UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10-Q**





x    QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934





For
      the
      quarterly period ended:  March 31, 2008





Or





o    TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934





For
      the
      transition period from_______________ to________________





Commission
      File Number 0-18412





YTB
      International, Inc.


(Exact
      name of registrant as specified in its charter)





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





1901
      East
      Edwardsville Road, Wood River, IL 62095


(Address
      of principal executive offices)       (Zip
      Code)


Registrant's
      telephone number, including area code: (618) 655-9477





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
      the
      preceding 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.


Yesx
            
            No****o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer or a smaller reporting
      company.  See the definitions of “large accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
      Exchange Act.  (Check one):


Large
                accelerated filero
            Accelerated
                fileroNon-accelerated
                filero
            Smaller
                reporting companyx





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yeso
            
            No****x





Indicate
      the number of shares outstanding of each of the issuer's classes of common
      stock, as of the latest practicable
      date.





As
      of May
      13, 2008, there were 64,754,480 shares of the registrant’s Class A Common Stock,
      $0.001 par value, outstanding and 38,451,373 shares of the registrant’s Class B
      Common Stock, $0.001 par value, outstanding. *





*
      Excludes 4,911,299 shares of restricted Class A Common Stock and 9,822,598
      shares of restricted Class B Common Stock that have been granted and are being
      held in escrow but have not yet vested and are therefore not treated as
      outstanding.





Transitional
      Small Business Disclosure Format (Check one): Yes o No x







**YTB
      INTERNATIONAL, INC.**


**Index
      to Quarterly Report on Form 10-QSB**


**Three
      months ended March 31, 2008**


PART
                  I
              
              FINANCIAL
                  INFORMATIONItem
                  1.
              
              Financial
                  Statements.Condensed
                  Consolidated Balance Sheets, March 31, 2008 (Unaudited) and December
                  31,
                  2007
              2Condensed
                  Consolidated Statements of Operations (Unaudited)Three
                  months ended March 31, 2008 and 2007
              3Condensed
                  Consolidated Statement of Change in Stockholders’
                  Equity (Unaudited)Three
                  months ended March 31, 2008
              4Condensed
                  Consolidated Statements of Cash Flows (Unaudited)Three
                  months ended March 31, 2008 and 2007
              5-6Notes
                  To Condensed Consolidated Financial Statements (Unaudited)
              7Item
                  2.
              
              Management's
                  Discussion and Analysis or Plan of Operation.
              21Item
                  3.
              
              Quantitative
                and Qualitative Disclosures About Market Risk (not
                required)Item
                  4T.
              
              Controls
                  and Procedures.
              29PART
                  II
              OTHER
                  INFORMATIONItem
                  1.
              
              Legal
                  Proceedings.
              29Item
                  1A.
              
              Risk
                Factor (not required)Item
                  2.
              
              Unregistered
                  Sales of Equity Securities and Use of Proceeds.
              29Item
                  3.
              
              Defaults
                  Upon Senior Securities.
              29Item
                  4.
              
              Submission
                  of Matters to a Vote of Security Holders.
              29Item
                  5.
              
              Other
                  Information.
              29Item
                  6.
              
              Exhibits.
              30Signatures
              31


1


**PART
      I – FINANCIAL INFORMATION**





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





**Item
      1.**  **Financial
      Statements.**


**YTB
      INTERNATIONAL, INC.**


**Condensed
      Consolidated Balance Sheets**


March 31, 2008
                  (Unaudited)
              
              December
                  31, 2007ASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              1,275,823
              
              $
              1,730,570Restricted
                  cash
              
              
              3,436,832
              
              
              2,268,344Available-for-sale
                  securities
              
              
              51,593
              
              
              26,834Accounts
                    receivable (less allowance for doubtful accounts of $7,846 in
                    2008 and
                    $5,699 in 2007)
              
              
              2,280,834
              
              
              2,662,101Notes
                      receivable (less allowance for uncollectible notes of $183,876
                      in 2008 and
                      $200,907 in 2007)
              
              
              1,825,033
              
              
              2,041,751Inventory,
                  net
              
              
              4,851,645
              
              
              4,903,244Prepaid
                  marketing commissions
              
              
              23,923,835
              
              
              25,080,737Other
                  prepaid expenses and current assets
              
              
              2,529,356
              
              
              2,056,535Total
                  current assets
              
              
              40,174,951
              
              
              40,770,116Long-term
                  investments
              
              
              1,000,000
              
              
              1,000,000Property
                  and equipment, net
              
              
              18,941,494
              
              
              15,432,502Intangible
                  assets, net
              
              
              2,376,794
              
              
              2,395,151Goodwill
              
              
              3,128,441
              
              
              2,979,322Other
                  assets, net
              
              
              5,563
              
              
              316,895**TOTAL
                  ASSETS**
              
              $
              65,627,243
              
              $
              62,893,986LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)Current
                  liabilities:Accounts
                  payable and accrued expenses
              
              $
              13,539,886
              
              $
              9,698,038Current
                  maturities of long-term debt
              
              
              22,239
              
              
              22,018Income
                  taxes payable
              
              
              231,471
              
              
              126,155Deferred
                  revenue
              
              
              32,101,320
              
              
              31,143,451Accrued
                  bonuses
              
              
              748,104
              
              
              928,303Short-term
                  debt
              
              
              1,995,990
              
              
              2,500,000Total
                  current liabilities
              
              
              48,639,010
              
              
              44,417,965Other
                  long-term liabilities:Long-term
                  debt, less current maturities
              
              
              213,998
              
              
              219,641Deferred
                  tax liability
              
              
              755,000
              
              
              755,000Other
                  income tax liabilities
              
              
              182,505
              
              
              181,821Other
                  liabilities
              
              
              11,125
              
              
              11,125Total
                  other long-term liabilities
              
              
              1,162,628
              
              
              1,167,587**TOTAL
                  LIABILITIES**
              
              
              49,801,638
              
              
              45,585,552Commitments
                  and Contingencies (Note 15)STOCKHOLDERS'
                  EQUITYPreferred
                      stock, $.001 par value, 5,000,000 shares authorized, none issued and
                      outstanding at March 31, 2008 and December 31,
                      2007.
              
              
              -
              
              
              -Class
                        A Common stock, $.001 par value, 300,000,000 shares authorized;
                        54,377,463 and 51,144,275 shares issued and outstanding at March 31,
                        2008 and December 31, 2007,
                        respectively.
              
              
              54,378
              
              
              51,144Class
                      B Common Stock, $.001 par value, 100,000,000 shares authorized;
                      48,752,571and 46,453,644 shares issued and outstanding at March
                      31, 2008
                      and December 31, 2007, respectively; convertible into Class A shares
                      on a one-for-one basis
              
              
              48,752
              
              
              46,453Additional
                  paid-in capital
              
              
              38,448,555
              
              
              36,419,266Retained
                  earnings (deficit)
              
              
              (22,726,080
              )
              
              (19,208,429
              )TOTAL
                  STOCKHOLDERS' EQUITY
              
              
              15,825,605
              
              
              17,308,434**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              $
              65,627,243
              
              $
              62,893,986




*See
      accompanying notes to condensed consolidated financial
      statements.*


2





**YTB
      INTERNATIONAL, INC.**


**Condensed
      Consolidated Statements of Operations**


(Unaudited)


Three
                  months endedMarch 31, 2008
              
              March 31, 2007NET
                  REVENUESOnline
                  travel store sales and monthly fees
              
              $
              33,959,388
              
              $
              17,965,361Travel
                  commissions and services
              
              
              5,328,627
              
              
              2,537,694Education programs
                  and marketing materials
              
              
              3,009,505
              
              
              3,361,152Other
              
              
              430,047
              
              
              314,274Net
                  revenues
              
              
              42,727,567
              
              
              24,178,481OPERATING
                  EXPENSESMarketing
                  commissions
              
              
              25,068,543
              
              
              16,136,795Travel
                  commissions
              
              
              3,852,416
              
              
              1,608,688Depreciation
                  and amortization
              
              
              535,662
              
              
              214,032Marketing
                  and selling
              
              
              1,392,615
              
              
              1,437,657General
                  and administrative
              
              
              15,330,144
              
              
              7,005,256Total
                  operating expenses
              
              
              46,179,380
              
              
              26,402,428LOSS
                  FROM OPERATIONS
              
              
              (3,451,813
              )
              
              (2,223,947
              )OTHER
                  INCOME (EXPENSE)Interest
                  and dividend income
              
              
              69,307
              
              
              49,536Interest
                  expense
              
              
              (17,023
              )
              
              (2,611
              )Foreign
                  currency translation loss
              
              
              (455
              )
              
              -Gain
                  (loss) on sale of assets
              
              
              (11,667
              )
              
              -Total
                  other income (expense)
              
              
              40,162
              
              
              46,925LOSS
                  BEFORE INCOME TAX PROVISION
              
              
              (3,411,651
              )
              
              (2,177,022
              )INCOME
                  TAX PROVISION
              
              
              106,000
              
              
              -NET
                  LOSS
              
              $
              (3,517,651
              )
              $
              (2,177,022
              )NET
                  LOSS PER SHARE:Weighted-average
                  shares outstanding - basic for Class A and Class B
              
              
              102,858,468
              
              
              94,309,323Weighted-average
                  shares outstanding - diluted for Class A and Class B
              
              
              102,858,468
              
              
              94,309,323Net
                    loss per share - basic for Class A and Class B (amounts for Class
                    A and
                    Class B shares are the same under the two-class method. See Note
                    3):
              
              $
              (0.03
              )
              $
              (0.02
              )Net
                    loss per share - diluted for Class A and Class B (amounts for
                    Class A and
                    Class B shares are the same under the two-class method. See Note
                    3):
              
              $
              (0.03
              )
              $
              (0.02
              )





*See
      accompanying notes to condensed consolidated financial
      statements.*




3


**YTB
      INTERNATIONAL, INC.**


**Condensed
      Consolidated Statement of Changes in Stockholders’ Equity**


(Unaudited)


Preferred
              
              Common Stock
              
              Additional
              
              Retained
              
              TotalStock
              
              Class A
              
              Class B
              
              Paid-in
              
              Earnings
              
              Stockholders'Shares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              (Deficit)
              
              EquityBalance
                  at January 1, 2008
              
              
              -
              
              $
              -
              
              
              51,144,275
              
              $
              51,144
              
              
              46,453,644
              
              $
              46,453
              
              $
              36,419,266
              
              $
              (19,208,429
              )
              $
              17,308,434Exchange
                  Class B Shares for Class A shares
              
              
              -
              
              
              -
              
              
              1,055,817
              
              
              1,056
              
              
              (1,055,817
              )
              
              (1,056
              )
              
              -
              
              
              -
              
              
              -Common
                      shares issued for restricted stock grant
              
              
              -
              
              
              -
              
              
              1,625,809
              
              
              1,626
              
              
              3,251,618
              
              
              3,252
              
              
              (4,878
              )
              
              -
              
              
              -Amortization
                      of restricted stock (unvested)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,221,384
              
              
              -
              
              
              1,221,384Shares
                  issued for services
              
              
              -
              
              
              -
              
              
              500,000
              
              
              500
              
              
              -
              
              
              -
              
              
              509,500
              
              
              -
              
              
              510,000Exercise
                  of common stock warrants
              
              
              -
              
              
              -
              
              
              51,562
              
              
              52
              
              
              103,126
              
              
              103
              
              
              90,080
              
              
              -
              
              
              90,235Stock
                  option compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              213,203
              
              
              -
              
              
              213,203Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,517,651
              )
              
              (3,517,651
              )Balance
                  at March 31, 2008
              
              
              -
              
              $
              -
              
              
              54,377,463
              
              $
              54,378
              
              
              48,752,571
              
              $
              48,752
              
              $
              38,448,555
              
              $
              (22,726,080
              )
              $
              15,825,605




*See
      accompanying notes to condensed consolidated financial
      statements.*




4





**YTB
      INTERNATIONAL, INC.**


**Condensed
      Consolidated Statements of Cash Flows**


(Unaudited)


Three
                  months endedMarch 31, 2008
              
              March 31, 2007CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  Loss
              
              $
              (3,517,651
              )
              $
              (2,177,022
              )Adjustments
                  to reconcile net loss to net cash provided by operating
                  activities:Depreciation
                  and amortization
              
              
              535,662
              
              
              214,032Write-off
                  of uncollectible notes
              
              
              100,000
              
              
              -Loss
                  on disposal of property and equipment
              
              
              11,667
              
              
              -Impairment
                  loss on inventory
              
              
              1,700,000
              
              
              -Provision
                  for uncollectible notes
              
              
              (17,032
              )
              
              -Reserve
                  against deposit on acquisition of business
              
              
              356,332Interest
                  income added to notes receivable
              
              
              (27,968
              )
              
              -Shares
                  issued for restricted stock grant
              
              
              -
              
              
              2,799,994Shares
                  issued for services
              
              
              510,000
              
              
              -Amortization
                  of restricted stock (unvested)
              
              
              1,221,384
              
              
              1,222,411Stock
                  option expense
              
              
              33,004
              
              
              13,194FIN
                  48 tax provision
              
              
              684
              
              
              -Change
                  in operating assets and liabilities:Accounts
                  receivable, net
              
              
              381,267
              
              
              (687,018
              )Notes
                  receivable
              
              
              156,718
              
              
              (414,282
              )Inventory
              
              
              (1,648,401
              )
              
              (20,926
              )Prepaid
                  marketing commissions
              
              
              1,156,902
              
              
              (6,034,184
              )Other
                  prepaid expenses and current assets
              
              
              (452,821
              )
              
              (221,645
              )Other
                  assets
              
              
              -
              
              
              3,761Accounts
                  payable and accrued expenses
              
              
              3,710,665
              
              
              2,462,462Income
                  taxes payable
              
              
              105,316
              
              
              -Accrued
                  bonuses
              
              
              -
              
              
              (150,000
              )Deferred
                  revenue
              
              
              957,869
              
              
              8,107,316Other
                  liabilities
              
              
              -
              
              
              (9,903
              )NET
                  CASH PROVIDED BY OPERATING ACTIVITIES
              
              
              5,273,597
              
              
              5,108,190CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchases
                  of property and equipment
              
              
              (3,976,781
              )
              
              (1,924,074
              )Proceeds
                  from sale of property and equipment
              
              
              10,000
              
              
              -Acquisition
                  of business
              
              
              (149,119
              )
              
              -Proceeds
                  from sale of available-for-sale securities
              
              
              -
              
              
              664,796Purchases
                  of available-for-sale securities
              
              
              (24,759
              )
              
              -NET
                  CASH USED IN INVESTING ACTIVITIES
              
              
              (4,140,659
              )
              
              (1,259,278
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Repayment
                  of bank overdraft
              
              
              -
              
              
              (812,464
              )Principal
                  payments on debt
              
              
              (5,422
              )
              
              (5,209
              )Repayment
                  of short-term debt
              
              
              (504,010
              )
              
              -Cash
                  collateral for standby letter of credit
              
              
              (1,910,000
              )
              
              -Reduction
                  in cash collateral for standby letter of credit
              
              
              357,167
              
              
              -Restricted
                  cash-collateral used as reserves forcredit
                  card processing
              
              
              (115,655
              )
              
              (1,235,432
              )Reduction
                  in restricted cash-collateral for outstanding note
              
              
              500,000
              
              
              -Proceeds
                  from exercise of common stock warrants
              
              
              90,235
              
              
              198,437NET
                  CASH USED IN FINANCING ACTIVITIES
              
              
              (1,587,685
              )
              
              (1,854,668
              )NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              (454,747
              )
              
              1,994,244CASH
                  AND CASH EQUIVALENTS, BEGINNING OF PERIOD
              
              
              1,730,570
              
              
              -CASH
                  AND CASH EQUIVALENTS, END OF PERIOD
              
              $
              1,275,823
              
              $
              1,994,244




5




**YTB
      INTERNATIONAL, INC.**


**Condensed
      Consolidated Statements of Cash Flows (continued)**


**(Unaudited)**


Three
                  months endedMarch 31, 2008
              
              March 31, 2007SUPPLEMENTAL
                  CASH FLOW INFORMATION:Interest
                  paid
              
              $
              17,595
              
              $
              51,466Taxes
                  paid
              
              $
              29,510
              
              $
              -SUPPLEMENTAL
                  NON-CASH INVESTING AND FINANCING ACTIVITIES:Increase
                  in accounts payable and property and equipment
              
              $
              131,183
              
              $
              69,628Shares
                  issued under a restricted stock grant in settlement of bonus
                  liability
              
              $
              -
              
              $
              6,849,999Shares
                  issued in cashless warrant exercise
              
              $
              -
              
              $
              602Stock
                  option compensation
              
              $
              180,199
              
              $
              -Transfer
                  of Class B common stock shares to Class A common stock
                  shares
              
              $
              1,056Shares
                  issued for restricted stock grant
              
              $
              4,878
              
              $
              -Notes
                  receivable issued for sale of auto
              
              $
              60,000
              
              $
              -Reclass
                  of notes receivable to other current assets
              
              $
              20,000
              
              $
              -Reclass
                  of notes receivable to other assets
              
              $
              45,000
              
              $
              -





*See
      accompanying notes to condensed consolidated financial
      statements.*




6


YTB
      INTERNATIONAL, INC.


Notes
      to
      Condensed Consolidated Financial Statements





NOTE
      1
      - ORGANIZATION AND NATURE OF OPERATIONS




YTB
      International, Inc. (“YTB,” or the “Company”) and its three wholly-owned
      subsidiaries, YourTravelBiz.com, Inc. (“YTB Marketing”), YTB Travel Network,
      Inc. (“YTB Travel”) and REZconnect Technologies, Inc. (“REZconnect”), are
      sometimes hereafter collectively referred to as the “Company”. Effective July
      31, 2007, the Company underwent a reclassification of its existing common stock
      and an accompanying three-for-one stock split (structured as a stock dividend)
      that resulted in the holders of the Company’s existing common stock receiving
      one share of the Company’s Class A common stock, par value $0.001 per share
      (“Class A Common Stock”) and two shares of Class B common stock, par value
      $0.001 per share (“Class B Common Stock”) for each share of existing common
      stock held prior to such date. The Company’s authorized capital was also
      increased in conjunction with the reclassification, resulting in 300,000,000
      shares of Class A Common Stock and 100,000,000 shares of Class B Common Stock
      being authorized under the Company’s Amended and Restated Certificate of
      Incorporation. Please see Note 15, “Common Stock Reclassification”, of the Notes
      to Consolidated Financials Statements included in the Company’s Form 10-KSB for
      the year ended December 31, 2007.





The
      Company provides Internet-based travel-related services and technology, which
      offers proprietary reservation systems for the travel industry,
      and is also a full-service provider of travel products and services to the
      leisure and small business traveler. The Company operates under various trade
      names, including “Your Travel BizTM”, “YTBnet.comTM”, “Travel NetworkTM”, “Global
      Travel NetworkTM”, “YTB Travel NetworkTM” and “Travel Network Vacation CentralTM”,
      as well as Internet websites “Bookmytravel.comTM”, “REZconnect.comTM” and
“RezCity.comTM”. 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 the state
      of New Jersey.





Each
      of
      the three aforementioned operating subsidiaries was formed to divide the
      Company’s operations into three basic divisions. The YTB Marketing subsidiary
      markets online travel websites on behalf of YTB Travel by use of independent
      marketing representatives (“Reps”). The YTB Travel subsidiary is a travel agency
      which books online travel transactions, collects payments, collects licensing
      fees, and pays travel sales commissions. The REZconnect subsidiary operates
      as a
      travel vendor relationship management company and offers franchises to brick
      and
      mortar travel agencies. All of REZconnect’s franchised operations are
      independently owned and operated. All sales of travel products by REZconnect
      are
      made through its independent agencies and franchisees, or through its
      interactive websites.





In
      early
      2008, YTB expanded its services into Canada, the Bahamas, and Bermuda. YTB
      Bahamas commenced operations on January 1, 2008, and YTB Canada and YTB Bermuda
      commenced operations in early February 2008. As a result of this international
      expansion, Referring Travel Agents (“RTAs”) living in these countries can now
      sell travel through websites that they acquire from the Company, and, similarly,
      Reps who are located there can market online travel websites to others in the
      U.S., Puerto Rico, the Bahamas, Bermuda and Canada.




7


YTB
      INTERNATIONAL, INC.


Notes
      to
      Condensed Consolidated Financial Statements





NOTE
      2 – BASIS OF PRESENTATION





The
      Condensed Consolidated Balance Sheet as of March 31, 2008, the related Condensed
      Consolidated Statements of Operations for the three months ended March 31,
      2008
      and 2007, the Condensed Consolidated Statement of Changes in Stockholders’
Equity (Deficit) for the three months ended March 31, 2008 and the Condensed
      Consolidated Statements of Cash Flows for the three months ended March 31,
      2008
      and 2007, have been prepared without audit, pursuant to the rules and
      regulations of the Securities and Exchange Commission. Certain information
      and
      disclosures included in the financial statements prepared in accordance with
      accounting principles generally accepted in the United States of America (“US
      GAAP”) have been condensed or omitted pursuant to such rules and
      regulations.





The
      condensed consolidated financial statements reflect all adjustments (consisting
      only of normal recurring accruals), which are, in the opinion of management,
      necessary for a fair presentation of the results for the interim periods
      presented. The condensed consolidated financial statements should be read in
      conjunction with the consolidated financial statements and notes thereto
      included in the Company’s Annual Report on Form 10-KSB for the year ended
      December 31, 2007.




The
      results of operations for the interim periods should not be considered
      indicative of results to be expected for the full year. The condensed balance
      sheet as of December 31, 2007 was derived from the audited financial statements
      for the year then ended included in the Company’s Annual Report on Form 10-KSB
      for the year ended December 31, 2007. The preparation of financial statements
      in
      conformity with US GAAP requires management to make estimates and assumptions
      that affect the reported amounts of assets and liabilities at the date of the
      financial statements and the reported amounts of revenues and expenses during
      the reporting period. Actual results could differ from those
      estimates.




On
      January 7, 2008, the Company reserved two cruise
      ship dates with a cruise line. The Company reserved all of the cabins on both
      dates sailing on May 30, 2008 and June 30, 2008. The Company recorded the full
      value of the contracts with the cruise line for both ship dates as inventory.
      This includes all cost directly related to the selling price of the cabins,
      including related taxes and fuel costs. Cabin sales have been recorded as
      deferred revenue until the departure date with a corresponding reduction in
      the
      cruise cabin inventory balance. An impairment charge has been recorded against
      the inventory balance based upon the estimated amount of unsold cabin inventory
      as of each departure date.




Certain
      reclassifications have been made to the 2007 financial statements to conform
      to
      the current year presentation.





All
      share
      references and share-based calculations are presented to give retroactive effect
      to the 3:1 stock split and reclassification that was effective July 31, 2007.
      See Note 15, “Common Stock Reclassification”, of the Notes to Consolidated
      Financials Statements included in the Company’s Annual Report on Form 10-KSB for
      the year ended December 31, 2007.




***Newly
        Adopted Accounting Standards:***
 
 Effective
        January 1, 2008, the Company adopted Statement of Financial Accounting
        Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”), for
        assets and liabilities measured at fair value on a recurring
        basis.  SFAS 157 accomplishes the following key
        objectives:
  ·
              Defines
                  fair value as the price that would be received to sell an asset
                  or paid to
                  transfer a liability in an orderly transaction between market participants
                  at the measurement date;·
              Establishes
                  a three-level hierarchy (“valuation hierarchy”) for fair value
                  measurements;
 ·
              Requires
                  consideration of the Company’s creditworthiness when valuing liabilities;
                  and·
              Expands
                  disclosures about instruments measured at fair
                  value.
 
 The
        valuation hierarchy is based upon the transparency of inputs to the valuation
        of
        an asset or liability as of the measurement date.  A financial
        instrument’s categorization within the valuation hierarchy is based upon the
        lowest level of input that is significant to the fair value
        measurement.  The three levels of the valuation hierarchy and the
        distribution of the Company’s financial assets within it are as
        follows:
 
 ·
              Level
                  1 - inputs to the valuation methodology are quoted prices (unadjusted)
                  for
                  identical assets or liabilities in active markets.·
              Level
                  2 - inputs to the valuation methodology include quoted prices for
                  similar
                  assets and liabilities in active markets, and inputs that are observable
                  for the asset or liability, either directly or indirectly, for
                  substantially the full term of the financial
                  instrument.
 ·
              Level
                  3 - inputs to the valuation methodology are unobservable and significant
                  to the fair value measurement.
 
 The
        Company’s assets carried at fair value on a recurring basis are its investments
        in auction rate securities as described in Note 6, Long-term
        Investments.  The securities have been classified within level 3 as
        their valuation requires substantial judgment and estimation of factors that
        are
        not currently observable in the market due to the lack of trading in the
        securities.  The valuation may be revised in future periods as market
        conditions evolve.
 
 Certain
        financial instruments are carried at cost on our condensed consolidated balance
        sheet, which approximates fair value due to their short-term, highly liquid
        nature.  These instruments include cash and cash equivalents, accounts
        receivable, prepaid expenses, accounts payable and accrued
        expenses.


8




YTB
      INTERNATIONAL, INC.


Notes
      to
      Condensed Consolidated Financial Statements




When
        a
        determination is made to classify a financial instrument within level 3,
        the
        determination is based upon the significance of the unobservable parameters
        to
        the overall fair value measurement.  However, the fair value
        determination for level 3 financial instruments may include observable
        components. The estimated fair value at March 31, 2008 is based upon
        management’s internal assessment and information provided by the investment bank
        through which the Company holds such securities.


In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
      for Financial Assets and Financial Liabilities - Including an amendment of
      FASB
      Statement No. 115.”  SFAS No. 159 permits an entity to elect fair
      value as the initial and subsequent measurement attribute for many financial
      assets and liabilities.  Entities electing the fair value option would
      be required to recognize changes in fair value in earnings.  Entities
      electing the fair value option are required to distinguish, on the face of
      the
      statement of financial position, the fair value of assets and liabilities for
      which the fair value option has been elected and similar assets and liabilities
      measured using another measurement attribute.  SFAS No. 159 became
      effective beginning January 1, 2008.  The Company elected not to
      measure any eligible items using the fair value option in accordance with SFAS
      No. 159 and therefore, SFAS No. 159 did not have an impact on the Company’s
      consolidated financial position, results of operations or cash
      flows.


NOTE
      3 – NET INCOME (LOSS) PER SHARE





The
      Company has two classes of common stock: Class A Common Stock and Class B Common
      Stock. Shares of Class B Common Stock are convertible into shares of Class
      A
      Common Stock at any time, on a one-for-one basis. Shares of Class B Common
      Stock
      automatically convert into shares of Class A Common Stock upon sale or other
      disposition (except for transfers among related entities, transfers to trusts
      for the benefit of the transferring holder of the Class B Common Stock, bona
      fide pledges under financing arrangements and similar transfers). The Company
      has computed the earnings per share in compliance with Statement of Financial
      Accounting Standards (SFAS) No. 128, “Earnings per Share”, which requires
      companies that have multiple classes of equity securities to use the “two-class”
method in computing earnings per share. Under the Company’s Amended and Restated
      Certificate of Incorporation, e ach
      share
      of Class A Common Stock and each share of Class B Common Stock are equal with
      respect to the right to receive dividends declared by the Company’s Board of
      Directors in its discretion from time to time from funds legally available
      therefor, whether in cash, stock or property. Because both classes share the
      same rights with respect to dividends, basic and diluted earnings per share
      are
      the same for both classes.





Basic
      earnings (loss) per share is computed based on the weighted average number
      of
      common shares (both Class A and Class B) outstanding for the period. Diluted
      earnings (loss) per share is computed based on the weighted average number
      of
      common shares (both Class A and Class B) and potentially dilutive common
      equivalent shares (both Class A and Class B) outstanding for the period, based
      on the treasury stock method. A reconciliation of basic and diluted earnings
      (loss) is presented in the table below:


Three
                    Months EndedMarch
                    31,2008
                
                2007Numerator:Net
                    loss
                
                $
                (3,517,651
                )
                $
                (2,177,022
                )Denominator:Weighted
                      average common shares and denominator for basic
                      calculation:
                
                
                102,858,468
                
                
                94,309,323Weighted
                    average effects of dilutive equity
                    based compensation awards:Stock
                    options
                
                
                -
                
                
                -Stock
                    warrants
                
                
                -
                
                
                -Restricted
                    stock awards
                
                
                -
                
                
                -Denominator
                    for diluted calculation
                
                
                102,858,468
                
                
                94,309,323Net
                    loss per share - basic for Class A and Class B
                
                $
                (0.03
                )
                $
                (0.02
                )Net
                    loss per share - diluted for Class A and Class B
                
                $
                (0.03
                )
                $
                (0.02
                )





An
      aggregate of 4,581,442 and 15,075,559 shares
      (of both Class A Common Stock and Class B Common Stock) were excluded from
      the
      computation of diluted earnings per share for the three months ended March
      31,
      2008 and 2007, respectively, as the inclusion of such shares would have had
      an
      anti-dilutive effect.





9


YTB
      INTERNATIONAL, INC.


Notes
      to
      Condensed Consolidated Financial Statements





NOTE
      4 – RESTRICTED CASH





Restricted
      cash as of March 31, 2008 and December 31, 2007 was $3,436,832 and $2,268,344
      respectively. Restricted cash as of December 31, 2007 included a $500,000
      certificate of deposit representing collateral for the outstanding indebtedness
      on the property serving as the Company’s new corporate headquarters and
      $1,768,233 in reserves with the Company’s credit card processor, the former of
      which was released but subsequently surrendered by the Company on January 8,
      2008 in partial repayment of the principal amount outstanding under such
      indebtedness. The increase in restricted cash of $1,168,488 as of March 31,
      2008
      compared with December 31, 2007 was primarily due to approximately $127,000
      deposited in reserve with an additional credit card processor in connection
      with
      the Company’s launch of its Canadian operations on February 8, 2008, as well as
      funds deposited in connection with the Company’s obtaining a Standby Letter of
      Credit of $1.9 million on January 7, 2008, collateralizing the obligations
      of
      the Company’s Sales Director-level Reps’ obligations under two cruises that they
      booked. The increase in restricted cash was partially offset by the release
      of
      the $500,000 certificate of deposit as noted above, as well as by the release
      of
      $357,167 of the $1.9 million Standby Letter of Credit related to the amount
      of
      sold cabin inventory.





NOTE
      5– INVENTORY




Inventory,
      net of reserves, consists of the following materials available for sale to
      Reps
      and customers:


March 31, 2008
              
              December 31, 2007"Success
                  From Home" and "Success" magazines
              
              $
              2,477,438
              
              $
              2,772,016"Fun
                  & Travel" magazines
              
              
              1,152,866
              
              
              1,173,130Audio
                  / Video Marketing
              
              
              657,794
              
              
              576,292Cruise
                  cabin inventory
              
              
              107,045
              
              
              -Printed
                  marketing materials
              
              
              456,502
              
              
              381,806Inventory
              
              $
              4,851,645
              
              $
              4,903,244




Cruise
      cabin inventory represents $2,254,496 in cabins held to be sold on two cruises
      set to sail May 30, 2008 and June 30, 2008, net of a $1.7 million reserve. 
The
      cruise cabin inventory is comprised of the full value of the contracts with
      the
      cruise line and includes all cost directly related to the selling price of
      the
      cabins, including related taxes and fuel costs.The Company
      recorded this reserve since the Company has evaluated the inventory as of March
      31, 2008 and believes it will not be able to sell the majority of these cabins
      before the departure date of each of the cruises.






10


YTB
      INTERNATIONAL, INC.


Notes
      to
      Condensed Consolidated Financial Statements




NOTE
      6 – LONG-TERM INVESTMENTS




As
      of
      March 31, 2008, the Company's investment portfolio included $1.0 million of
      auction rate securities (“ARSs”), which are primarily backed by student loans
      originated under the Federal Family Education Loan Program, or FFELP, and are
      over-collateralized, and guaranteed by the United States Federal Department
      of
      Education. In addition, all ARSs held by the Company are rated by the major
      independent rating agencies as either AAA or Aaa at the time of purchase. Most
      of these ARSs were scheduled to reset subsequent to December 31, 2007. As of
      February 29, 2008, $1.0 million of the Company's auction rate securities,
      representing the entire portfolio of such securities, have failed auctions
      due
      to sell orders exceeding buy orders. These failures are not believed to be
      a
      credit issue, but rather caused by a lack of liquidity. Under the contractual
      terms, the issuer is obligated to pay penalty rates should an auction fail.
      In
      the near term, the Company will not be able to access these funds associated
      with the failed auctions until one of the following occurs: a successful auction
      occurs, the issuer redeems the issue, a buyer is found outside of the auction
      process or the underlying securities have matured.





Due
      to
      the current market conditions, the Company has evaluated the accounting
      treatment of its ARS investments. In its evaluation, the Company has reviewed
      SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities,
      in addition to SFAS No. 157, Fair Value Measurements, and related guidance
      issued by the FASB and the Securities and Exchange Commission (the "SEC").
      As a result, the Company classified the $1.0 million in ARSs as long-term
      investments as of March 31, 2008 and December 31, 2007. This amount represents
      the entire balance of the ARSs as of March 31, 2008, none of which, have
      yet been sold by the Company subsequent to the end of the first quarter of
      2008.
      The Company’s ARSs are all held at one investment bank. As previously stated,
      all of the ARS investments are AAA and/or Aaa rated. The investment
      bank has not reduced the par value of the company’s ARSs on the Company’s
      March 31, 2008 statement. While the failures in the auction process have
      affected the Company’s ability to access these funds in the near term, the
      Company does not believe that the values of the underlying securities or
      collateral have been affected.




The
      Company believes that its cash flows from operations provide it with the ability
      to withstand the loss in liquidity for these securities. The Company determined
      that no temporary or other-than-temporary impairment losses existed as of March
      31, 2008, as the Company had no evidence that the securities were valued at
      an
      amount less than par value. However, if the issuer of the auction rate
      securities is unable to successfully close future auctions or does not redeem
      the auction rate securities, or the United States government fails to support
      its guaranty of the obligations, the Company may be required to adjust the
      carrying value of the auction rate securities and record other-than-temporary
      impairment charges in future periods.




NOTE
      7 – PROPERTY AND EQUIPMENT




Property
      and equipment consists of the following:


March 31, 2008
              
              December 31, 2007Equipment
              
              $
              3,137,491
              
              $
              2,736,467Furniture
                  and fixtures
              
              
              897,016
              
              
              847,233Aircraft
              
              
              1,300,000
              
              
              -Software
              
              
              3,979,678
              
              
              2,016,844Vehicles
              
              
              64,295
              
              
              164,294Building
                  and improvements
              
              
              5,407,295
              
              
              5,408,154Land
              
              
              4,721,218
              
              
              4,721,218Construction
                  in progress
              
              
              2,583,044
              
              
              2,209,710Leasehold
                  improvements
              
              
              142,295
              
              
              120,44522,232,332
              
              
              18,224,365Less:
                  Accumulated depreciation
              
              
              (3,290,838
              )
              
              (2,791,863
              )Property
                  and equipment, net
              
              $
              18,941,494
              
              $
              15,432,502




11




YTB
      INTERNATIONAL, INC.


Notes
      to
      Condensed Consolidated Financial Statements





Depreciation
      and amortization expense on property and equipment was $ 517,305 and $195,672
      for the three months ended March 31, 2008 and 2007, respectively.





As
      of
      March 31, 2008 and December 31, 2007, capitalized software development costs,
      net of accumulated amortization, totaled $333,041 and $370,237, respectively.
      For the three months ended March 31, 2008 and 2007, the Company recorded
      amortization of capitalized software development costs of $37,205 and $14,481,
      respectively, which is included in total depreciation and amortization expense
      above.





On
      February 29, 2008, the Company acquired a business jet for the purchase price
      of
      $1.3 million. The Company expects to utilize the jet for the transport of
      members of its management team for business-related purposes. The Company has
      determined the useful life of the jet to be seven years. See Note 11, "Related
      Party Transactions."




On
      February 1, 2008, SAP, the Company's new enterprise resource planning software
      application, was implemented.  The cost of approximately $1.5 million,
      $987,316 of which was included in assets under construction as of December
      31, 2007, was recorded as an addition to software during the first quarter
      of
      2008.  Depreciation for first quarter of 2008 was $77,987.





12


YTB
      INTERNATIONAL, INC.


Notes
      to
      Condensed Consolidated Financial Statements





NOTE
      8 – BUSINESS COMBINATION




On
        November 28, 2007, the Company signed a letter of intent and made a deposit
        of
        $311,332 in connection with a proposed acquisition of a business. The Company
        had also previously advanced the potential target company $45,000. As of
        March
        31, 2008, it was likely that the acquisition will not take place and accordingly
        the advance payments on deposit totaling $356,332 have been fully reserved
        for.




**Acquisition
      of Travel Agency for Canadian Operations**





On
      February 8, 2008, the Company completed the acquisition of the assets of Sunrise
      Travel Service (“Sunrise”), an award-winning travel agency located in Ontario,
      Canada, for $149,119. As there were no material identifiable assets in Sunrise,
      the purchase price was recorded to goodwill in the first quarter of 2008. The
      acquisition is expected to provide YTB with a competitive advantage in three
      very lucrative markets as part of its new Canadian operations: leisure,
      honeymoon, and corporate travel, all of which are areas of expertise for
      Sunrise. Additionally, Sunrise has developed a niche market for travel to Europe
      and the Middle East, which will increasingly broaden YTB’s international travel
      offerings and create even more opportunities for the RTAs who have already
      joined YTB in Canada. Revenues generated by Sunrise totaled $51,774 for the
      quarter ended March 31, 2008.




NOTE
      9 – STOCK-BASED COMPENSATION




**Stock
      Options**





As
      of
      March 31, 2008, the Company had a stock-based employee compensation plan and
      a
      stock-based Sales Director bonus plan. The stock-based employee compensation
      plan (the 2004 Stock Option and Restricted Stock Plan (the “2004 Plan”)) and the
      stock-based Sales Director bonus plan (the 2007 Sales Director Bonus Plan)
      are
      more fully described in Note 16, “Stock-Based Compensation”, of the Notes to
      Consolidated Financial Statements included in the Company’s Annual Report on
      Form 10-KSB for the year ended December 31, 2007.





***2004
      Stock Option and Restricted Stock Plan***





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





**Additional
      Awards Under 2004 Stock Option and Restricted Stock Plan**





On
      January 1, 2008, the Company granted incentive stock option to purchase 300,000
      shares of YTB’s Class A Common Stock to each of two officers of the Company
      pursuant to employment agreements entered into with such officers effective
      as
      of such date. These stock options vest in five equal installments of 60,000
      shares on the effective date of the employment agreements (January 1, 2008)
      and
      the first four anniversaries thereof and expire 10 years from the date of grant.
      The fair value of each option is estimated on the date of grant using the
      Black–Scholes option pricing model with the following weighted-average
      assumptions used for grants in 2008: risk-free interest rate of 3.58%; expected
      life of 6.0 years; dividend yield of 0% and expected volatility of 58.91%.
      The
      expected average life represents the period of time that options granted are
      expected to be outstanding giving consideration to vesting schedules, historical
      exercise and forfeiture patterns. The expected dividend yield is based on
      historical information and management’s plan. Since the Company had insufficient
      historical data available over the 6-year expected life term, expected
      volatility is based on the Company’s peer group historical volatility as
      measured for the expected term of the grant. The Company adjusts share-based
      compensation on a quarterly basis for changes to the estimate of expected equity
      awarded for forfeitures based on a review of recent forfeiture activity and
      expected future employee turnover. The effect of forfeiture adjustments in
      2008
      has been insignificant thus far.




13


YTB
      INTERNATIONAL, INC.


Notes
      to
      Condensed Consolidated Financial Statements





The
      Company recognized $33,004 and $13,194 in compensation expense for stock options
      issued under the 2004 Plan for the three months ended March 31, 2008 and 2007,
      respectively. Unrecognized expense related to future service on existing stock
      options granted under the 2004 Plan as of March 31, 2008 and 2007 was $402,190
      and $85,688 respectively.





*2007
      Sales Director Bonus Plan*





On
      July
      16, 2007, three of the Company’s Reps, who have qualified as Sales Directors,
      received performance-based grants consisting of discounted stock options
      pursuant to the 2007 Sales Director Bonus Plan. Each of the three qualifying
      Sales Directors received 70,422 options to purchase shares of Class A Common
      Stock based upon the defined level of achievement measured as of June 30, 2007.
      These options have an exercise price of $0.71, which is equal to fifty percent
      (50%) of the fair market value of the Class A Common Stock on the close of
      business on the business day immediately preceding the grant date as defined
      under the 2007 Sales Director Bonus Plan (as adjusted to account for the
      three-for-one stock split that occurred pursuant to the Reclassification).
      While
      all of the options that were granted vested immediately on the date of grant,
      the options are only exercisable in accordance with the following schedule:
      1/3
      were exercisable at any time during the remainder of calendar year 2007, 1/3
      are
      exercisable on December 15, 2008 (and only on such date) and the remaining
      1/3
      are exercisable on December 15, 2009 (and only on such date). The fair value
      of
      each option is estimated on the date of grant using the Black-Scholes option
      pricing model with the following weighted-average assumptions used for these
      grants in 2007: risk-free interest rate of 4.96%; expected life (in years)
      of
      0.2-2.4; dividend yield of 0%; and expected volatility of 98.0%-98.3% (weighted
      average expected volatility of 98.16%). The expected average life represents
      the
      period of time that options granted are expected to be outstanding giving
      consideration to vesting schedules, historical exercise and forfeiture patterns.
      The expected dividend yield is based on historical information and management’s
      plan. Since the Company had sufficient historical data available, expected
      volatility is based on the Company’s historical volatility as measured for the
      expected term of each tranche. The Company adjusts share-based compensation
      on a
      quarterly basis for changes to the estimate of expected equity awarded for
      forfeitures based on a review of recent forfeiture activity and expected future
      employee turnover. The effect of forfeiture adjustments in 2008 has been
      insignificant thus far. The fair value of the three awards as of the date of
      the
      grant measured on June 30, 2007, based upon the Black-Scholes option pricing
      model, was $187,415 and was recorded as accrued bonuses on the balance sheet
      as
      of June 30, 2007 with a corresponding expense recorded as marketing commissions. During
      the first quarter of 2008, the Company recorded a reduction in accrued bonuses
      of $18,874 and a related charge to additional paid in capital associated with
      the fair value amount related to the exercisable portion of the grant. As of
      March 31, 2008, $80,217 of accrued bonuses relate to the options that are
      exercisable in the future.





**Additional
      Awards Under 2007 Sales Director Bonus Plan**





On
      January 15, 2008, five of the Company’s Reps, who have qualified as Sales
      Directors, received performance-based grants consisting of discounted stock
      options to purchase shares of Class A Common Stock pursuant to the 2007 Sales
      Director Bonus Plan . Three of the qualifying Sales Directors each received
      95,238 stock options and two of the qualifying Sales Directors each received
      190,476 stock options, in each case based upon the defined levels of achievement
      measured as of December 31, 2007. All of the options granted have an exercise
      price of $0.525, which was equal to fifty percent (50%) of the fair market
      value
      of the Class A Common Stock on the close of business on the business day
      immediately preceding the grant date, as defined under the 2007 Sales Director
      Bonus Plan. While all of the options that were granted vested immediately on
      the
      date of grant, the options are only exercisable in accordance with the following
      schedule: 1/3 are exercisable at any point until the end of 2008, 1/3 are
      exercisable on December 15, 2009 (and only on such date) and the remaining
      1/3
      are exercisable on December 15, 2010 (and only on such date). The fair value
      of
      each option is estimated on the date of grant using the Black -Scholes option
      pricing model with the following weighted-average assumptions used for these
      grants in the first quarter of 2008: risk-free interest rate of 2.73%; expected
      life (in years) of 0.5-2.9; dividend yield of 0%; and expected volatility of
      89.7%-99.1% (weighted average expected volatility of 94.3%). The expected
      average life represents the period of time that options granted are expected
      to
      be outstanding giving consideration to vesting schedules, historical exercise
      and forfeiture patterns. The expected dividend yield is based on historical
      information and management’s plan. Since the Company had sufficient historical
      data available, expected volatility is based on the Company’s historical
      volatility as measured for the expected term of each tranche. The Company
      adjusts share-based compensation on a quarterly basis for changes to the
      estimate of expected equity awarded for forfeitures based on a review of recent
      forfeiture activity and expected future employee turnover. The effect of
      forfeiture adjustments in 2008 has been insignificant thus far. The fair value
      of the five awards as of the date of the grant, measured on December 31,
      2007, based upon the Black-Scholes option pricing model, was $448,979 and
      was recorded as accrued bonuses on the accompanying balance sheet as of December
      31, 2007 with a corresponding expense recorded as marketing
      commissions. During
      the first quarter of 2008, the Company recorded a reduction in accrued bonuses
      of $161,325 and a related charge to additional paid in capital associated with
      the fair value amount related to the exercisable portion of the grant. As of
      March 31, 2008, $287,654 of accrued bonuses relate to the options that are
      exercisable in the future.




14


YTB
      INTERNATIONAL, INC.


Notes
      to
      Condensed Consolidated Financial Statements





The
      following table provides additional information with respect to the aggregate
      stock option plan activity under the Company’s 2004 Plan and 2007 Sales Director
      Bonus Plan, taken as a whole:


Shares
                  
                  Weighted-Average
                      Exercise Price
                  
                  Weighted-Average
                      Fair ValueOptions
                      outstanding, beginning of period
                  
                  
                  785,841
                  
                  $
                  0.46
                  
                  $
                  0.34For
                      the period from January 1 to March 31, 2008:Granted
                  
                  
                  1,266,666
                  
                  
                  0.79
                  
                  
                  0.65Forfeited
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Expired
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Exercised
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Options
                      outstanding, end of period
                  
                  
                  2,052,507
                  
                  $
                  0.66
                  
                  $
                  0.53Options
                      exercisable, end of period
                  
                  
                  447,222
                  
                  $
                  0.65
                  
                  $
                  0.48




A
      summary
      of stock options outstanding and exercisable as of March 31, 2008 are as
      follows:


Options
                  Outstanding
              
              Options
                  ExercisableWeighted-Average
              
              Weighted-
              
              
              
              Weighted-Number
              
              Remaining
              
              Average
              
              Number
              
              AverageRange of Exercise Prices
              
              Outstanding
              
              Life (years)
              
              Exercise Price
              
              Outstanding
              
              Exercise Price$0.40 -
                  $1.00
              
              
              1,452,507
              
              
              2.72
              
              $
              0.49
              
              
              327,222
              
              $
              0.48$1.01
                  - $1.09
              
              
              600,000
              
              
              9.76
              
              
              1.09
              
              
              120,000
              
              
              1.092,052,507
              
              
              4.77
              
              $
              0.66
              
              
              447,222
              
              $
              0.65


15




YTB
      INTERNATIONAL, INC.


Notes
      to
      Condensed Consolidated Financial Statements





**Restricted
      Stock**





Effective
      January 2, 2007 (the “Grant Date”), the Board of Directors of the Company
      approved a one-time restricted stock award of an aggregate of 28,950,027 shares
      (as adjusted to account for the three-for-one stock split that occurred pursuant
      to the Reclassification) (the “Award Shares”) of the Company’s common stock, par
      value $0.001 per share, to thirty Sales Director level Reps (each, a “Grante”)
      who have made outstanding contributions to the growth and success of the Company
      and/or its wholly owned operating subsidiaries. Of the thirty Grantees, three
      are members of the Company’s Board of Directors and an additional Grantee is the
      President of one of the Company’s operating subsidiaries. The Award Shares vest
      in stages for each Grantee, provided various performance-related conditions
      specified in the restricted stock award agreement entered into by the Company
      and each Grantee (each, a “Restricted Stock Award Agreement”) are satisfied at
      each vesting date. The Grantees are the Company’s most successful Reps who have
      met the criteria for being deemed “Sales Directors”.





An
      aggregate of 9,338,703 of the Award Shares (or approximately 32.3% of each
      award) vested immediately on the Grant Date, while up to an additional
      19,611,324 Award Shares in the aggregate are subject to vesting in four equal
      installments of up to 4,902,831 shares each on the first four anniversary dates
      of the Grant Date. The vesting of any single Grantee’s award shall be determined
      independently of the vesting of any other Grantee’s award; thus, each Grantee
      must independently meet the performance related criteria specified in the
      Restricted Stock Award Agreement between himself or herself and the Company.
      The
      Company’s transfer agent, American Stock Transfer & Trust Company, serves as
      escrow agent with respect to the unvested Award Shares awarded and will retain
      such shares until the relevant vesting conditions in each Restricted Stock
      Award
      Agreement are met. To the extent that the conditions to the vesting of any
      unvested Award Shares of a Grantee have not been met by the relevant vesting
      date therefor, such shares shall be cancelled by the Company.





On
      January 2, 2008, an additional 1,625,809 shares of Class A Common Stock and
      3,251,618 shares of Class B Common Stock were issued, in the aggregate, to
      the
      Grantees upon the vesting of the second tranche of the Award Shares,
      representing an additional 16.9% of the Award Shares (as adjusted to reflect
      the
      stock split pursuant to the Reclassification).





The
      Company received no cash consideration for the Award Shares, as the shares
      were
      issued in consideration of the outstanding contributions and services rendered
      by the Grantees in their roles as Sales Directors on behalf of the Company
      and/or its wholly owned operating subsidiaries. The grant of the Award Shares
      was exempt from the registration requirements of the Securities Act of 1933,
      as
      amended (the “ Securities Act ”), pursuant to Section 4(2) thereof, as each of
      the Grantees has provided representations in the Restricted Stock Award
      Agreement between himself or herself and the Company as to his or her status
      as
      an “accredited investor” (as defined in Regulation D promulgated under the
      Securities Act). Although not obligated to do so under the Restricted Stock
      Award Agreements, on May 17, 2007, the Company filed a registration statement
      on
      Form S-8 to cover the resale of the Award Shares.





The
      Company calculated the cost for the restricted stock grants by using the fair
      market value of the Company’s common stock on the Grant Date, the number of
      shares issued and an estimate of shares that will not vest due to forfeitures.
      With respect to the 26 Grantees who are not members of management, the Company
      accrued for the cost of the Award Shares during the period over which the Sales
      Directors qualified for the awards and reported these costs as marketing
      commission expense and a corresponding bonus liability in fiscal 2006.
      Additional expense has been and will be incurred in subsequent periods during
      which the vesting of Award Shares occurs.





Furthermore,
      the Company has accounted for the grant of the Award Shares to the four members
      of management as marketing commission expense in the first quarter of 2007
      of
      $2,799,994, the period in which the grant was approved by the Board of
      Directors. The Company also recorded $1,221,384 and $1,222,411 for the quarters
      ended March 31, 2008 and 2007, respectively, as marketing commission expense
      related to the amortization of the unvested portion of the Award Shares, which
      includes a nominal forfeiture rate of 4% due to the performance related criteria
      that must be met to determine vesting at each anniversary date.





As
      of
      March 31, 2008, there was approximately $13.9 million of unrecognized
      compensation expense related to the 14,708,493 shares of non-vested restricted
      stock, which the Company expects to recognize over the next 2.75
      years.




16


YTB
      INTERNATIONAL, INC.


Notes
      to
      Condensed Consolidated Financial Statements





The
      following table summarizes the status of restricted shares during the quarter
      ended March 31, 2008:


Weighted-averageRestricted
              
              grant-dateshares
              
              fair
                  valueNon-vested
                  at beginning of 2008
              
              
              19,611,324
              
              
              1.03Granted
              
              
              -
              
              $
              -Vested
              
              
              4,902,831
              
              
              1.03Forfeited
              
              
              -
              
              
              -Non-vested
                  at March 31, 2008
              
              
              14,708,493
              
              $
              1.03





NOTE
      10 - STOCKHOLDERS’ EQUITY





During
      the first quarter of 2008, equity compensation in the amount of $510,000 was
      recorded as a result of 500,000 shares issued as compensation for services
      to
      non-employees with an offsetting adjustment to Class A Common Stock in the
      amount of $500 and additional paid in capital in the amount of
      $509,500.





Also
      during the first quarter of 2008, the Company received $90,235 in proceeds
      from
      the exercise of 154,688 common stock warrants associated with its February
      2005
      Private Placement Offering. The Company recorded a corresponding amount of
      $90,080 to additional paid in capital, $52 to Class A Common Stock and $103
      to
      Class B Common Stock. Each warrant is exercisable to purchase one share of
      common stock at an exercise price of $0.58, exercisable for five years from
      date
      of issuance. As of March 31, 2008, 46.93 of the 64 warrant units (each unit
      consisting of 56,250 common stock purchase warrants) remain
      unexercised.





NOTE
      11 - RELATED PARTY TRANSACTIONS





Certain
      members of management of the Company own a company that YTB Marketing utilizes
      for printing of its sales materials. During the three months ended March 31,
      2008 and 2007, the Company expended $1,036,003 and $490,688, respectively,
      in
      payments to this printing company. In addition, at March 31, 2008 and December
      31, 2007, respectively, the Company has a pre-paid asset of $368,339 and
      $157,289, reflected on the balance sheet for payments related to work not yet
      completed by this company.




In
        July
        2006, the Company borrowed $2.5 million from Meridian Bank in connection
        with
        its acquisition of the land and building which houses its corporate headquarters
        in Wood River, Illinois. The chairman and principal shareholder of, and another
        director and principal shareholder of, Meridian Bank, Timothy Kaiser, M.D.
        and
        Clay Winfield, respectively, are also directors of the Company. This transaction
        was approved by the independent members of the Company’s Board of Directors. On
        January 8,  2008,
        the
        Company’s $500,000 certificate of deposit representing restricted cash
        collateral for the Company’s outstanding indebtedness related to its corporate
        headquarters property was surrendered in partial repayment of the principal
        amount outstanding under such indebtedness. The remaining principal balance
        as
        of March 31, 2008 was $1,995,990.




During
      the three months ended March 31, 2008, the Company made aggregate payments
      of
      approximately $415,000 pursuant to the terms of the development contract for
      its
      new corporate headquarters in Wood River, Illinois. No payments were made during
      the first quarter of 2007. The contract for the development of the real property
      on which such headquarters are located was awarded to Winfield Development,
      which is controlled by Clay Winfield, a member of the Company’s Board of
      Directors.





17





YTB
      INTERNATIONAL, INC.


Notes
      to
      Condensed Consolidated Financial Statements




The
      Company leases approximately 5,000 square feet of office space (which served
      as
      part of our previous headquarters office) at the real property location at
      600
      Country Club View, Edwardsville, Illinois 62025 (the “Building Two Property”)
      under a commercial lease agreement (the “Building Two Lease”), dated August 4,
      2005, by and between Meridian Land Company, Inc. (“Meridian Land”), as lessor,
      and the Company, as lessee, which is to expire on October 31, 2010. In January
      2008, the Company exercised its purchase option under the Building Two Lease
      to
      acquire the Building Two Property for $2,350,000 in cash and entered into a
      purchase contract with Meridian Land pursuant thereto. The Company paid $500,000
      of the $2,350,000 purchase price as a deposit as of the execution of the
      purchase contract, and the remaining $1,850,000 is due at the closing of the
      acquisition of the Building Two Property, which is scheduled to occur prior
      to
      the end of the second quarter of 2008.




Besides
        the Building Two Lease, the Company had also leased office space (which also
        served as part of the Company’s previous headquarters office) from Meridian Land
        at the approximate 13,000 square foot premises located on the real property
        at
        One Country Club View, Edwardsville, Illinois 62025 (the “Building One
        Property”), under a commercial lease agreement (the “Building One Lease”) that
        commenced on July 1, 2005 and was to expire on June 30, 2010. On July 27,
        2007,
        the Company exercised its option (the “Building One Purchase Option”) under the
        Building One Lease to purchase the Building One Property, which the Company
        closed upon on August 14, 2007.
 
 During
        the first quarter of 2007, the Company’s rental expense under the Building One
        Lease and the Building Two Lease, in the aggregate, was $15,000 per month
        ($45,000 for the quarter as a whole). While the Company no longer paid any
        rent
        with respect to the Building One Property during the first quarter of 2008
        (due
        to the termination of the Building One Lease upon the Company’s acquisition of
        the Building One Property in August 2007), the Company’s rental expense under
        the Building Two Lease was $8,400 per month ($25,200 for the quarter) during
        the
        first quarter of 2008.




In
        July
        2006, the Company borrowed $2.5 million from Meridian Bank in connection
        with
        its acquisition of the land and building which houses its corporate headquarters
        in Wood River, Illinois. The chairman and principal shareholder of, and another
        director and principal shareholder of, Meridian Bank, Timothy Kaiser, M.D.
        and
        Clay Winfield, respectively, are also directors of the Company. This transaction
        was approved by the independent members of the Company’s Board of Directors. On
        January 8,  2008,
        the
        Company’s $500,000 certificate of deposit representing restricted cash
        collateral for the Company’s outstanding indebtedness related to its corporate
        headquarters property was surrendered in partial repayment of the principal
        amount outstanding under such indebtedness. The remaining principal balance
        as
        of March 31, 2008 was $1,995,990.





The
      Company had utilized a Learjet 35A, N360LJ business jet (the “Executive Jet”)
      owned by Meridian/Silver, LLC, a Florida limited liability company
      (“Meridian/Silver”), which had been owned 50% by Meridian Land and 50% by an
      unaffiliated third party. During the quarter ended March 31, 2007, the Company
      made payments for the use of the aircraft to Meridian/Silver in the amount
      of
      $35,058.





On
      February 29, 2008, the Company acquired all of the outstanding membership
      interests of Meridian/Silver for the purchase price of $1.3 million. The only
      significant asset held by Meridian/Silver is the Executive Jet, which is held
      free and clear of any and all liens and encumbrances. Meridian/Silver is not
      subject to any material liabilities or contractual obligations. The Company
      expects to utilize the Executive Jet for the transport of members of its
      management team for business-related purposes.





On
      August
      17, 2007, the Company entered into a Commercial Lease Agreement (the “Magnolia
      Lease”), by and between Meridian Land, as lessor, and the Company, as lessee,
      covering the approximately 5,500 square feet premises located at #112 Magnolia
      Drive (Lot #9 Magnolia Commons), Glen Carbon, Illinois 62034 (the “Magnolia
      Leased Premises”). The Magnolia Leased Premises serve as additional office space
      for the Company. The Magnolia Lease has an initial term of eighteen (18) months,
      originally scheduled to commence on November 1, 2007 and expire on April 30,
      2009. Due to delays in construction being performed with respect to the Magnolia
      Leased Premises, the term of the Magnolia Lease was postponed such that it
      commenced on February 15, 2008 and extends until August 15, 2009. Rent under
      the
      Magnolia Lease has been set at $8,400 per month. In addition to monthly rental
      payments, the Company will be responsible for utilities and maintenance and
      must
      pay all real estate taxes assessed on the property on which the Magnolia Leased
      Premises are located during the term of the Magnolia Lease, as well as all
      costs
      of maintaining any common areas used by the Company in conjunction with the
      Magnolia Leased Premises. During the first quarter of 2008, rent expense for
      the
      Magnolia Leased Premises totaled $16,800.





Meridian
      Land is controlled by its principals, Timothy Kaiser, M.D. and Clay Winfield,
      each of whom is a member of the Company’s Board of Directors. Each of the
      transactions entered into by the Company with Meridian Land (including the
      Building Two Lease, the prospective acquisition of the Building Two Property,
      the prospective acquisition of the membership interests of Meridian/Silver
      and
      the Magnolia Lease) was considered and approved by the independent members
      of
      the Company’s Board of Directors.




During
      the first quarter of 2008, REZconnect paid approximately $4,600 in legal fees
      for work performed by Harold Kestenbaum, a member of the Company's Board of
      Directors.




18


YTB
      INTERNATIONAL, INC.


Notes
      to
      Condensed Consolidated Financial Statements




NOTE
      12 – NEW ACCOUNTING PRONOUNCEMENTS


In
        December 2007, the FASB issued SFAS No. 141R (“SFAS 141R”), “Business
        Combinations”, which establishes principles and requirements for how the
        acquirer recognizes and measures in its financial statements the identifiable
        assets acquired, the liabilities assumed, and any noncontrolling interest
        in the
        acquiree, goodwill acquired in the business combination or a gain from a
        bargain
        purchase. SFAS 141R is effective for business combinations with an acquisition
        date on or after the beginning of the first annual reporting period beginning
        on
        or after December 15, 2008. The Company expects SFAS 141R to have an impact
        on
        the accounting for any future business acquisitions of the effective date.
 
 In
        December 2007, the FASB issued SFAS No. 160, *Noncontrolling
        Interests in Consolidated Financial Statements - an amendment of ARB No.
        51* (“SFAS
        No. 160”). SFAS No. 160 requires the recognition of a noncontrolling interest,
        or minority interest, as equity in the consolidated financial statements
        and
        separate from the parent’s equity. The amount of net income attributable to the
        noncontrolling interest will be included in consolidated net income on the
        face
        of the income statement. SFAS No. 160 also includes expanded disclosure
        requirements regarding the interests of the parent and its noncontrolling
        interest. The Company is currently evaluating the impact his statement may
        have
        in its future financial statements.


In
      February 2008, the Financial Accounting Standards Board (the “FASB”) issued
      FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement
      No. 157” (“FSP 157-2”), to partially defer the effectiveness of SFAS
      No. 157. FSP 157-2 defers the effective date of SFAS 157 for
      nonfinancial assets and nonfinancial liabilities, except those that are
      recognized or disclosed at fair value in the financial statements on a recurring
      basis (at least annually), to fiscal years, and interim periods within those
      fiscal years, beginning after November 15, 2008. The Company is currently
      evaluating the impact of FSP 157-2 on its consolidated financial position
      and results of operations.





In
      March
      2008, the FASB issued SFAS 161, *Disclosures
      about Derivative*  *Instruments
      and Hedging Activities* (“SFAS
      161”), which requires expanded disclosures about derivative instruments and
      hedging activities.  SFAS 161 is effective for fiscal years and
      interim periods beginning after November 15, 2008, with earlier adoption
      permitted. The
      implementation of this standard is not expected to have an impact on the
      Company’s consolidated financial position and results of operations. .
      SFAS
      161 is effective for our 2009 Annual Report on Form 10-K.





NOTE
      13 – SEGMENT INFORMATION





The
      Company operates in the following two business segments: marketing of online
      travel stores including the development of a sales network (“Marketing”) and
      sales of travel through online travel stores (“Travel”). The Company’s business
      segments operate primarily in the United States and Canada, but are structured
      for additional 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.


Three Months EndedMarch
                  31, 2008
              
              
              Marketing
              
              
              Travel
              
              
              Parent
              
              
              Elimination
              
              
              TotalExternal
                  and inter-segment revenue
              
              $
              36,929,690
              
              $
              5,776,621
              
              $
              21,256
              
              $
              -
              
              $
              42,727,567Segment
                  profit (loss)
              
              
              (222,392
              )
              
              (249,896
              )
              
              (3,045,363
              )
              
              -
              
              
              (3,517,651
              )Assets
              
              
              53,365,988
              
              
              14,334,118
              
              
              24,306,272
              
              
              (26,379,135
              )
              
              65,627,243Depreciation
                  and amortization
              
              
              315,777
              
              
              48,804
              
              
              171,081
              
              
              -
              
              
              535,662Capital
                  expenditures
              
              
              556,759
              
              
              316,794
              
              
              3,103,228
              
              
              -
              
              
              3,976,781Three
                  Months EndedMarch
                  31, 2007
              
              
              Marketing
              
              
              Travel
              
              
              Parent
              
              
              Elimination
              
              
              TotalExternal
                  and inter-segment revenue
              
              $
              21,293,428
              
              $
              3,166,810
              
              $
              -
              
              $
              (281,757
              )
              $
              24,178,481Segment
                  profit (loss)
              
              
              (2,221,139
              )
              
              963,789
              
              
              (919,672
              )
              
              -
              
              
              (2,177,022
              )Assets
              
              
              32,904,515
              
              
              5,543,750
              
              
              9,122,750
              
              
              (6,961,782
              )
              
              40,609,233Depreciation
                  and amortization
              
              
              153,748
              
              
              -
              
              
              60,284
              
              
              -
              
              
              214,032Capital
                  expenditures
              
              
              923,558
              
              
              -
              
              
              1,070,144
              
              
              -
              
              
              1,993,702


GEOGRAPHIC
                    FINANCIAL INFORMATIONNET
                    SALES:Three
                    Months Ended
                
                
                2008
                
                
                2007United
                    States
                
                $
                41,439,623
                
                $
                24,178,481Canada
                
                
                1,287,944
                
                
                -$
                42,727,567
                
                $
                24,178,481


19





YTB
      INTERNATIONAL, INC.


Notes
      to
      Condensed Consolidated Financial Statements





NOTE
      14 – INCOME TAXES





In
      June
      2006, the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for
      Uncertainty in Income Taxes” which clarifies the accounting for uncertainty in
      income taxes recognized in the financial statements in accordance with FASB
      Statement No. 109, Accounting for Income Taxes.” FIN 48 provides guidance on the
      financial statement recognition and measurement of a tax position taken or
      expected to be taken in a tax return.





As
      of
      March 31, 2008 and December 31, 2007, the Company had approximately $1,399,000
      and $1,398,000 of unrecognized tax benefits, respectively. Of the unrecognized
      tax benefits at March 31, 2008, $182,504 if recognized, would impact the
      Company’s effective income tax rate.





The
      Company classifies interest expense and any related penalties related to income
      tax uncertainties as a component of income tax expense. As of March 31, 2008
      and
      December 31, 2007 the Company had approximately $7,472 and $7,068, respectively,
      of accrued interest related to uncertain positions.





The
      Company does not expect any significant changes in the unrecognized tax benefits
      within twelve months of the filing date of this Quarterly Report on Form
      10-Q.





The
      Company files income tax returns in the U.S. federal jurisdiction and various
      state jurisdictions and Canada and is subject to examination by the various
      taxing authorities.





The
      Company’s tax provision for the three months ended March 31, 2008 consists of
      state and foreign income taxes. The Company has a federal tax loss for the
      current period, which received no tax benefit, as the Company’s deferred tax
      assets have a full valuation allowance recorded against them.





NOTE
      15 – COMMITMENTS & CONTINGENCIES





Certain
      conditions may exist as of the date the financial statements are issued, which
      may result in a loss to the Company but which will only be resolved when one
      or
      more future events occur or fail to occur. The Company’s management and its
      legal counsel assess such contingent liabilities, and such assessment inherently
      involves an exercise of judgment. In assessing loss contingencies related to
      legal proceedings that are pending against the Company or unasserted claims
      that
      may result in such proceedings, the Company’s legal counsel evaluates the
      perceived merits of any legal proceedings or unasserted claims as well as the
      perceived merits of the amount of relief sought or expected to be sought
      therein.





If
      the
      assessment of a contingency indicates that it is probable that a material loss
      has been incurred and the amount of the liability can be estimated, then the
      estimated liability is accrued in the Company’s financial statements. If the
      assessment indicates that a potentially material loss contingency is not
      probable, but is reasonably possible, or is probable but cannot be estimated,
      then the nature of the contingent liability, together with an estimate of the
      range of possible loss if determinable and material, is disclosed.





Loss
      contingencies considered remote are generally not disclosed unless they involve
      guarantees, in which case the nature of the guarantee is disclosed.





NOTE
      16 – SUBSEQUENT EVENTS




On
      April
      17, 2008, the Company's Class A Common Stock was approved for quotation on
      the Over-the-Counter Bulletin Board (the “OTCBB”). All existing market makers
      will move to the OTCBB within 30 days of such date. The Company’s Class A Common
      Stock will continue to be quoted under the ticker symbol “YTBLA”.




As
        of May
        1, 2008, restricted cash has decreased from the March 31, 2008 balance of
        $3,436,832 by $1,136,272 to $2,300,560. This decrease in restricted cash
        resulted primarily from the release of $1,196,637 to the cruise line for
        deposits due on the two cruises that were booked by the Company. This decrease
        was partially offset by the increase in reserves of $62,762 for the Company’s
        new Canadian credit card processor.




20


**Item
      2.**  **Management’s
      Discussion and Analysis or Plan of Operation**





STATEMENT
      REGARDING FORWARD-LOOKING INFORMATION





*The
      Private Securities Litigation Reform Act of 1995 and Section 21E of the
      Securities Exchange Act of 1934, as amended (the “Exchange Act”), provide a safe
      harbor for forward-looking statements made by or on behalf of the Company.
      The
      Company and its representatives may from time to time make written or oral
      statements that are “forward-looking”, including statements contained in this
      report and other filings with the Securities and Exchange Commission (“SEC”) and
      in our reports to stockholders. In some cases forward-looking statements can
      be
      identified by words such as “believe,” “expect,” “anticipate,” “plan,”
“potential,” “continue” or similar expressions. Such forward-looking statements
      include risks and uncertainties and there are important factors that could
      cause
      actual results to differ materially from those expressed or implied by such
      forward-looking statements. These factors, risks and uncertainties can be found
      in the, “Risk Factors” section of our registration statement on Form SB-2 filed
      with the SEC on May 21, 2007.*





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





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





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





**Overview**




We
      are a
      leading provider of Internet-based travel related services and operate through
      our three subsidiaries: YourTravelBiz.com, Inc., YTB Travel Network, Inc. and
      REZconnect Technologies, Inc. YourTravelBiz.com, Inc. (“YTB Marketing”)
      establishes and sells online travel agencies and compensates its Independent
      Marketing Representatives (“Reps”) who sell such travel agencies via a
      multilevel marketing commission structure. YTB Travel Network, Inc. (“YTB
      Travel”) contracts with the online travel agencies, provides online booking
      systems, collects travel commissions and pays sales commissions. REZconnect
      Technologies, Inc. (“REZconnect”) is a travel vendor relationship management
      company and offers franchises to brick and mortar travel agencies. REZconnect
      is
      reported as part of the YTB Travel segment for segment reporting purposes.




YTB
      Marketing conducts business through marketing, education and support of its
      sales force, consisting of  341,305  Reps
      who
      are responsible for marketing and selling online travel web sites to Referring
      Travel Agents (“RTAs”), most of whom work from their homes. Of the 341,305
      Reps, 138,814  are
      RTAs
      with active travel websites. YTB Marketing’s sales of online travel agencies
      (via its Reps) to RTAs benefit from certain advantages. Firstly, such sales
      are
      not subject to the seasonality of the travel business. Also, typical online
      travel merchants sell a commodity (travel), which does not engender strong
      customer loyalty. By contrast, each RTA develops personal relationships with
      his
      or her customers, who book travel through the RTA’s own online travel store,
      thereby creating a significant advantage for our company over the major online
      travel companies. The cost to book a trip through an RTA is nearly identical
      to
      booking a trip through a major online travel company. The RTAs’ online stores
      provide access to more than 60 booking engines, including World Choice Travel
      (a
      subsidiary of Travelocity), Hotels.com, Apple Vacations, Collette Vacations,
      and
      more.





As
      of
      March 31, 2008, there are
      138,814  RTA
      travel store websites in operation and numerous registered travel agents, which
      include franchisees and independent travel agents, using the travel portal
      site.
      Site owners are permitted to solicit organizations and associations for travel
      sites. On July 11, 2007, the Company announced that it had been named one of
      the
      country’s leading travel agencies in Travel Weekly’s 2007 Power List, with the
      Company ranking 35 th among
      all travel agencies and included among the top 11 leisure travel
      agencies.





21





YTB
      Travel is the travel management subsidiary that processes travel sales from
      online business models and processes and handles bookings (reservations) from
      the
      RTAs' 138,814 websites
      and negotiates deals with preferred vendors, receiving incentives based on
      the
      volume of business that it produces. The fulfillment is offered through
      interactive, real time booking engines and access to preferred deals with
      leading travel industry suppliers. The emerging market shift to the Internet
      for
      travel services presents the opportunity for advancement of products and
      services by referral relationships. Future travel revenue growth should
      accelerate as more RTAs are added to the system, and as each goes through the
      various education programs that YTB Travel provides. RTA sites are
      available for use 24 hours, 7 days a week.





REZconnect
      is a travel relationship vendor management company as well as a franchisor
      of
      travel agencies and generates revenue through registered travel agents and
      franchised travel agencies.





Our
      revenues derive primarily from online travel store sales monthly RTA web hosting
      fees, franchise fees and franchise service fees and commissions paid by travel
      providers. 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, based on prior years experience adjusted for current year
      volumes. Management believes these estimates to be reasonable. Franchise service
      fees are recognized on an accrual basis as earned. Revenue from online travel
      store sales is deferred and recognized ratably as revenue over a twelve-month
      period.





The
      commission rates paid by travel suppliers, in addition to overrides, are
      determined by individual travel suppliers and are subject to change.
      Historically, typical standard base commission rates paid by travel suppliers
      have been approximately 10% for hotel reservations, 5% to 10% for car rentals,
      10% to 16% for cruises and vacation packages and a nominal service fee for
      airline tickets. During the past several years, leisure vendors (including
      tour
      operators, cruise lines and hotel and car packagers) have not reduced their
      commission levels but in fact have offered YTB Travel incentive commissions
      above the standard compensation for its volume business. YTB Travel expects
      that
      its 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 latter offering lower commissions. Each
      website travel storeowner pays a monthly fee of $49.95 to us, and can earn
      transactional compensation from travel purchased from his or her website. There
      can be no assurance that travel suppliers will not reduce commission rates
      paid
      to YTB Travel or eliminate such commissions entirely, which could, individually
      or in the aggregate, have a material adverse effect on our business, operating
      results and financial condition.





**About
      Our Industry**





Booking
      via the Internet has resulted in many opportunities for individuals and provides
      greater access to the consumer. Our Company has become a target for some
      traditional “brick and mortar” agencies as their market share diminishes. As a
      result, petitions have been circulated to protest our method of marketing and
      the Internet method of booking travel.  Management does not anticiapte that
      such efforts by competitors will have a material impact on our business model
      results.




We
      believe that the shift to the Internet for booking travel and our unique
      programs for our RTAs position our Company in a valuable and unique position
      to
      provide an income stream for our RTAs and allows the ultimate consumer a choice
      of booking his or her travel through the ever-growing Internet travel industry.




We
      do not
      attempt to conform to the pre-Internet travel industry of the 1970s and 1980s.
      Rather, our company is built on new ideas, building an army of entrepreneurs.
      We
      anticipate continuing to attract RTAs to sell our products. We plan to continue
      to provide our sales force with a powerful e-commerce consumer website that
      sells travel as well as other highly consumed products. Our customers shop
      and
      purchase on the Internet from someone they know and someone they can trust.




We
      offer
      business alternatives for entrepreneurs who desire to capitalize on the
      growing trend of on-line travel bookings. In our eighth year of business and
      with well over a billion dollars of travel services booked in our history,
      we teach and practice the highest standards of business principles and practices
      in this exciting and growing travel industry.




22





**Results
      of Operations**





The
      following tables set forth, for the three and nine months ended March 31, 2008
      and 2007, as indicated, the percentage relationship of certain items from
      our consolidated statement of operations to total net revenues. A summary
      of consolidated results follows.


Three months ended
              
              Three months ended
              
              VarianceMarch 31, 2008
              
              % of NetRevenues
              
              March 31, 2007
              
              % of NetRevenues
              
              Increase(Decrease)
              
              Inc.(Decr.)%NET
                  REVENUES****Online
                  travel stores and monthly fees
              
              $
              33,959,388
              
              
              79.5
              %
              $
              17,965,361
              
              
              74.3
              %
              $
              15,994,027
              
              
              89.0
              %Travel
                  commissions and services
              
              
              5,328,627
              
              
              12.5
              %
              
              2,537,694
              
              
              10.5
              %
              
              2,790,933
              
              
              110.0
              %Education programs
                  and marketing materials
              
              
              3,009,505
              
              
              7.0
              %
              
              3,361,152
              
              
              13.9
              %
              
              (351,647
              )
              
              (10.5
              )%Other
              
              
              430,047
              
              
              1.0
              %
              
              314,274
              
              
              1.3
              %
              
              115,773
              
              
              36.8
              %Total
                  net revenues
              
              
              42,727,567
              
              
              100.0
              %
              
              24,178,481
              
              
              100.0
              %
              
              18,549,086
              
              
              76.7
              %OPERATING
                  EXPENSESMarketing
                  commissions
              
              
              25,068,543
              
              
              58.7
              %
              
              16,136,795
              
              
              66.7
              %
              
              8,931,748
              
              
              55.4
              %Travel
                  commissions
              
              
              3,852,416
              
              
              9.0
              %
              
              1,608,688
              
              
              6.7
              %
              
              2,243,728
              
              
              139.5
              %Depreciation
                  and amortization
              
              
              535,662
              
              
              1.3
              %
              
              214,032
              
              
              0.9
              %
              
              321,630
              
              
              150.3
              %Marketing
                  and selling
              
              
              1,392,615
              
              
              3.3
              %
              
              1,437,657
              
              
              5.9
              %
              
              (45,042
              )
              
              (3.1
              )%General
                  and administrative
              
              
              15,330,144
              
              
              35.9
              %
              
              7,005,256
              
              
              29.0
              %
              
              8,324,888
              
              
              118.8
              %Total
                  operating expenses
              
              
              46,179,380
              
              
              108.2
              %
              
              26,402,428
              
              
              109.2
              %
              
              19,776,952
              
              
              74.9
              %LOSS
                  FROM OPERATIONS
              
              
              (3,451,813
              )
              
              (8.2
              )%
              
              (2,223,947
              )
              
              (9.2
              )%
              
              (1,227,866
              )
              
              55.2
              %OTHER
                  INCOME/(EXPENSE)Interest
                  and dividend income
              
              
              69,307
              
              
              0.2
              %
              
              49,536
              
              
              0.2
              %
              
              19,771
              
              
              39.9
              %Interest
                  expense
              
              
              (17,023
              )
              
              0.0
              %
              
              (2,611
              )
              
              0.0
              %
              
              (14,412
              )
              
              552.0
              %Foreign
                  currency translation loss
              
              
              (455
              )
              
              0.0
              %
              
              -
              
              
              0.0
              %
              
              (455
              )
              
              (100.0
              )%Gain
                  (loss) on sale of assets
              
              
              (11,667
              )
              
              0.0
              %
              
              -
              
              
              0.0
              %
              
              (11,667
              )
              
              (100.0
              )%Total
                  other income/(expense)
              
              
              40,162
              
              
              0.2
              %
              
              46,925
              
              
              0.2
              %
              
              (6,764
              )
              
              (14.4
              )%LOSS
                  BEFORE INCOME TAX PROVISION
              
              
              (3,411,651
              )
              
              (8.0
              )%
              
              (2,177,022
              )
              
              (9.0
              )%
              
              (1,234,629
              )
              
              56.7
              %INCOME
                  TAX PROVISION
              
              
              106,000
              
              
              0.2
              %
              
              -
              
              
              0.0
              %
              
              106,000
              
              
              100.0
              %NET
                  LOSS
              
              $
              (3,517,651
              )
              
              (8.2
              )%
              $
              (2,177,022
              )
              
              (9.0
              )%
              $
              (1,340,629
              )
              
              61.6
              %





The
      following table sets forth the number of active RTAs as of conclusion of the
      first quarter of our last two fiscal years, as well as the number of on-line
      site sales during each such quarter.


RTAs as of
              
              RTAs as ofMarch 31, 2008
              
              March 31, 2007138,814
              
              82,932
  Site sales for the
              
              Site sales for the3 months ended
              
              3 months ended
 March 31, 2008
              
              March 31, 200730,893
              
              
              33,415




23




The
      RTA
      numbers represent the number of active RTAs paying $49.95 per month to us as
      monthly web hosting fees. The site sales numbers represent the number of online
      travel store sites sold during the respective periods. The number of sales,
      and
      the number of recurring monthly fees paid, each directly impacts our revenues
      and expenses. As each new site is sold for $449.95, marketing commissions are
      paid on that sale. Likewise, each recurring monthly fee paid results in
      marketing commissions paid to the Reps. As the number of active RTAs grows,
      the
      amount of our travel commission revenue grows as well. Correspondingly, our
      travel commission expense follows suit.





The
      growth on a year-to-year basis of our organization that is evidenced by the
      above numbers directly impacts our financial results, both on the revenue side,
      as well as the expense side. As more sites are sold and maintained, the amount
      of marketing and travel commissions correspondingly increase, as do other volume
      related expenses, such as wage and benefit costs. As more sales are made, our
      entire infrastructure needs to keep pace with the sales volume.





**Three
      months ended March 31, 2008 compared to three months ended March 31,
      2007**





We
      recognized net loss for the quarter ended March 31, 2008 of $3,517,651 or $0.03
      per diluted share compared to a net loss of $2,177,022 or $0.02 per diluted
      share for the comparable quarter of 2007.





**Net
      Revenues**





Net
      revenues totaled $42,727,567 and $ 24,178,481 in the first quarters of 2008
      and
      2007, respectively.





·
            Online
                travel store sales and monthly fees increased $15,994,027 or 89.0%
                in the
                first quarters of 2008 to $33,959,388 from the $17,965,361 amount
                reported
                in the comparable prior year quarter. The increase was due to an
                increase
                in the average number of RTAs and an increase in the average monthly
                fee
                being paid by such RTAs. The average number of RTAs for whom we recognize
                monthly revenue increased to 133,928 in the first quarter of 2008
                from
                80,961 in the comparable quarter of 2007. We believe that the significant
                growth in average number of RTAs was attributable to the emerging
                market shift to the Internet for travel services which presents the
                opportunity for advancement of products and services by referral
                relationships and the growth in the desire for home-based businesses.




·
            Travel
                agency commissions for the first quarter of 2008 increased $2,790,933
                or
                110.0% to $5,328,627 from the $2,537,694 reported in the comparable
                prior
                year quarter. The increase was attributable to the increase in the
                number of customers utilizing the Company as their travel provider
                in 2008
                due to the growth in the number of our RTAs. Also contributing to
                the
                growth in travel agency commissions was the fact that we held more
                travel education events/tradeshows in the first quarter of 2008
                compared to the first quarter of 2007, which in turn increased product
                awareness, making our RTAs more effective in selling travel. We
                anticipate that the number of educational events and tradeshows held
                will continue to increase as the number of RTAs continues to grow.
                As an
                increase in travel bookings occurs, a preferred travel bonus is paid
                in
                addition to commissions. A portion of the anticipated bonus has been
                recorded as travel commission revenue with an offsetting
                receivable.





·
            Education programs
                  and marketing materials revenue decreased $351,647 or 10.5% in
                  the first
                  quarter of 2008 to $3,009,505 from $3,361,152 in the comparable
                  prior year
                  quarter. This decrease was due to a decrease in sales of magazine and
                  sales aids, due to a reduction in the number of participants in
                  our
                  magazine Autoship Program. Educational
                  programs and marketing materials revenue decreased $351,647 pr
                  10.5% in
                  the first quarter of 2008 to $3,009,505 from $3,361,152 in the
                  comparable
                  prior year quarter. This decrease is due to a decrease in sales
                  of
                  magazines and sales aides, due to a reduction in the number of
                  participants in the magazine Autoship Program. Also contributing
                  to the
                  decrease in education program and marketing material revenue is the
                  fact that the number of paid attendees at the company’s CRTA training
                  events decreased as compared to the 1stquarter of 2007. Additionally, we revamped its association education,
                  thus resulting in a reduction in the number of paid attendees at
                  these
                  events.





·
            Other
                income increased by $115,773 or 36.8% in the first quarter of 2008 as
                compared to 2007 to $430,047 from $314,274 for the comparable period
                in
                2007. This increase is primarily related to a new program implemented
                in
                2008, “Two Fly Free.” We also saw a significant increase in revenues
                earned from flower sales through Flora
                2000.





**Operating
      Expenses**




·
            Marketing
                commissions expense increased by $8,931,748 or 55.4% in the first
                quarter of 2008 to $ 25,068,543 from $16,136,795 in the first quarter
                of
                2007. This increase was due to the increase in the number of active
                travel
                websites being operated by our RTAs. The increase was also due to
                an
                increase in the number of Sales Directors in the Company, along with
                an
                increase in the amount being paid out to the entire Director’s Pool. The
                Director’s Pool consists of Reps who have achieved certain performance
                levels within the Company which entitles them to additional commissions
                on
                the number of new sales, monthly renewals and the number of paid
                attendees
                at educational events.




24




·
            Travel
                expense commission expense for the first quarter of 2008
                increased by $2,243,728 or 139.5% to $3,852,416 from $1,608,688 for
                the
                first quarter of 2007. The increase was attributable to the increase
                in the number of customers utilizing us as their travel provider
                in the first quarter of 2008 relative to the comparable quarter of
                2007, due to the growth in the number of active travel
                websites.





·
            Depreciation
                and amortization was $535,662 in the first quarter of 2008, compared
                to
                $214,032 in the corresponding quarter of 2007. This increase in
                depreciation and amortization was attributable to the addition of new
                depreciable assets, including assets related to our new
                headquarters building and to the growth of our
                infrastructure.





·
            Marketing
                and selling expenses decreased by $45,042 or 3.1% to $1,392,615 for
                the
                first quarter of 2008,  from $1,437,657 for the first quarter of
                2007. This decrease in cost was associated with a reduction in
                magazine related expenses.





·
            General
                and administrative expense increased $8,324,888 or 118.8% to
                $15,330,144 for the first quarter of 2008 from $7,005,256 in the
                first quarter of 2007. As a percentage of total net revenues, these
                expenses were 35.9% in 2008 and 29.0% in the first quarters of 2008
                and
                2007, respectively. The increase in general and administrative expense
                in
                2008 was attributable to the growth in the number of active RTAs,
                resulting in increased costs associated with the growth in our
                infrastructure to support the increased volume, as well as the costs
                associated with the ongoing implementation of new business strategies
                company-wide. The increases year over year relate primarily to the
                following increases:





·
            Salaries
                and benefits increased by $2.3 million primarily as a result of additional
                staffing requirements at our headquarters office directly related
                to the
                increased sales of online travel stores and continuing renewals of
                RTAs.


·
            Postage
                and shipping increased by $553,903 as a result of the continued strong
                sales and renewal base of RTAs and the related costs for shipping
                marketing materials to our RTAs. Additionally, our expansion into
                Canada during the first quarter of 2008 had a direct effect on
                shipping costs, causing an increase in expenditures for postage on
                checks and for shipping marketing materials.


·
            Credit
                card fees and bank charges increased by $131,167 in direct proportion
                to
                the number of sales and
                renewals.


·
            Legal
                and accounting fees increased $1.5 million as a result of work done
                relating to the Canadian expansion, and an increase in
                expenses related to general business, both domestic and
                international.


·
            Sarbanes-Oxley
                compliance (first year implementation)
                fees.


·
            Reserve
                of cabin inventory of $1.7 million.


·
            Building
                overhead increased due to the increases in the number our employees,
                and the number of locations at which we have
                employees.


·
            Printing
                expense increased $430,721 as a result of our revamping a number
                of our printed brochures and other sales aid
                materials.





**Variability
      of Results**




Our
      gross
      bookings of travel products and services have increased from the first
      quarter of 2007 to the first quarter of 2008 due to an increase in the number
      of
      hosted websites and an increase in products and services sold by travel agencies
      utilizing our unique private label agent only web-based booking site. Cost
      of
      travel revenues have similarly increased from the first quarter of 2007 to
      the
      first quarter of 2008.




As
      a
      result of our operating history in online commerce, we are unable to
      accurately forecast our revenues. Our current and future expense levels are
      based predominantly on our operating plans. We may be unable to adjust spending
      in a timely manner to compensate for any unexpected revenue shortfall.
      Accordingly, any significant shortfall in revenues would likely have an adverse
      effect on our business, operating results and financial condition. Further,
      we currently intend to substantially increase our operating expenses to
      develop and offer new and expanded travel services, to fund increased sales
      and
      marketing and customer service, operations, to develop our technology and
      transaction processing systems. To the extent such expenses precede or are
      not
      subsequently followed by increased revenues, our operating results will
      fluctuate and net losses in a given period may be greater than
      expected.




25


We expect
      to experience fluctuations in its future quarterly operating results due to
      a
      variety of other factors, many of which are outside our control. Factors
      that may adversely affect our quarterly operating results include, but are
      not limited to (i) our 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 us or our 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 us, (vi) our 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 our 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 our business, operations and infrastructure, (x) governmental
      regulation and (xi) unforeseen events affecting the travel industry, including
      terrorist activities similar to the events of September 11, 2001 and the
      conflict in the Middle East.




In
      addition, we expect that we will experience seasonal fluctuations in
      the travel industry, Internet and commercial online service usage and
      advertising expenditures. We anticipate 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 travel sales.




Due
      to
      the foregoing factors, quarterly revenues and operating results are difficult
      to
      forecast, and we believe that quarter-to-quarter comparisons of our
      operating results will not necessarily be meaningful and should not be relied
      upon as an indication of future performance. It is likely that our future
      quarterly operating results from time to time will not meet the expectations
      of
      security analysts or investors. In such event, the price of our Class
      A Common Stock would likely be materially and adversely
      affected.





**Liquidity
      and Capital Resources**





The
      following table presents a summary of our cash flows for the first quarter
      of
      2008 and 2007:


Three
                  months endedMarch 31, 2008
              
              March 31, 2007Net
                  cash provided by (used in):Operating
                  activities
              
              $
              5,273,597
              
              $
              5,108,190Investing
                  activities
              
              
              (4,140,659
              )
              
              (1,259,278
              )Financing
                  activities
              
              
              (1,587,685
              )
              
              (1,854,668
              )Net
                  increase (decrease) in cash
              
              $
              (454,747
              )
              $
              1,994,244




Net
        cash
        provided by operating activities in the first quarter of 2008 was $5,273,597
        as
        compared to cash provided by operating activities of $5,108,190 in the
        first quarter of 2007.
 
 Net
        cash
        used in investing activities was $4,140,659 during the first quarter of 2008
        compared to $1,259,278 used in the first quarter of 2007. This $2,881,381
        increase in cash consumed was primarily related to an increase in purchases
        of
        property and equipment of $2,052,707 and a $620,037 reduction in the net
        proceeds from the sale of available-for-sale securities as well as $149,119
        related to the acquisition of a travel agency in Ontario, Canada. The increase
        in property and equipment resulted primarily from the acquisition of an
        executive jet for $1.3 million as well as approximately $500,000 paid as
        a
        deposit on the acquisition of a building which housed our previous
        headquarters office, the closing of which is scheduled to occur before the
        end
        of the second quarter of 2008.


26


Net
      cash
      used in financing activities was $1,587,685 and $1,854,668, respectively, for
      the first quarter of 2008 and 2007. Net cash consumed by financing activities
      in
      the first quarter of 2008 resulting primarily from funds deposited in connection
      with the Company’s obtaining a Standby Letter of Credit of $1.9 million
      collateralizing the obligations of the Company’s Sales Director-level Reps’
under two cruises that they booked of which $357,167 was released during the
      quarter to the cruise line as a deposit due on such cruises. Also during the
      first quarter of 2008, a $500,000 certificate of deposit representing collateral
      for the outstanding indebtedness on the property serving as the Company’s new
      corporate headquarters was released but subsequently surrendered by the Company
      in partial repayment of the principal amount outstanding under such
      indebtedness. Cash consumed by financing activities in the first quarter of
      2007
      was primarily attributable to the repayment of the December 31, 2006 bank
      overdraft balance of $812,464 and the increase in restricted cash-collateral
      used as a reserve for credit card processing of $1,235,432 partially offset
      by
      $198,437 in proceeds from the exercise of common stock warrants issued by the
      Company.





As
      of
      March 31, 2008, we had $1,275,823 in cash and cash equivalents and $51,593
      in available for sale securities. We believe that our cash and
      available for sale securities on hand at March 31, 2008, and our cash flow
      from operations will be sufficient to meet our obligations on a timely
      basis for the next 12 months.





As
      of
      March 31, 2008, the Company's investment portfolio included $1.0 million of
      auction rate securities (“ARSs”), which are primarily backed by student loans
      originated under the Federal Family Education Loan Program, or FFELP, and are
      over-collateralized, and guaranteed by the United States Federal Department
      of
      Education. In addition, all ARSs held by the Company are rated by the major
      independent rating agencies as either AAA or Aaa at the time of purchase. Most
      of these ARSs were scheduled to reset subsequent to December 31, 2007. As of
      February 29, 2008, $1.0 million of the Company's auction rate securities,
      representing the entire portfolio of such securities, have failed auctions
      due
      to sell orders exceeding buy orders. These failures are not believed to be
      a
      credit issue, but rather caused by a lack of liquidity. Under the contractual
      terms, the issuer is obligated to pay penalty rates should an auction fail.
      In
      the near term, the Company will not be able to access these funds associated
      with the failed auctions until one of the following occurs: a successful auction
      occurs, the issuer redeems the issue, a buyer is found outside of the auction
      process or the underlying securities have matured.





Due
      to
      the current market conditions, the Company has evaluated the accounting
      treatment of its ARS investments. As a result, the Company classified the $1.0
      million in auction rate securities as long-term investments as of March 31,
      2008
      and December 31, 2007. This amount represents the entire balance of the auction
      rate securities as of March 31, 2008, none of which have yet been sold by the
      Company subsequent to the end of the first quarter of 2008. The Company’s ARSs
      are all held at one investment bank. As previously stated, all of the ARS
      investments are AAA and/or Aaa rated. The investment bank has not
      reduced the par value of the company’s ARSs on the Company’s March 31, 2008
      statement. While the failures in the auction process have affected the Company’s
      ability to access these funds in the near term, the Company does not believe
      that the values of the underlying securities or collateral have been
      affected.




27


The
          Company believes that its cash flows from operations provide it with the
          ability
          to withstand the loss in liquidity for these securities. The Company determined
          that no temporary or other-than-temporary impairment losses existed as
          of March
          31, 2008, as the Company had no evidence that the securities were valued
          at an
          amount less than par value. However, if the issuer of the auction rate
          securities is unable to successfully close future auctions or does not
          redeem
          the auction rate securities, or the United States government fails to support
          its guaranty of the obligations, the Company may be required to adjust
          the
          carrying value of the auction rate securities and record other-than-temporary
          impairment charges in future periods.
 **Off-Balance
          Sheet Arrangements**
 
 The
          Company has no off-balance sheet arrangements.
 
 **New
          Accounting Pronouncements**
 In
            December 2007, the FASB issued SFAS No. 141R (“SFAS 141R”), “Business
            Combinations”, which establishes principles and requirements for how the
            acquirer recognizes and measures in its financial statements the identifiable
            assets acquired, the liabilities assumed, and any noncontrolling interest
            in the
            acquiree, goodwill acquired in the business combination or a gain from
            a bargain
            purchase. SFAS 141R is effective for business combinations with an acquisition
            date on or after the beginning of the first annual reporting period beginning
            on
            or after December 15, 2008. The Company expects SFAS 141R to have an
            impact on
            the accounting for any future business acquisitions of the effective
            date.
 
 In
            December 2007, the FASB issued SFAS No. 160, *Noncontrolling
            Interests in Consolidated Financial Statements - an amendment of ARB
            No. 51* (“SFAS
            No. 160”). SFAS No. 160 requires the recognition of a noncontrolling interest,
            or minority interest, as equity in the consolidated financial statements
            and
            separate from the parent’s equity. The amount of net income attributable to the
            noncontrolling interest will be included in consolidated net income on
            the face
            of the income statement. SFAS No. 160 also includes expanded disclosure
            requirements regarding the interests of the parent and its noncontrolling
            interest. The Company is currently evaluating the impact his statement
            may have
            in its future financial statements.
  In
          February 2008, the Financial Accounting Standards Board (“ FASB ”)
          issued
          FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement
          No. 157” (“ FSP 157-2 ”),
          to
          partially defer the effectiveness of SFAS No. 157. FSP 157-2 defers
          the effective date of SFAS 157 for nonfinancial assets and nonfinancial
          liabilities, except those that are recognized or disclosed at fair value
          in the
          financial statements on a recurring basis (at least annually), to fiscal
          years,
          and interim periods within those fiscal years, beginning after November 15,
          2008. We are currently evaluating the impact of FSP 157-2 on our
          consolidated financial position and results of operations.
 
 In
          March
          2008, the FASB issued SFAS 161, *Disclosures
          about Derivative*  *Instruments
          and Hedging Activities* (“ SFAS
          161 ”),
          which
          requires expanded disclosures about derivative instruments and hedging
          activities.  SFAS 161 is effective for fiscal years and interim
          periods beginning after November 15, 2008, with earlier adoption
          permitted. The
          implementation of this standard is not expected to have a material impact
          on the
          Company’s consolidated financial position and results of
          operations.
 **Application
            of Critical Accounting Policies**
 
 Our
            significant accounting policies are discussed in the Notes to the Consolidated
            Financial Statements that are included in our Annual Report on Form 10-KSB
            for
            the year ended December 31, 2007 that is filed with the Securities and
            Exchange
            Commission.  In most cases, the accounting policies that we utilize are the
            only ones permissible under U.S. Generally Accepted Accounting Principles
            for
            businesses in our industry.  However, the application of certain of these
            policies requires significant judgments or a complex estimation process
            that can
            affect our results of operations and financial position, as well as the
            related
            footnote disclosures.  We base our estimates on historical experience and
            other assumptions that we believe are reasonable. If actual amounts are
            ultimately different from previous estimates, the revisions are included
            in our
            results of operations for the period in which the actual amounts become
            known.  The accounting policies and estimates that can have a significant
            impact on our operating results, financial position and footnote disclosures
            are
            described in Management’s Discussion and Analysis of Financial Condition and
            Results of Operations in our Annual Report on Form 10-KSB for the year
            ended
            December 31, 2007.
 
 **Forward-Looking
            Statements**
 
 All
            statements other than statements of historical fact included in this
            Quarterly
            Report on Form 10-QSB, including without limitation statements regarding
            our
            financial position, business strategy and the plans and objectives of
            our
            management for future operations are forward-looking statements. When
            used in
            this Quarterly Report on Form 10-QSB, 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 our management,
            as well
            as assumptions made by and information currently available to our 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, and capacity and supply constraints. Such statements reflect
            our
            views with respect to future events and are subject to these and other
            risks,
            uncertainties and assumptions relating to our operations, results of
            operations,
            growth strategy and liquidity. Readers are cautioned not to place undue
            reliance
            on these forward-looking statements. We do 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.


28


**Item
          4T.**  **Controls
          and Procedures**
  **Evaluation
          of Disclosure Controls and Procedures**
 
 Our
          management is responsible for establishing and maintaining adequate disclosure
          controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of
          the
          Securities Exchange Act of 1934, as amended (the “ Exchange
          Act ”).
          We
          continue to develop disclosure controls and procedures that are designed
          to
          ensure that information required to be disclosed in our reports under the
          Exchange Act is recorded, processed, summarized and reported within the
          time
          periods specified in the SEC’s rules and forms, and that such information is
          accumulated and communicated to management, including our Chief Executive
          Officer and Chief Financial Officer, as appropriate, to allow timely decisions
          regarding required disclosure. In designing and evaluating the disclosure
          controls and procedures, management recognizes that any controls and procedures,
          no matter how well designed and operated, can provide only reasonable assurance
          of achieving the desired control objectives, as our procedures are designed
          to
          achieve.
  As
        of the
        end of the period covered by this report, our management, under the supervision
        and with the participation of our Chief Executive Officer and Chief Financial
        Officer, conducted an evaluation of the effectiveness of our disclosure controls
        and procedures. Based upon such evaluation, our Chief Executive Officer and
        Chief Financial Officer concluded that our disclosure controls and procedures
        were effective as of the date of such evaluation to provide reasonable assurance
        that information required to be disclosed by us in the reports that we file
        or
        submit under the Exchange Act is recorded, processed, summarized and reported
        within the time periods specified by the SEC’s rules and forms.




**Changes
        in Internal Control Over Financial Reporting**
 
 Our
        management, under the supervision and with the participation of our Chief
        Executive Officer and Chief Financial Officer, conducted an evaluation
        of any
        change in our internal control over financial reporting (as defined in Rules
        13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the fiscal
        quarter covered by this Quarterly Report on Form 10-Q, and, as a result of
        such
        evaluation, has concluded that, except as noted below, there has not been
        any
        change in our internal control over financial reporting that has materially
        affected, or is reasonably likely to materially affect, our internal control
        over financial reporting.
 
 During
        the three months ended March 31, 2008, we implemented a new consolidation
        and financial reporting software package, SAP, to enhance our worldwide
        consolidation function. This software implementation is part of an ongoing
        effort to improve the effectiveness of our financial reporting process. In
        connection with this implementation, we have modified the design, operation
        and
        documentation of our internal control processes impacted by the new software.





**PART
      II - OTHER INFORMATION**





**Item
      1.** **Legal
      Proceedings.**





None.





**Item
      2.** **Unregistered
      Sales of Equity Securities and Use of Proceeds.**





None.





**Item
      3.** **Defaults
      Upon Senior Securities.**





None.





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





None.





**Item
      5.** **Other
      Information.** ****





None.




29




**Item
      6.**  **Exhibits**





3.1
            
            Form
                of Amended and Restated Certificate of Incorporation of the Company,
                effective as of July 31, 2007, incorporated by reference to the Company's
                Definitive Proxy Statement on Schedule 14A, Appendix A, filed with
                the SEC
                on April 24, 2007.3.2
            
            Amended
                and Restated By-Laws of the Company, incorporated by reference to
                the
                Company's Current Report on Form 8-K, Exhibit 3.1, filed with the
                SEC on
                September 28, 2007.4.1
            
            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 the
                Company’s Current Report on Form 8-K, as amended, Exhibit 4.1, filed with
                the SEC on June 20, 2005.4.2
            
            Agreement
                and Irrevocable Proxy, dated November 22, 2006, by and among J. Lloyd
                Tomer, J. Scott Tomer, J. Kim Sorensen, jointly and severally, and
                Michael
                Y. Brent, Derek Brent and Darren Brent, jointly and severally, with
                respect to certain matters specified therein, incorporated by reference
                to
                Exhibit 99.1 to the Schedule 13D/A filed by Great River Enterprises,
                LP
                #1, J. Lloyd Tomer, J. Scott Tomer and J. Kim Sorensen with the SEC
                on
                November 24, 2006.10.1
            
            Membership
                Interests Purchase Agreement, dated as of January 14, 2008, by and
                among the Company,Meridian/Silver,
                LLC, and WDS Holdings, LTD.10.2
            
            Form
                of Employment Agreement, dated as of January 1, 2008, by and between
                the
                Company and J. Lloyd Tomer, incorporated by reference to the Company’s
                Annual Report on Form 10-K for the year ended December 31, 2007,
                Exhibit
                10.5, filed with the SEC on March 31, 2008.10.3
            
            Form
                of Employment Agreement, dated as of January 1, 2008, by and between
                the
                Company and J. Scott Tomer, incorporated by reference to the Company’s
                Current Report on Form 8-K, Exhibit 10.1, filed with the SEC on January
                30, 2008.10.4
            
            Form
                of Employment Agreement, dated as of January 1, 2008, by and between
                the
                Company and J. Kim Sorensen, incorporated by reference to the Company’s
                Current Report on Form 8-K, Exhibit 10.3, filed with the SEC on January
                30, 2008.10.5
            
            Form
                of Employment Agreement, dated as of January 1, 2008, by and between
                the
                Company and John D. Clagg, incorporated by reference to the Company’s
                Current Report on Form 8-K, Exhibit 10.4, filed with the SEC on January
                30, 2008.10.6
            
            Form
                of Employment Agreement, dated as of January 1, 2008, by and between
                the
                Company and Andrew Cauthen, incorporated by reference to the Company’s
                Current Report on Form 8-K, Exhibit 10.1, filed with the SEC on January
                10, 2008.10.7
            
            Form
                of Employment Agreement, dated as of January 1, 2008, by and between
                the
                Company and Michael Y. Brent.31.1
            
            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 Certification pursuant to Rule 13a-14(b) of the
                Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.2*
            
            Chief
                Financial Officer Certification pursuant to Rule 13a-14(b) of the
                Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.





* These
        certifications are attached as Exhibits 32.1 and 32.2 accompanying this
        Quarterly Report on Form 10-QSB 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. Signed originals of these written
        statements required by Section 906 have 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.





30


**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned thereunto duly
      authorized.


**YTB
                International, Inc**/s/
              J. Scott TomerJ.
              Scott TomerChief
                Executive Officer and DirectorDated:
                May 15, 2008/s/
                John D. ClaggJohn
                D. ClaggChief
                Financial OfficerDated:
                May 15, 2008





31