004 and 2003. Remediation of those internal control issues is
      currently in process. The following is a summary of those weaknesses identified
      by management:


13





·
            The
                Company did not maintain sufficient competent personnel to maintain
                an
                appropriate accounting and financial reporting organizational structure.
                Specifically, the Company did not maintain personnel with an appropriate
                level of accounting knowledge, experience and training in the selection,
                application and implementation of generally accepted accounting principles
                commensurate with the Company’s financial reporting requirements. As a
                result, the Company’s controls over selection and application of
                accounting principles were ineffective. This deficiency resulted
                in the
                improper presentations in the Company’s financial statements.





·
            The
                Company’s design and operation of controls over the accounting closing and
                reporting process are not effective due to lack of timely and complete
                preparation of account analyses and reconciliations, a lack of appropriate
                review of account reconciliations and supporting analyses and errors
                in
                account balance classification. This lack of proper evaluations resulted
                in cut-off, completeness and presentation errors in the Company’s
                financial statements.





·
            The
                Company did not maintain effective controls over the development
                of
                accounting estimates. Specifically, the Company did not have controls
                in
                place to conduct a review over the propriety or collectibility of
                account
                and notes receivable in order to determine the proper recorded value
                of
                those assets and the proper valuation of the allowance for doubtful
                accounts. In addition, the deficient controls did not allow for the
                proper
                evaluation of the estimated lives of RTAs so that a proper matching
                of
                revenue and expense could be accomplished. Additionally, the Company
                did
                not analyze average marketing commissions paid in relation to original
                enrollment transactions in order to determine proper expense
                recognition.





·
            The
                Company did not maintain proper internal controls over expenditures
                and
                accounting for certain liabilities which resulted in unrecorded
                liabilities and expenses.





·
            The
                Company did not conduct an in-depth study of the carrying value of
                its
                recorded assets or testing over the impairment of those assets.
                Specifically, the deficient controls did not allow for the proper
                identification of the composition of the items included in the Company’s
                capitalized software accounts nor did it allow for an impairment
                valuation
                to determine the proper carrying value of the
                asset.





·
            The
                Board of Directors failed to maintain documentation of approved acts
                of
                the Company. Formal Board of Director minutes were not maintained
                during
                this reporting period. As a result, certain share-based transactions
                were
                not recorded or were recorded incorrectly in the Company’s financial
                statements.





In
      connection with the filing of this Form 10-KSB/A No. 6, the Company’s management
      including the Chief Executive Officer and Chief Financial Officer, have
      re-evaluated the effectiveness of the Company’s disclosure controls and
      procedures as of December 31, 2004 and 2003. Because of the material weaknesses
      discussed above, the Company’s Chief Executive Officer and Chief Financial
      Officer have now concluded that the Company’s disclosure controls and procedures
      were not effective as of December 31, 2004 and 2003.





Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      provide reasonable assurance that information required to be disclosed in
      Company reports filed or submitted under the Securities and Exchange Act of
      1934
      (“Exchange Act”) is recorded, processed, summarized and reported, within the
      time periods specified in the Securities and Exchange Commission’s rules and
      forms. Disclosure controls and procedures include, without limitation, controls
      and procedures designed to provide reasonable assurance that information
      required to be disclosed in Company reports filed under the Exchange Act is
      accumulated and communicated to management, including the Company’s Chief
      Executive Officer and Chief Financial Officer as appropriate, to allow timely
      decisions regarding required disclosure.





It
      should
      be noted that a control system, no matter how well designed and operated, can
      provide only reasonable, not absolute, assurance that the objectives of the
      control system are met. As a result, there can be no assurance that a control
      system will succeed in preventing all possible instances of error and fraud.
      The
      Company’s disclosure controls and procedures are designed to provide reasonable
      assurance of achieving their objectives, and the conclusions of our Chief
      Executive Officer and Chief Financial Officer are made at the “reasonable
      assurance” level.






14





**b.**
            **Changes
                in internal control over financial
                reporting.**





There
      were no changes in the Company’s internal controls over financial reporting that
      materially affected, or are reasonably likely to materially affect the Company’s
      internal control over financial reporting during the year ended December 31,
      2004 and 2003.





**c.**
            **Management
                Remediation Plan.**





The
      Company’s management and Audit Committee are committed to addressing and
      resolving these material weaknesses fully and promptly, by putting in place
      the
      personnel, processes, technology and other resources appropriate to support
      our
      financial reporting processes.





To
      remediate the internal control material weaknesses described above, management
      has commenced implementation of the following measures:





·
            For
                material transactions that are unique or outside the Company’s core
                operations, the Company will continue to document its process for
                accounting for such transactions and the Company will improve its
                process
                for researching the applicable accounting literature and documenting
                its
                conclusions, by consulting with outside experts to ensure its
                interpretations are correct.





·
            The
                Company will prepare a standardized memorandum that is required to
                be
                completed for each transaction that is unique or outside the Company’s
                normal core operations that is material to its financial statements.
                This
                memo will be reviewed and approved by the Chief Financial
                Officer.





·
            The
                Company will enhance formal communication with, and approval by,
                its Chief
                Financial Officer and Audit Committee of its application of Generally
                Accepted Accounting Principles in the United States (“US GAAP”) and
                account policy decisions for transactions that are outside the Company’s
                core operations and the advice received from outside
                experts.





·
            All
                Board of Directors’ meetings as well as Committee meetings minutes will be
                reviewed by an appropriate member of the internal accounting staff
                to
                determine if there are any transactions that need to be accounted
                for
                properly or events that rise to the level of
                disclosure.




·
            Management
                will evaluate and augment when necessary, the qualifications of accounting
                personnel and staffing levels at both the Illinois and New Jersey
                locations.





·
            Management
                will establish new policies and procedures as part of an enhanced
                quarterly and annual financial review close process to include additional
                analysis and support for the financial accounts as well as to ensure
                that
                all appropriate disclosures are made in accordance with US GAAP and
                the
                rules and regulations of the SEC.





We
      have
      undertaken remedial action to address and correct the weakness in our internal
      controls and disclosure controls identified subsequent to the end of 2004.
      These
      actions include adopting an adequate review of the annual and quarterly
      financial statements, engaging qualified personnel to prepare the statements
      and
      ensuring that the personnel receive continuing professional educational related
      specifically to US GAAP. These actions were put in place during the quarter
      beginning January, 2006.





We
      have
      begun the extensive process of documenting and evaluating our internal control
      procedures in order to satisfy the requirements of Section 404 of the
      Sarbanes-Oxley Act which will apply to us beginning with our fiscal year 2007.
      Section 404 will require an annual report by our management on the effectiveness
      of our internal controls over financial reporting and for our independent
      registered public accounting firm to attest to management’s evaluation
      report.





**Internal
      Inquiry**





The
      Company initiated an internal inquiry into (i) possible improper recognition
      of
      approximately $30,000 in revenue for the period ended June 30, 2005 as reported
      in the Company’s Form 10-QSB for the period ended June 30, 2005, which possible
      improper recognition the Company believes was rectified in its Form 10-QSB
      for
      the period ended September 30, 2005, and (ii) the probability that Dischino
      & Associates, P.C., the Company’s former independent auditor, was not
      independent during a portion of the period in which it performed services on
      behalf of the Company. Management of the Company concluded that in light of
      the
      fact that it appears the Company’s former audit firm provided certain prohibited
      services and appeared not to have followed appropriate auditing standards,
      the
      financial statements included in the Company’s Annual Reports for the years
      ended December 31, 2003 and 2004, and the Company’s Quarterly reports on Form
      10-QSB for years 2004 and 2005 cannot be relied upon. Accordingly, all of the
      affected statements and filings have been restated and
      re-audited.


15








The
      legal
      firm of Greenberg Traurig, LLP was retained by the Audit Committee of the Board
      of Directors of the Company to handle the inquiry and to make recommendations
      to
      the Audit Committee. In April 2006, the findings of Greenberg Traurig, LLP
      were
      presented to the Company’s Audit Committee of the Board of Directors. As a
      result, the Audit Committee presented certain resolutions to the Board of
      Directors which were adopted on April 24, 2006. The resolutions included, but
      were not limited to, enhanced controls over an executive’s ability to enter into
      contracts on behalf of the Company, additional controls over safeguarding
      Company assets and changes to enhance the Company’s record retention
      procedures.





In
      September 2006, the Company’s Chief Financial Officer and the Company’s legal
      counsel met with the SEC Staff to explain the financial statement restatements,
      the internal control weaknesses that gave rise to those restatements as well
      as
      the corrective actions that have been undertaken.





**ITEM
      8B.****OTHER
      INFORMATION.**





**None.**





**PART
      III**





**ITEM
      9.****DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;****COMPLIANCE
      WITH SECTION 16(a) OF THE EXCHANGE ACT.**





**Directors
      and Executive Officers**





Each
      director will serve for a term of one year and thereafter until their successors
      are duly elected and appointed or he resigns, unless sooner removed. Set forth
      below is certain information concerning the directors and executive
      officers:





Name
            
            Director
                Since
            
            Age
            
            Position/TitleJ.
                Lloyd Tomer
            
            December
                2004
            
            70
            
            Chairman
                of the Board of DirectorsJ.
                Scott Tomer
            
            December
                2004
            
            46
            
            President
                and DirectorMichael
                Y. Brent
            
            November
                1989
            
            62
            
            Chief
                Executive Officer and DirectorDerek
                J. Brent
            
            April
                1995
            
            33
            
            Secretary
                and DirectorJ.
                Kim Sorensen
            
            December
                2004
            
            54
            
            Treasurer
                and DirectorHarold
                L. Kestenbaum
            
            December
                1991
            
            55
            
            Director





J.
      Lloyd
      Tomer, Chairman of the Board of Directors, father of J. Scott Tomer, is a
      seasoned veteran of direct sales and marketing. After spending thirteen years
      in
      the ministry, he became an agent of the A.L. Williams Company (now known as
      Primerica Financial Services (“Primerica”)) in January 1981. He achieved the
      level of Senior National Sales Director in 1985 and maintained that position
      through 2001. While at A.L. Williams he built a successful sales organization
      numbering in the thousands, whose combined life insurance sales was measured
      in
      the billions, with assets under management of $750 million. He sold his agency
      in Primerica in January 2002 to devote his marketing expertise to
      YourTravelBiz.com. He attended Anderson College in Anderson,
      Indiana.




16


J.
      Scott
      Tomer, President of the Company and Director, worked with his father, J. Lloyd
      Tomer, at Primerica Financial Services from 1981-1993. Scott earned the level
      of
      National Sales Director at A.L. Williams and had the responsibility of field
      support and training for their sales force, where he trained over 2,000 sales
      personnel. He left the A.L. Williams to become a Certified Financial Planner,
      which he continued while specializing in real estate investing prior to
      co-founding YourTravelBiz.com in 2001.





Michael
      Y. Brent, Chief Executive Officer of the Company and Director, father of Derek
      J. Brent, graduated from the University of Miami in June 1965 with a Bachelor
      of
      Arts in administration and accounting. From July 1965 through 1974, he was
      a
      Director of Convention Sales, for his family’s hotel business. From 1974 - 1981,
      Mr. Michael Y. Brent owned and operated a travel company. In 1982, he co-founded
      Travel Network, Ltd. (one of the Company’s predecessors) and served as Vice
      President until June 1989 when he became its Chief Operating Office and a part
      owner. In 1994, Mr. Michael Y. Brent became its President and Chief Executive
      Officer.





Derek
      J.
      Brent, Secretary of the Company and Director, the son of Michael Y. Brent,
      graduated from the University of Maryland in June 1993 with a Bachelor of
      Business Administration and Accounting. He joined the Company’s predecessor in
      May 1993, as sales consultant. In 1996, he became Director of Sales and on
      December 8, 2004 Mr. Derek J. Brent became President of REZconnect Technologies,
      Inc.





J.
      Kim
      Sorensen, Treasurer of the Company and Director, brings to the Company an
      extensive and successful business history. He has owned several businesses,
      and
      managed a multi-million dollar mixed real estate complex across from the
      Illinois state capital in Springfield. He was also a professional bowler and
      bowling proprietor from 1975-1980. He joined A.L. Williams in 1981 and earned
      the Sr. Vice President position in 1985. In 1990 Kim partnered with Lloyd Tomer
      to provide technical and management support for his growing sales organization
      through 2001. He is a co-founder of YourTravelBiz.com, and his expertise in
      computer technology has led to the development and management of many of the
      systems at the Company.





Harold
      L.
      Kestenbaum, Director, graduated from the University of Richmond School of Law
      in
      1975, and is the Company’s franchise and general counsel. Mr. Kestenbaum is
      engaged primarily in the independent practice of law, specializing in franchise
      and distribution law, representing franchisors only, both start-up and
      established from his Garden City, New York offices. He is, among other
      professional roles, a founding member of the New York State Bar Association’s
      Franchising, Distribution and Licensing Law Section.





**Compliance
      with Section 16(a) of the Securities Exchange Act**





Section
      16(a) of the Exchange Act requires our executive officers, directors and persons
      who own more than ten percent of a registered class of our equity securities
      (“Reporting Persons”) to file reports of ownership and changes in ownership on
      Forms 3, 4, and 5 with the SEC. These Reporting Persons are required by SEC
      regulation to furnish us with copies of all Forms 3, 4 and 5 they file with
      the
      SEC. Based solely on our review of the copies of the forms we have received,
      we
      believe that all Reporting Persons, other than J. Lloyd Tomer, J. Scott Tomer
      and J. Kim Sorensen, are non-compliant with filing requirements applicable
      to
      them with respect to transactions during fiscal year 2004. The Company is
      currently reviewing the transactions of the Reporting Persons and intends to
      assist them in connection with filing the required reports.





**Code
      of Ethics**





The
      Sarbanes-Oxley Act (“SOX”) was adopted by Congress July 2002 to impose corporate
      governance standards and associated disclosures on publicly reporting companies.
      One of those requirements related to adoption of a Code of Ethics promoting,
      among other objectives, “...honest and ethical conduct, including fair dealing
      and the ethical handling of conflicts of interest...” on executive level
      financial and accounting people for fiscal years ending after the July 15,
      2003.
      The Company adopted the Code of Ethics (filed herewith as Exhibit 14.1) July
      10,
      2003, voluntarily extending such standards to all (not just financial and
      accounting) executive officers (as well as all management personnel) of the
      Company and any subsidiaries.





The
      Board
      of Directors of YTB International, Inc. (with its subsidiaries, the “Company”)
      has adopted this code of ethics (this “Code”) to:





·
            Promote
                honest and ethical conduct, including fair dealing and the ethical
                handling of conflicts of interest;


·
            Promote
                full, fair , accurate, timely and understandable
                disclosure;


·
            Promote
                compliance with applicable laws and governmental rules and
                regulations;


17





·
            Ensure
                the protection of the Company’s legitimate business interests, including
                corporate opportunities; assets and confidential information
                and


·
            Deter
                wrongdoing.





All
      directors, officers and employees of the Company are expected to be familiar
      with the code and to adhere to those principles and procedures set forth in
      the
      Code that apply to them. The Company’s more detailed policies and procedures set
      forth in Policies and Procedures Manual are separate requirements and are not
      part of this Code. Any questions regarding the Code should be addressed with
      the
      Company’s “Code of Ethics Contact Person,” initially Thayer
      Lindauer.





**ITEM
      10.****EXECUTIVE
      COMPENSATION.**





**Summary
      Compensation Table**





The
      following table sets forth the compensation of the named executive officers
      for
      each of the last three years:





Long
                  Term CompensationAnnual
                  Compensation
              
              Awards(a)
              
              (b)
              
              (c)
              
              (d)
              
              (e)
              
              (g)Name
                  and Principal Position
              
              Year
              
              Salary
                  ($)
              
              Bonus
                  ($)
              
              Other
                Annual
                  Compensation ($)
              
              Securities
                  Underlying Options/ SARs (#)Michael
                  Y. Brent,
              
              
              2004
              
              
              211,074
              
              
              60,700
              (3)
              
              17,054
              (7)
              
              -Chief
              
              
              2003
              
              
              206,080
              (1)
              
              19,200
              (4)
              
              39,955
              (8)
              
              -Executive
                  Officer
              
              
              2002
              
              
              149,656
              (2)
              
              -
              
              
              20,000
              (9)
              
              -Derek
                  J. Brent,
              
              
              2004
              
              
              48,574
              
              
              1,205,350
              (5)
              
              -
              
              
              -Secretary
              
              
              2003
              
              
              46,433
              
              
              3,810
              (6)
              
              -
              
              
              -2002
              
              
              37,147
              
              
              5,000
              
              
              -
              
              
              -J.
                  Lloyd Tomer,
              
              
              2004
              
              
              -
              
              
              -
              
              
              -
              
              
              100,000Chairman
                  of
              
              
              2003
              
              
              -
              
              
              -
              
              
              -
              
              
              -the
                  Board of Directors
              
              
              2002
              
              
              -
              
              
              -
              
              
              -
              
              
              -J.
                  Kim Sorensen,
              
              
              2004
              
              
              10,000
              
              
              -
              
              
              -
              
              
              135,000Treasurer
              
              
              2003
              
              
              -
              
              
              -
              
              
              -
              
              
              -2002
              
              
              -
              
              
              -
              
              
              -
              
              
              -J.
                  Scott Tomer,
              
              
              2004
              
              
              10,000
              
              
              -
              
              
              -
              
              
              135,000President
              
              
              2003
              
              
              -
              
              
              -
              
              
              -
              
              
              -2002
              
              
              -
              
              
              -
              
              
              -
              
              
              -




(1)
            Includes
                stock in lieu of compensation of $31,249 for 56,816 shares at the
                then-current price of $.55 per
                share.





(2)
            Includes
                stock in lieu of compensation of $32,873 for 109,576 shares at the
                then-current market price of $.30 per
                share.





(3)
            Stock
                bonuses of $11,700 including 9,000 shares at the then-current market
                price
                of $1.30 per share, and $49,000including
                196,000 shares at the then-current price of $.25 per
                share.






18





(4)
            Stock
                bonuses of $19,200 including 60,000 shares at the then-current market
                price of $.32 per share.





(5)
                Stock
                    bonuses of $1,205,350 including 900,000 shares at the then-current
                    market
                    price of $1.32 per share, 4,500 shares at the then-current market
                    price of
                    $1.30 per share and 46,000 shares at the then-current market
                    price of $.25
                    per share.





(6)
            Stock
                bonus of $3,810 including 11,906 shares at the then-current market
                price
                of $.32 per share.





(7)
            Includes
                $11,580 for vehicle allowance.





(8)
                Includes
                    $23,500 in consulting fees; and $12,545 for vehicle
                    allowance.





(9)
            Includes
                $20,000 in consulting fees.





**Employment
      Agreements**




The
      Company entered into a long-term employment agreement with Michael Y.
      Brent, the president, dated March 1, 2000. Under such agreement (which would
      have expired April 9, 2005 and subjects him to confidentiality, non-raid and
      non-compete provisions), Mr. Michael Y. Brent is paid, directly or indirectly,
      a
      combination of (i) a $200,000 salary and/or consulting fee with annual increases
      of 6% and (ii) options and/or warrants, determined by the Board acting as a
      Compensation Committee, based on the Company’s financial performance. Mr.
      Michael Y. Brent will continue to be subject to his confidentiality covenant
      and, for 3 years, his non-compete covenants. His estate also receives a benefit
      in the amount of one year's salary, upon Mr. Michael Y. Brent's death.




During
      December 2004, the Company entered into a long-term employment agreement with
      each of Mr. J. Scott Tomer, (President), Mr. J. Kim Sorensen, (Treasurer),
      Mr.
      Michael Y. Brent, (Chief Executive Officer) and Mr. Derek Brent, (Secretary).
      All employment agreements, which were effective January 1, 2005, expire December
      31, 2009 and subject each officer to confidentiality provisions, as well as
      non-solicitation and non-compete provisions for an additional two years
      following termination of employment.





Each
      of
      Messrs. J. Kim Sorensen and J. Scott Tomer receive a base annual salary of
      $120,000, increasing annually by 6%. They each receive an override on RTA sales
      and monthly fees generated by “representative position #2” of the
      YourTravelBiz.com sales organization equal to 50% of the monthly commissions
      and
      overrides earned by such representative position #2, paid monthly. Additionally,
      each of Messrs. J. Kim Sorensen and J. Scott Tomer receives a cash bonus based
      on the net pre-tax income of the Company equal to 2% if net pre-tax income
      is
      between $500,000 and $1,500,000, 2.25% if net pre-tax income is between
      $1,500,000 and $3,000,000 and 2.5% if net pre-tax income is at least $3,000,000.
      They each receive a car allowance and health and medical insurance provided
      by
      the Company. The Company has also taken out a term life insurance policy on
      the
      lives of Messrs. J. Kim Sorensen and J. Scott Tomer in an amount equal to three
      times their respective annual base salary, payable to beneficiaries designated
      by each.





Mr.
      Michael Y. Brent receives a base annual salary of $240,000, increasing annually
      in 6% increments. Mr. Michael Y. Brent receives an override on the RTA sales
      and
      monthly fees generated by “representative position #1” of the YourTravelBiz.com
      sales organization equal to 16.69% of the monthly commissions and overrides
      earned by said position #1, paid monthly. Additionally, Mr. Michael Y. Brent
      receives a cash bonus based on the net pre-tax income of the Company equal
      to 2%
      if net pre-tax income is between $500,000 and $1,500,000, 2.25% if net pre-tax
      income is between $1,500,000 and $3,000,000 and 2.5% if net pre-tax income
      is at
      least $3,000,000. Mr. Michael Y. Brent receives a car allowance and health
      and
      medical insurance provided by the Company. The Company has also taken out a
      term
      life insurance policy on the life of Mr. Brent in an amount equal to three
      times
      his annual base salary, payable to beneficiaries designated by him.





Mr.
      Derek
      Brent receives a base annual salary of $120,000, increasing annually in $12,000
      increments. Additionally,
      Mr. Derek J. Brent receives a cash bonus based on the net pre-tax income of
      the
      Company equal to 2% if net pre-tax income is between $500,000 and $1,500,000,
      2.25% if net pre-tax income is between $1,500,000 and $3,000,000 and 2.5% if
      net
      pre-tax income is at least $3,000,000.In addition, Mr. Derek Brent
      receives an automobile allowance and health and medical insurance provided
      by
      the Company.




Effective
      November 20, 2006, an agreement has been reached between Michael Brent, Kim
      Sorensen and Scott Tomer for each of them to share a one-third interest in
      YTB
      Rep position #2. Previously, Mr. Brent had a one-sixth share in YTB Rep Position
      #1. This agreement was reached to document the verbal agreement between the
      three parties whereby each would receive the same compensation. The Board of
      Directors had instructed the parties to come to a resolution of this issue
      and come back with a settlement. Formal approval of the change in employment
      contracts will occur at the next regular Board meeting.


19


**Option/SAR
      Grants in Last Fiscal Year**





The
      following table sets forth certain information with respect to stock options
      granted to the officers named in the Summary Compensation Table during the
      fiscal year ended December 31, 2004.





Individual
                Grants(a)
            
            (b)
            
            (c)
            
            (d)
            
            (e)Name
            
            Number
                of
              Securities
                Underlying
              Options/SARs
              Granted
                (#)
            
            %
                of Total Options/SARs Granted to Employees in Fiscal Year
            
            Exercise
                or Base Price ($/Sh)
            
            Expiration
              DateJ.
                Lloyd Tomer
            
            100,000(1)
            
            21.28%
            
            $1.00
            
            November
                26, 2006J.
                Scott Tomer
            
            35,000(1)
            
            7.45%
            
            $2.00
            
            November
                26, 2006J.
                Scott Tomer
            
            100,000(1)
            
            21.28%
            
            $1.00
            
            November
                26, 2006J.
                Kim Sorenson
            
            35,000(1)
            
            7.45%
            
            $2.00
            
            November
                26, 2006J.
                Kim Sorensen
            
            100,000(1)
            
            21.28%
            
            $1.00
            
            November
                26, 2006





(1)
            Per
                the underlying option agreements, these options are exercisable if
                and
                when certain vested options held by other executives are
                exercised.





**Aggregated
      Option/SAR Exercises and Fiscal Year-End Options/SAR Value
      Table**





The
      following information concerns the exercise of each stock option and/or free
      standing SAR during the last fiscal year by each of the named executive officers
      and the aggregate fiscal year-end value of unexercised options and
      SARs.





(a)
            
            (b)
            
            (c)
            
            (d)
            
            (e)Name
            
            Shares
                Acquired On Exercise of Option/# of Securities Underlying
                SARs
            
            Value
                Realized
            
            Number
                of Unexercised Options/SARs at Fiscal Year-End (#)
              Exercisable/
              Unexercisable
            
            Value
                of
              Unexercised
              In-the-Money
                Options/SARs
              at
                Fiscal Year-End($)
              Exercisable/
              UnexercisableMichael
                Y. Brent
            
            -
            
            -
            
            200,000/0
            
            60,000/0Derek
                J. Brent
            
            -
            
            -
            
            100,000/0
            
            30,000/0J.
                Lloyd Tomer
            
            -
            
            -
            
            100,000/0
            
            30,000/0J.
                Scott Tomer
            
            -
            
            -
            
            135,000/0
            
            30,000/0J.
                Kim Sorenson
            
            -
            
            -
            
            135,000/0
            
            30,000/0





**Indemnification
      Agreements**





The
      Company has entered into separate indemnification agreements with certain of
      the
      Company’s officers and directors and the Company has agreed to provide
      indemnification with regard to specified legal proceedings so long as the
      indemnified officer or director has acted in good faith and in a manner he
      or
      she reasonably believed to be in, or not opposed to, the Company’s best
      interests and, with respect to any criminal proceedings, had no reasonable
      cause
      to believe his or her conduct was unlawful. The Company only provides
      indemnification for expenses, judgments, fines and amounts paid in settlement
      actually incurred by the relevant officer or Director, or on his or her behalf,
      arising out of proceedings brought against the officer or Director by reason
      of
      his or her corporate status.





**ITEM
      11.****SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS.**





The
      following table sets forth information known to the Company with respect to
      the
      beneficial ownership of each class of the Company’s capital stock as of the date
      hereof for (1) each person known by the Company to beneficially own more than
      5%
      of each class of the Company’s voting securities, (2) each executive officer,
      (3) each of the Company’s directors and (4) all of the Company’s executive
      officers and directors as a group. The number of shares beneficially owned
      is
      determined under rules promulgated by the SEC, and the information is not
      necessarily indicative of beneficial ownership for any other purpose. Under
      those rules, beneficial ownership includes any shares as to which the individual
      has sole or shared voting or investment power and also any shares which the
      individual has the right to acquire within 60 days of the date hereof, through
      the exercise or conversion of any stock option, convertible security, warrant
      or
      other right. Including those shares in the tables does not, however, constitute
      an admission that the named shareholder is a direct or indirect beneficial
      owner
      of those shares. The table also presents the number of votes each person is
      entitled to cast on any matter submitted to a vote of the holders of Common
      Stock. Unless otherwise indicated, each person or entity named in the table
      has
      sole voting power and investment power (or shares that power with that person’s
      spouse) with respect to all shares of capital stock listed as owned by that
      person or entity.


20








Common
                Stock
            
            Series
                B Stock(3)Name(1)
            
            Number
            
            Percent(2)
            
            Number
            
            PercentMichael
                Y. Brent
            
            5,312,032(4)
            
            27.70%
            
            -
            
            -Derek
                Brent
            
            1,224,734(5)
            
            6.42%
            
            -
            
            -Harold
                Kestenbaum
            
            20,454
            
            0.11%
            
            -
            
            -J.
                Lloyd Tomer
            
            4,047,559(6)(7)
            
            21.22%
            
            2,174,279
            
            53.13%J.
                Scott Tomer
            
            1,528,125(8)
            
            8.00%
            
            767,321
            
            18.75%J.
                Kim Sorensen
            
            1,528,125(9)
            
            8.00%
            
            767,321
            
            18.75%All
                directors and
              officers
                as a group
            
            13,661,029
            
            69.54%
            
            3,708,921
            
            90.63%




(1)
            The
                address of each of the individuals and entities in this table is
                560
                Sylvan Avenue, Englewood Cliffs, New
                Jersey, 07632. (2)
            As of December 31, 2004, the Company had 18,976,125
              issued and outstanding shares. (3)
            As
                of December 31, 2004, the Company had issued and outstanding Series
                B
                Stock of 4,092,376 shares. The Series B Preferred Stock was converted
                into
                the underlying Common Stock on January 9,
                2005.


(4)
            Includes
                200,000 shares exercisable within 60 days pursuant to a stock option
                agreement


(5)
            Includes
                100,000 shares exercisable within 60 days pursuant to a stock option
                agreement.


(6)
            Includes
                3,947,559 shares owned by Great River Enterprises, LP#1 in which
                J. Lloyd
                Tomer serves as general partner.


(7)
            Includes
                100,000 shares exercisable within 60 days pursuant to a stock option
                agreement.


(8)
            Includes
                135,000 shares exercisable within 60 days pursuant to a stock option
                agreement.


(9)
            Includes
                135,000 shares exercisable within 60 days pursuant to a stock option
                agreement.








**PART
      IV**





**ITEM
      12.****CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS.**





At
      the
      current time, the Company has no provision to issue any additional securities
      to
      management, promoters or their respective affiliates or associates. While the
      Board of Directors recently adopted an employee stock option or pension plan,
      any issuance would be in accordance with the terms thereof and proper approval.





Because
      of certain statutory and case law relating to broad discretion granted
      management of a company, typically directors and officers of a corporation
      are
      indemnified by and have limited monetary liability to its shareholders. Failure
      of management to satisfy its fiduciary responsibility to shareholders could
      subject management to certain claims. The following inherent or potential
      conflicts of interest should be considered by prospective investors before
      subscribing for shares.





While
      the
      Company may enter into transactions with affiliates in the future, the Company
      intends to continue to enter into such transactions only at prices and on terms
      no less favorable to us than transactions with independent third parties. See
      for example, the descriptions in “Summary Executive Compensation” and
“Employment Agreement with Chief Executive Officer.” In that context, the
      Company will require any director or officer who has a pecuniary interest in
      a
      matter being considered to recuse them from any negotiations. In any event,
      any
      debt instruments in the future are expected generally to prohibit us from
      extending loans to Company principals.




During
        the years ended December 31, 2004 and 2003, the Company incurred consulting
        fee
        expenses for services provided by an entity owned by the Company’s chief
        executive officer, a significant shareholder of the Company. These fees totaled
        approximately $20,000 and $23,500 for the year ended December 31, 2004 and
        2003.
        Under a new employment agreement reached in December 2004, such consulting
        fees
        have been eliminated. At year end, December 2004, there are no consulting
        fees
        owed to the Company’s Chief Executive Officer. At December 31, 2004, a
        subsidiary of the Company owed $8,000 to the Chairman of the Company’s Board of
        Directors for unpaid rent for office occupancy.
 
 A
        printing company owned by certain members of the Board of Directors is sometimes
        utilized to produce printed brochures, etc., for the Company. In 2004, the
        total
        expense reflected in the accompanying consolidated financial statements is
        $4,280, of which $3,542 is accrued as of December 31,
        2004.


21


**ITEM
      13.****EXHIBITS.**




a.
              Financial
                  Statements




The
      financial statements listed in the accompanying index to financial statements
      and schedules are filed as part of this report.




**b.**  **Exhibits**




2.1
            
            Amended
                and Restated Merger and Stock Exchange Agreement dated November 19,
                2004
                by and between REZconnect Technologies, Inc. and YourTravelBiz.com,
                Inc.
                (incorporated by reference to YTB International, Inc.’s Current Report on
                Form 8-K as amended, Exhibit 2.1, filed June 20, 2005).3.1
            
            Articles
                of Incorporation of the Company (incorporated by reference to YTB
                International, Inc.’s Current Report on Form 8-K, as amended, Exhibit 3.1,
                filed June 20, 2005).3.2
            
            Bylaws
                of the Company (incorporated by reference to YTB International, Inc.’s
                Current Report on Form 8-K, as amended, Exhibit 3.2, filed June 20,
                2005).10.1
            
            Genesis
                Web Hosting Agreement dated September 6, 2002 by and between Genesis
                Consulting and yourTravelBiz.com, Inc.10.2
            
            YTBL
                Franchise Agreement10.3
            
            YTBL
                Area Franchise Agreement (otherwise known as the Master Franchise
                Agreement)10.4
            
            Software
                License Agreement dated September 2, 1999 by and among Taurus TeleSys
                Inc., Global Travel Network LLC and Etravnet.com, Inc.10.5
            
            Stockholders’
                Agreement dated December 8, 2004 by and among Great River Enterprises,
                LP#1, J. Scott Tomer, J. Kim Sorensen, Michael Y. Brent, Derek J.
                Brent
                and REZconnect Technologies Inc. (incorporated by reference to YTB
                International, Inc.’s Current Report on Form 8-K as amended, Exhibit 4.1,
                filed June 20, 2005).10.6
            
            Employment
                Agreement dated March 1, 2000 by and between Michael Y. Brent and
                Etravnet.com, Inc. (incorporated by reference to Etravnet.com, Inc.’s
                Annual Report for fiscal year 1999 on Form 10-KSB, Exhibit 10.1,
                filed
                March 30, 2000).10.7
            
            Lease
                Agreement dated July 1, 1996 by and between Wal-Mart Stores, Inc.
                and
                Travel Network (incorporated by reference to Etravnet.com, Inc.’s Annual
                Report for fiscal year 1999 on Form 10-KSB, Exhibit 10.2, filed March
                30,
                2000).10.8*
            
            Long
                Term Web Servicing Agreement, dated February 11, 2003 by and between
                REZconnect Technologies, Inc. and YourTravelBiz, Inc./YTB Travel
                and
                Cruises, Ltd.14.1
            
            YTB
                International, Inc. Code of Business Ethics Summary31.1
            
            Chief
                Executive Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a)
                of
                the Securities Exchange Act of 1934, as adopted pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002.31.2
            
            Chief
                Financial Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a)
                of
                the Securities Exchange Act of 1934, as adopted pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002.32.1**
            
            Chief
                Executive Officer and Chief Financial Officer Certification pursuant
                to 18
                U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.*
            
            This
                agreement is not attached as it is no longer in effect.**
            
            This
                certification is attached as Exhibit 32.1 accompanying this Annual
                Report
                on Form 10-KSB pursuant to Section 906 of the Sarbanes-Oxley Act
                of 2002
                and shall not be deemed “filed” by YTB International, Inc. for the
                purposes of Section 18 of the Exchange Act.A
                signed original of this written statement required by Section 906
                has been
                provided to YTB International, Inc. and will be retained by YTB
                International, Inc. and furnished to the Securities and Exchange
                Commission or its staff upon
                request.






**ITEM
      14.****PRINCIPAL
      ACCOUNTANT FEES AND SERVICES.**




The
      aggregate fees billed to our Company by Dischino & Associates, P.C. for the
      fiscal years ended December 31, 2004 and Israeloff, Trattner & Co. 2003 are
      as follows:




2004
            
            2003Audit
                and Tax Fees
            
            $
            27,583
            
            $
            53,500All
                Other Fees
            
            $
            -
            
            $
            -


The
        aggregate fees billed to our Company by UHY LLP through October 31, 2006
        for the
        fiscal years ended December 31, 2004 and 2003 are as follows:
  2004
              
              2003Audit
              
              $
              245,630
              
              $
              245,630All
                  Other Fees
              
              
              3,650
              
              
              3,650Total
              
              $
              249,280
              
              $
              249,280




22


SIGNATURES





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, YTB International, Inc. (successor to REZconnect Technologies, Inc.)
      has
      duly caused this Report to be signed on its behalf by the undersigned thereunto
      duly authorized on the 22 nd day of
      November, 2006.





YTB
                International, Inc.
              (successor to REZconnect(R) Technologies,
                Inc.)/s/ J.
              Scott
              TomerJ.
              Scott Tomer, Director andChief
              Executive Officer




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this Report has
      been
      signed below by the following persons on behalf of YTB International, Inc.
      (successor to REZconnect Technologies, Inc.) in the capacities indicated on
      the
      22 nd day of
      November 2006.





/s/
                J. Scott Tomer
            
            Director
                and Chief Executive Officer
            
            November
                22, 2006J.
                Scott Tomer/s/
                Michael Y. Brent
            
            Director
                and President
            
            November
                22, 2006Michael
                Y. Brent/s/
                J. Lloyd Tomer
            
            Chairman
                of the Board of Directors
            
            November
                22, 2006J.
                Lloyd Tomer/s/
                J. Kim Sorensen
            
            Director
                and Vice President
            
            November
                22, 2006J.
                Kim Sorensen/s/
                John D. Clagg
            
            Chief
                Financial Officer
            
            November
                22, 2006John
                D. Clagg/s/
                Harold Kestenbaum
            
            Director
            
            November
                22, 2006Harold
                Kestenbaum


/s/ Derek
              J. Brent
            
            Director
                and Secretary
            
            November
                22, 2006Derek
                J. Brent









23




TABLE
      OF
      CONTENTS


YEARS
      ENDED DECEMBER 31, 2004 AND 2003




Page(s)Report
                  of UHY LLP, Independent Registered Public Accounting Firm.
              
              F1Financial
                  StatementsConsolidated
                  Balance Sheets as of December 31, 2004 and 2003
              
              F2Consolidated
                  Statements of Operations for the Years Ended December 31, 2004
                  and
                  2003
              
              F3Consolidated
                  Statements of Changes in Stockholders’ Equity for the Years
                  EndedDecember
                  31, 2004 and 2003
              
              F4Consolidated
                  Statements of Cash Flows for the Years Ended December 31, 2004
                  and
                  2003
              
              F5Notes
                  to Consolidated Financial Statements
              
              F6
                  -F35










**Report
      of Independent Registered Public Accounting Firm**





The
        Board
        of Directors and Stockholders of


REZconnect
      Technologies, Inc. (now known as YTB
      International, Inc.) :




We
      have
      audited the accompanying consolidated balance sheets of REZconnect Technologies,
      Inc., now known as YTB International, Inc. (the "Company") as
      of
      December 31, 2004 and 2003, and the related consolidated statements of
      operations, changes in stockholders’ equity, and  cash flows for each of
      the years in the two-year period ended December 31, 2004. These financial
      statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards req uire
      that
      we plan and perform the audit to obtain reasonable assurance about whether
      the
      financial statements are free of material misstatement. The
      Company is not required to have, nor were we engaged to perform, an audit
      of its internal control over financial reporting. Our audit included
      consideration of internal control over financial reporting as a basis for
      designing audit procedures that are appropriate in the circumstances, but not
      for the purpose of expressing an opinion on the effectiveness of the Company's
      internal control over financial reporting. Accordingly, we express no such
      opinion.An audit also includes examining, on a test basis, evidence
      supporting the amounts and disclosures in the financial statements, assessing
      the accounting principles used and significant estimates made by management,
      as
      well as evaluating the overall financial statement presentation. We believe
      that
      our audits provide a reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the consolidated financial position of the Company as of
      December 31, 2004 and 2003, and the consolidated results of its operations
      and
      its cash flows for each of the years in the two-year period ended December
      31,
      2004 in conformity with accounting principles generally accepted in the United
      States of America.




/s/
              UHY
              LLPSt. Louis,
              MissouriNovember 22, 2006







F1


REZCONNECT
      TECHNOLOGIES, INC.


Consolidated
      Balance Sheets


December
      31, 2004 and 2003





(RESTATED)2004
            
            (RESTATED)2003ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            25,719
            
            $
            48,120Available-for-sale
                securities
            
            
            528,311
            
            
            732,135Accounts
                receivable (less allowance for doubtful accounts of$169,644
                in 2004 and
              $173,909
                in 2003)
            
            
            20,411
            
            
            84,500Prepaid
                marketing commissions
            
            
            1,622,645
            
            
            -Other
                prepaid expenses and current assets
            
            
            -
            
            
            4,400Total
                current assets
            
            
            2,197,086
            
            
            869,155Property
                and equipment, net
            
            
            353,047
            
            
            519,075Intangible
                assets, net
            
            
            3,262,800
            
            
            -Goodwill
            
            
            2,224,322
            
            
            -Other
                assets
            
            
            96,705
            
            
            228,672TOTAL
                ASSETS
            
            $
            8,133,960
            
            $
            1,616,902LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                liabilities:Notes
                payable
            
            $
            102,342
            
            $
            -Current
                maturities of long-term debt
            
            
            18,768
            
            
            18,470Accounts
                payable and accrued expenses
            
            
            941,101
            
            
            307,839Current
                portion of deferred revenue
            
            
            1,820,808
            
            
            -Other
                current liabilities
            
            
            100,000
            
            
            -Total
                current liabilities
            
            
            2,983,019
            
            
            326,309Other
                long-term liabilities:Long-term
                debt, less current maturities
            
            
            286,789
            
            
            302,700Deferred
                revenue, less current portion
            
            
            86,245
            
            
            6,538Other
                liabilities
            
            
            20,920
            
            
            26,266Total
                other long-term liabilities
            
            
            393,954
            
            
            335,504TOTAL
                LIABILITIES
            
            
            3,376,973
            
            
            661,813STOCKHOLDERS’
                EQUITYPreferred
                stock, Series B convertible, par value $.001;  liquidation preference
                $1.45 per share;
              5,000,000shares
                authorized,4,092,376
                issued and outstanding
            
            
            4,092
            
            
            -Common
                stock, par value $.001; 20,000,000 shares authorized18,976,125
                shares in 2004 and 10,606,314 shares in  2003issued
                and outstanding
            
            
            18,976
            
            
            10,606Additional
                paid-in capital
            
            
            12,616,988
            
            
            6,634,203Accumulated
                deficit
            
            
            (7,883,069
            )
            
            (5,689,720
            )TOTAL
                STOCKHOLDERS’ EQUITY
            
            
            4,756,987
            
            
            955,089TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            $
            8,133,960
            
            $
            1,616,902




*See
      accompanying notes*  *to
      consolidated financial statements.*




F2


REZCONNECT
      TECHNOLOGIES, INC.


Consolidated
      Statements of Operations


Years
      Ended December 31, 2004 and 2003





(RESTATED)2004
            
            (RESTATED)2003NET
                REVENUESTravel
                commissions and services
            
            $
            1,631,656
            
            $
            1,053,025Online
                travel store sales and monthly fees
            
            
            922,407
            
            
            284,376Franchise
                service fees and other fees
            
            
            632,393
            
            
            807,952Other
            
            
            6,236
            
            
            11,208Total
                net revenues
            
            
            3,192,692
            
            
            2,156,561OPERATING
                EXPENSESTravel
                commissions
            
            
            1,261,751
            
            
            852,888Marketing
                commissions
            
            
            278,555
            
            
            -Franchise
                services and products
            
            
            194,360
            
            
            248,160Depreciation
                and amortization
            
            
            474,986
            
            
            426,259General
                and administrative
            
            
            3,167,361
            
            
            1,418,220Total
                operating expenses
            
            
            5,377,013
            
            
            2,945,527LOSS
                FROM OPERATIONS
            
            
            (2,184,321
            )
            
            (788,966
            )OTHER
                INCOME (EXPENSES)Interest
                and dividend income
            
            
            25,707
            
            
            18,225Interest
                expense
            
            
            (34,735
            )
            
            (28,865
            )Total
                other expenses
            
            
            (9,028
            )
            
            (10,640
            )NET
                LOSS
            
            $
            (2,193,349
            )
            $
            (799,606
            )NET
                LOSS PER SHARE:Weighted-average
                shares outstanding
            
            
            12,353,203
            
            
            10,351,179Net
                loss per share - basic and diluted
            
            $
            (0.18
            )
            $
            (0.08
            )




*See
      accompanying notes to consolidated financial statements.*




F3


REZCONNECT
      TECHNOLOGIES, INC,


Consolidated
      Statements of Changes in Stockholders’ Equity


Years
      Ended December 31, 2004 (RESTATED) and 2003 (RESTATED)





Series
            
            
            
            
            
            Additional
            
            
            
            TotalConvertible
                Preferred
            
            Common
                Stock
            
            Paid-In
            
            Accumulated
            
            Stockholders’Shares
            
            Amount
            
            Shares
            
            Amount
            
            Capital
            
            (Deficit)
            
            EquityDecember
                31, 2002,as
                previously reported
            
            
            -
            
            $
            -
            
            
            9,362,983
            
            $
            9,363
            
            $
            6,198,963
            
            $
            (4,655,773
            )
            $
            1,552,553Stock
                option compensation restatement
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            100,000
            
            
            (100,000
            )
            
            -Accounts
                payable restatement
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (134,341
            )
            
            (134,341
            )Balance
                at December 31, 2003,as
                restated
            
            
            -
            
            
            -
            
            
            9,362,983
            
            
            9,363
            
            
            6,298,963
            
            
            (4,890,114
            )
            
            1,418,212Shares
                returned issued in 2002
            
            
            -
            
            
            -
            
            
            (220,576
            )
            
            (221
            )
            
            (48,307
            )
            
            -
            
            
            (48,528
            )Shares
                issued for services
            
            
            -
            
            
            -
            
            
            264,000
            
            
            264
            
            
            57,816
            
            
            -
            
            
            58,080Shares
                issued to employees
            
            
            -
            
            
            -
            
            
            199,907
            
            
            200
            
            
            56,731
            
            
            -
            
            
            56,931Shares
                issued to YTB, Inc.
            
            
            -
            
            
            -
            
            
            1,000,000
            
            
            1,000
            
            
            219,000
            
            
            -
            
            
            220,000Stock
                option compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            50,000
            
            
            
            
            
            50,000Net
                loss, as restated
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (799,606
            )
            
            (799,606
            )Balance
                at December 31, 2004,as
                restated
            
            
            -
            
            
            -
            
            
            10,606,314
            
            
            10,606
            
            
            6,634,203
            
            
            (5,689,720
            )
            
            955,089Shares
                issued for services
            
            
            -
            
            
            -
            
            
            196,061
            
            
            196
            
            
            46,466
            
            
            -
            
            
            46,662Shares
                issued for employeebonuses
            
            
            -
            
            
            -
            
            
            1,243,750
            
            
            1,244
            
            
            1,266,456
            
            
            -
            
            
            1,267,700Shares
                surrendered
            
            
            -
            
            
            -
            
            
            (1,000,000
            )
            
            (1,000
            )
            
            (199,750
            )
            
            -
            
            
            (200,750
            )Stock
                option compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            111,061
            
            
            -
            
            
            111,061Common
                shares issued foracquisition
            
            
            -
            
            
            -
            
            
            7,930,000
            
            
            7,930
            
            
            3,084,770
            
            
            -
            
            
            3,092,700Convertible
                preferred sharesissued
                for
              acquisition
            
            
            4,092,376
            
            
            4,092
            
            
            -
            
            
            -
            
            
            1,673,782
            
            
            -
            
            
            1,677,874Net
                loss, as restated
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,193,349
            )
            
            (2,193,349
            )Balance
                at December 31,2004,as
                restated
            
            
            4,092,376
            
            $
            4,092
            
            
            18,976,125
            
            $
            18,976
            
            $
            12,616,988
            
            $
            (7,883,069
            )
            $
            4,756,987




*See
      accompanying notes to consolidated financial statements.*




F4


REZCONNECT
      TECHNOLOGIES, INC.


Consolidated
      Statements of Cash Flows


Years
      Ended December 31, 2004 and 2003





(RESTATED)2004
            
            (RESTATED)2003CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                Loss
            
            $
            (2,193,349
            )
            $
            (799,606
            )Adjustments
                to reconcile net loss to net cash provided by(used
                in) operating activities:Depreciation
                and amortization
            
            
            474,986
            
            
            426,259Deferred
                revenue and related costs
            
            
            190,051
            
            
            (510,384
            )Shares
                issued for services
            
            
            46,662
            
            
            53,680Shares
                issued for employee compensation
            
            
            1,267,700
            
            
            56,931Shares
                issued for services subsequently surrendered
            
            
            -
            
            
            (48,527
            )Employee
                stock option expense
            
            
            111,061
            
            
            50,000Changes
                in operating assets and liabilities:Accounts
                receivable, net
            
            
            64,089
            
            
            186,306Other
                prepaid expenses and current assets
            
            
            4,400
            
            
            -Other
                assets
            
            
            (77,034
            )
            
            518,563Accounts
                payable and accrued expenses
            
            
            (182,162
            )
            
            91,886Other
                liabilities
            
            
            (5,346
            )
            
            (16,361
            )NET
                CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
            
            
            (298,942
            )
            
            8,747CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchases
                of property and equipment
            
            
            (11,671
            )
            
            -Proceeds
                from sale of available-for-sale securities
            
            
            1,137,875
            
            
            851,059Purchase
                of available-for-sale securities
            
            
            (934,050
            )
            
            (871,674
            )NET
                CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
            
            
            192,154
            
            
            (20,615
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Increase
                in current liabilities
            
            
            100,000
            
            
            -Principal
                payments on debt
            
            
            (15,613
            )
            
            (3,330
            )NET
                CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
            
            
            84,387
            
            
            (3,330
            )NET
                DECREASE IN CASH AND CASH EQUIVALENTS
            
            
            (22,401
            )
            
            (15,198
            )CASH
                AND CASH EQUIVALENTS, BEGINNING OF YEAR
            
            
            48,120
            
            
            63,318CASH
                AND CASH EQUIVALENTS, END OF YEAR
            
            $
            25,719
            
            $
            48,120SUPPLEMENTAL
                CASH FLOW INFORMATION:Interest
                paid
            
            $
            28,815
            
            $
            12,867SUPPLEMENTAL
                NON-CASH INVESTING AND FINANCING ACTIVITIES:Escrowed
                shares returned
            
            
            -
            
            $
            4,400Common
                shares issued for acquisition
            
            $
            3,092,700
            
            $
            -Preferred
                shares issue for acquisition
            
            $
            1,677,874
            
            $
            -Accrued
                transaction cost included in accounts payable
            
            
            77,354
            
            
            -




*See
      accompanying notes to consolidated financial statements*




F5


REZCONNECT
      TECHNOLOGIES, INC.


Notes
      to
      Consolidated Financial Statements





NOTE
      1
      - ORGANIZATION AND NATURE OF OPERATIONS




REZconnect
      Technologies, Inc. (the “Company”) was incorporated under the laws of the State
      of New York on December 4, 1981 under the original name of Playorena, Inc.
      The
      Company is a franchisor of traditional “brick and mortar” travel agencies, as
      well as internet-based travel-related services and technology offering
      proprietary reservation systems for the travel and entertainment industry.
      The
      Company provides internet-based travel-related services and technology, which
      offers proprietary reservation systems for the travel and entertainment
      industry, and is also a full-service provider of discount travel products and
      services to the leisure and small business traveler. The Company operates under
      various trade names, including “Your Travel Biz,” “YTBnet.com,” “Travel
      Network,” “Global Travel Network” and “Travel Network Vacation Central,” as well
      as internet web sites “Bookmytravel.com,” “REZconnect.com” and “RezCity.com.”
The Company provides services to customers located primarily in the United
      States, and maintains its corporate headquarters in the State of Illinois.
      One
      of its subsidiaries maintains administrative offices in New Jersey.




On
      December 8, 2004, the Company acquired 100% of the outstanding common shares
      from the stockholders of YourTravelBiz.com, Inc. (“YTB, Inc.”), following
      requisite approval by the Boards of Directors and stockholders, in a business
      combination structured as a statutory merger under laws of the State of New
      York
      and the reorganization provisions of the Internal Revenue Code. This
      acquisition, recorded at a total value of $4,847,928, was effected through
      an
      exchange of equity interests, with the Company exchanging 7,430,000 shares
      of
      its common stock and 4,092,376 shares of its Series B convertible preferred
      stock for all of the outstanding common stock of YTB, Inc., (see Note 3). Each
      share of such Series B convertible preferred stock was converted into one share
      of common stock on January 9, 2005 following the re-incorporation of the Company
      under the law of the State of Delaware and the corresponding increase in its
      number of authorized shares subsequent to December 31, 2004, as described in
      Note 13.





All
      of
      the Company’s franchised operations are independently owned and operated. All
      sales of travel products by the Company are made through its independent
      agencies and franchisees, or through its interactive web sites. Operational
      expenses consist of franchise system sales and support personnel, executive
      management and administrative personnel.





NOTE
      2
      - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Principles
      of consolidation





The
      consolidated financial statements include the accounts of REZconnect
      Technologies, Inc. and YourTravelBiz.com, Inc. All intercompany accounts and
      transactions are eliminated in consolidation.





Basis
      of presentation





The
      financial statements include the activity of YourTravelBiz.com, Inc. from the
      date of acquisition, December 8, 2004, to December 31, 2004 for the period
      ended
      December 31, 2004 (see Notes 1 and 3).





Use
      of
      estimates





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Significant estimates that are particularly
      sensitive to change in the near term include, but are not limited to the
      recoverability of capitalized software development costs, allowance for doubtful
      accounts and ultimate sales commissions/bonuses. Actual results could differ
      from those estimates.





Cash
      and cash equivalents





The
      Company considers all highly liquid investments with an original maturity of
      three months or less to be cash equivalents.




F6


REZCONNECT
      TECHNOLOGIES, INC.


Notes
      to
      Consolidated Financial Statements





Available-for-sale
      securities





The
      Company presents investments in marketable securities that are available for
      sale at fair value as determined when material by quoted market prices, with
      changes in realized/unrealized gains and losses recorded directly to other
      comprehensive income when material.   As of December 31, 2004, the
      cost of marketable securities approximates fair value.





Accounts
      and notes receivable





The
      Company reflects both accounts and notes receivable at their outstanding
      principal balances as of the balance sheet date, as adjusted by any charge-offs
      or allowances established as a reserve for potentially uncollectible accounts. The
      allowance for doubtful accounts reflects management’s best estimate of probable
      losses inherent in the account receivable balance. Management determines the
      allowance based on the length of time receivables are past due, known troubled
      accounts, historical experience, and other currently available evidence.
      Activity in the allowance for doubtful accounts is as follows:





(RESTATED)
              2004
            
            (RESTATED)
              2003Beginning
                balance
            
            $
            173,909
            
            $
            166,287Provision
                for doubtful accounts
            
            
            40,882
            
            
            172,801Accounts
                written off
            
            
            (45,147
            )
            
            (165,179
            )Ending
                balance
            
            $
            169,644
            
            $
            173,909





Concentration
      of credit risk





The
      Company is subject to credit risk through its cash, trade receivables and
      available-for-sale securities. The Company maintains it cash deposits in
      accounts insured up to $100,000 by the Federal Deposit Insurance Corporation.
      There were no balances in excess of the Federal Deposit Insurance at December
      31, 2004. The Company has deposits in a limited number of financial institutions
      with federally insured limits. Cash (including cash equivalents) at these
      institutions is normally in excess of the insured limits. However, the Company
      believes that the institutions are financially sound and there is only nominal
      risk of loss. There is no collateral currently required for cash, trade
      receivables, short term investments and notes receivables.





Fair
      value of financial instruments





The
      Company considers the carrying amounts of its accounts receivable, accounts
      payable and accrued expenses to approximate fair value because of the short
      maturity of these financial instruments. The Company considers amounts
      outstanding under debt agreements to approximate their fair value, based on
      the
      incremental borrowing rates currently available to the Company for financing
      with similar terms and maturities.





Property
      and equipment





Property
      and equipment are recorded at cost. Depreciation and amortization of property
      and equipment generally is computed using the straight-line method based on
      the
      estimated useful lives of the assets. The estimated useful lives of furniture
      and fixtures range from two to five years, equipment, including computer
      hardware and software, has an estimated useful life of three to five years
      and
      vehicles have a life of five years.





Expenditures
      for improvements are capitalized, while normal repair and maintenance costs
      are
      charged to expense when incurred. When property and equipment are disposed,
      the
      related cost and accumulated depreciation are removed from the respective
      accounts and any gain or loss is credited or charged to income.





In
      accordance with Accounting Standards Executive Committee Statement of Position
      (“SOP”) 98-1, “Accounting for the Costs of Computer Software Developed or
      Obtained for Internal Use”, property and equipment includes amounts related to
      the capitalization of certain costs incurred in connection with developing
      or
      obtaining software for internal use.




F7


REZCONNECT
      TECHNOLOGIES, INC.


Notes
      to
      Consolidated Financial Statements





Long-lived
      Asset Recoverability





In
      accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
      Long-lived Assets”, long-lived assets, primarily property and equipment, are
      tested for recoverability whenever events or changes in circumstances indicate
      that their carrying amount may not be recoverable.





The
      Company believes that the carrying amounts of its long-lived assets are fully
      recoverable. Accordingly, no impairment loss has been reflected in the Company’s
      reported results of operations for years ended December 31, 2004 or
      2003.





Intangible
      assets, net





Intangible
      assets are amortized using the straight-line method over their estimated period
      of benefit, ranging from one to ten years. The Company periodically evaluates
      the recoverability of intangible assets and takes into account events or
      circumstances that warrant revised estimates of useful lives or that indicate
      than an impairment exists. No impairment of intangible assets was identified
      during any of the periods presented.





Goodwill




Goodwill,
      which is the excess of cost over the fair value of net assets (including
      identifiable intangibles) acquired in a business acquisition, is not amortized
      but rather tested at least annually for impairment or whenever events or changes
      in circumstances indicate that the carrying amount of the asset might not be
      fully recoverable, in accordance with the provisions of SFAS No. 142, “Goodwill
      and Other Intangible Assets”. SFAS 142 also requires the Company to compare the
      fair value of the acquired business to its carrying amount on an annual basis
      to
      determine if there is potential goodwill impairment. If the fair value of the
      acquired business is less than its carrying value, an impairment loss is
      recorded to the extent that the fair value of the goodwill is less than its
      carrying value. Fair values for acquired businesses are determined based on
      discounted cash flows, market multiples or appraised values.





Revenue
      Recognition





*Travel
      commissions and services*





Commissions
      and incentives earned from travel sales are recognized as revenue when the
      related travel has been completed by the customer. Commissions earned where
      the
      Company acts in the capacity of a wholesaler are recorded at their gross amount.
      The cost of such revenue is recorded separately as an operating
      expense.





*Online
      travel store sales and monthly fees*





The
      Company generates revenue from the selling of on-line travel agencies, and
      from
      providing training and ongoing maintenance services to the new business owners
      of such on-line travel agencies, i.e. referring travel agents (“RTA(s)”). The
      recognition of all up-front fees received from new RTA sales is deferred and
      recognized as income over a twelve-month period, which is the weighted average
      RTA life. Monthly maintenance fees are recognized in the month the services
      are
      provided.





*Franchise
      service fees and other fees*





The
      Company is a franchisor of traditional “brick and mortar” travel agencies. The
      initial franchise fee related to the sale of these travel agencies is due upon
      execution of a franchise agreement with the franchisee. The initial franchise
      fee is deferred and subsequently recognized as revenue when all material
      conditions prior to the opening of a franchised business have been satisfied
      and
      all substantial doubts of collectibility have been eliminated generally upon
      receipt of payment. Fees paid are non-refundable once a site location has been
      selected.





*Other
      revenue*





Sales
      revenues from sales aids and miscellaneous promotional and marketing materials
      are recognized when the related merchandise is shipped to the
      customer.




F8


REZCONNECT
      TECHNOLOGIES, INC.


Notes
      to
      Consolidated Financial Statements





Expense
      recognition of commission costs





The
      Company incurs commission costs that are directly related to the origination
      of
      new RTA sales; sales which result in the deferral of revenue. Such incremental
      direct commission costs are capitalized in accordance with Financial Accounting
      Standards Board (“FASB”) Technical Bulletin No. 90-1 (FTB 90-1). In addition,
      the Company has elected to account for such commission costs in accordance
      with
      SAB 104 and FTB 90-1, by deferring and charging such costs to expense in
      proportion to the related revenue recognized, over the same deferral period
      of
      twelve months.





Marketing
      compensation plan





The
      Company offers a compensation plan to its sales representatives under an
      arrangement that pays the representatives direct sales commissions, override
      compensation (if qualified) and other bonus incentives based on amounts
      attributable to each representative’s sales or enrolled referrals. Direct sales
      commissions are paid on a weekly basis, based upon the amount of the previous
      week’s sales. Residual commissions are paid on a monthly basis for active
      representatives, following the month earned. Bonuses are earned by maintaining
      a
      minimum number of personal enrollments. Commission costs are capitalized and
      recognized as expense in proportion to the related revenue recognized, over
      a
      period of twelve months.





Advertising
      costs





Pursuant
      to the provisions of Statement of Position (“SOP”) No. 93-7 issued by the
      American Institute of Certified Public Accountants, the Company expenses
      advertising costs as incurred. Advertising expense was $37,967 in 2004 and
      $3,596 in 2003.





Income
      taxes





The
      Company recognizes deferred income tax assets and liabilities for future tax
      consequences resulting from differences between the book and tax bases of
      existing assets and liabilities. A valuation allowance is provided for that
      portion of deferred income tax assets which may not be realized.





Stock-based
      compensation





The
      Company accounts for stock-based employee compensation arrangements in
      accordance with provisions of Accounting Principles Board Opinion (“APB”) No.
      25, “Accounting for Stock Issued to Employees,” Financial Accounting Standards
      Board Interpretation No. 44 (“FIN 44”), “Accounting for Certain Transactions
      Involving Stock Based Compensation—an Interpretation of APB No. 25,” and related
      interpretations and comply with the disclosure provisions of SFAS No. 123,
      “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148,
“Accounting for Stock-Based Compensation—Transition and Disclosure”.





Under
      APB
      No. 25 and FIN 44, compensation expense is based on the difference, if any,
      on
      the date of the grant, between the fair value of the Company’s stock and the
      exercise price of the stock option being granted. Certain
      options, which have been re-priced, are subject to the “variable accounting”
requirements of APB No. 25 and FIN 44 that require the Company record
      compensation expense for changes in the fair value of the Company’s common stock
      when it exceeds the re-priced amount.




FAS
        123
        encourages, but does not require, companies to record compensation cost for
        stock-based employee compensation plans at fair value. The Company has chosen
        to
        continue to account for stock-based compensation using the intrinsic value
        method prescribed in APB No. 25, and related interpretations where, generally,
        when the price of stock options equals the market price of the underlying
        stock
        on the date of grant, no compensation expense is recorded. Pro forma information
        using the fair value method to record stock-based compensation cost is as
        follows:




F9




REZCONNECT
      TECHNOLOGIES, INC.


Notes
      to
      Consolidated Financial Statements





(RESTATED)2004
            
            (RESTATED)2003Net
                loss - as reported
            
            $
            (2,193,349
            )
            $
            (799,606
            )Add:
                Stock-based compensation expenseincluded
                in reported net loss
            
            
            111,061
            
            
            50,000Less:
                Additional stock-based compensationexpense
                determined under fair value based
              method
                for all awards
            
            
            (8,994
            )
            
            (10,977
            )Net
                loss - proforma
            
            $
            (2,091,282
            )
            $
            (760,583
            )Net
                loss per common share - basic and dilutedAs
                reported
            
            $
            (0.18
            )
            $
            (0.08
            )Pro
                forma
            
            $
            (0.17
            )
            $
            (0.07
            )





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 2004 and 2003: risk-free interest rates of 2.9% and 3.5%,
      respectively: expected lives of 2 years; dividend yield of 0% and expected
      volatility of 75%.





Earnings
      (loss) per share





Basic
      earnings (loss) per share are based on the weighted-average number of common
      shares outstanding. Diluted earnings (loss) per share assumes that outstanding
      common shares are increased by common shares issuable upon the exercise of
      stock
      options and warrants, and by the conversion of preferred stock using the
      treasury stock method, where such exercise or conversion would be dilutive.
      For
      the years ended December 31, 2004 and 2003, the effects any assumed exercise
      of
      stock options and warrants on the 2004 and 2003 loss per share would be
      anti-dilutive and, therefore, are not included in the calculation of the
      Company’s basic loss per share for the years ended December 31, 2004 and
      2003.





However,
      the 4,092,376 shares of the Company’s Series B convertible preferred stock that
      were issued on December 8, 2004 (and subsequently converted into common shares
      on January 9, 2005) were considered to be common stock equivalents on the date
      of original issuance. Accordingly, all 4,092,376 shares of the Company’s Series
      B convertible preferred stock have been included in the calculation of the
      Company’s loss per common share for the year ended December 31,
      2004.





New
      accounting pronouncements





SFAS
      No.
      123R, “Share-Based Payment” requires that a public entity measure the cost of
      equity based service awards based on the grant-date fair value of the award.
      That cost will be recognized over the period during which an employee is
      required to provide service in exchange for the award or the vesting period.
      No
      compensation cost is recognized for equity instruments for which employees
      do
      not render the requisite service. A public entity will initially measure the
      cost of liability based service awards based on current fair value. The fair
      value of those awards will be re-measured subsequently at each reporting date
      through the settlement date. Changes in fair value during the requisite period
      will be recognized as compensation cost over the period. The Company is required
      to adopt SFAS No. 123R on January 1, 2006. Although there will be no impact
      on
      the Company’s cash flows, the adoption of SFAS No. 123R will have significant
      impact on its operating results.





The
      Company currently plans to adopt SFAS No. 123R using the modified prospective
      method. At December 31, 2004, the unvested option expense is approximately
      $260,000 and is expected to be expensed over the next 2.18 years. The Company
      is
      currently assessing the impact of the adoption of SFAS No. 123R on its
      compensation strategies.




F10


REZCONNECT
      TECHNOLOGIES, INC.


Notes
      to
      Consolidated Financial Statements





The
      Company does not believe that there are any other new accounting pronouncements
      that the Company is required to adopt that are likely to have at least some
      effect on the Company’s future financial statements.





NOTE
      3
      - BUSINESS COMBINATION





On
      December 8, 2004, the Company merged with YTB, Inc. and thereby YTB, Inc. became
      a wholly owned subsidiary of the Company. Pursuant to the terms of the merger
      agreement the holders of YTB, Inc. common stock received in aggregate 7,430,000
      shares of common and 4,092,376 shares of Series B convertible preferred stock
      in
      exchange for all of their holdings in YTB, Inc. In addition, in connection
      with
      the transaction 500,000 shares of common stock were issued pursuant to a
      finder’s agreement and transaction costs of $77,354 were incurred. The merger
      was accounted for as a purchase business combination with the Company, deemed
      the acquirer. Prior to the merger, YTB, Inc. was a significant customer of
      the
      Company. Management’s primary reason for the acquisition was to benefit from the
      increased synergies of the combined companies in exploiting the growth potential
      of YTB, Inc.’s referral-marketing business.





The
      value
      of the shares of the Company issued in connection with the purchase was
      determined by an appraisal conducted by an independent valuation company. The
      assumed assets and liabilities of YTB, Inc. were recorded at fair value and
      were
      determined by independent appraisal. The value of the assets and liabilities
      recorded is as follows:





Assets
            
            (RESTATED)
              BalancePrepaid
                marketing commissions
            
            $
            1,666,419Property
                and equipment, net
            
            
            241,837Intangible
                assets
            
            
            3,310,000Goodwill
            
            
            2,224,3227,442,578Liabilities
                and EquityAccounts
                payable and accrued expenses
            
            
            (738,070
            )Notes
                payable
            
            
            (102,342
            )Deferred
                revenue
            
            
            (1,754,238
            )(2,594,650
            )Total
            
            $
            4,847,928





The
      operations of YTB, Inc. have been consolidated from the acquisition date. The
      cost to acquire YTB, Inc. has been allocated to the assets acquired and
      liabilities assumed according to their estimated fair values. The purchase
      price
      of $4,847,928 including transaction costs resulted in acquired goodwill of
      $2,224,322 which is not deductible for tax purposes.





The
      following unaudited pro forma consolidated financial information for the
      years ended December 31, 2004 and 2003 give effect to REZconnect’s acquisition
      of YTB, Inc. and reflects the results of YTB, Inc.’s operations as if the
      acquisition had occurred and been completed as of January 1, 2004 and 2003,
      respectively.





The
      following table summarizes the unaudited pro forma information for the
      years ended December 31, 2004 and 2003:





(RESTATED)
              2004
            
            (RESTATED)
              2003Revenue
            
            $
            7,923,826
            
            $
            6,001,925Net
                loss
            
            $
            (3,942,911
            )
            $
            (2,218,300
            )Weighted
                average common shares outstanding
            
            
            12,353,203
            
            
            10,351,179Basic
                and diluted loss per share
            
            $
            (0.32
            )
            $
            (0.21
            )




F11


REZCONNECT
      TECHNOLOGIES, INC.


Notes
      to
      Consolidated Financial Statements





NOTE
      4
      - PROPERTY PLANT AND EQUIPMENT





Property
      and equipment at December 31, 2004 and 2003 consists of the
      following:




(RESTATED)
            
            (RESTATED)2004
            
            2003Equipment
            
            $
            136,475
            
            $
            103,744Furniture
                and fixtures
            
            
            15,340
            
            
            6,930Capitalized
                software
            
            
            1,361,650
            
            
            1,245,052Vehicles
            
            
            95,769
            
            
            -1,609,234
            
            
            1,355,726Less:
                Accumulated depreciation
            
            
            (1,256,187
            )
            
            (836,651
            )Property
                and equipment, net
            
            $
            353,047
            
            $
            519,075





Depreciation
      and amortization expense on property and equipment was $419,563 and $415,259
      for
      the years ended December 31, 2004 and 2003, respectively.





As
      of
      December 31, 2004 and 2003, capitalized software development costs, net of
      accumulated amortization, totaled $113,013 and $518,348, respectively. For
      the
      years ended December 31, 2004 and 2003, the Company recorded amortization of
      capitalized software development costs of $416,788 and $415,259,
      respectively.





NOTE
      5
      - INTANGIBLE ASSETS





The
      following tables present the components of the Company’s intangible assets as of
      December 31, 2004:





(RESTATED)At
                December 31, 2004Intangible
                Assets
            
            Cost
            
            Accumulated
                Amortization
            
            Net
            
            LifeAmortized
                intangible assetsNon-compete
                agreement
            
            $
            360,000
            
            $
            3,180
            
            $
            356,820
            
            
            7RTA
                agreements
            
            
            690,000
            
            
            42,660
            
            
            647,340
            
            
            1Vendor
                agreements
            
            
            220,000
            
            
            1,360
            
            
            218,640
            
            
            10Total
                amortized intangible assets
            
            
            1,270,000
            
            
            47,200
            
            
            1,222,800Unamortized
                intangible assetsDomain
                names
            
            
            2,040,000
            
            
            -
            
            
            2,040,000Total
                unamortized intangible assets
            
            
            2,040,000
            
            
            -
            
            
            2,040,000Total
                Intangible Assets
            
            $
            3,310,000
            
            $
            47,200
            
            $
            3,262,800





Amortization
      expense was $47,200 and $0 for the years ended December 31, 2004 and 2003,
      respectively. The
      estimated amortization expense related to intangible assets as of December
      31,
      2004 over the next five years follows, assuming no subsequent impairment of
      the
      underlying assets, is as follows:




(RESTATED)2005
            
            $
            720,7802006
            
            
            73,4292007
            
            
            73,4292008
            
            
            73,4292009
            
            
            73,429




F12


REZCONNECT
      TECHNOLOGIES, INC.


Notes
      to
      Consolidated Financial Statements





NOTE
      6
      - FINANCING ARRANGEMENTS





Advances





During
      December 2004, pending the closing of a private placement memorandum (“PPM”), an
      investor advanced $100,000 to the Company. The PPM closed in February 2005
      at
      which time the Company repaid the advance. The liability is included in other
      current liabilities in the accompanying consolidated balance sheet as of
      December 31, 2004.





Notes
      Payable





The
      Company assumed the following short-term notes payable upon the acquisition
      of
      its acquired entity on December 8, 2004:





(RESTATED)6.25%
                promissory note secured by vehicle purchase. Interest and principal
                are
                payable in monthly installments of $1,000 for 12 months, remaining
                balance
                due February 28, 2005.
            
            $
            44,2546.25%
                promissory note secured by vehicle purchase. Interest and principal
                are
                payable in monthly installments of $1,000 for 12 months, remaining
                balance
                due March 4, 2005.
            
            
            58,088Total
                Notes Payable
            
            $
            102,342





Long-Term
      Debt





On
      January 11, 2002, as a result of the events of September 11, 2001, the Company
      borrowed $324,500 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 until November
      2003. The loan is repayable via a monthly installment of $2,607, including
      interest at 4% per annum, through October 2017. The loan is personally
      guaranteed by the Company’s chief executive officer. The outstanding long term
      debt balance as of December 31, 2004 and 2003 was $305,557 and $321,170,
      respectively.





Minimum
      principal payments of long-term debt as of December 31, 2004 are as
      follows:





Year
                ending December 31, 2004
            
            (RESTATED)
              Amount2005
            
            $
            18,7682006
            
            
            19,5322007
            
            
            20,3282008
            
            
            21,1562009
            
            
            22,018Thereafter
            
            
            203,755Total
            
            $
            305,557





F13


REZCONNECT
      TECHNOLOGIES, INC.


Notes
      to
      Consolidated Financial Statements





NOTE
      7
      - COMMITMENTS AND CONTINGENCIES





Leases





The
      Company is obligated under an operating lease for the New Jersey office location
      which expires on April 30, 2008, to pay minimum annual rentals, currently at $44,667 per year
      plus real estate taxes and operating cost charges. In addition, the Company
      has
      entered into various operating lease agreements with Wal-Mart Stores, Inc.
      (“Wal-Mart”) for eight locations pursuant to a master lease agreement. The term
      of the individual location leases is two years with two options to extend the
      lease for one consecutive term of three years followed by one consecutive term
      of five years. The Company has also entered into sub-lease agreements with
      franchisees at these Wal-Mart locations. The subleases with the franchisees
      also
      have a two-year term with two options to extend the lease for one consecutive
      term of three years followed by one consecutive term of five years.





Following
      is a summary of net rental income (expense) for the years ended December 31,
      2004 and 2003:





(RESTATED)2004
            
            2003Sublease
                rental income
            
            $
            160,863
            
            
            222,646Less
                minimum rental expense
            
            
            149,342
            
            
            204,368Net
                rental income (expense)
            
            $
            11,521
            
            $
            18,278





Minimum
      future rental payments under non-cancelable operating leases (including the
      Wal-Mart location leases on which sublease rental income is earned), having
      remaining terms in excess of one year as of December 31, 2004 are as
      follows:





(RESTATED)Year
                ending December 31
            
            Office
                Location
            
            Wal-Mart
                Locations
            
            Sublease
                Rental Income
            
            Net
                Rental Expense (Income)2005
            
            $
            46,333
            
            $
            118,654
            
            $
            135,384
            
            $
            29,6032006
            
            
            48,333
            
            
            87,007
            
            
            86,722
            
            
            48,6182007
            
            
            50,470
            
            
            31,252
            
            
            31,922
            
            
            49,8002008
            
            
            17,068
            
            
            23,789
            
            
            25,230
            
            
            15,6272009
            
            
            -
            
            
            5,947
            
            
            6,496
            
            
            (549
            )Total
            
            $
            162,204
            
            $
            266,649
            
            $
            285,754
            
            $
            143,099




Employment
      agreements




The
      Company entered into a long-term employment agreement with Michael Y. Brent,
      the
      president, dated March 1, 2000. Under such agreement (which would have expired
      April 9, 2005 and subjects him to confidentiality, non-raid and non-compete
      provisions), Mr. Michael Y. Brent is paid, directly or indirectly, a combination
      of (i) a $200,000 salary and/or consulting fee with annual increases of 6%
      and
      (ii) options and/or warrants, determined by the Board acting as a Compensation
      Committee, based on the Company’s financial performance. Mr. Michael Y. Brent
      will continue to be subject to his confidentiality covenant and, for 3 years,
      his non-compete covenants. His estate also receives a benefit in the amount
      of
      one year's salary, upon Mr. Michael Y. Brent's death.





Effective
      January 1, 2005, Mr. Michael Y. Brent, along with three other Company
      executives, entered into a new long-term employment agreements with the Company
      (see also Note 13 - Subsequent Events).




F14


REZCONNECT
      TECHNOLOGIES, INC.


Notes
      to
      Consolidated Financial Statements







NOTE
      8
      - STOCK OPTIONS





The
      Company has a stock option plan that is administered by the compensation
      committee of the board of directors, which in turn determines the employees,
      officers, and directors subject to receive awards and the terms and conditions
      of these awards.  The purpose of the plan is to make available to our key
      employees and directors certain compensatory arrangements related to the growth
      in the value of our 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 our
      employees and directors with the interests of our stockholders.  No shares
      of common stock have been reserved for this plan.





As
      of
      December 31, 2004 and 2003, the Company recognized $3,061 and $50,000,
      respectively, in compensation expense related to options granted with an
      exercise price less than the fair value of the underlying stock at the date
      of
      the grant.





FIN
      44
      requires variable accounting for compensation expense when stock options have
      been cancelled and re-issued with a change in strike price.  The variable
      compensation associated with these types of stock options was an expense of
      $108,000 in 2004 and zero in 2003.





A
      summary
      of stock option activity is as follows:





(RESTATED)
            
            (RESTATED)2004
            
            2003Weighted
                Average
            
            
            
            Weighted
                AverageShares
            
            Exercise
                Price
            
            Shares
            
            Exercise
                PriceOutstanding
                - Beginning of Period
            
            
            520,000
            
            $
            1.09
            
            
            520,000
            
            $
            1.09Granted
            
            
            470,000
            
            
            1.15
            
            
            -
            
            
            -Exercised
            
            
            -
            
            
            -
            
            
            -
            
            
            -Forfeited
            
            
            -
            
            
            -
            
            
            -
            
            
            -Outstanding
                on December 31,
            
            
            990,000
            
            $
            1.12
            
            
            520,000
            
            $
            1.09Exercisable
                on December 31,
            
            
            990,000
            
            $
            1.12
            
            
            520,000
            
            $
            1.09




F15


REZCONNECT
      TECHNOLOGIES, INC.


Notes
      to
      Consolidated Financial Statements





A
      summary
      of stock options outstanding and exercisable as of December 31, 2004 are as
      follows:





(RESTATED)Options
                Outstanding
            
            Options
                ExercisableExercise
                Price
            
            Number
                Outstanding
            
            Weighted-Average
                Remaining Life
            
            Weighted-Average
                Exercise Price
            
            Number
                Outstanding
            
            Weighted-Average
                Price≤$1.00
            
            
            850,000
            
            
            2.04
                years
            
            $
            0.97
            
            
            850,000
            
            $
            0.97≥$2.00
            
            
            140,000
            
            
            1.95
                years
            
            $
            2.00
            
            
            140,000
            
            $
            2.00Total
            
            
            990,000
            
            
            2.03
                years
            
            $
            1.12
            
            
            990,000
            
            $
            1.12





NOTE
      9
      - STOCKHOLDERS’ EQUITY





In
      2002,
      the Company issued shares into escrow in satisfaction of an indemnity agreement
      reached with a former officer. During the first quarter of 2003, the number
      of
      shares needed to satisfy the indemnity agreement became known and shares
      originally issued were cancelled. The Company recorded a reduction in the
      escrow account in the amount of $48,528 and an equivalent reduction in common
      stock and paid in capital in the amount of $221 and $48,307,
      respectively.





During
      2003, equity compensation in the amount of $73,567 was recorded as a result
      of 334,396 shares issued as compensation for services to non-employees with
      an offsetting adjustment to common stock in the amount of $334 and additional
      paid in capital in the amount of $73,233. In addition, 129,511 shares were
      issued as compensation in the amount of $41,444 to employees with an offsetting
      adjustment to common stock and additional paid in capital in the amounts of
      $130
      and $41,314, respectively.





On
      February 11, 2003, the Company entered into a Long-Term Web Servicing Agreement
      in exchange for the issuance of 1,000,000 shares of restricted stock which
      was
      approved and ratified by the Company’s Board of Directors. Specifically, the
      Company issued 800,000 restricted shares to YourTravelBiz, Inc. and 200,000
      restricted shares to YTB Travel and Cruises, Ltd. The issued shares were valued
      at $.22 per share for which the Company recorded $220,000 in deferred costs
      and
      a corresponding increase in common stock and paid in capital in the amount
      of $1,000 and $219,000, respectively. During the fourth quarter of 2004, the
      unamortized balance of the contract of $200,750 was written off with an
      offsetting adjustment to common stock of $1,000 and paid in capital of $199,750
      when the agreement was modified and the shares were surrendered.




During
      2004, equity compensation in the amount of $46,662 was recorded as a result
      of
      196,061 shares issued as compensation for services to non-employees with an
      offsetting adjustment to common stock in the amount of $196 and additional
      paid
      in capital in the amount of $46,466. In addition, 1,243,750 shares were issued
      as compensation in the amount of $1,267,700 to employees with an offsetting
      adjustment to common stock and additional paid in capital in the amounts of
      $1,244 and $1,266,456, respectively.




NOTE
      10 - INCOME TAXES





The
      Company accounts for income taxes under SFAS No. 109, “Accounting for Income
      Taxes. SFAS No. 109 requires the recognition of deferred tax assets and
      liabilities for both the expected impact of differences between the financial
      statements and tax basis of assets and liabilities, and for the expected future
      tax benefit to be derived from tax loss and tax credit carry forwards. SFAS
      No.
      109 additionally requires the establishment of a valuation allowance to reflect
      the likelihood of realization of deferred tax assets.




F16




REZCONNECT
      TECHNOLOGIES, INC.


Notes
      to
      Consolidated Financial Statements





As
      a
      result of the Company’s operating losses in 2004 and 2003, and loss carry
      forwards available in 2004, there is no provision for current income taxes.





Statement
      of Financial Accounting Standards No. 109, Accounting for Income Taxes, requires
      a valuation allowance to reduce any deferred tax assets to their net realizable
      amounts if, based on the weight of evidence, it is more likely than not that
      all
      or some portion of such deferred tax assets will not be realized. As of December
      31, 2004 and 2003, the Company is uncertain if it will realize any future tax
      benefit of its deferred tax assets. Accordingly, a full valuation allowance
      has
      been established as a reserve against the Company’s deferred tax assets and,
      therefore, no deferred income tax credits have been recognized in the statements
      of operations for the years ended December 31, 2004 and 2003.





At
      December 31, 2004 the Company had approximately $7,007,000 of federal and state
      net operating losses that may be available to offset future taxable income.
      The
      net operating loss carry forwards, if not utilized, will begin to expire in
      2019
      for federal and state purposes. The net operating losses may be subject to
      a
      substantial limitation under the “Change of Ownership” Section 382 of the
      Internal Revenue Code.





A
      reconciliation of income taxes, with the amounts computed at the statutory
      federal rate, is a follows:


(RESTATED)As
                    of December 312004
                
                2003Computed
                    tax at federal statutory rate
                
                $
                (755,644
                )
                $
                (273,362
                )Other,
                    net
                
                
                (16,356
                )
                
                (19,638
                )Change
                    in valuation allowance
                
                
                772,000
                
                
                293,000Total
                
                $
                -
                
                $
                -


Deferred
      tax assets and liabilities consist of the following:





(RESTATED)As
                of December 312004
            
            2003**Deferred
                Tax Assets**Allowance
                for doubtful accounts
            
            $
            63,000
            
            $
            64,000Allowance
                for notes receivable
            
            
            25,000
            
            
            1,000Capitalized
                consulting
            
            
            50,000
            
            
            -Accrued
                vacation
            
            
            5,000
            
            
            -Capital
                losses
            
            
            7,000
            
            
            5,000Accrued
                compensation
            
            
            8,000
            
            
            -Net
                operation loss carry-forward
            
            
            2,593,000
            
            
            1,909,0002,751,000
            
            
            1,979,000**Deferred
                Tax Liabilities**
            
            
            -
            
            
            -**Net
                Deferred Tax Assets**Before
                valuation allowance
            
            
            2,751,000
            
            
            1,979,000Less
                valuation allowance
            
            
            (2,751,000
            )
            
            (1,979,000
            )**Net
                Deferred Tax Asset**
            
            $
            -
            
            $
            -




F17


REZCONNECT
      TECHNOLOGIES, INC.


Notes
      to
      Consolidated Financial Statements





NOTE
      11 - RELATED PARTY TRANSACTIONS





During
      the years ended December 31, 2004 and 2003, the Company incurred consulting
      fee
      expenses for services provided by an entity owned by the Company’s chief
      executive officer, a significant shareholder of the Company. These fees totaled
      approximately $20,000 and $23,500 for the year ended December 31, 2004 and
      2003.
      Under a new employment agreement reached in December 2004, such consulting
      fees
      have been eliminated. At year end, December 2004, there are no consulting fees
      owed to the Company’s Chief Executive Officer. Prior to the merger YTB, Inc. was
      a privately held company and it rented office space on a month-to-month
      basis from a majority Stockholder who is new Chairman of the Board of Directors.
      At December 31, 2004, a subsidiary of the Company owed $8,000 to the Chairman
      of
      the Company’s Board of Directors for unpaid rent for office
      occupancy.





A
      printing company owned by certain members of the Board of Directors is sometimes
      utilized to produce printed brochures, etc., for the Company. In 2004, the
      total
      expense reflected in the accompanying consolidated financial statements is
      $4,280, of which $3,542 is accrued as of December 31, 2004.





NOTE
      12 - SEGMENT INFORMATION


The
          Company operates in the following three business segments: marketing of
          online
          travel stores including the development of a sales network; sales of travel
          through online travel stores; and developing and commercializing internet-based
          technology programs used in supporting online travel stores. The Company’s
          business segments operate primarily in the United States, but are structured
          for
          potential international growth.
 
 Summarized
          financial information concerning the Company’s reportable segments is shown in
          the following tables. The “parent” column includes corporate items not
          specifically allocated to the segments.
  (RESTATED)Year
                    Ended
                  December
                    31, 2004
                
                Marketing
                
                Travel
                
                Technology
                
                Parent
                
                Elimination
                
                TotalExternal
                    and inter-segment
                    revenue
                
                $
                501,214
                
                $
                2,265,271
                
                $
                426,207
                
                $
                -
                
                $
                -
                
                $
                3,192,692Segment
                    profit (loss)
                
                
                (245,667
                )
                
                (1,459,286
                )
                
                (488,396
                )
                
                -
                
                
                -
                
                
                (2,193,349
                )Assets
                
                
                2,416,019
                
                
                566,828
                
                
                357,272
                
                
                5,487,122
                
                
                (693,281
                )
                
                8,133,960Depreciation
                    and amortization
                
                
                3,036
                
                
                -
                
                
                471,950
                
                
                -
                
                
                -
                
                
                474,986Capital
                    Expenditures
                
                
                11,671
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                11,671
 
 
 (RESTATED)Year
                    Ended
                  December
                    31, 2003
                
                Marketing
                
                Travel
                
                Technology
                
                Parent
                
                Elimination
                
                TotalExternal
                    and inter-segment
                    revenue
                
                $
                -
                
                $
                1,872,185
                
                $
                284,376
                
                $
                -
                
                $
                -
                
                $
                2,156,561Segment
                    profit (loss)
                
                
                -
                
                
                (477,150
                )
                
                (322,456
                )
                
                -
                
                
                -
                
                
                (799,606
                )Assets
                
                
                -
                
                
                535,310
                
                
                1,081,592
                
                
                -
                
                
                -
                
                
                1,616,902Depreciation
                    and amortization
                
                
                -
                
                
                -
                
                
                426,259
                
                
                -
                
                
                -
                
                
                426,259Capital
                    Expenditures
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
 
 F18


REZCONNECT
      TECHNOLOGIES, INC.


Notes
      to
      Consolidated Financial Statements





NOTE
      13 - SUBSEQUENT EVENTS




The
        Company has entered into a long-term employment agreement with each of Mr.
        J.
        Scott Tomer, (President), Mr. J. Kim Sorensen, (Treasurer), Mr. Michael Y.
        Brent, (Chief Executive Officer) and Mr. Derek Brent, (Secretary). All
        employment agreements, which were effective January 1, 2005, expire December
        31,
        2009 and subject each officer to confidentiality provisions, as well as
        non-solicitation and non-compete provisions for an additional two years
        following termination of employment.
 
 Each
        of
        Messrs. J. Kim Sorensen and J. Scott Tomer receive a base annual salary of
        $120,000, increasing annually by 6%. They each receive an override on RTA
        sales
        and monthly fees generated by “representative position #2” of the
        YourTravelBiz.com sales organization equal to 50% of the monthly commissions
        and
        overrides earned by such representative position #2, paid monthly. Additionally,
        each of Messrs. J. Kim Sorensen and J. Scott Tomer receives a cash bonus
        based
        on the net pre-tax income of the Company equal to 2% if net pre-tax income
        is
        between $500,000 and $1,500,000, 2.25% if net pre-tax income is between
        $1,500,000 and $3,000,000 and 2.5% if net pre-tax income is at least $3,000,000.
        They each receive a car allowance and health and medical insurance provided
        by
        the Company. The Company has also taken out a term life insurance policy
        on the
        lives of Messrs. J. Kim Sorensen and J. Scott Tomer in an amount equal to
        three
        times their respective annual base salary, payable to beneficiaries designated
        by each.




Mr.
      Michael Y. Brent receives a base annual salary of
      $240,000, increasing annually in 6% increments. Mr. Michael Y. Brent receives
      an
      override on the RTA sales and monthly fees generated by “representative position
      #1” of the YourTravelBiz.com sales organization equal to 16.69% of the monthly
      commissions and overrides earned by said position #1, paid monthly.
      Additionally, Mr. Michael Y. Brent receives a cash bonus based on the net
      pre-tax income of the Company equal to 2% if net pre-tax income is between
      $500,000 and $1,500,000, 2.25% if net pre-tax income is between $1,500,000
      and
      $3,000,000 and 2.5% if net pre-tax income is at least $3,000,000. Mr. Michael
      Y.
      Brent receives a car allowance and health and medical insurance provided by
      the
      Company. The Company has also taken out a term life insurance policy on the
      life
      of Mr. Brent in an amount equal to three times his annual base salary, payable
      to beneficiaries designated by him.




Mr.
        Derek
        Brent receives a base annual salary of $120,000, increasing annually in $12,000
        increments. Additionally,
        Mr. Derek J. Brent receives a cash bonus based on the net pre-tax income
        of the
        Company equal to 2% if net pre-tax income is between $500,000 and $1,500,000,
        2.25% if net pre-tax income is between $1,500,000 and $3,000,000 and 2.5%
        if net
        pre-tax income is at least $3,000,000.In addition, Mr. Derek Brent
        receives an automobile allowance and health and medical insurance provided
        by
        the Company.




On
      January 4, 2005, subsequent to the New York merger between the Company and
      YTB,
      the assets of this combined entity were assigned respectively to three
      newly-organized Delaware corporations, respectively YourTravelBiz.com, Inc.,
      REZconnect Technologies, Inc. and YTB Travel Network, Inc., each of which
      becoming wholly-owned subsidiaries of the Company on that date.





On
      January 4, 2005 the Company re-incorporated in the State of Delaware by means
      of
      a “downstream merger” between the Company and a Delaware corporation named YTB
      International, Inc. The Company then changed its name to YTB International,
      Inc.
      and increased the number of its authorized common shares to 50,000,000, while
      maintaining the same 5,000,000 authorized preferred shares. As a consequence
      of
      this Delaware merger and associated re-incorporation, YTB International, Inc.
      became the successor to the Company and to the Company’s three subsidiaries:
      REZconnect Technologies, Inc. (“Technologies”), YourTravelBiz.com, Inc. (“YTB
      Marketing”), and YTB Travel Network, Inc. (“YTB Travel”) (the Company,
      Technologies, YTB Marketing and YTB Travel are sometimes hereafter collectively
      referred to as the “Company”), with each subsidiary becoming a wholly-owned
      subsidiary of YTB International, Inc. As part of the Reorganization, the assets
      of the Company were assigned to the three newly-organized wholly-owned
      subsidiaries, each a Delaware corporation.





F-19


On
      January 9, 2005, following both the Reorganization and a corresponding increase
      in the number of its authorized common shares from 20,000,000 to 50,000,000,
      each share of the aforementioned Series B convertible preferred stock was
      converted into one share of the Company’s common stock





On
      January 19, 2006, the Company announced that it had initiated an internal
      investigation as to certain matters related to its former accounting firm,
      Dischino & Associates, P.C., including its probable lack of independence in
      previously reported financial statements and the possible improper recognition
      of approximately $30,000 in revenue for the period ended June 30, 2005. The
      Company retained the legal firm of Greenberg Traurig, LLP to perform the
      investigation.


On
        January 26, 2005, YTB International, Inc., formerly REZconnnect Technologies,
        Inc. (or the "Company") authorized the sale to Laurus Master Fund, Ltd.
        ("Laurus") of a Secured Convertible Term Note in the principal amount of
        two
        million dollars ($2,000,000), which is convertible into the Company’s common
        stock at an initial fixed conversion price of $0.80 per share (the "Term
        Note").
        Laurus also acquired a Common Stock Purchase Warrant for the purchase of
        up to
        800,000 shares of Common Stock, exercisable until January 26, 2012 at a price
        of
        $1.25 per share on the first 400,000 shares and $1.58 on the 400,000 share
        balance (the "Warrant"). The Term Note matures on January 26, 2008 and is
        secured by a first priority lien on all collateral of the Company and its
        wholly-owned subsidiaries, including inventory, accounts receivable, raw
        materials and all of its ownership interests in REZconnect Technologies,
        Inc.,
        YourTravelBiz.com, Inc. and YTB Travel Network, Inc., its wholly-owned
        subsidiaries. The Term Note is also guaranteed by each of the Company’s
        wholly-owned subsidiaries. The Term Note accrues interest at a rate per annum
        equal to the "prime rate" published in The Wall Street Journal from time
        to
        time, plus three percent (3%), but shall in no event be less than eight percent
        (8%) per annum. The Company also granted Laurus the right, on or prior to
        October 26, 2005 (270 days following the closing) to issue an additional
        note in
        the aggregate principal amount of $1,000,000 on the same terms and conditions
        (including the same interest rate and fixed conversion price of $1.25). Finally,
        the Company has granted Laurus registration rights with respect to all shares
        of
        Common Stock underlying the Term Note and Warrant. Closing and funding occurred
        January 2005. The second funding occurred on in October 2005.


On
        November, 20, 2006, the Company entered into a
        Settlement Agreement with Laurus Master Fund, Ltd., (Laurus), whereby the
        Company agreed to issue an additional 200,000 shares of YTBI stock to Laurus
        as
        settlement for liquidated damages for the Company's inability to timely file
        a
        Registration Statement as stipulated in the original documents between Laurus
        and YTBI. In addition, all of the original document provisions are terminated,
        excluding January Warrant and the October Warrant. These warrants have not
        been
        exercised and the value of these warrants have been recognized in the
        accompanying financial statements.




The
      Company executed an employment agreement on January 30, 2006 with its new Chief
      Financial Officer effective December 1, 2005. The term of the Agreement is
      through December 31, 2009, followed by a three-year renewal period.




On
      February 7, 2006, the Company reported that it was in the process of having
      its
      financial statements for the years ended December 31, 2004 and 2003 as
      previously-filed with the SEC on Form 10-KSB/A, re-audited by UHY LLP, the
      Company's new independently registered public accounting firm.




On
      February 8, 2005, the Company commenced a Private Placement Memorandum for
      the
      issuance of up to 1,000,000 shares at a price of $0.80 per share, sold in units
      of $15,000.  Each unit contained warrants for a like amount of shares at an
      exercise price of $1.75, exercisable for 5 years from date of
      issuance.




On
      June
      1, 2006, the Company announced its common stock had been removed from trading
      on
      the OTC Bulletin Board as a result of its annual report on Form 10-KSB for
      the
      year ended December 31, 2005 having not yet been filed with the
      SEC.




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 their new corporate
      headquarters in Wood River, Illinois. The Company financed the purchase of
      the
      Property with a note in the amount of $2.5 million with an interest rate of
      Prime, less 0.50% floating daily from Meridian Bank, a local bank. Interest
      only
      is payable monthly for the first two years of the note. The Note is
      collateralized by the first mortgage on the Property and a $500,000 Certificate
      of Deposit. The Certificate of Deposit will be released after the Company makes
      $625,000 of improvements to the Property. The Company plans to begin a $6.0
      million renovation project to the Property in late 2006.




Effective
      November 22, 2006, an agreement has been reached between Michael Brent, Kim
      Sorensen and Scott Tomer for each of them to share a one-third interest in
      YTB
      Rep position #2. Previously, Mr. Brent had a one-sixth share in YTB Rep position
      #1. This agreement was reached to document the verbal agreement between the
      three parties whereby each would receive the same compensation. The Board of
      Directors had instructed the parties to come to a resolution of this issue
      and
      come back with a settlement. Formal approval of the change in employment
      contracts will occur at the next regular Board meeting.


Effective
        November 22, 2006, Michael Y. Brent, Derek J. Brent and Darren J. Brent resigned
        as members of the Company’s Board of Directors.


F-20




REZCONNECT
      TECHNOLOGIES, INC.


Notes
        to
        Consolidated Financial Statements
 
 
 NOTE
        14 - RESTATEMENT OF FINANCIAL STATEMENTS
 
 On
        February 6, 2006 the Company concluded that its financial results for the
        year’s
        ended December 31, 2003 and 2004 and the interim periods ended March 31,
        June 30
        and September 30, 2003 and the interim periods ended March 31, June 30,
        September 30, 2004 would be restated to reflect certain errors identified
        in its
        previously filed financial statements. The errors noted relative to the 2003
        and
        2004 financial statements are more completely described in the following
        paragraphs and tables.
 
 In
        addition, as a result of the review and restatement process conducted by
        the
        Company relative to the 2003 and 2004 financial statements the Company
        identified certain errors in the financial statements for the year ended
        December 31, 2002. These errors have been corrected in the statements herein
        presented as adjustments to beginning accumulated deficit.
 
 For
        the
        year ended December 31, 2002 the impact of the corrections of the errors
        identified resulted in an increase to the previously reported operating and
        net
        loss of $234,341. This result increased the Company’s basic and diluted loss per
        share from $(0.23 )
        to
        $(0.26) for the year ended December 31, 2002. The Company’s previously reported
        liabilities increased by $134,341 with a corresponding decrease in equity
        of
        $134,341. The adjustments had no impact on operating cash flow and had no
        affect
        on previously reported income tax expense as the Company has recorded a full
        valuation allowance against all deferred tax assets.
 
 The
        items
        giving rise to the corrections of the 2002 financial statements are as
        follows:
 
 The
        Company identified unrecorded liabilities related to revolving credit card
        debt
        that had not been disclosed or recorded in prior periods.  The amount
        recorded as a liability relative to this item was $125,847. In addition the
        Company identified that it had not accrued all amounts owed to its CEO under
        his
        compensation agreement and reflected additional compensation expense in the
        amount of $32,433. This liability was offset against personal charges included
        in the credit card adjustment discussed above in the amount of $23,940
        Correction of these items resulted in an increase in current liabilities
        of
        $134,341 and a corresponding decrease in equity.
 
 Additionally,
        the Company has corrected a previously recorded prior period adjustment it
        had
        recorded to reflect the issuance of 900,000 shares to an officer of the Company.
        The shares were issued in 2004. Of the total expense of $252,000 recorded
        as a
        result of the share issuance, the Company reflected a prior period adjustment
        affecting its 2003 and 2002 and prior financial statements in the amount
        of
        $67,200 and $134,400 respectively to reflect shares issued to the officer.
        The
        balance of the expense in the amount of $50,400 was recorded in 2004. According
        to an informal agreement between the Company and the officer the shares were
        issued as compensation for services in 2004 and for past services.
        However, no binding agreement was entered into by the Company or officer
        in the
        year’s restated. Accordingly, the Company has reversed the previously recorded
        prior period adjustment.
 
 In
        2001
        the Company issued options on 50,000 shares of common stock that vested over
        three years. The options were in the money on the date issued. The Company
        revised its financial statements to reflect equity compensation over the
        three
        year vesting period. A correction was made to opening equity and paid in
        capital
        in the amount of $100,000 to properly reflect these items.
 
 
 F-21
  REZCONNECT
        TECHNOLOGIES, INC.
 Notes
        to
        Consolidated Financial Statements
  For
          the
          year ended December 31, 2003 the impact of the corrections of the errors
          identified resulted in a decrease to the previously reported net loss of
          $1,107,483. This result decreased the Company’s basic and diluted loss per share
          from $(0.11) to $(0.08) for the year ended December 31, 2003. The Company’s
          previously reported assets decreased by $268,731, liabilities decreased
          by
          $536,751 with a corresponding increase in equity of $268,020. The adjustments
          resulted in a decrease in previously reported net sales of $243,527 and
          an
          increase in operating loss of $318,626 and a decrease in operating cash
          flow of
          $8,747 for the year ended December 31, 2003. The adjustments had no affect
          on
          previously reported income tax expense as the Company has recorded a full
          valuation allowance against all deferred tax assets.
 
 For
          the
          year ended December 31, 2004 the impact of the corrections of the errors
          identified resulted in an increase to the previously reported net loss
          of
          $288,310. This result increased the Company’s basic and diluted loss per share
          from $0.02 to $0.18 for the year ended December 31, 2004. The Company’s
          previously reported assets decreased by $12,722,380, liabilities decreased
          by
          $1,587,093 with a corresponding decrease in equity of $11,135,287. The
          adjustments results in a decrease in previously reported net sales of $545,818
          and an increase in operating loss of $1,890,639 for the year ended December
          31,
          2004. The adjustments had no affect on previously reported income tax expense
          as
          the Company has recorded a full valuation allowance against all deferred
          tax
          assets.
 In
        addition to the adjustments made to correct errors in previously filed financial
        statements, certain amounts have been reclassified to conform to presentation
        in
        the current financial statements and the footnotes to the Company’s financial
        statements have been revised to adequately address all of the disclosures
        required under generally accepted accounting principles.
 
 The
        following tables summarize in a condensed format the financial statements
        previously reported and as restated for the years ended December 31, 2003
        and
        2004.
  F-22
  REZCONNECT
        TECHNOLOGIES, INC.
 Notes
        to
        Consolidated Financial Statements
  **2003
        RESTATEMENT SUMMARY**
 
 2003ASSETS
              
              As
                  Previously Reported
              
              Adjustments
              
              As
                RestatedCURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              62,718
              
              $
              (14,598
              )
              $
              48,120Available-for-sale
                  securities
              
              
              732,135
              
              
              -
              
              
              732,135Accounts
                  receivable (less allowance for doubtful accounts of
                restated
                  $173,909 and $74,061 originally reported)
              
              
              255,244
              
              
              (170,744
              )
              
              84,500Current
                  portion of notes receivable
              
              
              112,490
              
              
              (112,490
              )
              
              -Other
                  prepaid expenses and current assets
              
              
              -
              
              
              4,400
              
              
              4,400TOTAL
                  CURRENT ASSETS
              
              
              1,162,587
              
              
              (293,432
              )
              
              869,155PROPERTY
                  AND EQUIPMENT (net)
              
              
              -
              
              
              519,075
              
              
              519,075DEFERRED
                  CONTRACT COST (net)
              
              
              -
              
              
              209,000
              
              
              209,000TOTAL
                  OTHER ASSETS
              
              
              723,046
              
              
              (703,374
              )
              
              19,672TOTAL
                  ASSETS
              
              $
              1,885,633
              
              $
              (268,731
              )
              $
              1,616,902LIABILITIES
                  AND STOCKHOLDERS’ EQUITYCURRENT
                  LIABILITIES:Current
                  maturities of long-term debt
              
              $
              20,368
              
              $
              (1,898
              )
              $
              18,470Accounts
                  payable and accrued expenses
              
              
              105,776
              
              
              202,063
              
              
              307,839Deferred
                  revenue
              
              
              112,490
              
              
              (112,490
              )
              
              -TOTAL
                  CURRENT LIABILITIES
              
              
              238,634
              
              
              87,675
              
              
              326,309OTHER
                  LONG-TERM LIABILITIES:Long-term
                  debt, less current maturities
              
              
              300,802
              
              
              1,898
              
              
              302,700Deferred
                  revenue, less current portion
              
              
              632,862
              
              
              (626,324
              )
              
              6,538Other
                  liabilities
              
              
              26,266
              
              
              -
              
              
              26,266TOTAL
                  OTHER LONG-TERM LIABILITIES
              
              
              959,930
              
              
              (624,426
              )
              
              335,504TOTAL
                  LIABILITIES
              
              
              1,198,564
              
              
              (536,751
              )
              
              661,813STOCKHOLDERS’
                  EQUITYCommon
                  stock shares issued and outstanding, 10,606,314restated
                  and
                10,879,983
                  as originally reported
              
              
              10,880
              
              
              (274
              )
              
              10,606Additional
                  paid-in capital
              
              
              6,574,385
              
              
              59,818
              
              
              6,634,203Accumulated
                  deficit
              
              
              (5,898,196
              )
              
              208,476
              
              
              (5,689,720
              )TOTAL
                  STOCKHOLDERS’ EQUITY
              
              
              687,069
              
              
              268,020
              
              
              955,089TOTAL
                  LIABILITIES AND STOCKHOLDERS’ EQUITY
              
              $
              1,885,633
              
              $
              (268,731
              )
              $
              1,616,902
  F-23
 
 
 REZCONNECT
        TECHNOLOGIES, INC.
 Notes
        to
        Consolidated Financial Statements
  Year
                  Ended December 31, 2003As
                  Previously Reported
              
              Adjustments
              
              As
                RestatedREVENUESFranchise
                  service fees and other fees
              
              $
              684,825
              
              $
              123,127
              
              $
              807,952Travel
                  commissions and services
              
              
              1,346,930
              
              
              (293,905
              )
              
              1,053,025Online
                  travel store sales and monthly fees
              
              
              282,471
              
              
              1,905
              
              
              284,376Other
              
              
              85,862
              
              
              (74,654
              )
              
              11,208GROSS
                  REVENUES
              
              
              2,400,088
              
              
              (243,527
              )
              
              2,156,561Less
                  returns and allowances
              
              
              -
              
              
              -
              
              
              -TOTAL
                  NET REVENUES
              
              
              2,400,088
              
              
              (243,527
              )
              
              2,156,561OPERATING
                  EXPENSESCost
                  of travel service and products
              
              
              526,141
              
              
              (526,141
              )
              
              -Travel
                  commissions
              
              
              906,235
              
              
              (53,347
              )
              
              852,888Franchise
                  services and products
              
              
              -
              
              
              248,160
              
              
              248,160Depreciation
                  and amortization
              
              
              376,486
              
              
              49,773
              
              
              426,259Marketing
                  and selling
              
              
              31,535
              
              
              (31,535
              )
              
              -General
                  and administrative
              
              
              884,076
              
              
              534,144
              
              
              1,418,220Impairment
                  of capitalized software
              
              
              783,207
              
              
              (783,207
              )
              
              -TOTAL
                  OPERATING EXPENSES
              
              
              3,507,680
              
              
              (562,153
              )
              
              2,945,527LOSS
                  FROM OPERATIONS
              
              
              (1,107,592
              )
              
              318,626
              
              
              (788,966
              )OTHER
                  INCOME (EXPENSES)Interest
                  and dividend income
              
              
              18,225
              
              
              -
              
              
              18,225Interest
                  expense
              
              
              (1,885
              )
              
              (26,980
              )
              
              (28,865
              )Loss
                  on sale of short term investments
              
              
              (14,113
              )
              
              14,113
              
              
              -TOTAL
                  OTHER INCOME (EXPENSES)
              
              
              2,227
              
              
              (12,867
              )
              
              (10,640
              )LOSS
                  BEFORE INCOME TAXES
              
              
              (1,105,365
              )
              
              305,759
              
              
              (799,606
              )INCOME
                  TAX
              
              
              2,118
              
              
              (2,118
              )
              
              -NET
                  LOSS
              
              $
              (1,107,483
              )
              $
              307,877
              
              $
              (799,606
              )LOSS
                  PER SHARE:Weighted-average
                  common shares outstanding
              
              
              9,912,983
              
              
              438,196
              
              
              10,351,179Basic
                  and diluted loss per share
              
              $
              (0.11
              )
              $
              (0.03
              )
              $
              (0.08
              )
 
 F-24
  REZCONNECT
        TECHNOLOGIES, INC.
 Notes
        to
        Consolidated Financial Statements
 
 
 The
        following provides an in-depth discussion of the items that have been restated
        in the Company’s financial statements for the year ended December 31, 2003 as
        summarized above:
 
 **Cash
        and Cash Equivalents**
 
 The
        Company identified errors in its bank and investment account reconciliation
        process which resulted in the incorrect recording of the recording of settlement
        receivables as deposits in transit.
 
 **Accounts
        Receivable (including Allowances for Doubtful Accounts)**
 
 The
        Company had not previously properly assessed the collectibility of its recorded
        accounts receivable balances. Upon an in-depth review the Company concluded
        that
        certain accounts in the amount of $170,744 should have been written off and
        the
        allowance for doubtful accounts should have been increased by $99,848 to
        allow
        for potentially uncollectible accounts.
 
 Property
        and Equipment (net)
 
 Previously,
        the Company determined that certain capitalized software related to the
        net-to-phone technology for which the Company had not generated any revenue
        was
        impaired and recorded an impairment loss of $783,207. Upon a further more
        in-depth evaluation by the Company, it was determined that the net-to-phone
        technology did not represent a significant portion of the originally capitalized
        software. Rather, it was determined that the majority of costs capitalized
        were
        not impaired. The Company has reflected in its restated financial statements
        the
        reestablishment of the previously impaired software net of amortization expense
        of $426,476.
 
 **Deferred
        Contract Costs less Accumulated Amortization**
 
 The
        Company also identified it had failed to properly record an agreement it
        had
        entered into with YTB. In exchange for the exclusive right to provide web
        hosting services to YTB’s on-line travel agents, REZconnect issued 1,000,000
        shares of its common stock to YTB. This deferred contract right was not
        accounted for in the previously filed financial statements and has been assigned
        a value of $220,000. The contract right will be amortized over 20 years and
        $11,000 in amortization has been reflected in the restated financial
        statements.
 
 **Notes
        Receivable and Deferred Revenue**
 
 In
        addition to the evaluation of the collectibility of accounts receivable
        performed by the Company, the Company identified that it had not previously
        properly assessed the collectibility of its recorded notes receivable related
        to
        franchise operations. Upon an in-depth review, the Company concluded that
        certain notes in the amount of $112,490 should have been written off. The
        Company’s policy with respect to revenue recognition relative to franchise
        operations requires the collection of any amounts owed from franchisees before
        it is deemed appropriate to record revenue. Accordingly, the balances recorded
        in notes receivable are fully offset by a liability for deferred revenue.
        The
        deferred revenue balance was adjusted to reflect an offsetting adjustment
        to the
        write down of notes receivable.
 
 **Current
        Maturities of Long-Term Debt and Long-Term Debt**
 
 The
        Company determined that it had incorrectly identified the current portion
        of its
        long-term debt and recorded an adjustment to properly reflect the principal
        amounts currently due.
 
 **Accounts
        Payable and Accrued Expenses**
 
 The
        Company determined that it had failed to achieve a proper cutoff of amounts
        owed
        for goods and services it had received as of December 31, 2003. An adjustment
        was made to properly record all expenses incurred and not yet paid in 2003
        in
        accounts payable and accrued expenses in the amount of $202,063.
  F-25
  REZCONNECT
        TECHNOLOGIES, INC.
 Notes
        to
        Consolidated Financial Statements
 
 
 As
        discussed previously, the Company identified unrecorded liabilities related
        to
        revolving credit card debt that had not been recorded in prior periods. 
The amount recorded as a liability relative to this item in 2003 was $32,001.
        In
        addition the Company identified that it had not accrued all amounts owed
        to its
        CEO under his compensation agreement and reflected additional compensation
        expense in the amount of $3,620. This liability was offset against personal
        charges included in the credit card adjustment discussed above in the amount
        of
        $16,577. Correction of these items resulted in an increase in current
        liabilities of $19,044 and a corresponding decrease in equity.
 
 
 **Stockholders’
        Equity**
 
 In
        its
        originally filed financial statements the Company did not maintain an adequate
        accounting of shares issued to employees and other in compensation for services
        and did not properly apply generally accepted principles to record the issuance
        of those shares. In its restated financial statements the Company has corrected
        the following errors.
 
 
 As
        discussed previously, in 2001 the Company issued options on 50,000 shares
        of
        common stock that vested over three years. The options were in the money
        on the
        date issued. In 2003, a correction was made to compensation expense and paid-in
        capital in the amount of $50,000 to properly reflect this items.
 
 §
            Equity
                compensation in the amount of $41,444 has been recorded as a result
                of
                129,511 shares issued as compensation to employees that had not been
                previously recorded. The amount recorded as equity compensation was
                the
                fair value of the shares as of the date of
                issuance. 
 §
            Additional
                equity compensation in the amount of $51,567 has been recorded as
                a result
                of shares issued for services that had not been previously recorded.
                The
                amount recorded as equity compensation was the fair value of the
                shares as
                of the date of issuance. 
 §
            In
                2002 the Company issued shares into escrow in satisfaction of an
                indemnity
                agreement reached with a former officer. In 2003, the number of shares
                needed to satisfy the indemnity agreement became known and shares
                originally issued were canceled. The company had not recorded this
                transaction and has recorded a reduction of settlement expense in
                the
                amount of $48,528 and an equivalent reduction in common stock and
                paid in
                capital in the amount of $221 and $48,307
                respectively. 
 §
            As
                discussed previously, the Company has corrected a previously recorded
                prior period adjustment it had recorded to reflect the issuance of
                900,000
                shares to an officer of the Company. The shares were issued in 2004.
                Of
                the total expense of $252,000 recorded as a result of the share issuance,
                the company reflected a prior period adjustment affecting its 2003
                financial statements in the amount of $67,200 to reflect shares issued
                to
                the officer. However, no binding agreement was entered into by the
                Company
                or officer in the year’s restated. Accordingly, the Company has reversed
                the previously recorded prior period
                adjustment. 
 F-26
  REZCONNECT
        TECHNOLOGIES, INC.
 Notes
        to
        Consolidated Financial Statements
  
 As
        a
        result of the various restatement items identified by the Company the following
        changes have been reflected in stockholders equity:
 
 Total
                  Stockholders’ Equity as previously reported
              
              $
              687,0692002
                  accounts payable restatment
              
              
              (134,341
              )Shares
                  issued to employees
              
              
              41,444Shares
                  returned on indemnity agreements
              
              
              (48,528
              )Correction
                  of previously recorded restatement
              
              
              51,568Compensation
                  expense recognized for in
                the
                  money options
              
              
              50,000Change
                  in previously reported net income
              
              
              307,877Total
                  Stockholders’ Equity as Restated
              
              $
              955,089
 
 **Net
        Revenues**
 
 The
        Company identified that it had incorrectly recorded travel revenue on a gross
        rather than net basis for transactions in which the Company was an agent.
        An
        adjustment reducing revenue and travel commissions in the amount of $244,231
        has
        been reflected in the Company’s restated financial statements. In addition, the
        Company has reclassified amounts within the reported revenue captions to
        accurately reflect the components of revenue..
 
 **Operating
        Expenses**
 The
        Company noted it had incorrectly classified certain items of expense within
        its
        reporting classifications. Accordingly, certain reclassifications of expense
        were recorded to reflect the proper amount of expense in the reporting
        captions.
 
 In
        addition, as previously discussed the company failed to achieve a proper
        cut off
        of expenses and adjusted accounts payable and accrued expenses to reflect
        additional amounts owed as of December 31, 2002.
 
 **Loss
        from Sales of Short-Term Investments and Interest Expense**
 
 The
        Company identified it had incorrectly classified interest expense as a loss
        of
        short term investments. Therefore a reclassification between these accounts
        in
        the amount of $14,113 was reflected in the restated financial statements.
 
 **Income
        Taxes**
 
 As
        a
        result of the Company’s operating losses, no income taxes need to be
        provided.
  F-27
 
 REZCONNECT
        TECHNOLOGIES, INC.
 Notes
        to
        Consolidated Financial Statements
 
 
 **Net
        Loss**
 
 As
        a
        result of the various restatement items identified by the Company the following
        changes have been reflected in net loss for the year ended December 31,
        2003:
 
 Net
                  loss as previously reported
              
              $
              (1,107,483
              )Variable
                  accounting on repriced stock options
              
              
              (50,000
              )Revenue
                  correction of previously recorded restatement
              
              
              (244,231
              )Expense
                  correction of previously recorded restatement
              
              
              244,231Accrual
                  basis accounting for operating expenses
              
              
              (201,852
              )Accounts
                  Receivable bad debt expense
              
              
              (175,729
              )Depreciation
                  and amortization
              
              
              (49,773
              )Reversal
                  of impairment loss
              
              
              783,207Other
              
              
              2,024Net
                  loss as restated
              
              $
              (799,606
              )
  F-28
  REZCONNECT
        TECHNOLOGIES, INC.
 Notes
        to
        Consolidated Financial Statements
 
 **2004
        RESTATEMENT SUMMARY**
 
 The
        restated amounts and the previously-reported amounts as of and for the year
        ended December 31, 2004 are as follows:
 
 2004ASSETS
              
              As
                Previously
                Reported
              
              Adjustment
              
              As
                  RestatedCURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              25,449
              
              $
              270
              
              $
              25,719Available-for-sale
                  securities
              
              
              528,311
              
              
              -
              
              
              528,311Accounts
                  receivable (less allowance for doubtful accounts
                restated
                  $169,644 and $65,009 originally reported)
              
              
              383,033
              
              
              (362,622
              )
              
              20,411Prepaid
                  marketing commissions
              
              
              1,716,958
              
              
              (94,313
              )
              
              1,622,645Other
                  current assets
              
              
              15,312
              
              
              (15,312
              )
              
              -Current
                  portion of notes receivable
              
              
              24,240
              
              
              (24,240
              )
              
              -Loans
                  receivable
              
              
              122,195
              
              
              (122,195
              )
              
              -TOTAL
                  CURRENT ASSETS
              
              
              2,815,498
              
              
              (618,412
              )
              
              2,197,086PROPERTY
                  AND EQUIPMENT (net)
              
              
              73,121
              
              
              279,926
              
              
              353,047INTANGIBLES
                  ASSETS (net)
              
              
              6,458,333
              
              
              (3,195,533
              )
              
              3,262,800GOODWILL
              
              
              9,436,118
              
              
              (7,211,796
              )
              
              2,224,322OTHER
                  ASSETS:Capitalized
                  software (less accumulated amortization of $1,141,964 in2004
                  and $105,222 originally reported)
              
              
              79,514
              
              
              (79,514
              )
              
              -Security
                  deposits receivable and other assets
              
              
              10,460
              
              
              -
              
              
              10,460Prepaid
                  commissions, less current portion
              
              
              1,845,936
              
              
              (1,845,936
              )
              
              -Notes
                  receivable
              
              
              137,360
              
              
              (51,115
              )
              
              86,245TOTAL
                  OTHER ASSETS
              
              
              2,073,270
              
              
              (1,976,565
              )
              
              96,705TOTAL
                  ASSETS
              
              $
              20,856,340
              
              $
              (12,722,380
              )
              $
              8,133,960LIABILITIES
                  AND STOCKHOLDERS’ EQUITYCURRENT
                  LIABILITIES:Notes
                  payable
              
              $
              202,342
              
              $
              (100,000
              )
              $
              102,342Current
                  maturities of long-term debt
              
              
              19,532
              
              
              (764
              )
              
              18,768Accounts
                  payable and accrued expenses
              
              
              743,743
              
              
              197,358
              
              
              941,101Deferred
                  revenue
              
              
              1,737,984
              
              
              82,824
              
              
              1,820,808Other
                  current liabilities
              
              
              -
              
              
              100,000
              
              
              100,000TOTAL
                  CURRENT LIABILITIES
              
              
              2,703,601
              
              
              279,418
              
              
              2,983,019OTHER
                  LONG-TERM LIABILITIES:Long-term
                  debt, less current maturities
              
              
              283,221
              
              
              3,568
              
              
              286,789Deferred
                  revenue, less current portion
              
              
              1,956,324
              
              
              (1,870,079
              )
              
              86,245Other
                  libilities
              
              
              20,920
              
              
              -
              
              
              20,920TOTAL
                  OTHER LONG-TERM LIABILITIES
              
              
              2,260,465
              
              
              (1,866,511
              )
              
              393,954TOTAL
                  LIABILITIES
              
              
              4,964,066
              
              
              (1,587,093
              )
              
              3,376,973STOCKHOLDERS’
                  EQUITYPreferred
                  stock, Series B convertible, par value $.001; liquidation preference
                  $1.45
                  per share;5,000,000
                  shares authorized, 4,092,376 issued and outstanding
              
              
              4,092
              
              
              -
              
              
              4,092Common
                  stock, par value $.001; 20,000,000 shares authorized;18,976,125
                  shares in 2004 and 10,606,314 shares in 2003issued
                  and outstanding
              
              
              18,976
              
              
              -
              
              
              18,976Additional
                  paid-in capital
              
              
              22,055,712
              
              
              (9,438,724
              )
              
              12,616,988Accumulated
                  deficit
              
              
              (6,186,506
              )
              
              (1,696,563
              )
              
              (7,883,069
              )TOTAL
                  STOCKHOLDERS’ EQUITY
              
              
              15,892,274
              
              
              (11,135,287
              )
              
              4,756,987TOTAL
                  LIABILITIES AND STOCKHOLDERS’ EQUITY
              
              $
              20,856,340
              
              $
              (12,722,380
              )
              $
              8,133,960
 
 F-29
  REZCONNECT
        TECHNOLOGIES, INC.
 Notes
        to
        Consolidated Financial Statements
 
 2004REVENUES
              
              As
                Previously
                Reported
              
              Adjustment
              
              As
                  RestatedFranchise
                  service fees and other fees
              
              $
              814,307
              
              $
              (181,914
              )
              $
              632,393Travel
                  commissions and services
              
              
              2,056,617
              
              
              (424,961
              )
              
              1,631,656Online
                  travel store sales and monthly fees
              
              
              840,256
              
              
              82,151
              
              
              922,407Other
              
              
              57,140
              
              
              (50,904
              )
              
              6,236GROSS
                  REVENUES
              
              
              3,768,320
              
              
              (575,628
              )
              
              3,192,692Less
                  returns and allowances
              
              
              29,810
              
              
              (29,810
              )
              
              -TOTAL
                  NET REVENUES
              
              
              3,738,510
              
              
              (545,818
              )
              
              3,192,692OPERATING
                  EXPENSESCost
                  of travel services and products
              
              
              930,519
              
              
              (930,519
              )
              
              -Marketing
                  commissions
              
              
              -
              
              
              278,555
              
              
              278,555Travel
                  commissions
              
              
              1,521,145
              
              
              (259,394
              )
              
              1,261,751Franchise
                  services and products
              
              
              153,035
              
              
              41,325
              
              
              194,360Depreciation
                  and amortization
              
              
              86,169
              
              
              388,817
              
              
              474,986Marketing
                  and selling
              
              
              103,418
              
              
              (103,418
              )
              
              -General
                  and administrative
              
              
              1,237,906
              
              
              1,929,455
              
              
              3,167,361TOTAL
                  OPERATING EXPENSES
              
              
              4,032,192
              
              
              1,344,821
              
              
              5,377,013LOSS
                  FROM OPERATIONS
              
              
              (293,682
              )
              
              (1,890,639
              )
              
              (2,184,321
              )OTHER
                  INCOME (EXPENSES)Interest
                  and dividend income
              
              
              38,096
              
              
              (12,389
              )
              
              25,707Interest
                  expense
              
              
              (22,596
              )
              
              (12,139
              )
              
              (34,735
              )Loss
                  on sale of short term investments
              
              
              (8,458
              )
              
              8,458
              
              
              -TOTAL
                  OTHER INCOME (EXPENSES)
              
              
              7,042
              
              
              (16,070
              )
              
              (9,028
              )LOSS
                  BEFORE INCOME TAXES
              
              
              (286,640
              )
              
              (1,906,709
              )
              
              (2,193,349
              )INCOME
                  TAX
              
              
              1,670
              
              
              (1,670
              )
              
              -NET
                  LOSS
              
              $
              (288,310
              )
              $
              (1,905,039
              )
              $
              (2,193,349
              )LOSS
                  PER SHAREWeighted-average
                  common shares outstanding
              
              
              11,867,842
              
              
              485,361
              
              
              12,353,203Basic
                  and diluted loss per share
              
              $
              (.02
              )
              $
              (.16
              )
              $
              (.18
              )
 
 The
        following provides an in-depth discussion of the items that have been restated
        in the Company’s financial statements for the year ended December 31, 2004 as
        summarized above:
 
 **Cash**
 
 The
        Company identified errors in its bank and investment account reconciliation
        process which resulted in adjustments to the recorded balances.
 
 **Accounts
        Receivable (including Allowances for Doubtful Accounts)**
 
 The
        Company had not previously properly assessed the collectibility of its recorded
        accounts receivable balances. Upon an in-depth review the Company concluded
        that
        certain accounts in the amount of $45,147 should have been written off and
        the
        allowance for doubtful accounts should have been increased by $212,570 to
        allow
        for potentially uncollectible accounts.
 
 F-30
  REZCONNECT
        TECHNOLOGIES, INC.
 Notes
        to
        Consolidated Financial Statements
 
 
 **Prepaid
        Marketing Commissions and Deferred Revenue**
 
 Based
        upon a more detailed analysis by Company management, the Company concluded
        that
        the proper estimated life of an RTA was 12 months. Previously, the company
        had
        estimated the life of an RTA to be 36 months. The change resulted in all
        prepaid
        commissions being categorized as current as well as reduction in the overall
        amount of the prepaid commissions. Additionally, the change in the RTA life
        had
        a similar impact upon deferred revenue. Adjustments were also made to the
        prepaid commissions as a result of the Company not previously analyzing the
        actual marketing commissions paid in relation to original enrollments.
  **Loans
        Receivable**
 
 The
        Company had not properly reconciled the certain accounts including the loans
        receivable.account. Upon an in-depth review the Company concluded that the
        amounts reflected in loans receivable did not represent valid collectible
        loans.
        Accordingly, the Company recorded an adjustment to write off this
        balance.
 
 **Other
        Current Assets**
 
 The
        restatement represents a reclassification of previously - reported
        amounts.
 
 **Property
        and Equipment (net)**
 
 The
        restatement is a result of the previously issued financial statements not
        properly reflecting property and equipment acquired in conjunction with the
        merger transactions on December 8, 2004. In addition the Company had not
        properly capitalizing certain equipment purchases from the date of acquisition
        through December 31, 2004.
 
 **Intangible
        Assets and Goodwill**
 
 Upon
        the
        merger of YTB, Inc. and REZconnect, the excess of the value of the equity
        issued
        for the assets was recorded as Intangible Assets, including Goodwill. An
        independent appraisal was not performed. During 2005, the Company retained
        a
        qualified firm to perform valuations to determine the value of the consideration
        exchanged in the transaction as well as the value of identifiable intangible
        assets as of the acquisition date. Aa a result of the appraisal the Company
        determined that the total fair value of the consideration provided in the
        purchase was $4,847,928. Previously, the Company had reflected the value
        of the
        consideration to be $15,257,445. The allocation of the revised purchase price
        to
        the fair value of assets acquired resulted in a reduction in the value
        attributable to intangible assets of $3,190,000 and a reduction in the residual
        value allocated to goodwill in the amount of $7,211,796. In addition, the
        appraisal identified differing lives for the recorded intangible assets.
        The
        combination of different asset values and different amortization periods
        resulted in a increase in amortization in the amount of $5,533.
 
 **Deferred
        Costs less Accumulated Amortization**
 
 As
        discussed in the 2003 restatement summary, the Company previously wrote down
        capitalized software by $783,207 during 2003, and had determined that the
        write
        down was not appropriate, The restatement reflects the reversal of the original
        write-down of capitalized software occurring in 2003, less additional
        amortization of such capitalized software recorded in 2004 in the amount
        of
        $415,259.
 
 F-31
  REZCONNECT
        TECHNOLOGIES, INC.
 Notes
        to
        Consolidated Financial Statements
 
 
 **Notes
        Receivable and Deferred Revenue**
 
 In
        addition to the evaluation of the collectibility of accounts receivable
        performed by the Company the Company identified that it had not previously
        properly assessed the collectibility of its recorded notes receivable related
        to
        franchise operations. Upon an in-depth review, the Company concluded that
        certain notes in the amount of $75,355 should have been written off. The
        Company’s policy with respect to revenue recognition relative to franchise
        operations requires the collection of any amounts owed from franchisees before
        it is deemed appropriate to record revenue. Accordingly, the balances recorded
        in notes receivable are fully offset by a liability for deferred revenue.
        The
        deferred revenue balance was adjusted to reflect an offsetting adjustment
        to the
        write down of notes receivable.
 
 **Notes
        Payable**
 
 The
        restatement is a result of the reclassification of an unsecured advance of
        $100,000 not evidenced by a note from short term notes payable to other current
        liabilities.
 
 **Accounts
        Payable and Accrued Expenses**
 
 As
        a
        result of a lack of internal controls related to proper cut-off and recording
        of
        expenses, the balances previously reported were not proper. Company management
        reviewed and analyzed transactions, making appropriate cut-off corrections
        for
        these transactions, resulting in changes to previously reported results in
        the
        amount of $297,358 with an equivalent increase in expenses.
 
 As
        discussed previously, the Company identified unrecorded liabilities related
        to
        revolving credit card debt that had not been recorded in prior periods. 
The Company recorded expense for amounts charged to the cards based on payments
        made. In 2004 credit card payments were made in excess of charges in the
        amount
        of $53,334. In addition the Company identified that it had not accrued all
        amounts owed to its CEO under his compensation agreement and reflected
        additional compensation expense in the amount of $36,118. This liability
        was
        offset against personal charges included in the credit card adjustment discussed
        above in the amount of $8,863. Correction of these items resulted in an decrease
        in current liabilities of $26,079 and a corresponding increase in
        equity.
  **Current
        Maturities of Long-Term Debt and Long Term Debt**
 
 The
        Company determined that it had incorrectly identified the current portion
        of its
        long-term debt and recorded an adjustment to properly reflect the principal
        amounts currently due.
 
 **Preferred
        Stock, Common Stock and Additional Paid In Capital**
 
 In
        its
        originally filed financial statements the Company did not maintain an adequate
        accounting of shares issued to employees and others in compensation for services
        and did not properly apply generally accepted principles to record the issuance
        of those share. In its restated financial statements, the Company has corrected
        the following errors:
  F-32
  REZCONNECT
        TECHNOLOGIES, INC.
 Notes
        to
        Consolidated Financial Statements
 
  
 §
            Additional
                equity compensation in the amount of $1,113,612 has been recorded
                as a
                result of shares issued for services to vendors and employees that
                had not
                been previously recorded. The amount recorded as equity compensation
                was
                the fair value of the shares as of the date of
                issuance. 
 §
            As
                a result of the appraisal performed on the value of shares issued
                in
                connection with the purchase of YTBas more fully describe above the
                Company concluded that the value previously attributed to the shares
                issued was in error. Accordingly the Company revised the value of
                the
                consideration given in the transaction. The value originally subscribed
                to
                the transaction was reduced by
                $10,687,621. 
 §
            As
                discussed previously, the Company has corrected a previously recorded
                prior period adjustment it had recorded to reflect the issuance of
                900,000
                shares to an officer of the Company. The shares were issued in 2004.
                The
                total expense of $252,000 was recorded as a result of the share issuance.
                The company had previously reflected a prior period adjustment $201,600.
                As no binding agreement had been entered into by the Company to justify
                the accrual of an expense in the prior period the expense properly
                belongs
                in the period in which the shares were issued. Accordingly, the Company
                has reversed the previously recorded prior period adjustment and
                reflected
                the all of the expense in 2004 
 In
        2001
        the Company cancelled and reissued and repriced its outstanding options.
        Under
        the requirements of FIN 44 the reissuance and repricing subjects the stock
        option to variable accounting. In 2004 the Company recorded additional equity
        compensation to reflect the change in value of its stock options under the
        provisions of APB No. 25 as interpreted by FIN 44 in the amount of
        $111,061.
 
 
 As
        a
        result of the various restatement items identified by the Company, the following
        changes have been reflected in stockholders equity:
 
 Total
                  Stockholders’ Equity as previously reported
              
              $
              15,892,274Shares
                  issued to employees
              
              
              1,267,700Shares
                  issued to non-employees
              
              
              46,662Adjustment
                  in value of shares issued in purchase of YTB
              
              
              (10,687,621
              )Change
                  in previously reported net loss
              
              
              (1,905,039
              )Stock
                  option compensation
              
              
              111,061Other
              
              
              31,950Total
                  Stockholders’ Equity as restated
              
              $
              4,756,987
  F-33
  REZCONNECT
        TECHNOLOGIES, INC.
 Notes
        to
        Consolidated Financial Statements
 
  **Net
        Revenues**
 
 The
        Company identified that it had incorrectly recorded travel revenue on a gross
        rather than net basis for transactions in which the Company was an agent.
        An
        adjustment reducing revenue and travel commissions in the amount of $244,231
        has
        been reflected in the Company’s restated financial statements. In addition, the
        Company has reclassified amounts within the reported revenue captions to
        accurately reflect the components of revenue..
 
 As
        a
        result of the reduction in the estimated life of an RTA the Company recognized
        additional revenue in the amount of $82,151.
 
 **Commissions
        Expense (Represents Marketing Commission Expense and Travel Commission Expense)
        and Cost of Travel Services and Products/Marketing and
        Selling**
 
 As
        a
        result of the reduction in the estimated life of an RTA the Company recognized
        additional commission expense in the amount of $103,418.
 
 
 **Depreciation
        and Amortization Expense**
 
 As
        a
        result of the change in values assigned to Intangible Assets described
        previously and changes to the estimated useful lives of the asssets amortization
        expense has been adjusted from previously reported amounts. Additionally,
        adjustments have been recorded to reflect the continued amortization of
        capitalized software costs that had previously been written off, but for
        which
        write-off was reversed in 2003 (see 2003 Restatement Summary).
 
 
 **Franchise
        Services and Products**
 
 After
        additional review by Company management, it was determined that numerous
        adjustments were necessary to properly classify Franchise Services and Products.
        This review was performed in conjunction with the review of franchise revenue
        discussed above. The restatements are a result of the need to record such
        expenses on an accrual basis and also due to the reclassification of certain
        expenses between revenue segments.
 
 **General
        and Administrative**
 
 The
        increase is a result of recording additional expense related to certain
        share-based transactions that were not originally recorded as discussed above,
        in addition to the reclassification of certain previously reported amounts.
        In
        addition, as previously discussed the company failed to achieve a proper
        cut-off
        of expenses and adjusted accounts payable and accrued expenses to reflect
        additional amounts recorded as of December 31, 2004.
 
 
 **Loss
        from Sales of Short-Term Investments and Interest Expense**
 
 Sales
        of
        investments were included in the investment analysis prepared by management.
        The
        review determined that there were no losses associated with the sale of
        short-term investments and should amounts reflected as expense should have
        been
        reported as interest expense; therefore a reclassification between these
        accounts was necessary.
  F-34
  REZCONNECT
        TECHNOLOGIES, INC.
 Notes
        to
        Consolidated Financial Statements
 
 
 **Interest
        and Dividend Income**
 
 Interest
        income was previously overstated due to improper interest income recognition
        and
        reclassifications from previous reported amounts.
 
 **Income
        Taxes**
 
 As
        a
        result of the Company’s operating losses, no income taxes need to be
        provided.
  **Net
        Loss**
 
 As
        a
        result of the various restatement items identified by the Company, the following
        changes have been reflected in net loss for the year ended December 31,
        2004.
 
 Net
                  loss as previously reported
              
              $
              (288,310
              )Revenue
                  gross to net
              
              
              (424,961
              )Travel
                  Commission expense gross to net
              
              
              424,961Adjustment
                  of Compensation expense for shares issued to an officer of the
                  company
              
              
              (1,188,000
              )Accrual
                  basis accounting for operating expenses
              
              
              (62,939
              )Accounts
                  Receivable bad debt expense
              
              
              (209,369
              )Compensation
                  expense recognized for inthe
                  money options
              
              
              (111,061
              )Revised
                  amortization of purchase intangibles
              
              
              40,094Amortization
                  of capitalized software
              
              
              (423,510
              )Other
              
              
              49,746Net
                  loss as restated
              
              $
              (2,193,349
              )
 
 F-35