UNIVERSAL TRAVEL GROUP - FORM 10-Q/A

Attached files

file	filename
EX-31.1 - UNIVERSAL TRAVEL GROUP	v229422_ex31-1.htm
EX-31.2 - UNIVERSAL TRAVEL GROUP	v229422_ex31-2.htm
EX-32.2 - UNIVERSAL TRAVEL GROUP	v229422_ex32-2.htm
EX-32.1 - UNIVERSAL TRAVEL GROUP	v229422_ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1 to

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

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

For the transition period from ______________ to _____________

Commission file number: 001-34284

UNIVERSAL TRAVEL GROUP

(Exact name of registrant as specified in its charter)

Nevada		90-0296536
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

9F, Building A, Rongchao Marina Bay Center NO. 2021 Haixiu Road, Bao’an District, Shenzhen People’s Republic of China		518133
(Address of principal executive offices)		(Zip Code)

86 755 836 68489

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed 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.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o 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.

Large accelerated filer	o	Accelerated filer	o

Non-accelerated filer	o	Smaller reporting company	x

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

As of May 4, 2010, there are 16,930,218 shares of $0.001 par value common stock issued and outstanding.

EXPLANATORY NOTE

This Amendment No. 1 to Form 10-Q (this “Amendment”) hereby amends our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2010, previously filed with the Securities and Exchange Commission (the “Commission’) on May 11, 2010 (the “Original Filing”). This Amendment is being filed mainly to reclassify and restate certain line items on the March 31, 2010 unaudited consolidated financial statements.

In this Amendment, the Company has

Reclassified cash restricted by local travel bureau from cash and cash equivalent to restricted cash;

Restated goodwill, intangible assets, deferred tax liabilities, and retained earnings due to an inconsistency between the acquisition dates of three new subsidiaries per the Company's 8-K filings and the reported periods of profit and loss statements included in the consolidated financial statements of the Company;

Reclassified business tax and levies from selling expenses and COGS to revenues;

Reclassified commission paid to retail air ticketing agencies from selling expenses to COGS;

Restated overstated net income $543,406, revenues $5,704,228, and expenses due to an inconsistency between the acquisition dates of three new subsidiaries per the Company's 8-K filings and the reported periods of profit and loss statements included in the consolidated financial statements of the Company;

Restated overstated retained earnings $543,406 due to an inconsistency between the acquisition dates of three new subsidiaries per the Company's 8-K filings and the reported periods of profit and loss statements included in the consolidated financial statements of the company;

Reclassified the revenue and cost of services of hotel reservation business in Huangshan Holiday Travel Service Co., Ltd. from packaged tours segment to hotel reservation segment;

Reclassified the revenue and cost of services of packaged tours business in Chongqing Travel World E-Business Co., Ltd. from air ticketing segment to packaged tours segment; and

Restated the corresponding line items on the consolidated statements of cash flows, as result of above reclassifications and restatement.

Pursuant to the above reclassification and restatements, we have also revised our disclosure under Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), this Amendment contains new certifications pursuant to Rules 13a-14 and 15d-14 under the Exchange Act and Section 302 of the Sarbanes-Oxley Act of 2002.

Except as discussed above, the Company has not modified or updated disclosures presented in this Amendment, except as required to reflect the effects of the restatement. Accordingly, this Amendment does not reflect events occurring after the Original Filing or modify or update those disclosures affected by subsequent events, except as specifically referenced herein. Information not affected by the restatement is unchanged and reflects the disclosures made at the time of the Original Filing.

FORM 10-Q/A

UNIVERSAL TRAVEL GROUP

INDEX

		Page

PART I.	Financial Information	4

	Item 1. Financial Statements (Unaudited)	4

	Report of Independent Registered Public Accounting Firm	5

	Consolidated Balance Sheets as of March 31, 2010 (Unaudited) and December 31, 2009	7

	Consolidated Statements of Income for the Three Months Ended March 31, 2010 and 2009 (Unaudited)	8

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009 (Unaudited)	9

	Consolidated Statements of Stockholders' Equity	10

	Notes to Consolidated Financial Statements as of March 31, 2010 (Unaudited)	11

	Item 2. Management’s Discussion and Analysis of Financial Condition or Results of Operation	36

	Item 3. Quantitative and Qualitative Disclosures About Market Risk.	42

	Item 4. Controls and Procedures	42

PART II.	Other Information	42

	Item 1. Legal Proceedings	42

	Item 1A. Risk Factors.	42

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	43

	Item 3. Defaults Upon Senior Securities	43

	Item 4. (Removed and Reserved).	43

	Item 5. Other Information	43

	Item 6. Exhibits	43

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

UNIVERSAL TRAVEL GROUP

CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

ACSB Acquavella, Chiarelli, Shuster, Berkower & Co., LLP
517 Route one	1 Penn Plaza
Iselin, New Jersey, 08830	36the Floor
732.855.9600	New York, NY 10119

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Universal Travel Group

We have reviewed the accompanying balance sheet of Universal Travel Group. (the “Company”) as of March 31, 2010, and the related statements of income, stockholders’ equity and comprehensive income, and cash flows for the three-month period ended March 31, 2010. These financial statements are the responsibility of the company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2009 and the related consolidated statements of income, retained earnings and comprehensive income, and consolidated statement of cash flows for the year then ended; and in our report dated February 22, 2010, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2009, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Acquavella, Chiarelli, Shuster, Berkower & Co., LLP

Certified Public Accountant

New York, N.Y.

May 10, 2010

TABLE OF CONTENTS

Consolidated Balance Sheets		7

Unaudited Consolidated Statements of Income and Comprehensive Income		8

Unaudited Consolidated Statements of Cash Flows		9

Unaudited Consolidated Statements of Stockholders’ Equity		10

Notes to Unaudited Consolidated Financial Statements		11-35

UNIVERSAL TRAVEL GROUP

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2010 AND DECEMBER 31, 2009

	March 31, 2010		December 31, 2009
	Unaudited Restated		Restated
ASSETS
Cash and cash equivalents	$	37,660,201	$	36,574,741
Restricted cash		172,871		102,681
Accounts receivable, net		18,832,395		17,321,174
Other receivables and deposits, net		1,282,919		257,907
Trade deposit		10,580,801		9,775,735
Advances		439,504		440,063
Prepaid expenses		49,076		216,727
Note receivable		738,457		1,711,392
Acquisition deposits		-		4,077,921
Total Current Assets		69,756,224		70,478,341

Property, plant & equipment, net		5,465,481		4,992,677
Intangible assets		2,334,377		339,240
Goodwill		18,921,485		9,896,270
Total Noncurrent Assets		26,721,343		15,228,187
Total Assets	$	96,477,567	$	85,706,528

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	8,187,468	$	2,615,730
Customer deposits		1,555,445		2,000,117
Income tax payable		1,299,373		1,654,475
Total Current Liabilities		11,042,286		6,270,322
Derivative liability		1,705,868		1,815,319
Deferred tax liabilities		495,589		-
Total Liabilities		13,243,743		8,085,641

Stockholders' Equity
Common stock, $.001 par value, 70,000,000 shares authorized, 16,930,218 and 16,714,457 issued and outstanding at March 31, 2010 and December 31, 2009, respectively		16,929		16,714
Additional paid in capital		40,043,651		37,671,645
Statutory reserve		570,329		372,144
Retained earnings		41,461,686		37,915,251
Accumulated other comprehensive income		1,141,229		1,645,133
Total Stockholders' Equity		83,233,824		77,620,887
Total Liabilities and Stockholders' Equity	$	96,477,567	$	85,706,528

The accompanying notes are an integral part of these consolidated financial statements.

UNIVERSAL TRAVEL GROUP

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31,

	March 31, 2010			March 31, 2009
	Restated
Gross revenues,	$	20,425,779		$	15,421,993
Cost of services		14,169,485			10,306,052
Gross Profit		6,256,294			5,115,941

Selling, general and administrative expenses		1,565,987			876,929

Income from operations		4,690,307			4,239,012

Other income (expense)
Other income		3,554			3,828
Gain on change in fair value of derivative liabilities		109,451			113,265
Interest income		22,189			10,939
Total other income		135,194			128,032
Income before income taxes - continuing operation		4,825,501			4,367,044

Provision for income taxes		1,279,066			1,117,196
Net Income - continuing operation		3,546,435			3,249,848

Income from discontinued operations		-			131,693
Net income (loss) from discontinued operation		-			131,693

Net Income	$	3,546,435		$	3,381,541

Net income per common share - continuing operation
Basic	$	0.21		$	0.23
Diluted	$	0.20		$	0.23

Net income per common share - discontinued operation
Basic	$	-		$	0.01
Diluted	$	-		$	0.01

Weighted average common shares outstanding
Basic		16,822,339			13,873,969
Diluted		18,019,257			13,885,722

Net income	$	3,546,435		$	3,249,848
Translation		(503,904	)		34,707
Comprehensive income	$	3,042,531		$	3,284,555

The accompanying notes are an integral part of these unaudited consolidated financial statements.

UNIVERSAL TRAVEL GROUP

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31,

	2010			2009
	Restated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	3,546,435		$	3,249,850
Add (deduct):
Net income (loss) from discontinued operations		-			131,693
Income from continuing operations		3,546,435			3,381,543
Add (deduct):
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		301,104			84,656
Provision for doubtful accounts		24,931			9,205
Stock based compensation		336,632			165,000
Gain on change in fair value of derivative liabilities		(109,451	)		(113,265	)
(Increase) / decrease in assets:
Restricted cash		(70,190	)		-
Accounts receivable		(1,365,395	)		(2,279,625	)
Other receivable		(392,698	)		(176,658	)
Advances		559			(513	)
Prepaid expenses		199,876			123,111
Trade deposits		(796,862	)		2,003,342
Escrow deposits		-			600,499
Increase / (decrease) in current liabilities:
Accounts payable and accrued expenses		5,167,468			718,269
Customer deposits		(456,392	)		366,025
Income tax payable		(589,990	)		(784,295	)
Deferred tax liabilities		495,589			-
Net cash provided by continuing operations		6,291,615			4,097,294
Net cash provided by discontinued operations		-			92,516
Net cash provided by operating activities		6,291,615			4,189,810

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property & equipment		(619,616	)		(1,260,398	)
Purchase of intangibles		(29,298	)		-
Proceeds from collection of notes		972,935			-
Acquisition deposits		4,077,921			-
Paid for acquisition – net of cash acquired		(9,354,457	)		-
Net cash (used in) continuing operations		(4,952,515	)		(1,260,398	)
Net cash (used in) discontinued operations		-			-
Net cash (used in) continuing operations		(4,952,515	)		(1,260,398	)

Effect of exchange rate changes on cash and cash equivalents		(253,640	)		37,334

Net change in cash and cash equivalents		1,085,460			2,966,746
Cash and cash equivalents, beginning balance		36,574,741			16,204,531
Cash and cash equivalents, ending balance	$	37,660,201		$	19,171,277

SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Interest payments	$	-		$	-
Income taxes	$	1,354,660		$	1,929,630
Other non-cash transactions
Purchased goodwill	$	(9,025,215	)	$	-
Purchased intangible assets		(1,982,354	)		-
Fair value of assets purchased less cash acquired		(382,477	)		-
Acquisition financed with stock issuance		2,035,589			-
Acquisition paid for with cash – net of acquired	$	(9,354,457	)	$	-

The accompanying notes are an integral part of these unaudited consolidated financial statements.

UNIVERSAL TRAVEL GROUP

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2010 (UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 2009

						Additional							Other			Total
						Paid In			Statutory		Retained		Comprehensive			Stockholders’
			Amount			Capital			Reserve		Earnings		Income			Equity

Balance December 31, 2008	13,873,969		$	13,873		$	15,861,116		$	372,144	$	26,633,573	$	1,520,166		$	44,400,872

Restated
Cumulative effect of a change in accounting principle-adoption of EITF 07-05 effective January 1, 2009							(2,091,738	)				536,777					(1,554,961	)
Stock based compensation – Net of warrants exercise	41,120			42			1,154,367										1,154,409
Fair market value Of treasury stock received and retired	(238,095	)		(239	)		(2,780,711	)									(2,780,950	)
Warrants exercised	235,569			236			6,571,594										6,571,830
Options cashless exercised	576,372			577			(577	)									-
Option cash exercised	3,300			3			9,567										9,570
Stock issued for cash net of offering costs	2,222,222			2,222			18,948,027										18,950,249
Income for the year ended December 31, 2009												10,744,901					10,744,901
Foreign currency translation adjustments														124,967			124,967

Balance December 31, 2009 (restated)	16,714,457			16,714			37,671,645			372,144		37,915,251		1,645,133			77,620,887
Stock based compensation							336,632										336,632
Stock issued for acquisitions	215,761			215			2,035,374			198,185							2,233,774
Income for the three months ended March 31, 2010												3,546,435					3,546,435
Foreign currency translation adjustments														(503,904	)		(503,904	)

Balance March 31, 2010 (restated)	16,930,218		$	16,929		$	40,043,651		$	570,329	$	41,461,686	$	1,141,229		$	83,233,824

The accompanying notes are an integral part of these unaudited consolidated financial statements.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 1 - ORGANIZATION

Universal Travel Group was incorporated on January 28, 2004 under the laws of the State of Nevada. Full Power Enterprise Global Limited – BVI was incorporated under the laws of the British Virginia Islands. Shenzhen Yuzhilu Aviation Service Co., Ltd. was incorporated on March 9, 1998 under the laws of the Peoples Republic of China (PRC)., Shenzhen Speedy Dragon Enterprises Limited was incorporated in August of 2002 under the laws of the Peoples Republic of China (PRC), Xian Golden Net Travel Serve Services was incorporated on July 25, 2001 under the laws of the Peoples Republic of China, Xian City, Shanghai Lanbao Travel Service Co., Ltd. was established in 2002 under the laws of Shanghai China. Foshan Overseas International Travel Service Co., Ltd. was incorporated in 1990 under the laws of the Peoples Republic of China, Chongqing Universal Travel E-Commerce Co., Ltd. and Shenzhen Universal Travel Agency Co., Ltd. were both incorporated in 2009 under the laws of the Peoples Republic of China, Hebei Tianyuan Travel Agency Co., Ltd. was incorporated in April 1999 under the laws of the Peoples Republic of China, Huangshan Holiday Travel Service Co., Ltd. was incorporated in April 1999 under the laws of the Peoples Republic of China, Zhengzhou Yulongkang Travel Agency Co., Ltd. was incorporate in 2000 under the laws of the Peoples Republic of China. Full Power Enterprise Global Limited owns 100% of the Shenzhen Yuzhilu Aviation Service Co., Ltd. Collectively these corporations are referred to herein as the Company.

On June 12, 2009, the Company entered into a termination agreement with Shenzhen Speedy Dragon Enterprise Limited. Accordingly, the Company has accounted for Shenzhen Speedy Dragon Enterprise Limited adiscontinued operations. The Company is now engaged in the travel business, including airline ticketing, hotel reservation services and technological solutions to travel reservations, and tour planning and tour guide services.

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying audited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The Company's functional currency is the Chinese Renminbi, however the accompanying audited consolidated financial statements have been translated and presented in United States Dollars.

Reclassification

Certain prior-year amounts have been reclassified to conform to the current-year presentation. These reclassifications had no effect on reported income or losses.

Discontinued Operations

On June 12, 2009, the Company entered into a termination agreement with Shenzhen Speedy Dragon Enterprise Limited (“Speedy Dragon”). The Company had acquired all the equity interest in Speedy Dragon on or about April 10, 2007 in exchange for 238,095 (post-reverse split) shares of the Company’s common stock and an interest-free promissory note in the principal amount of $3,000,000 payable no later than April 10, 2008 (see Note 7). Pursuant to the termination agreement, the Company transferred back the equity interest in Speedy Dragon on or before June 30, 2009 and that the 238,095 (post-reverse split) shares of the Company’s common stock were returned to the Company and canceled as of June 30, 2009. In addition, the sole shareholder of Speedy Dragon was also required to return to the Company an aggregate of $2,773,411, in cash, within one year of the completion of all the formalities of the termination agreement. The cash to be returned to the Company included a declared dividend in the amount of $2,260,981 to be paid to the Company.

Accordingly, the Company has accounted for Shenzhen Speedy Dragon Enterprise Limited as discontinued operations. The consolidated financial statements reflect the operating results and balance sheet items of the discontinued operations separately from continuing operations. Prior year’s amounts have been reclassified to confirm with current year’s presentation of the discontinued operations. The following table summarized the operating result of the discontinued operations for the three month ended March 31, 2009.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Discontinued Operations (Continued)

	March 31,
	2009
Sales	$	1,858,999
Cost of sales		(1,604,303	)
Gross profit		254,696
Operating expenses		(94,932	)
Income from discontinued operation before income tax		159,764
Income tax		(28,071	)
Net Income from discontinued operations	$	131,693

Translation Adjustment

As of March 31, 2010 and December 31, 2009 the accounts of Universal Travel Group were maintained, and its financial statements were expressed, in Chinese Yuan Renminbi (CNY). Such financial statements were translated into U.S. Dollars (USD) in accordance with the Foreign Currency Matters Topic of the FASB Accounting Standards Codification (“ASC 830”) with the CNY as the functional currency. According to the Statement, all assets and liabilities were translated at the current exchange rate, stockholders equity are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with the Comprehensive Income Topic of the FASB Accounting Standard Codification (“ASC 220”). Transaction gains and losses are reflected in the income statement.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of Universal Travel Group and its wholly owned subsidiaries Shenzhen Yuzhilu Aviation Service Co., Ltd., Shenzhen Speedy Dragon Enterprises Limited, Shanghai Lanbao Travel Service Co., Ltd., Xian Golden Net Travel Serve Services, Ltd., Foshan Overseas International Travel Service Co. Ltd., Chongqing Universal Travel E-Commerce Co., Ltd., Shenzhen Universal Travel Agency Co., Ltd., Hebei Tianyuan Travel Agency Co., Ltd., Huangshan Holiday Travel Service Co., Ltd., Zhengzhou Yulongkang Travel Agency Co., Ltd., and Full Power Enterprise Global Limited collectively referred to herein as the Company. On June 12, 2009 the Company entered into a termination agreement with Shenzhen Speedy Dragon Enterprise Limited. Accordingly, the Company has accounted for Shenzhen Speedy Dragon Enterprise Limited as a discontinued operations. The consolidated financial statements reflect the operating results and balance sheet items of the discontinued operations separately from continuing operations. Prior year’s amounts have been reclassified to confirm with current year’s presentation of the discontinued operations. All material inter-company accounts, transactions and profits have been eliminated in consolidation.

Risks and Uncertainties

The Company is subject to substantial risks from, among other things, intense competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility of public markets.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Contingencies

Certain conditions may exist as of the date the financial statements are issued. These conditions may result in a future 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 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.

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 would be accrued in the Company’s financial statements. If the assessment indicates that a potential 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 would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.

Restricted Cash

Restricted cash of $172,871 and $102,681 as of March 31, 2010 and December 31, 2009, respectively, consists of cash deposited in bank required and hold by Providence Travel Bureaus.

Accounts Receivable

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Terms of the sales vary. Reserves are recorded primarily on a specific identification basis. Allowance for doubtful accounts amounted to $439,858 and $414,927 as of March 31, 2010 and December 31, 2009, respectively.

Description		Balance at beginning of year				Charged to expenses				Deductions				Balance at end of year
Allowance for doubtful receivables		$	414,927			$	24,931			$	-			$	439,858

Reverse Split

On March 31, 2009 the Company effected a three-for-one (3:1) reverse split of the Company’s issued and outstanding shares of common stock, decreasing the number of outstanding shares from 41,619,966 to 13,873,969. These statements have been adjusted to reflect this reverse split on a historical pro-forma basis.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property & Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives of:

Furniture and Fixtures	5 years
Transportation equipment	5 years
Office equipment	5 years
Leasehold Improvements	5 – 10 years

As of March 31, 2010 and December 31, 2009, Property & Equipment of consist of the following:

	March 31,2010			December 31,2009
Furniture & fixtures	$	52,600		$	23,560
Transportation equipment		237,672			150,232
Office equipment		4,856,620			4,146,637
Leasehold improvements		1,439,270			1,385,481
		6,586,162			5,705,910
Accumulated depreciation		(1,120,681	)		(713,233	)
	$	5,465,481		$	4,992,677

Depreciation expense for the three months ended March 31, 2010 and 2009 was $284,589 and $60,082, respectively, of which $48,192 and $54,074 was included as part of cost of services for the three months ended March 31, 2010 and 2009, respectively.

Goodwill

Goodwill represents the excess cost of a business acquisition over the fair value of the net assets acquired. In accordance with the Intangibles, Goodwill and other topic of the FASB Accounting Standard Codification (“ASC 350”), indefinite-life identifiable intangible assets and goodwill are not amortized. Under the provisions of ASC 350, we are required to perform an annual impairment test of our goodwill. Goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit, which we define as our business segments, with its net book value or carrying amount including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. The fair value of the reporting unit is allocated to all of the assets and liabilities of that unit including any unrecognized intangible assets as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit. See Note 7, Purchase of Subsidiaries, for additional information regarding goodwill.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Goodwill (Continued)

As of March 31, 2010 and December 31, 2009, Goodwill consists of the following:

	March 31, 2010 Restated		December 31,2009
Shanghai Lanbao Travel Service Co., Ltd.	$	3,081,799	$	3,081,799
Foshan International Travel Service Co., Ltd.		6,049,576		6,049,576
Xian Golden Net Travel Serve Services Co.,Ltd		764,895		764,895
Zhengzhou Yulongkang Agency Co., Ltd		3,812,004		-
Hebei Taiyuan Travel Agency Co., Ltd		3,320,700		-
Huangshan Holiday Travel Service Co., Ltd		1,892,511		-
	$	18,921,485	$	9,896,270

Long-Lived Assets

The Company adopted the Property, Plant and Equipment Topic of the FASB Accounting Standard Codification (“ASC 360”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations for a Disposal of a Segment of a Business. The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with ASC 360. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. Based on its review, the Company believes that, as of March 31, 2010 and December 31, 2009 there were no significant impairments of its long-lived assets.

Derivative Liability

The Company issued warrants in connection with the “Securities Purchase Agreement” dated August 28, 2008 with certain reset exercise price provisions. If the Company issues or sells shares of its common stock after the August 28, 2008 Securities Purchase Agreement or Financing for an amount less than the original exercise price per share, the exercise price of the warrants is reduced to equal the new issuance price of those shares.

Upon the Company’s adoption of the Derivative and Hedging Topic of the FASB Accounting Standards Codification (“ASC 815”) on January 1, 2009, the Company determined that the warrants did not qualify for a scope exception under ASC 815 as they were determined to not be indexed to the Company’s stock as prescribed by ASC 815. On January 1, 2009, the warrants, under ASC 815, were reclassified from equity to derivative liability at its fair market value of $2,091,738 and marked to market. The values of the warrants were decreased by $536,777 from the warrants issuance date to the adoption date of ASC 815 on January 1, 2009. As of January 1, 2009, the cumulative effect in adopting ASC 815 was a reduction to additional paid in capital of $2,091,738 to reclassify the warrants from equity to derivative liability and an increase in retained earnings of $536,777 as a cumulative effect of a change in accounting principle to reflect the change in the value of the warrants between their issuance date and January 1, 2009. For the three month ended March 31, 2010, the Company recorded a gain on change in fair value of derivative liability of $109,451 to mark to market for the increase in fair value of the warrants during the three months ended March 31, 2010. Under ASC 815, the warrants will be carried at fair value and adjusted at each reporting period. As of March 31, 2010 and 2009, there were warrants outstanding to purchase 227,151 and 764,785 shares of common stock related to the derivative liabilities - warrants.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Derivative Liability (Continued)

The Company determined the fair value of the reset provisions at January 1, 2009 was $1,470,199 as the initial fair value at the adoption date of EITF No. 07-05. The fair value originally was determined using the Black-Scholes Option Pricing model based on the following assumptions: dividend yield: 0%; volatility:129%, risk free rate: 1.72%, expected term: 4.65 years.

The Company determined the fair value of the reset provisions at March 31, 2010 was $1,705,868. The fair value was determined using the Black Scholes Option Pricing Model based on the following assumptions: dividend yield: -0-%; volatility: 117%, risk free rate: 2.55%, expected term: 3.41years.

Fair Value of Financial Instruments

FASB Accounting Standards Codification Topic on Fair Value Measurements and Disclosures (“ASC 820”) requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value.

Revenue Recognition

The Company’s revenue recognition policies are in compliance with FASB Accounting Standards Codification Topic on Revenue Recognition (“ASC 605”). Revenue is recognized at the date the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

The Company had four types of revenue stream from its four lines of businesses, namely (i) air-ticketing (Shenzhen Yuzhilu Aviation Service Co., Ltd. and Chongqing Universal Travel E-Commerce Co., Ltd.), (ii) hotel reservations (Shanghai Lanbao Travel Service Co., Ltd.), (iii) packaged tours (Foshan Overseas International Travel Service Co., Ltd., Xian Golden Net Travel Serve Services Co., Ltd. and Shenzhen Universal Travel Agency Co., Ltd.) and (iv) air cargo agency services (Shenzhen Speedy Dragon Enterprises Ltd.). On June 12, 2009, the Company entered into a termination agreement with Shenzhen Speedy Dragon Enterprise Ltd. Accordingly the Company has accounted for Shenzhen Speedy Dragon Enterprise Ltd, its air cargo agency services as a discontinued operation (see Note 2 Discontinued Operations). Effective June 12, 2009, the Company has three types of revenue stream from its current three lines of businesses.

Air-ticketing services

The Company receives commissions from travel suppliers for air-ticketing services through its transaction and service platform under various services agreements. The Company does not charge customers differently from the prices provided by travel suppliers. The Company has no discretion on the air ticket prices or the applicable commission rates as they are dictated by the travel suppliers. Commissions from air-ticketing services rendered are recognized after air tickets are issued. The Company presents revenues from such transactions on a net basis in the statements of income as the Company, generally, does not assume inventory risks and has no obligations for cancelled airline ticket reservations.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Hotel reservation services

The Company receives commissions from travel suppliers for hotel room reservations through its transaction and service platform. The Company does not charge customers differently from the prices provided by hotel suppliers. The Company has no discretion on the hotel room prices or the applicable commission rates as they are dictated by the hotel suppliers. Commissions from hotel reservation services rendered are recognized after hotel customers have completed their stay at the applicable hotel and upon confirmation of pending payment of the commissions by the hotel. The Company presents revenues from such transactions on a net basis in the statements of income as the Company, generally, does not assume inventory risks and has no obligations for cancelled hotel reservations.

Packaged-tour

The Company receives fees from providing domestic and cross-boarder travel tour our services. The Company contracts with traffic service providers, accommodation providers and leisure service providers to purchase air tickets, train and coach tickets, accommodation and leisure or entertainment packages in bulk and then resell them to its customers with a mark-up. Fees generated from packaged-tour are recognized on a gross basis in the statements of income, when the tour is completed, as the Company, generally, undertakes the majority of the business risk. The Company is the primary obligor to pay the service providers upon rendering of those services. In addition, the Company acts as principal related to the packaged-tour services rendered or when tour is completed and collections are reasonably assured. Generally, the Company does not issue refund to its customers unless cancellation is due to its and or the service provider’s non-delivery of services. Historically, refunds and cancellations do not have a material impact on the Company’s consolidated financial statements in any accounting period.

Air Cargo Business

The Company received fees from its air cargo business. However, this business segment had been accounted for as a discontinued operation upon consummation of a termination agreement with Shenzhen Speedy Dragon Enterprise Ltd dated June 12, 2009. The Company basically brokered air cargo spaces and resell them to local logistic companies to generate revenue. The Company had contracted with Chinese domestic airlines as its vendors to carry out its cargo services. Revenues generated from air cargo business were recognized on a gross basis in the statements of income, when the service was rendered, as the Company, generally, undertook the majority of the business risk. The Company was the primary obligor to pay the service providers upon rendering of those services. In addition, the Company acted as principal related to the air cargo services rendered and collections are reasonably assured. Customers were charged based on the class and weight of goods shipped.

Historically, the Company has experienced minimum and or immaterial returns and or cancellation from its four lines of businesses, which amount if any, would have no material impact on its consolidated financial statements. Accordingly, no allowance has been provided for in the periods presented.

Cost of Services

Costs of services for air tickets cover mainly revenue related commissions paid to retail agents. Costs of services for hotel reservations cover mainly commissions paid to the sales agents for selling hotel rooms in the Company’s system. Costs of services for the cargo agency business mainly include the costs of warehousing and delivery charges. Costs of services for packaged tours include meals, transportation (airline tickets, train tickets and car rental), lodging, airport transfers, tickets to local attractions and tours.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cost of Services (Continued)

Other direct costs such as systems and related technologies used by each segment operations, and costs associated with payment processing are also included in the Company’s Costs of Services. In addition, the Company allocates costs of labor and facilities, depreciation, communications, and utility expenses incurred by each segment between costs of services and general administrative expenses. The percentage, ranging from 50% to 80%, allocated to costs of sales is based on management estimate, and the percentage allocated is estimated to be directly associated with the generation of revenues.

Consolidated costs such as stock-based compensation and corporate professional fees are not allocated to any segment. These costs are reported as general operating expenses in the Company’s Statements of Operations. For the three month ended March 31, 2010 and for the years ended December 31, 2009, such expenses amounted $336,632 and $2,393,958.

Advertising

Advertising expenses consist primarily of costs of promotion for corporate image and product marketing and costs of direct advertising. The Company expenses all advertising costs as incurred.

Income Taxes

The Company utilizes FASB Accounting Standards Codification Topic on Income Taxes (“ASC 740”), which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

Statement of Cash Flows

In accordance with FASB Accounting Standards Codification Topic on Statement of Cash flows (“ASC 230”), cash flows from the Company’s operations are based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

Intangibles

Intangible assets are amortized using the straight-line method over their estimated period of benefit. Evaluation of the recoverability of intangible assets is made annually to take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of our intangible assets are subject to amortization. No impairments of intangible assets have been identified during any of the periods presented. The Company’s intangible assets consist primarily of map of hotels and scenic spots used for marketing purposes, CRM systems software, and Organization cost of new companies. These definitive lived intangible assets are being amortized over their useful lives. Expenditures of $29,298 and $0 were capitalized for the three months ended March 31, 2010 and 2009 and will be amortized over a 5 year life. In conjunction the acquisitions during the three months ended March 31, 2010, the Company capitalized $1,982,354 of Identifiable Intangible Assets, which are being amortized over 5 years. The Company recorded amortization expense for intangible assets of $16,515 and $27,201, for the three months ended March 31, 2010 and 2009, respectively. The Company will record approximately $68,013, $68,013, and $68,013 over the next three years, respectively.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has a diversified customer base, most of which are in China. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.

Net Income (Loss) Per Share

The Company accounts for net income (loss) per share in accordance with FASB Accounting Standards Codification Topic on Earning Per Share (“ASC 260”), which requires presentation of basic and diluted EPS on the face of the statement of income for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS. Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during each period. It excludes the dilutive effects of potentially issuable common shares such as those related to the Company’s warrants and stock options (calculated using the treasury stock method). Diluted net income (loss) per share is calculated by including potentially dilutive share issuances in the denominator.

The following table sets forth the computation of basic and diluted earnings per share of common stock:

	Three months ended March 31,
	2010			2009
	Restated			Restated
Basic earnings from continuing operations per share:
Numerator:
Income from continuing operations used in computing basic earnings per share		$	3,546,435		$	3,249,848
Income from continuing operations applicable to common shareholders		$	3,546,435		$	3,249,848
Denominator:
Weighted average common shares outstanding			16,822,339			13,873,969
Basic earnings (losses) per share from continuing operations		$	0.21		$	0.23
Diluted earnings per share from continuing operations:
Numerator:
Income from continuing operations used in computing diluted earnings (losses) per share		$	3,546,435		$	3,249,848
Income from continuing operations applicable to common shareholders		$	3,546,435		$	3,249,848
Denominator:
Weighted average common shares outstanding			16,822,339			13,873,969
Weighted average effect of dilutive securities:
Stock options and warrants			1,196,918			11,753.00
Shares used in computing diluted net income per share			18,019,257			13,885,722
Diluted earnings per share from continuing operations		$	0.20		$	0.23
Basic earnings from discontinued operations per share:
Numerator:
Income from discontinued operations used in computing basic earnings per share		$	-		$	131,693
Income from discontinued operations applicable to common shareholders		$	-		$	131,693
Denominator:
Weighted average common shares outstanding			16,822,339			13,873,969
Basic earnings per share from discontinued operations		$	-		$	0.01
Diluted earnings per share from discontinued operations:
Numerator:
Income from discontinued operations used in computing diluted earnings (losses) per share		$	-		$	131,693
Income from discontinued operations applicable to common shareholders		$	-		$	131,693
Denominator:
Weighted average common shares outstanding			16,822,339			13,873,969
Weighted average effect of dilutive securities:
Stock options and warrants			1,196,918			11,753
Shares used in computing diluted net income (loss) per share			18,019,257			13,885,722
Diluted losses(earnings) earnings per share from discontinued operations		$	-		$	0.01
Total net income per common share
Basic		$	0.21		$	0.24
Diluted		$	0.20		$	0.24

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements

In February, 2007, FASB issued SFAS 159 ‘The Fair Value Option for Financial Assets and Financial Liabilities’ – Including an Amendment of FABS Statement No. 115. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. This statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments. This statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, SFAS No 159 was superseded by the Financial Instruments Topic of FASB Accounting Standards Codification (“ASC 825”), the adoption of this accounting requirement has no effect on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements” (“SFAS 160”). This Statement amends ARB 51 to establish accounting and reporting standards for the non-controlling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). SFAS No 160 was superseded by the Consolidation Topic of FASB Accounting Standards Codification (“ASC 810”) The Company adopted SFAS 160 on January 1, 2009. The adoption of this statement had no effect on the Company’s consolidated financial statements.

In March 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The new standard also improves transparency about the location and amounts of derivative instruments in an entity’s financial statements; how derivative instruments and related hedged items are accounted for under Statement 133; and how derivative instruments and related hedged items affect its financial position, financial performance, and cash flows. SFAS No 161 was superseded by the Derivative and Hedging Topic of FASB Accounting Standards Codification (“ASC 815”).

On May 8, 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 162, The Hierarchy of Generally Accepted Accounting Principles, which will provide framework for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (GAAP) for nongovernmental entities. With the issuance of SFAS No. 162, the GAAP hierarchy for nongovernmental entities will move from auditing literature to accounting literature. SFAS No 162 was superseded by the General Accounting Principle Topic of FASB Accounting Standards Codification (“ASC 105”).

In June 2008, the FASB ratified the consensus reached on Emerging Issues Task Force (“EITF”) Issue No. 07-05, 05”). EITF No. 07-05 clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock, which would qualify as a scope exception under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. EITF No. 07-05 is effective for financial statements issued for fiscal years beginning after December 15, 2008. EITF No. 07-05 was superseded by the Derivative and Hedging Topic of FASB Accounting Standards Codification (“ASC 815”). Based on the Company’s evaluation of this issue, the adoption of this accounting requirement has a material effect on the Company’s consolidated financial statements, please see note above under “Derivative Liability”.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (Continued)

In June 2009, the FASB issued amended standards for determining whether to consolidate a variable interest entity. These amended standards eliminate a mandatory quantitative approach to determine whether a variable interest gives the entity a controlling financial interest in a variable interest entity in favor of a qualitatively focused analysis, and require an ongoing reassessment of whether an entity is the primary beneficiary. These amended standards are effective for us beginning in the first quarter of fiscal year 2010 and we are currently evaluating the impact that adoption will have on our consolidated financial statements.

In June 2009, the FASB issued ASC 855 (previously SFAS No. 165, Subsequent Events), which establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before the financial statements are issued or available to be issued. It is effective for interim and annual periods ending after June 15, 2009. There was no material impact upon the adoption of this standard on the Company’s consolidated financial statements.

In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends ASC Topic 820, Measuring Liabilities at Fair Value, which provides additional guidance on the measurement of liabilities at fair value. These amended standards clarify that in circumstances in which a quoted price in an active market for the identical liability is not available, we are required to use the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities, or quoted prices for similar liabilities when traded as assets. If these quoted prices are not available, we are required to use another valuation technique, such as an income approach or a market approach. These amended standards are effective for us beginning in the fourth quarter of fiscal year 2009. There was no material impact upon the adoption of this standard on the Company’s consolidated financial statements.

In January 2010, the FASB issued Accounting Standards Update No. 2010-06 (ASU 2010-06), Fair Value Measurements and Disclosures which amends ASC Topic 820, adding new requirements for disclosures for Levels 1 and 2, separate disclosures of purchases, sales, issuances, and settlements relating to Level 3 measurements and clarification of existing fair value disclosures. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010 (the Company’s fiscal year 2012); early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2009-14 on its financial statements.

Merger and Corporate Restructure

On June 26, 2006 the company entered into an agreement and plan of merger with Full Power Enterprises Global Limited, a holding company that owns all of the issued and outstanding shares of Shenzhen Yuzhilu Aviation Service Company Limited, the operating Company. In substance the agreement is a recapitalization of Shenzhen Yuzhilu Aviation Service Company’s capital structure.

For accounting purposes, the company accounted for the transaction as a reverse acquisition and with Full Power Enterprises Global Limited being the surviving entity. The Company did not recognize goodwill or any intangible assets in connection with the transaction. Prior to the Agreement, the company was an inactive corporation with no significant assets and liabilities.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 3 – TRADE DEPOSITS AND ADVANCES

Trade deposits represents amount held by Airlines and deposits. As of March 31, 2010 and December 31, 2009 the Company had paid $10,580,801 and $9,775,735 as trade deposits respectively.

The following summaries the Company’s deposits outstanding by each of its subsidiaries and the nature and purpose of each deposit as of March 31, 2010 and December 31, 2009:

	March 31,		December 31,
	2010		2009
Shenzhen Yuzhilu Aviation Service Co., Ltd:
Deposit for tripeasy kiosks. The Company will start record of asset and depreciation on a 5 year straight-line method for the actual number of kiosk when they start operation.	$	860,729	$	1,465,592
Deposit for tripeasy Kiosks location. This were deposits for admittance to install tripeasy at each location and paid to real estate management companies.		418,662		-
Deposit for airlines. This was a credit based for issuing air-tickets, and the full amount is returnable if the company discontinues air-ticket business.		1,713,750		2,811,004
Deposit for Financial System Software		-		16,898
Deposit for air-ports. This was a deposit for admittance to do marketing in air-ports, and is deductible against monthly rental obligation to air-ports		-		8,508
Deposit for agencies. This was a credit based for the company to issue other ticket agencies' special fare air-ticket, and the full amount is returnable if the company discontinues its business with other agencies.		3,321,183		1,100,158
Subtotal		6,314,324		5,402,160
Huangshan Holiday Travel Agency Co., Ltd.:
Advance payment to tour guides for expenses during leading the tour. This will be transferred to costs when the tour guide return from tour and provide supporting evidence.		879		-
Subtotal		879		-
Zhengzhou Yulongkang Travel Agency Co., Ltd.:
Deposit paid to tour companies. This was a credit based for co-operate travel agencies, and is deductible against tour payments, the balance is returnable when cease doing business with these agencies.		7,325		-
Subtotal		7,325		-
Foshan Overseas International Travel Service Co. Ltd.:
Deposit paid to tour companies. This was a credit based for co-operate travel agencies, and is deductible against tour payments, the balance is returnable when cease doing business with these agencies.		298,318		969,261
Advance payment to tour guides for expenses during leading the tour. This will be transferred to costs when the tour guide return from tour and provide supporting evidence.		745,257		243,342
Subtotal		1,043,575		1,212,603
Xian Golden Net Travel Serve Services, Ltd.:
Deposit for Tour companies. This was a credit based for co-operate travel agencies, and is deductible against tour payments, the balance is returnable when cease doing business with these agencies		556,705		425,396
Deposit for transportations. This was a credit based for co-operate transportation suppliers, and is deductible against transportation payments, the balance is returnable when cease doing business with these agencies.		-		132,019
Subtotal		556,705		557,415
Chongqing Travel World E-Business Co., Ltd.
Deposit for agencies. This was a credit based for the company to issue other ticket agencies' special fare air-ticket, and the full amount is returnable if the company discontinues its business with other agencies.		2,584,019		2,587,279
Subtotal		2,584,019		2,587,279
Shenzhen Universal Travel
Deposit for agencies. This was a credit based for the company to issue other ticket agencies' special fare air-ticket, and the full amount is returnable if the company discontinues its business with other agencies.		73,974		16,278
Subtotal		73,974		16,278
Total	$	10,580,801	$	9,775,735

The Company has entered into a co-operation agreement with an unrelated company, to assist that company in their business development by participating in that business operations and providing working capital funding. As of March 31, 2010 and December 31, 2009 the Company has advanced this company $439,504 and $440,063 respectively.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 4 - COMPENSATED ABSENCES

Regulation 45 of local PRC labor law entitles employees to annual vacation leave after 1 year of service. In general all leave must be utilized annually, with proper notification. Any unutilized leave is cancelled.

Note 5 - INCOME TAXES

The Company through its primary operating subsidiary, Shenzhen Yuzhilu Aviation Service Co., Ltd. (“YZL”), is governed by the Income Tax Laws of the PRC. Operations in the United States of America have incurred accumulated net operating losses for income tax purposes. YZL is subject to the PRC Enterprise Income Tax (EIT) at a statutory rate of 22% and 20% for tax years ending 2010 and 2009, respectively. However, other PRC operating subsidiaries have a statutory rate of 25%. The following is components of income tax expense for the three months ended March 31, 2010 and 2009.

	March 31,		March 31,
	2010		2009
Current income tax expense	$	1,279,066	$	1,117,196
Actual effective tax rate		26.51%		25.58%

The Company recognized deferred tax liabilities and recorded a corresponding entry to goodwill from acquired identified intangible assets of three new acquisitions in March 2010. As of March 31, 2010, deferred tax liabilities recognized from acquired identifiable intangibles are $495,589.

Management evaluates tax positions and establishes liabilities for uncertain tax positions that may be challenged by local authorities. Uncertain tax positions are reviewed and adjusted accordingly based on new facts and circumstances or change in tax laws. As of March 31, 2010, there is no impact on the results of operations related to uncertain tax positions of the Company

Note 6 – COMMITMENTS

The Company leases various office facilities under month-to-month arrangements. Rental expense for leases consisted of $210,516 and $94,937 for the three month ended March 31, 2010 and 2009, respectively. The Company has future minimum lease obligations as of March 31, 2010 as follows:

2011	$	429,917
2012		264,322
2013		245,582
2014		217,313
2015		83,575
There after		10,987
Total	$	1,251,696

Pursuant to the Securities Purchase Agreement entered into on August 28, 2008, the Company and the Buyers in this Agreement entered into a Lock up Agreement. Under the Lock-Up Agreement, the Principal Shareholder agreed that she would not sell any of the Lock-Up Shares, 5,000,000 shares of Common Stock and options to purchase 2,000,000 shares of Common Stock, and shall not transfer such shares for twelve (12) months.

Note 7 – COMMON STOCK

On March 29, 2010 the Company through its VIE structure and strategy consummated the acquisition of a 100% interest in Zhengzhou Yulongkang Travel agency Co. Ltd (“ZYT”) for a cash and stock transaction valued at approximately US$5.7 million in aggregate.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 7 – COMMON STOCK (CONTINUED)

The stock consideration consisted of 60,633 newly issued shares of the Company’s common stock, which were given to ZYT’s Shareholder immediately before the completion of the Share Exchange Transaction. The cash consideration consisted of $5,141,764. The shares were valued at $571,172, which was the average fair value of the shares 15 days prior to the date of the exchange agreement. This amount is included in the cost of net assets, identified intangible assets, and goodwill purchased.

ZYT is engaged in the business of Chinese domestic tourism. The purchase price was determined based on arms' length negotiations between Universal Travel Group and the shareholder of ZYT.

The acquisition had been accounted for as a purchase business combination and the results of operations from the acquisition date have been included in the Company's consolidated financial statements in accordance with ASC 810. The allocation of the purchase price is as follows:

Cash acquired	$	1,513,636
Accounts receivable		29,154
Other assets		11,779
Property Plant & Equipment		29,019
Identifiable Intangibles		805,626
Goodwill		3,812,004
Total assets acquired		6,201,218
Liabilities assumed
Accounts & Income Taxes payable		230,107
Deferred Tax Liability		201,406
Other payable		56,769
Total	$	5,712,936

The excess of purchase price over tangible assets acquired and liabilities assumed was $4,617,630 of which $3,812,004 was recorded as goodwill. At the time of the acquisition $805,626 of identifiable intangible assets and related deferred tax liability of $201,406 existed under the contractual legal or the reparability criterion as required under ASC 805 and ASC 740, respectively.

Prior to the acquisition, Zhengzhou Yulongkang Travel agency Co. Ltd prepared its financial statements under accounting principles generally accepted in the United States of America.

On March 26, 2010 the Company through its VIE structure and strategy consummated the acquisition of a 100% interest in Huangshan Holiday Travel Service Co., Ltd (“HHT”) for a cash and stock transaction valued at approximately US$2.9 million in aggregate.

The stock consideration consisted of 61,846 newly issued shares of the company’s common stock, which were given to HHTs Shareholder immediately before the completion of the Share Exchange Transaction. The cash consideration consisted of $2,343,824. The shares were valued at $585,691, which was the average fair value of the shares 15 days prior to the date of the exchange agreement. This amount is included in the cost of net assets, identified intangible assets, and goodwill purchased.

HHT is engaged in the business of Chinese domestic tourism. The purchase price was determined based on arms' length negotiations between Universal Travel Group and the shareholder of HHT, and approved by board of directors.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 7 – COMMON STOCK (CONTINUED)

Cash acquired	$	340,174
Accounts receivable		21,450
Other assets		452,193
Property Plant & Equipment		69,682
Identifiable Intangibles		479,870
Goodwill		1,892,511
Total assets acquired		3,255,880
Liabilities assumed
Accounts & Income Taxes payable		176,863
Deferred Tax Liability		119,968
Other payable		29,534
Total	$	2,929,515

The excess of purchase price over tangible assets acquired and liabilities assumed was $2,372,381 of which $1,892,511 was recorded as goodwill. At the time of the acquisition $479,870 of identifiable intangible assets and related deferred tax liability of $119,968 existed under the contractual legal or the reparability criterion as required under ASC 805 and ASC 740, respectively.

Prior to the acquisition, Huangshan Holiday Travel Service Co., Ltd prepared its financial statements under accounting principles generally accepted in the United States of America.

On March 29, 2010 the Company through its VIE structure and strategy consummated the acquisition of a 100% interest in Hebei Tianyuan Travel Agency Co., Ltd (“HTT”) for a cash and stock transaction valued at approximately US$4.4 million in aggregate.

The stock consideration consisted of 93,282 newly issued shares of the company’s common stock, which were given to HTT’s Shareholder immediately before the completion of the Share Exchange Transaction. The cash consideration consisted of $3,519,736. The shares were valued at $878,726, which was the average fair value of the shares prior to the date of the exchange agreement. This amount is included in the cost of net assets, identified intangible assets, and goodwill purchased.

HTT is engaged in the business of Chinese domestic tourism. The purchase price was determined based on arms' length negotiations between Universal Travel Group and the shareholder of HTT, and approved by board of directors.

Cash acquired	$	532,349
Accounts receivable		120,152
Other assets		208,771
Property Plant & Equipment		49,637
Identifiable Intangibles		696,858
Goodwill		3,320,700
Total assets acquired		4,928,467
Liabilities assumed
Accounts & Income Taxes payable		232,188
Deferred Tax Liability		174,215
Other payable		123,602
Total	$	4,398,462

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 7 – COMMON STOCK (CONTINUED)

The excess of purchase price over tangible assets acquired and liabilities assumed was $4,017,558 of which $3,320,700 was recorded as goodwill. At the time of the acquisition $696,858 of identifiable intangible assets and related deferred tax liability of $174,215 existed under the contractual legal or the reparability criterion as required under ASC 805 and ASC 740, respectively.

Prior to the acquisition, Hebei Tianyuan Travel Agency Co., Ltd prepared its financial statements under accounting principles generally accepted in the United States of America.

Pursuant to a share exchange agreement, the Company issued 50,588 shares of newly issued shares of Common Stock to the former shareholders of Xian Golden Net Travel Serve Services, Inc. The shares were valued at $258,000, which was the fair value of the shares at the date the of the exchange agreement. This amount is included in the cost of net assets and goodwill purchased.

On August 6, 2007 the Company consummated the acquisition of a 100% interest in Xian Golden Net Travel Serve Services, Inc. (“XGN”) for a cash and stock transaction valued at approximately US$1.8 million in aggregate. This amount is included in the cost of net assets and goodwill purchased.

The stock consideration consisted of 50,588 newly issued shares of the Registrant’s common stock, which were given to XGN’s Shareholders immediately before the completion of the Share Exchange Transaction. The cash consideration consisted of $1,542,000 in cash and payable no later than the first anniversary of the Merger Transaction. The obligation to pay the cash consideration is evidenced by an interest-free promissory note between the Registrant and the XGN’s Shareholders.

XGN is engaged in the business of Chinese domestic tourism. The purchase price was determined based on arms' length negotiations between Universal Travel Group and the shareholders of XGN.

Cash acquired	$	45,356
Accounts Receivable		142,462
Loans to Shareholder		1,075,504
Property Plant & Equipment		773
Goodwill		764,895
Total assets acquired		2,028,990
Liabilities assumed
Accounts & Income Taxes payable		131,875
Other payable		97,115
Total	$	1,800,000

The excess of purchase price over tangible assets acquired and liabilities assumed of $764,895 was recorded as goodwill. At the time of the acquisition no identifiable intangibles assets existed under the contractual-legal or the separability criterion as required under ASC 805.

Prior to the acquisition, Xian Golden Net Travel Serve Services, Inc. prepared its financial statements under accounting principles generally accepted in the United States of America.

Pursuant to a share exchange agreement, the Company issued 200,000 shares of newly issued shares of Common Stock to the former shareholders of Shanghai Lanbao Travel Services Co., Ltd. The shares were valued at $1,092,000, which was the fair value of the shares at the date of the exchange agreement. This amount is included in the cost of net assets and goodwill purchased.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 7 – COMMON STOCK (CONTINUED)

On August 8, 2007, the Company consummated the acquisition of a 100% interest in Shanghai Lanbao Travel Services Co., Ltd. (“SLB”) for a cash and stock transaction valued at approximately US$3.92 million in aggregate. This amount is included in the cost of net assets and goodwill purchased.

The stock consideration consisted of 200,000 newly issued shares of the Registrant’s common stock immediately before the completion of the Share Exchange Transaction. The cash consideration consisted of $2,828,000 in cash and payable no later than the first anniversary of the Merger Transaction. The obligation to pay the cash consideration is evidenced by interest-free promissory notes between the Registrant and each of the SLB Shareholders.

SLB is engaged in the business of real time booking of travel related products via the internet. The purchase price was determined based on arms' length negotiations between Universal Travel Group and the shareholders of SLB.

The acquisition had been accounted for as a purchase business combination and the results of operations from the acquisition date have been included in the Company's consolidated financial statements in accordance with SFAS 94. The allocation of the purchase price is as follows:

Cash acquired	$	28,510
Accounts Receivable		1,265,352
Loans to shareholders		178,665
Property Plant & Equipment		9,376
Goodwill		3,081,799
Total assets acquired		4,563,702
Liabilities assumed
Accounts & Income Taxes payable		566,809
Other payable		76,893
Total	$	3,920,000

The excess of purchase price over tangible assets acquired and liabilities assumed of $3,081,799 was recorded as goodwill. At the time of the acquisition no identifiable intangibles assets existed under the contractual-legal or the separability criterion as required under ASC 825.

Prior to the acquisition, Shanghai Lanbao Travel Services Co., Ltd. prepared its financial statements under accounting principles generally accepted in the United States of America.

Pursuant to a share exchange agreement, the Company issued 374,321 shares of newly issued shares of Common Stock and a promissory note to the former shareholders of Foshan Overseas International Travel Service Co., Ltd. The shares were valued at $3,346,500, which was the fair value of the shares at the date of exchange agreement. This amount is included in the cost of net assets and goodwill purchased.

On September 20, 2007, the Company consummated the acquisition of a 100% interest in Foshan Overseas International Travel Service Co., Ltd. (“FOI”) for a cash and stock transaction valued at approximately US$6.5 million in aggregate. This amount is included in the cost of net assets and goodwill purchased.

The stock consideration consisted of 374,329 newly issued shares of the Registrant’s common stock, immediately before the completion of the Share Exchange Transaction. The cash consideration consisted of $3,153,500 due immediately before the completion of the Share Exchange Transaction and payable no later than the first anniversary of the Merger Transaction. The obligation to pay the cash consideration is evidenced by two interest-free promissory notes between the Registrant and each of the FOI Shareholders.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 7 – COMMON STOCK (CONTINUED)

FOI is engaged in the business of domestic and international travel inquiries as well as corporate travel, offering specialized packages that include national and international air ticket booking, hotel reservations, conference center reservations and rental cars. The purchase price was determined based on arms' length negotiations between Universal Travel Group and the shareholders of FOI. The acquisition had been accounted for as a purchase business combination and the results of operations from the acquisition date have been included in the Company's consolidated financial statements in accordance with ASC 810. The allocation of the purchase price is as follows:

Cash acquired	$	423,292
Accounts Receivable		2,204,094
Loans Shareholders		686,936
Trade Deposits		513,317
Prepaid Expenses		3,285
Property Plant & Equipment		42,244
Goodwill		6,049,576
Total assets acquired		9,922,744
Liabilities assumed
Accounts & Income Taxes payable		3,126,718
Other payable		296,026
Total	$	6,500,000

The excess of purchase price over tangible assets acquired and liabilities assumed of $6,049,576 was recorded as goodwill. At the time of the acquisition no identifiable intangibles assets existed under the contractual-legal or the separability criterion as required under ASC 805.

Prior to the acquisition, Foshan Overseas International Travel Service Co., Ltd. prepared its financial statements under accounting principles generally accepted in the United States of America.

In January 2007 the company adopted the Universal Travel Group 2007 Equity Incentive Plan. Under the terms of this Plan the Company issued 1,256,667 shares of the Company’s stock, valued at $1,583,400, for services rendered during the period from October 2, 2006 through February 28, 2007.

On August 28, 2008, Universal Travel Group (the “Company”) entered into a Securities Purchase Agreement with Access America Fund, LP, Chinamerica Fund LP, Pope Investments II LLC, Heller Capital Investments, LLC, CGM as C/F Ronald I. Heller IRA, Investment Hunter, LLC, MARed Investments, High Capital Funding, LLC, and Merrill Lynch, Pierce, Fenner & Smith, FBO Beau L. Johnson (collectively, the “Buyers”) to sell to the Buyers 1,529,569 shares of common stock, par value $0.001 of the Company (“Common Stock”) and warrants to purchase 764,785 shares of Common Stock for an aggregate purchase price of $7,112,500 (the “Financing”). (See footnote 2, derivative liability)

On December 15, 2009, the Company closed a Subscription Agreements with certain investors to sell to them an aggregate of 2,222,222 shares of common stock of the Company, par value $0.001 (the “Shares”) for a purchase price of $9.00 per share and an aggregate purchase consideration of $19,999,998. In connection with the subscription the company paid fees and other costs pertaining to the agreement totaling $1,049,749. Net proceeds of the transaction were $18,950,249. The offer and sale of the Shares were made pursuant to an effective Registration Statement on Form S-3 (Registration No. 333- 161139) initially filed with the Securities and Exchange Commission on August 7, 2009 and amended on November 2, 2009. The Registration Statement was declared effective on November 5, 2009.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 8 – STOCK WARRANTS, OPTIONS, AND COMPENSATION

On January 20, 2009, pursuant to the Securities Purchase agreement entered into on August 28, the Company enacted the Universal Travel Group 2009 Incentive Stock Option Plan which entitles the grant of up to 2,200,000 shares of common stock of Universal Travel Group, par value $0.001 to certain employees of the Company either as stock or stock options. The options are exercisable until January 19, 2019, with a vesting period of six years. Average purchase price for the options is $3.74 per share. The options were valued using the Black-Scholes option-pricing model on the date of grant. The total fair market value at grant date is $5,479,222 based on the following assumptions: dividend yield: 0%; volatility:127.94%, risk free rate: 2.35%, expected term: 10 years..

On September 1, 2009, the Company issued, to another newly appointed Board member, an option grant to purchase 10,000 shares of common stock at the closing price of $ 8.82 per share. The options are exercisable until August 2019. Stock options— the option holder has no voting or dividend rights. The company records the expense of the stock options over the related vesting period. The options were valued using the Black-Scholes option-pricing model at the date of grant.

On September 1, 2009, the Company issued, to the newly appointed CFO an option grant to purchase 105,000 shares of common stock at the closing price of $8.82 per share. The options are exercisable until August 2019. The options are exercisable until August 2019. Stock options— the option holder has no voting or dividend rights. The company records the expense of the stock options over the related vesting period. The options were valued using the Black-Scholes option-pricing model at the date of grant.

Expected volatility is based on the historical volatility of the Company’s stock price. The expected term represents the estimated average period of time that the options remain outstanding. No dividend payouts were assumed, as the Company has no plans to declare dividends during the expected term of the stock options. The risk-free rate of return reflects the weighted average interest rate offered for zero coupon treasury bonds over the expected term of the options. Based upon this calculation and pursuant to, ASC 718, the Company recorded a service period expense of $336,632 and $165,000 for the three months ended March 31, 2010 and 2009, respectively.

							Aggregate
			Exercise		Remaining		Intrinsic
	Total		Price		Life		Value

Outstanding, December 31, 2009		1,603,888	$	2.70–11.25	7.42-8.67yrs			-
Outstanding, March 31, 2010		1,600,588	$	-		-		-

Pursuant to the Securities Purchase Agreement entered into On August 28, 2008, the Company issued warrants to purchase 764,786 shares of Common Stock. The unit purchase price was $4.65 per Common Share and a related Warrant for the purchase of one-half a Common Share, times the number of Common Shares purchased. Market Value of the Company’s stock on August 28, 2008 was $4.05. Each warrant has an Exercise Price of $8.13 and a term of 5 years from the date of issuance. The Company measured and recognized an aggregate of $2,091,738 of the proceeds to additional paid in capital upon issuance of these warrants. The terms of the warrants provide for an adjustment to the exercise price of these warrants if the company closes on the sale or issuance of common stock at a price which is less than the exercise price then in effect for these warrants. Upon the Company’s adoption of EITF No. 07-05 on January 1, 2009, the Company determined that the warrants did not qualify for a scope exception under SFAS No. 133 as they were determined to not be indexed to the Company’s stock as prescribed by EITF No. 07-05. On January 1, 2009, the warrants were reclassified from equity to derivative liability for the then fair market value and marked to market (see Note 2 Derivative Liability). On August 20, 2009 322,580 warrants valued at $3,398,135 as of that date, were exercised under the cashless exercise provisions of the warrants. The Company issued 132,251 shares of common stock. On October 15, 2009, 215,054 warrants valued at $2,888,495 as of that date were exercised under the cashless exercise provision of the warrants. The company issued 103,318 shares of common stock.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 9 - OTHER COMPREHENSIVE INCOME

Balances of related after-tax components comprising accumulated other comprehensive income, included in stockholders equity, as of March 31, 2010 and December 31, 2009 are as follows:

	Foreign Currency Translation Adjustment			Accumulated Other Comprehensive Income
Balance December 31, 2008	$	1,520,166		$	1,520,166
Changes for year ended December 31, 2009		124,967			124,967
Balance December 31, 2009		1,645,133			1,645,133
Changes for the three months ended March 31, 2010		(503,904	)		(503,904	)
Balance at March31, 2010 (Restated)	$	1,141,229		$	1,141,229

Note 10 - CURRENT VULNERABILITY DUE TO CERTAIN RISK FACTORS

The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC's economy. The Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Note 11 – MAJOR CUSTOMERS AND CREDIT RISK

The Company derives a portion of its income from various Airlines. Most revenue is cleared through IATA, a centralized reporting platform.

Note 12 - SEGMENT INFORMATION

Pursuant to ASC 280 the Company operates and discloses three reportable segments: air ticketing, hotel reservation and packaged tours. Substantially all of the Company’s revenues and long-lived assets are in Peoples Republic of China.

Upon the disposition of Shenzhen Speedy Dragon Enterprises Limited pursuant to a termination agreement dated June 12, 2009, the Company currently operates and prepares accounting and other financial reports separately to management for nine major business organizations (Shenzhen Yuzhilu Aviation Service Co., Ltd., Shanghai Lanbao Travel Service Co., Ltd., Foshan International Travel Service Co., Ltd., Xian Golden Net Travel Serve Services, Chongqing Travel World E-Business Co., Ltd., Shenzhen Travel World Travel Agency Co., Ltd.), Hebei Tianyuan Travel Agency Co., Ltd, Zhengzhou Yulongkang Travel Agency Co., Ltd, and Huangshan Holiday Travel Service Co., Ltd..

Our air-ticketing segment relates to the segment reporting of Shenzhen Yuzhilu Aviation Service Co., Ltd. and Chongqing Travel World E-Business Co., Ltd. Our hotel reservation segment relates to Shanghai Lanbao Travel Service Co., Ltd and Huangshan Holiday Travel Service Co., Ltd. Our packaged tours segment relates to Chongqing Travel World E-Business Co., Ltd, Foshan International Travel Service Co., Ltd, Xi’an Golden Net Travel Serve Service Company Limited, Shenzhen Travel World Travel Agency Co., Ltd, Hebei Tianyuan Travel Agency Co., Ltd, Zhengzhou Yulongkang Travel Agency Co., Ltd, and Huangshan Holiday Travel Service Co., Ltd. Management monitors these segments regularly to make decisions about resources to be allocated to the segment and assess its performance.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 12 - SEGMENT INFORMATION (CONTINUED)

The following tables’ present summarized information by segment:

		Air		Hotel		Packaged
		Ticketing		Reservation		Tours		Other			Total
	Three Months Ended March 31, 2010 (Restated)
Revenue, net		$	3,905,975	$	3,030,106	$	13,489,698	$	-		$	20,425,779
Cost of services		$	1,367,871	$	998,417	$	11,803,197	$	-		$	14,169,485
Gross profit		$	2,538,104	$	2,031,689	$	1,686,501	$	-		$	6,256,294
Income from operations		$	1,768,126	$	1,994,178	$	1,535,358	$	(607,355	)	$	4,690,307
Depreciation & Amortization		$	297,846	$	439	$	2,819	$			$	301,104
Asset expenditures		$	608,210	$	-	$	11,406	$	-		$	619,616
Total assets		$	61,797,751	$	6,065,249	$	23,590,476	$	5,024,091		$	96,477,567
	Three Months Ended March 31, 2009
Revenue, net		$	2,751,128	$	2,516,831	$	10,154,034	$	-		$	15,421,993
Cost of services		$	869,988	$	773,463	$	8,662,601	$	-		$	10,306,052
Gross profit		$	1,881,140	$	1,743,368	$	1,491,433	$	-		$	5,115,941
Income from operations		$	1,574,790	$	1,699,296	$	1,385,861	$	(420,935	)	$	4,239,012
Depreciation & Amortization		$	79,629	$	1,061	$	3,966	$	-		$	84,656
Asset expenditures		$	1,260,398	$	-	$	-	$	-		$	1,260,398
Total assets		$	28,210,039	$	8,294,048	$	10,547,861	$	2,933,005		$	49,984,953

Note 13 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

The Company has reclassified and restated certain line items on the March 31, 2010 unaudited consolidated financial statements.

Consolidated balance sheet

Reclassified cash restricted by local travel bureau from cash and cash equivalent to restricted cash;

Consolidated statement of income and comprehensive income

Reclassified business tax and levies from selling expenses and COGS to revenues;

Reclassified commission paid to retail air ticketing agencies from selling expenses to COGS;

Consolidated Stockholders Equity

Consolidated statement of cash flows

As a result of above reclassifications and restatement, the corresponding line items on the consolidated statements of cash flows have been restated.

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 13 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (CONTINUED)

Segment information

Reclassified the revenue and cost of services of hotel reservation business in Huangshan Holiday Travel Service Co., Ltd from packaged tours segment to hotel reservation segment.

Reclassified the revenue and cost of services of packaged tours business in Chongqing Travel World E-Business Co., Ltd from air ticketing segment to packaged tours segment.

The following table summarizes the effects of the reclassifications and restatements on the previously issued consolidated balance sheet As of March 31, 2010 (restated):

	As of March 31, 2010
	As restated		As previously reported		Changes Inc/(Dec)
ASSETS
Cash and cash equivalents	$	37,660,201	$	37,833,072	$	(172,871	)
Restricted cash		172,871		-		172,871
Accounts receivable, net		18,832,395		18,832,395		-
Other receivables and deposits, net		1,282,919		1,282,919		-
Trade deposit		10,580,801		10,580,801		-
Advances		439,504		439,504		-
Prepaid expenses		49,076		49,076		-
Note receivable		738,457		738,457		-
Total Current Assets		69,756,224		69,756,224		-

Property, plant & equipment, net		5,465,481		5,465,481		-
Intangible assets		2,334,377		2,235,259		99,118
Goodwill		18,921,485		19,155,866		(234,381	)
Total Noncurrent Assets		26,721,343		26,856,606		(135,263	)
Total Assets	$	96,477,567	$	96,612,830	$	(135,263	)

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	8,187,468	$	8,187,468	$	-
Customer deposits		1,555,445		1,555,445		-
Income tax payable		1,299,373		1,299,373		-
Total Current Liabilities		11,042,286		11,042,286		-
Derivative liability		1,705,868		1,705,868		-
Deferred tax liabilities		495,589		-		495,589
Total Liabilities		13,243,743		12,748,154		495,589

Stockholders' Equity
Common stock, $.001 par value, 70,000,000 shares authorized, 16,930,218 and 16,714,457 issued and outstanding at March 31, 2010 and December 31, 2009, respectively		16,929		16,929		-
Additional paid in capital		40,043,651		40,043,651		-
Other comprehensive income		1,141,229		1,228,675		(87,446	)
Statutory reserve		570,329		570,329		-
Retained earnings		41,461,686		42,005,092		(543,406	)
Total Stockholders' Equity		83,233,824		83,864,676		(630,852	)
Total Liabilities and Stockholders' Equity	$	96,477,567	$	96,612,830	$	(135,263	)

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 13 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes the effects of the reclassifications and restatements on the previously issued consolidated income and comprehensive income for the three months ended March 31, 2010 (restated):

	For the three months ended March 31, 2010
	As restated			As previously reported			Changes Inc/(Dec)

Gross revenues,	$	20,425,779		$	26,130,007		$	(5,704,228	)
Cost of services		14,169,485			17,628,033			(3,458,548	)
Gross Profit		6,256,294			8,501,974			(2,245,680	)

Selling, general and administrative expenses		1,565,987			3,063,641			(1,497,654	)

Income from operations		4,690,307			5,438,333			(748,026	)

Other income (expense)
Other income		3,554			3,554			-
Gain on change in fair value of derivative liabilities		109,451			109,451			-
Interest income		22,189			23,631			(1,442	)
Total other income		135,194			136,636			(1,442	)
Income before income taxes - continuing operation		4,825,501			5,574,969			(749,468	)

Provision for income taxes		1,279,066			1,485,128			(206,062	)

Net Income	$	3,546,435		$	4,089,841		$	(543,406	)

Net income per common share
Basic	$	0.21		$	0.24		$	(0.03	)
Diluted	$	0.20		$	0.23		$	(0.03	)

Weighted average common shares outstanding
Basic		16,822,339			16,822,339			-
Diluted		18,019,257			18,019,257			-

Net income	$	3,546,435		$	4,089,841		$	(543,406	)
Translation		(503,904	)		(416,458	)		(87,446	)
Comprehensive income	$	3,042,531		$	3,673,383		$	(630,852	)

The following table summarizes the effects of the reclassifications and restatements on our previously issued consolidated statement of stockholders' equity As of March 31, 2010 (restated):

	As of March 31, 2010						Changes
	As restated			As previously reported			Inc/(Dec)
Retained earrings		$	41,461,686		$	42,005,092	$	(543,406	)
Accumulated other comprehensive income			1,141,229			1,228,675		(87,446	)
Total stock holders' equity		$	83,233,824		$	83,864,676	$	(630,852	)

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

The following table summarizes the effects of the reclassifications and restatements on our previously issued consolidated statement of cash flow for the three months ended March 31, 2010 (restated):

Note 13 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (CONTINUED)

	For the three months ended March 31, 2010
	As restated			As previously reported			Changes Inc/(Dec)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	3,546,435		$	4,089,841		$	(543,406	)
Add (deduct):
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		301,104			411,849			(110,745	)
Provision for doubtful accounts		24,931			24,931			-
Stock based compensation		336,632			336,632			-
Gain on change in fair value of derivative liabilities		(109,451	)		(109,451	)		-
(Increase) / decrease in assets:
Restricted cash		(70,190	)		-			(70,190	)
Accounts receivable		(1,365,395	)		(1,132,812	)		(232,583	)
Other receivable		(392,698	)		(195,058	)		(197,640	)
Advances		559			559			-
Prepaid expenses		199,876			213,586			(13,710	)
Trade deposits		(796,862	)		(805,066	)		8,204
Increase / (decrease) in current liabilities:
Accounts payable and accrued expenses		5,167,468			5,238,163			(70,695	)
Customer deposits		(456,392	)		(444,672	)		(11,720	)
Income tax payable		(589,990	)		(869,498	)		279,508
Deferred tax liabilities		495,589			-			495,589
Net cash provided by operating activities		6,291,615			6,759,004			(467,389	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property & equipment		(619,616	)		(619,616	)		-
Purchase of intangibles		(29,298	)		(29,298	)		-
Proceeds from collection of notes		972,935			972,935			-
Acquisition deposits		4,077,921			4,077,921			-
Paid for acquisition – net of cash acquired		(9,354,457	)		(9,588,838	)		234,381
Net cash (used in) provided by continuing operations		(4,952,515	)		(5,186,896	)		234,381

Effect of exchange rate changes on cash and cash equivalents		(253,640	)		(416,458	)		162,818
Net change in cash and cash equivalents		1,085,460			1,155,650			(70,190	)
Cash and cash equivalents, beginning balance		36,574,741			36,677,422			-
Cash and cash equivalents, ending balance	$	37,660,201		$	37,833,072		$	(172,871	)

SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Interest payments	$	-		$	-		$	-
Income taxes	$	1,354,660		$	1,840,230		$	(485,570	)
Other non-cash transactions
Purchased goodwill	$	(9,025,215	)	$	(9,259,596	)	$	234,381
Purchased intangible assets		(1,982,354	)		(1,982,354	)		-
Fair value of assets purchased less cash acquired		(382,477	)		(382,477	)		-
Acquisition financed with stock issuance		2,035,589			2,035,589			-
Acquisition paid for with cash – net of acquired	$	(9,354,457	)	$	(9,588,838	)	$	234,381

UNIVERSAL TRAVEL GROUP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

Note 14 - SUBSEQUENT EVENTS

On March 4, 2010, the company announced that it has entered into letters of intent to acquire four travel agency businesses in China – Tianjin Hongxun Aviation Agency Co., Ltd. (“Tianjin Hongxun”), Shanxi Jinyang Travel Agency Co., Ltd. (“Shanxi Jingyang”), Kunming Business travel Agency Co., Ltd. (“Kunming Business Travel”), and Shandong Century Aviation Development Co., Ltd. (“Shandong Century”) – for a total purchase consideration of $19.5 million. The combined unaudited 2009 revenue and net income for the four travel agencies were $23.0 million and $3.0 million, respectively. The final purchase consideration each of these companies may be subject to adjustment after completion of the diligence by the Company.

As of March 31, 2010, the Company has evaluated subsequent events for potential recognition and disclosure through the date of the financial statement issuance.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

Forward-Looking Statements: No Assurances Intended

In addition to historical information, this Quarterly Report contains forward-looking statements, which are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans to,” “estimates,” “projects,” or similar expressions. These forward-looking statements represent Management’s belief as to the future of Universal Travel Group. Whether those beliefs become reality will depend on many factors that are not under management’s control. Many risks and uncertainties exist that could cause actual results to differ materially from those reflected in these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.

Business Overview

Headquartered in Shenzhen, Guangdong Province, the Company is a travel services provider in the People’s Republic of China (“PRC”) and is engaged in providing reservation, booking, and domestic and international travel and tourism services throughout the PRC via the internet, its TRIPEASY Kiosks and through customer representatives.

Under the theme of “Wings towards a more colorful life”, our core services include tour packaging, booking services for air tickets and hotels reservations.

In 2007, we completed the acquisition of Speedy Dragon Enterprise Limited, specializing in air cargo agency; Xi'an Golden Net Travel Serve Services Co., Ltd., specializing in travel packaged tours; Shanghai Lanbao Travel Service Co., Ltd., specializing in hotel reservations and Foshan Overseas International Travel Service Co., Ltd., a PRC-based company that handles both domestic and international travel inquiries.

In the second calendar quarter of 2009, based on the past performance of our air cargo business, as well as the market perspective of this business, we decided to spin off our Speedy Dragon Enterprise Limited subsidiary, and as a result, exited the air cargo business. The air cargo industry had been suffering from the contraction in manufacturing in the Pearl River Delta, and we were not competitive enough in this segment of business. We believe the spin-off was beneficial to us as it allowed us to concentrate on our core business of selling air tickets, hotel accommodations and packaged tours.

In order to seize the opportunities arising from the economic promotion by the Chinese government of the mid and western regions of the PRC, we strategically set up Chongqing Universal Travel E-Business Co., Ltd. to strengthen our presence in that region in the second quarter of 2009 and began generating revenues in the third quarter of 2009.

At the end of March 2010, we completed the acquisitions of Huangshan Holiday Travel Service Co., Ltd. (“Huangshan Holiday”), Hebei Tianyuan International Travel Agency Co., Ltd. (“Tianyuan”), and Zhengzhou Yulongkang Travel Agency Co., Ltd. (“Yulongkang”).

Recently in May 2010, we also announced our intention of acquiring four more travel agency businesses in the PRC – Tianjin Hongxun Aviation Agency Co., Ltd. (“Tianjin Hongxun”), Shanxi Jinyang Travel Agency Co., Ltd. (“Shanxi Jinyang”), Kunming Business Travel Agency Co., Ltd. (“Kunming Business Travel”), and Shandong Century Aviation Development Co., Ltd. (“Shandong Century”).

We believe that we are able to improve the sales volume and operation efficiency of these new acquisitions, and on the other hand, they will also help lift the sales volume and operation efficiency of our existing subsidiaries.

We currently have three discrete lines of business and revenue. Our air-ticketing segment relates to the segment reporting of Shenzhen Yuzhilu Aviation Service Co., Ltd. and Chongqing Travel World E-Business Co., Ltd., hotel reservation segment relates to Shanghai Lanbao Travel Service Co., Ltd, and Huangshan Holiday Travel Service Co., Ltd, packaged tours segment relates to Chongqing Travel World E-Business Co., Ltd., Foshan Overseas International Travel Service Co., Ltd, Xi’an Golden Net Travel Serve Service Company Limited, Shenzhen Universal Travel Agency Co. Ltd, Huangshan Holiday Travel Service Co., Ltd., Hebei Tianyuan International Travel Agency Co., Ltd., and Zhengzhou Yulongkang Travel Agency Co., Ltd.. The new subsidiaries which previously had air-ticketing service, hotel reservation services, or packaged tours service were consolidated into our existing air-ticketing, hotel reservation, and packaged tours services. With higher volume in these three business segments, we believe that we now have better bargaining power with our suppliers, the airlines, hotels, or packaged tours.

In 2009, we were selected one of the Top Ten Brands of Travel Services in the PRC. We believe our quality of services will distinguish us in our long term competitiveness.

We aim to be the foremost leading online travel services provider in the PRC, especially in the air ticketing service, hotel booking and packaged tour providing sectors.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2010 AND 2009

The following table presents certain consolidated statement of operations information derived from the consolidated statements of income for the three months ended March 31, 2010 and 2009 respectively.

Because the Company had spun off its Speedy Dragon Enterprise Limited subsidiary and exited the air cargo business, all numbers attributable to continuing operations in the following discussion do not include the operating results of Speedy Dragon Enterprise Limited for the first quarter of 2009 and its historical results. Such had been reclassified as discontinued operations.

	Three months ended March 31, 2010			Three months ended			Increase /
	(Restated)			March 31, 2009			(Decrease)			Percentage
Revenues	$	20,425,779		$	15,421,993		$	5,003,786			32.45	%
Cost of Services		(14,169,485	)		(10,306,052	)		(3,863,433	)		37.49	%
Gross Profit		6,256,294			5,115,941			1,140,353			22.29	%
SG&A		(1,565,987	)		(876,929	)		(689,058	)		78.58	%
Income from Operations		4,690,307			4,239,012			451,295			10.65	%
Other income		3,554			3,828			(274	)		-7.16	%
Gain on change in fair value of derivative liabilities		109,451			113,265			(3,814	)		-3.37	%
Interest income		22,189			10,939			11,250			102.84	%
Income before income taxes		4,825,501			4,367,044			458,457			10.50	%
Provision for income taxes		(1,279,066	)		(1,117,196	)		(161,870	)		14.49	%
Net Income		3,546,435			3,249,848			296,587			9.13	%

Net income (loss) from discontinued operation		-			131,693			(131,693	)		-100.00	%
Net Income		3,546,435			3,381,541			164,894			4.88	%

For the three months ended March 31, 2010 (Restated):


	Air			(%) of			Hotel			(%) of			Packaged			(%) of
Revenue Segment	Ticketing			sector			Reservation			sector			Tours			sector			Total
Revenue	$	3,905,975			19.12	%	$	3,030,106			14.83	%	$	13,489,698			66.04	%	$	20,425,779
Cost of Services		(1,367,871	)		9.65	%		(998,417	)		7.05	%		(11,803,197	)		83.30	%		(14,169,485	)
Gross Profit	$	2,538,104			40.57	%	$	2,031,689			32.47	%	$	1,686,501			26.96	%	$	6,256,294
Gross Margin		64.98	%					67.05	%					12.50	%					30.63	%
Segment effect in Gross Margin (*)		12.43	%					9.95	%					8.26	%					30.63	%

For the three months ended March 31, 2009:


	Air			(%) of			Hotel			(%) of			Packaged			(%) of
Revenue Segment	Ticketing			sector			Reservation			sector			Tours			sector			Total
Revenue	$	2,751,128			17.84	%		2,516,831			16.32	%		10,154,034			65.84	%		15,421,993
Cost of Services		(869,988	)		8.44	%		(773,463	)		7.50	%		(8,662,601	)		84.05	%		(10,306,052	)
Gross Profit	$	1,881,140			36.77	%		1,743,368			34.08	%		1,491,433			29.15	%		5,115,941
Gross Margin		68.38	%					69.27	%					14.69	%					33.17	%
Segment effect in Gross Margin (*)		12.20	%					11.30	%					9.67	%					33.17	%

(*) “Segment effect in Gross Margin” was calculated by multiplying “the percentage of the segment revenue over the total revenue” with “gross margin of the related sector”. This outlines how each segment contributes to the total gross margin.

Revenue

Our air-ticketing segment relates to the segment reporting of Shenzhen Yuzhilu Aviation Service Co., Ltd. and Chongqing Travel World E-Business Co., Ltd., hotel reservation segment relates to Shanghai Lanbao Travel Service Co., Ltd and Huangshan Holiday Travel Service Co., Ltd., packaged tours segment relates to Chongqing Travel World E-Business Co., Ltd., Foshan International Travel Service Co., Ltd, Xi’an Golden Net Travel Serve Service Company Limited, Shenzhen Universal Travel Agency Co. Ltd, Huangshan Holiday Travel Service Co., Ltd., Hebei Tianyuan International Travel Agency Co., Ltd., and Zhengzhou Yulongkang Travel Agency Co., Ltd.

Revenues for the three months ended March 31, 2010 were $20,425,779 compared to $15,421,993 for the same period 2009, an increase of $5,003,786, or approximately 32.45%.

The increase of the previously existing subsidiaries was primarily due to the strong demand for travel demand as a result of the recovery of Chinese economy, and the continuing effect of the Chinese government’s stimulus package. We continue to see success in cross marketing and selling our travel related products across our business segments and increased brand awareness from online sales and the deployment of our TRIPEASY kiosks.

Revenue from air-ticketing segment were $3,905,975 for the three months ended March 31, 2010 compared to $2,751,128 for the same period last year, an increase of $1,154,847, or approximately 42.0%. This increase is generally driven by the same factors mentioned above, but more specifically, a result of the increased demand for air passenger transportation. Our Chongqing subsidiary, Chongqing Universal Travel E-Business Co., Ltd., has begun to contribute some revenues to this sector. As China’s economy recovers, we believe that our growth in air-ticketing is sustainable in the coming quarters.

Revenue from hotel reservations segment were $3,030,106 for the three months ended March 31, 2010 compared to $2,516,831 for the same period in 2009, an increase of $513,275, or approximately 20.4%. This increase is also a result of the factors mentioned above for air tickets and the successful cross marketing of our various business segments.

Revenue from our packaged tour segment were $13,489,698 for the three months ended March 31, 2010 for the three months ended March 31, 2010 compared to $10,154,034 for the same period in 2009, an increase of $3,335,664, or approximately 32.9%. This increase is a result of the recovery of Chinese economy, the government’s stimulus package, and our strong efforts in carrying our various marketing programs.

Cost of Services

Costs of services for air tickets cover mainly revenue related expenses and commission paid to the retail agents. Costs of services for hotel reservations cover mainly business and revenue related taxes, as well as commissions paid to the sales agents for selling hotel rooms in the Company’s system. Costs of services for packaged tours include meals, transportation (airline tickets, train tickets and car rental), lodging, airport transfers, tickets to local attractions and tours.

Other direct costs such as systems and related technologies used by each segment operations, and costs associated with payment processing are also included in the Company’s Costs of Services. In addition, the Company allocates costs of labor and facilities, depreciation, communications, and utility expenses incurred by each segment between costs of services and general administrative expenses. The depreciation expenses allocated to costs of sales is based on management estimate associated with the generation of revenues.

Costs of services for the three months ended March 31, 2010 were $14,169,485 compared to $10,306,052 for the same period in 2009, an increase of $3,863,433, or approximately 37.5%. The comparatively higher costs of services result from higher percentage of packaged tours in our revenues.

Costs of services from air-ticketing were $1,367,871 for the three months ended March 31, 2010, compared to $869,988 for the same period last year, an increase of $497,883, or approximately 57.2%. The increase is mostly due to our reclassification of costs associated.

Costs of services from hotel-reservation were $998,417 for the three months ended March 31, 2010, compared to $773,463 for the same period last year, an increase of $224,954, or approximately 29.1%. The increase is partly due to our reclassification of costs associated.

Costs of services from packaged-tour were $11,803,197 for the three months ended March 31, 2010, compared to $8,662,601 for the same period last year, an increase of $3,140,596, or approximately 36.3%. The increase is in tandem with the increase of revenue.

Gross Profit

Gross profit for the three months ended March 31, 2010 was $6,256,294 compared to $5,115,941 for the same period 2009, an increase of 1,140,353, or approximately 22.3%. The increase in gross profit is due to the same factors contributing to the growth in revenue. The exponential growth in both our domestic air-ticketing business and hotel reservations business is a result of synergies from our packaged tour operations.

Gross profit in our air-ticketing segment was $2,538,104 for the three months ended March 31, 2010, compared to $1,881,140 for the same period last year, an increase of 656,964, or approximately 34.9%. Gross profit margin in this segment for the three months ended March 31, 2010 was 65.0% compared to 68.4 % for the same period 2009, a decreased of approximately 3.4%. The decrease in gross margin was mainly attributable to their reclassification of the costs associated, and to a lesser extent, the consolidation of Chongqing's new operation in this segment. Despite the decrease in profit margin, the significant increase in the sales volume of this segment still resulted in an increase in the total gross profit in our air-ticketing business operated by Shenzhen Yuzhilu Aviation Service Co., Ltd. and Chongqing Travel World E-Business Co., Ltd.

Gross profit in our hotel reservation segment was $2,031,689 for the three months ended March 31, 2010 compared to $1,743,368 for the same period last year, an increase of $288,321 approximately 16.5%. Gross profit margin in this segment for the three months ended March 31, 2010 was 67.1% compared to 69.3% for the same period 2009, a decrease of approximately 2.2%. The decrease of gross profit margin was mainly due to our reclassification of certain costs associated.

Gross profit in our packaged tour segment was $1,686,501 for the three months ended March 31, 2010 compared to $1,491,433 for the same period last year, an increase of $195,068, or approximately 13.1%. Gross profit margin in this segment for the three months ended March 31, 2010 was 12.5% compared to 14.7% for the same period 2009, a decrease of approximately 2.2%. The reason for the lower gross profit margin is that we offered discounts to certain big customers. Despite the decrease in gross profit margin, total gross profit increased in this segment as a result of the increased volume in our packaged travel businesses operated by the existing businesses, as well as the additional three new acquisitions.

Our air-ticketing and hotel reservation have much higher gross margin than our packaged tour business primarily as our revenue from air-ticketing and hotel reservation are the commission we generated and our costs of service are mainly business taxes, systems and related technologies used in operations, costs associated with payment processing, and allocation of costs of labor and facilities, communications, and utility expenses, which all together are not substantial; while costs of services for the packaged tours include meals, transportation (airline tickets, train tickets and car rental), lodging, airport transfers, tickets to local attractions and tours, that all together are much substantial variable and fixed overheads.

Consolidated gross margin for the three months ended March 31, 2010 came in at 30.6%, a 2.5% decrease from the 33.2% the Company posted in the same period last year. The lower gross margin is mainly due to our changes in revenues mix. Due to the difference in revenues recognition, our packaged tour has lower gross margin. During the three months ended March 31, 2010, revenues generated from packaged tours, which have a smaller profit-margin, grew at a much higher rate than revenues generated from air ticketing and hotel reservations, leading to lower overall gross margin.

Selling, General and Administrative Expenses

Major selling, general, and administrative expenses for the three months ended March 31, 2010 and 2009 are as follows:

	For the three months ended March 31,
	2010 (Restated)		2009

Salary and commission	$	316,000	$	144,740
Marketing		71,242		38,347
Rent		80,584		38,520
Depreciation and amortization		232,562		8,419
Professional fees		265,005		255,934
Stock-based compensation		336,632		165,001
Other general and administrative expenses		263,962		225,968
Total	$	1,565,987	$	876,929

Selling, general and administrative expenses totaled $1,565,987 for three months ended March 31, 2010 compared to $876,929 for the same period last year, an increase of approximately 78.58%.

Selling, general and administrative expenses were approximately7.7% of revenue for the three months ended March 31, 2010 as compared to 5.7% for the same period last year. General increase in selling, general and administrative expenses are in connection with the growth in business operations during the three months ended March 31, 2010, as compared to the same period of last year. During the first quarter of 2010, we incurred extra professional fee. In addition, the slight increase in percentage was also due to the issuance of stock based compensation in early 2009 and the amortization of such stock based compensation, whereas the stock based compensation is less significant during the same period last year.

Other Income (Expenses)

Gain on change in fair value of derivative liability for the three months ended March 31, 2010 was $109,451 compared to $113,265 for same period last year. The Company adopted Derivative and Hedging, ASC 815-40 effective January 1, 2009 and the warrants issued in connection with the “Securities Purchase Agreement” dated August 28, 2008 were reclassified from equity to derivative liability and marked to market. Therefore, the Company recorded a gain on change in fair value of derivative liability of $109,451 on March 31, 2010 to mark to market for the increase in fair value of the warrants from January 1, 2010 to March 31, 2010.

Net Income

Net income was $3,546,435, or 17.4% of revenues for the three months ended March 31, 2010, compared to $3,381,541, or 21.9% of revenue for the same period last year. The decrease in net income as a percentage of revenue is mostly due to the change of revenue mix. The lower net margin compared to the same period last year, mainly comes from our higher percentage of packaged-tour in our gross revenues, and to a lesser extent, the effect of our discontinued operations and more provisions for income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Cash for operations and liquidity needs are funded primarily through cash flows from operations. Cash and cash equivalents were $37,660,201 as of March 31, 2010. Current assets and current liabilities as of March 31, 2010 were $69,756,224 and $11,042,286, respectively, yielding working capital of $58,713,938. We believe that the funds available to us from operations are adequate to meet our operating needs in 2010. For the three months ended March 31, 2010, net cash provided by operating activities was approximately $6,291,615, which resulted primarily from our organic operations and effective management of cash flow.

Capital expenditure

Total capital expenditure for three months ended March 31, 2010 was $619,616 to purchase fixed assets, primarily machinery and equipments, such as TRIPEASY kiosks. Management may consider substantial increase in equipment or other supporting machinery expenditure to support the fast development and expansion of our business.

Working Capital Requirements

Historically, operations and short term financing have been sufficient to meet our cash needs. We believe that we will be able to generate revenue from operations to provide the necessary cash flow to meet anticipated working capital requirements. However, our actual working capital needs for the long and short term will depend upon numerous factors, including operating results, competition, the opportunity to acquire or start-up new businesses, and the availability of credit facilities, none of which can be predicted with certainty. Due to our rapid growth and expansion, our need for additional capital may arise, and management will seek to raise capital for the maintenance and expansion of our operations through the issuance of debt or equity if necessary. To satisfy these capital needs due to our broad expansion in PRC, as well as to set up more TRIPEASY kiosks, we may incur additional capital expenditure.

We filed a Registration Statement on Form S-3 to register $50,000,000 worth of securities on Aug 7, 2009, which became effective on November 5, 2009. There can be no assurance that such financing will be available or, if available, will be on terms acceptable to us. Future expansion will be limited by the availability of financing. Unless otherwise indicated in a prospectus supplement, we intend to use the net proceeds from the sale of the securities under the S-3 registration for general corporate purposes, including expanding our products, and for general working capital purposes. We may also use a portion of the net proceeds to acquire or invest in businesses and products that are complementary to our own, although we have no current plans, commitments or agreements with respect to any acquisitions as of the date of the S-3 registration.

Off Balance Sheet Arrangements

We have never entered into any off-balance sheet financing arrangements and have never established any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We currently do not hold or use any derivative or other financial instruments that expose us to substantial market risk and we have no foreign exchange contracts.

We are exposed to foreign exchange risk arising from fluctuations in the exchange rate between U.S. Dollars and Renminbi. Our operations are located in the People’s Republic of China and substantially all of our revenues and assets are denominated in Renminbi. However our reporting currency is the U.S. Dollar and some of our expenses are denominated in U.S. Dollars. As a result, our financial results are potentially subject to the impact of changes in value between U.S. Dollars and Renminbi. If the Renminbi depreciates relative to the U.S. Dollar, the value of our revenues, earnings and assets as reported in our financial statements will decline.

Item 4. Controls and Procedures.

Evaluation of our Disclosure Controls

As of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer have evaluated the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”). Disclosure Controls, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure Controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Our management, including the CEO and CFO, does not expect that our Disclosure Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based upon their controls evaluation, our CEO and CFO have concluded that our Disclosure Controls are effective at a reasonable assurance level.

Changes in internal control over financial reporting

There have been no changes in our internal controls over financial reporting during our first fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

There is no material legal proceeding pending against us.

Item 1A. Risk Factors

Not Applicable.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved).

None.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.

Exhibit No.	SEC Ref. No.	Title of Document

1	31.1	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

2.	31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

3	32.1	Certification of the Principal Executive Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

4	32.2	Certification of the Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

* The Exhibit attached to this Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to liability under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

SIGNATURES

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

Date: July 22, 2011

	UNIVERSAL TRAVEL GROUP

	By:	/s/ Jiangping Jiang
		Jiangping Jiang
		Chairwoman and Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Jing Xie
		Jing Xie
		Chief Financial Officer
		(Principal Financial Officer)

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