UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





(Mark
One)


Amendment
No. 1 to





FORM
10-K





x
                ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the fiscal year ended December 31,
2008




or





o
                TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from _____________to
  ______________





Commission
file number  000-51516





UNIVERSAL
TRAVEL GROUP


(Exact
name of registrant as specified in its charter)





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





2008
Shennan Road, Hualian Center, Room 301-309, Shenzhen, The People’s Republic of
China


(Address
of principal executive offices) (Zip Code)





Registrant’s
telephone number, including area code 011-86-
755-836-68489




Securities
registered pursuant to Section 12(b) of the Act:





Title
      of each class
                  
                  Name
      of each exchange on which
registered





Securities
registered pursuant to section 12(g) of the Act:





Common
Stock, $0.001 par value per share


Preferred
Stock, $0.001 par value per share


(Title of
class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


o
Yes            x No





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. xYes  oNo





Note– Checking the box above
will not relieve any registrant required to file reports pursuant to Section 13
or 15(d) of the Exchange Act from their obligations under those
Sections.





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


x
Yes     o No





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. x





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 oNon-accelerated
      filer o
      (Do not check if a smaller reporting company)
            
            Smaller
      reporting company x





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


o
Yes                                 x  No





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter.





Note.—If a determination as to
whether a particular person or entity is an affiliate cannot be made without
involving


unreasonable
effort and expense, the aggregate market value of the common stock held by
non-affiliates may be calculated on the basis of assumptions reasonable under
the circumstances, provided that the assumptions are set forth in this
Form.





The
aggregate market value of the voting and non-voting common stock of the issuer
held by non-affiliates as of  March  12, 2009 was
approximately $16,538,602.94 (24,684,482 shares of common
stock)  based upon the closing price of the common stock as quoted by
Nasdaq OTC Bulletin Board on such date.





APPLICABLE
ONLY TO REGISTRANTS 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 Section 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.    o  Yes 
o No





(APPLICABLE
ONLY TO CORPORATE REGISTRANTS)





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





As of
March 12, 2009, there are presently 41,619,966  shares of common
stock, par value $0.001 issued and outstanding.





DOCUMENTS
INCORPORATED BY REFERENCE





List
hereunder the following documents if incorporated by reference and the Part of
the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).





Table
of Contents




PagePART
      IItem
      1.
                                                                                                                  Description
      of Business
                                                                                                                  5Item
      1A.
                                                                                                                  Risk
      Factors
                                                                                                                  17Item
      1B.
                                                                                                                  Unresolved
      Staff Comments
                                                                                                                  23Item
      2.
                                                                                                                  Description
      of Property
                                                                                                                  24Item
      3.
                                                                                                                  Legal
      Proceedings
                                                                                                                  24Item
      4.
                                                                                                                  Submission
      of Matters to a Vote of Security Holders
                                                                                                                  24PART
      IIItem
      5.
                                                                                                                  Market
      for Common Equity and Related Stockholder
      Matters
                                                                                                                  24Item
      6.
                                                                                                                  Selected
      Financial data
                                                                                                                  30Item
      7.
                                                                                                                  Management’s
      Discussion and Analysis of Financial Condition orPlan of
      Operation
                                                                                                                  31Item
      7A.
                                                                                                                  Quantitative
      and Qualitative Disclosures About Market
Risk
                                                                                                                  49Item
      8
                                                                                                                  Financial
      Statements
                                                                                                                  49Item
      9.
                                                                                                                  Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                                                                                                                  50Item
      9A.
                                                                                                                  Controls
      and Procedures
                                                                                                                  50Item
      9B.
                                                                                                                  Other
      Information
                                                                                                                  51PART
      IIIItem
      10.
                                                                                                                  Directors,
      Executive Officers, Promoters and Control Persons; Compliance with Section
      16(a) of the Exchange Act
                                                                                                                  51Item
      11.
                                                                                                                  Executive
      Compensation
                                                                                                                  54Item
      12.
                                                                                                                  Security
      Ownership of Certain Beneficial Owners and
      Management
                                                                                                                  57Item
      13.
                                                                                                                  Certain
      Relationships and Related Transactions
                                                                                                                  59Item
      14.
                                                                                                                  Principal
      Accountant Fees and Services
                                                                                                                  59PART
      IVItem
      15.
                                                                                                                  Exhibits
      and Financial Statement Schedules
                                                                                                                  60


2


EXPLANATORY
NOTE




In this
Amendment to Annual Report on Form 10-K (this “Form 10K/A”), we refer to
Universal Travel Group, a Nevada corporation, as “we,” “us,” “our” or “our
company.”




We are
filing this Amendment to Annual Report on Form 10-K/A to amend certain
disclosures in our Annual Report on Form 10-K for the year ended December 31,
2008, as originally filed with the Securities and Exchange Commission (the
“SEC”) on March 12, 2009 (our “Report”).  The principal changes to our
Report in this amendment are as follows:




The
Company has reclassified and included all costs directly associated with the
generation of revenue in its cost of services. These costs were previously
classified as selling, general, and administrative expenses in the consolidated
financial statements.  This reclassification has resulted in no change
in the Company’s reported Consolidated Balance Sheets as of December 31, 2008
and 2007 and Consolidated Statements of Cash Flows for each of the years in the
three-year period ended December 31, 2008.  The reclassification did
affect the individual components of the Company’s Consolidated Statements of
Income for each of the years in the three-year period ended December 31,
2008. However, this reclassification had no effect on the reported
consolidated net income.  The Company has added a reclassification
footnote under its Note 2 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES to the consolidated financial statements to disclose
the amount and impacts of this reclassification.




In
addition, for clarification purposes, the Company also modified and expanded its
disclosures of the following significant accounting policies:




·
            Revenue
      Recognition accounting policy was modified to present revenue recognition
      criteria for each source of revenues and the related significant
      assumptions, judgments and estimates associated with these revenues. The
      Company also added the disclosure of the impacts of sales returns and
      cancellations, as well as the pass through nature of pricing within the
      air-ticketing and hotel reservations segments. The modification of
      disclosures of revenue recognition policy had no impact on the Company’s
      consolidated financial statements and the results of
      operations,





·
            Costs
      of Services accounting policy was added to describe the nature of the
      costs considered to be cost of revenue attributable to each of the
      respective sources of revenue.  The addition of disclosures of
      costs of services accounting policy incorporated the reclassification as
      described above,





·
            Net
      Income Per Share accounting policy was added to clarify our computation of
      basic and diluted weighted average shares outstanding, and the effect of
      stock options and warrants on the average number of shares outstanding.
      The addition of disclosures of net income per share accounting policy had
      no impact on the Company’s consolidated financial statements and the
      results of operations,





·
            Goodwill accounting policy was modified to include
      a roll forward schedule that reconciles the beginning and ending
      balances of goodwill assigned to each segment for each period presented.
      The modification of disclosures of goodwill accounting policy had no
      impact on the Company’s consolidated financial statements and the results
      of operations,





The
Company also added the presentation of comprehensive income for each year
presented in an acceptable form set forth in SFAS 130.  Also, the
Segment Information footnote was modified to be in compliance with the
disclosures required by SFAS 131. In addition, we modified and expanded our
disclosures on Note 3, Trade Deposits and Advances, to provide a summary of the
Company’s deposits outstanding by each of its subsidiaries and the nature and
purpose of each deposit. The modification of the disclosures of this footnote is
for clarification purposes and had no impact on the Company’s consolidated
financial statements and the results of operations,


3




The
following sections of this Form 10-K/A have been amended to reflect the above
changes, or to provide a more detailed description of the business and the
analysis of the Company’s financial conditions and operating
results:




Part I —
Item 1. “Description of Business”;
 
 Part II —
Item 6. “Selected Financial Data”;
 
 Part II —
Item 7. “Management’s Discussion and Analysis of Financial Condition and Results
of Operations”; and
 
 Part II —
Item 8. “Financial Statements”.






Other
than the correction of certain typographical errors and the modification of
disclosures in the sections as described above, all other information in our
original Form 10-K remains unchanged. For the convenience of the reader, this
amendment includes, in their entirety, those items in our original filing not
being amended. Except to the extent relating to the amendment of our financial
information and disclosures described above, this amendment continues to
describe conditions as of our original filing, and does not update disclosures
contained herein to reflect events that occurred at a later date. Accordingly,
this Form 10-K/A should be read in conjunction with our other filings made with
the SEC subsequent to the filing of our Report.


4


PART
I




Item
1.  Business.




History
and Organization





We were
incorporated on January 28, 2004, pursuant to the laws of the state of
Nevada.





On March
15, 2006, we entered into an Acquisition Agreement and Plan of Merger (the
"Acquisition Agreement") with TAM of Henderson, Inc. ("TAM"), whereby TAM
acquired all of our outstanding shares of Common
Stock from our then sole stockholder and simultaneously merged with and into the
Company, with the Company as the surviving corporation.





On June
20, 2006, Mr. Xiao Jun ("Jun"), our former officer and director, acquired from
the then-majority-shareholder of our Company 8,000,000 shares of our Common
Stock, for an aggregate purchase price of $435,000 (the "Stock Transaction").
After giving effect to such acquisition, Jun held 8,000,000 of the 10,450,000
shares of our Common Stock then issued and outstanding, constituting, in the
aggregate, 77% of the then issued and outstanding shares of Common Stock of the
Company. In connection with his acquisition of shares in the Company, Jun was
appointed as our Chief Executive Officer.





On July
12, 2006, we consummated the transaction contemplated by the Agreement and Plan
of Merger, dated as of June 26, 2006 (the "Merger Agreement"), by and among the
Company, Merger Sub of Tam, Inc. ("Merger Subsidiary"), a wholly owned
subsidiary of us, Full Power Enterprise Global Limited (“Full Power”), and the
shareholders of Full Power. In accordance with the Merger Agreement, Merger
Subsidiary merged with and into Full Power, Merger Subsidiary ceased to exist
and Full Power was the surviving entity (the "Merger Transaction").





The Full
Power Shareholders received 20,000,000 shares of Common Stock in exchange for
all of the issued and outstanding shares of Full Power. As a result of the
Merger Transaction, Full Power became the Company's wholly owned subsidiary.
Full Power owns all of the issued and outstanding capital stock of Shenzhen Yu
Zhi Lu Aviation Service Company Limited  (“YZL”).





In
connection with the Merger Transaction, Jiangping Jiang (who, prior to the
Merger Transaction was a shareholder of Full Power), Xin Zhang and Hoi-Yui Lee
were appointed to our Board of Directors and Jun resigned from all positions
with us.





Business
Overview





With the
acquisition of Full Power and hence YZL, we shifted our business to the online
travel service industry in the People’s Republic of China (“PRC”). YZL, a
company organized under the laws of the PRC, is primarily engaged in the
business of providing domestic and international airline ticketing services and
cargo transportation agency services. Additionally, YZL provides hotel
reservations, packaged tours, and air delivery services both online
and  through customer representative offices. YZL also owns an
aviation network (www.cnutg.com) that provides a complete air ticket sales
network.





During 2007, we made several
acquisitions, which expanded our scope of business.





On April
10, 2007, we acquired Shenzhen Speedy Dragon Enterprise Limited ("SSD") in
exchange for 714,285 shares of our shares of Common Stock and an interest-free
promissory note in the principal amount of $3,000,000, payable no later than
April 10, 2008.  The note has been repaid in full.





SSD,
located in Shenzhen City, is a cargo logistics company providing commercial,
point-to-point parcel and container transportation services within the PRC. It
also operates as an international and domestic freight forwarding agency for
Chinese civil aviation companies and provides railway and express delivery
services. SSD relies upon independent delivery services with more than 200
vehicles and manages leased and owned warehouses totaling 40,000 square meters
(approximately 430,556 square feet), which it uses to stage, transfer, and store
packages in transit. During 2007, air cargo for which SSD arranged
transportation accounted for approximately 30% of the total air cargo market in
Shenzhen, China.


5





On August
6, 2007, we acquired Xi'an Golden Net Travel Serve Service Company Limited
("XGN") in exchange for 151,765 shares of our Common Stock and interest-free
promissory notes in the aggregate principal amount of $1,542,000, payable no
later than August 6, 2008. The note has been repaid in full.





XGN was
established in 2001 and focuses on the domestic tourism market. It provides air
tickets, train tickets and other travel-related services including servicing
individuals and groups attending conferences and exhibitions, making travel
arrangements for business studies, academic exchanges, travel adventures,
cultural education, sports competition, and theatrical performances. XGN also
specializes in central plains tours of Xi'an. Since 2005, XGN has
formed  joint ventures with other travel agencies in Tibet, Xinjiang,
Shanxi and Inner Mongolia that focus on western plains routes.





In August
8, 2007, we acquired Shanghai Lanbao Travel Service Company Limited ("SLB") in
exchange for 600,000 shares of our Common Stock and interest-free promissory
notes in the aggregate principal amount of $2,828,000, payable no later than
August 8, 2008. The note has been repaid in full.





SLB was
established in 2002 and its core business focus is a centralized real-time
booking system providing consumers and travel related businesses with hotel
bookings, air ticket and tourism information via the internet and mobile phone
text-messaging technology. It owns and manages the award winning China Booking
Association website, http://www.cba-hotel.com/, which receives approximately
200,000 visitors daily.





In
October 29, 2007, we acquired Foshan Overseas International Travel Service Co.,
Ltd. ("FOI") in exchange for 1,122,986 shares of our Common Stock and
interest-free promissory notes in the aggregate principal amount of $3,153,500,
payable no later than October 29, 2008.   This note has been
repaid in full.





FOI was
established in 1990. Its core business focuses on both domestic and
international tourism, as well as packaged airfare, hotel and conference
reservations with ground transportation within the PRC. For three consecutive
years, FOI has been recognized as one of the 100 outstanding enterprises by the
China Tourism Bureau and in 2004 was voted one of the most credible enterprises
in the country. Last year it served more than 120,000 people with packaged tours
and conferences.





Sources
of Revenue





We have four lines of business and
revenue, namely (i) air-ticketing (Shenzhen Yu Zhi Lu Aviation Service Company
Limited), (ii) hotel reservations (Shenzhen Yu Zhi Lu Aviation Service Company
Limited  and Shanghai Lanbao Travel Service Company Limited), (iii)
packaged tours (Xi'an Golden Net Travel Serve Service Company Limited and Foshan
Overseas International Travel Service Co., Ltd) and (iv) air cargo agency
services (Shenzhen Speedy Dragon Enterprise Limited).





Air-ticketing




We are,
through our subsidiary,YZL (Shenzhen
Yu Zhi Lu Aviation Service Company Limited) in the air-ticketing
business.  YZL has contracted with Chinese domestic airlines such as
Air China, China Southern Airlines and China Eastern Airlines and  34
international airlines such as United Airlines, Cathay Pacific and Virgin
Airlines to sell Chinese domestic and international air tickets.  YZL
holds the “First Class Air-Ticketing Agency” license from the General
Administration of Civil Aviation of China (“CAAC”).  YZL has been in
operation for more than ten years.




We and our agents utilize a centralized
air-ticketing booking system called the “eTerm system” maintained and owned by
the PRC government to issue air tickets.   We pay a license fee
for the use of the “eTerm system” and charge our agents a pro-rated portion of
that fee for their use of the system through us.


6




YZL
receives commissions (averaging 6%)  from travel suppliers for
air-ticketing under various services agreements. Commissions from air-ticketing
services rendered are recognized  at the time when the air tickets are
issued. Our customers pay for their tickets online or through our TRIPEASY
Kiosks with credit cards or bank debit cards and are then issued their tickets.
Our revenue from such transactions is on a net basis in the consolidated
statements of income as we generally do not assume inventory risks and have no
obligations for cancelled air-ticket reservations. We are, typically, paid our
aggregated commissions once every month.




Our air-ticketing business is affected
by the condition of the travel industry in China. Travel expenditures are highly
sensitive to business and personal discretionary spending levels and thus tend
to decline during general economic downturns, such as the slowdown in economic
growth arising from the international financial crisis which began in 2008.
Adverse trends or events that tend to reduce travel and are likely to reduce our
revenues include:




·
            declines
      in economic growth, recessions, and financial or other economic
      crises;




·
            increases
      in prices in the hotel, airline or other travel-related
      sectors;




·
            the
      occurrence of travel-related
accidents;




·
            outbreaks,
      or the fear of outbreaks, of H1N1 flu (swine flu), severe acute
      respiratory syndrome, avian flu or other
  diseases;




·
            terrorist
      attacks or threats of terrorist attacks or
wars;




·
            natural
      disasters or poor weather
conditions;




·
            increase
      in oil prices;




·
            a
      decrease in the number of extended holiday periods like the Spring
      Festival and long weekend holidays.




As a
result of any of these events, over which we have no control, our results could
be severely and adversely affected.




Further,
because we are agents for the sale of air tickets, we do not have any control
over air ticket prices, which directly affect their demand and our
profitability. Conversely, we do not bear any risk for unsold tickets and
maintain no inventory.  Also, we are affected by the seasonality of
travel in general and global events such as the Olympics 2008 and the World Expo
in Shanghai in 2010 which will increase the demand for travel.




Cargo
agency




We are,
through our subsidiary, Shenzhen Speedy Dragon Enterprise Limited ("SSD"),
involved in the cargo agency business, Our air cargo business basically brokers
air cargo spaces and resells them to local logistic companies to generate
revenue. Our customers are charged based on the class and weight of goods
shipped. Gross revenue is recognized upon rendering of services.




We
pre-book cargo space and then sell them to our customers.  Our profit
on each shipment depends on demand for cargo space on that shipment. We monitor
the demand for cargo space closely and because we are very conservative in our
estimates of the demand for cargo space when pre-booking it, we rarely have
unsold inventory.  However, any downturn in the demand for cargo space
would compel us to lower our rates in order to induce our customers to ship
cargo through us, thus affecting our profitability.


7


Our
business is dependent upon a number of factors that may have a materially
adverse effect on the results of our operations, many of which are beyond our
control. These factors include increases or rapid fluctuations in fuel prices,
capacity in the trucking industry, and insurance premiums. Our profitability
would decline if we were unable to anticipate and react to increases in our
operating costs, including purchased transportation and labor, or decreases in
the amount of revenue per pound of freight shipped through our system. As a
result of competitive factors, we may be unable to raise our prices to meet
increases in our operating costs, which could result in a materially adverse
effect on our business, results of operations and financial
condition.




Economic
conditions may adversely affect our customers and the amount of freight
available for transport. This may require us to lower our rates, and this may
also result in lower volumes of freight flowing through our network. Customers
encountering adverse economic conditions represent a greater potential for loss,
and we may be required to increase our reserve for bad-debt losses.




Our
results of operations may be affected by seasonal factors.. In addition, it is
not possible to predict the short or long-term effects of any geopolitical
events on the economy or on customer confidence in the People’s Republic of
China, or their impact, if any, on our future results of
operations.




In
summary, we believe the key drivers of our cargo agency business
are:




·
            the
      economy and the demand for goods;




·
            because
      the PRC is mainly an export driven country, demand for PRC made products
      and correspondingly, demand for shipment of cargo is directly related to
      the global economy and demand for PRC made
  products;




·
            the
      availability of other cost effective ways of cargo
      transportation;




·
            the
      price of oil;




·
            any
      subsidies from the PRC government on the price of oil in the
      PRC;




·
            distribution
      hubs and transportation routes accessible by airplanes and
      airports;




·
            competitive
      cargo shipment rates.




Hotel
reservations




We are
through our subsidiaries, Shanghai Lanbao Travel Service Co., Ltd (“SLB”)
involved in the hotel reservations business.




We have
contracted with 9,000 hotels, and have established a China Booking Association
comprising more than 1,000 travel agencies which share more than 200,000 hotel
resources internationally.




Our
customers are able to enquire via either our centralized website (www.cnutg.com)
or SLB's website (www.cba-hotel.com).  Additionally,
SLB maintains a 100 square meters call center in Shanghai and the call center
has 20 seats to handle hotel reservation enquiries.




We act as
agent in substantially all of our hotel-related transactions. Our customers
receive confirmed bookings and generally pay the hotels directly upon completion
of their stays, and in general, we pay no penalty to the hotels if our customers
do not check in. For our hotel suppliers, we earn pre-negotiated fixed
commissions on hotel rooms we sell.




We
contract with hotels for rooms under two agency models, the “guaranteed
allotment” model and the “on-request” model. Under our agreements with our hotel
suppliers, hotels are generally required to offer us prices that are equal to or
lower than their published prices, and notify us in advance if they have
promotional sales, so that we can lower our prices accordingly.


8




In
addition to the agreements that we enter into with all of our hotel suppliers,
we enter into a supplemental agreement with each of the hotel suppliers with
which we have a guaranteed allotment arrangement. Pursuant to this agreement, a
hotel guarantees us a specified number of available rooms every day, allowing us
to provide instant confirmations on such rooms to our customers before notifying
the hotel. The hotel is required to notify us in advance if it will not be able
to make the guaranteed rooms available to our customers due to reasons beyond
its control.




We
receive commissions from travel suppliers for hotel room reservations based on
the transaction value of the rooms. Commissions from hotel reservation service
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.  Our revenue from such transactions is on a net basis in
the consolidated statements of income.  We, generally, do not assume
inventory risks and have  no obligations for cancelled hotel
reservations.  Our customers reserve hotel rooms through us, our
website or our Kiosks and pay for their rooms directly to the
hotel.




Our
primary customers in this segment are business and leisure travelers in China
who do not travel in groups. These types of travelers, who are referred to in
the travel industry as FITs (free individual travelers) and whom we refer to as
independent travelers, form a traditionally under-served yet fast-growing
segment of the China travel market. We act as agent in substantially all of our
transactions and generally do not take inventory risks with respect to the hotel
rooms booked through us.




Apart
from the same factors affecting our air-tickets business, other factors
affecting our hotel reservations segment include:




·
                      our
      ability to secure more room supply relationships with
      hotels;·
                      the
      quality and depth of our hotel supplier network  and our ability
      to provide a diverse range of hotel rooms, locations and price points to
      appeal to our customers;·
                      our
      commission rates which are largely determined by the hotels;·
                      our
      ability to offer reservations at highly rated hotels is particularly
      appealing to our
customers.




Packaged
Tours




We are
through our subsidiaries, Foshan International Travel Service Co., Ltd. (“FOI”)
and Xian Golden Net Travel Serve Services Company Limited (“XGN”) in the
business of providing  domestic and cross border packaged tour travel
services.




We
contract with traffic service providers, accommodation providers and leisure
service providers so tha we are able to purchase air tickets, train and coach
tickets, accommodation and leisure or entertainment packages in bulk and then
resell them to our customers with a mark-up.  We have two sources of
revenue: one from payment by individual customers and the other, through group
sales.  We recognize gross revenue when a tour is
completed.




As we are
the agent for packaged tours, we do not have any control over the components for
air-ticket prices, hotel accommodation, transportation and tourism attraction
ticket prices, which directly relates to the demand for packaged tours and their
popularity or lack thereof.


9




We also
bear no risk because we maintain no inventory of air tickets, hotel rooms or
attraction tickets. We only purchase the various components comprising a
packaged tour when an order or request for such a tour is made and paid for by a
customer.   Our customers may make an order for a packaged tour
by booking it directly through us, our website or Kiosks.  However,
they may only pay for the packaged tour at our offices.




Because
the packaged tour segment is tourism related and a packaged tour typically
comprises a bundled travel and accommodation package, the significant factors,
trends, demands and uncertainties affecting this segment are the same for
air-ticketing and hotel reservations.





Insurance





We presently have Directors and
Officers insurance with AIG.  The policy is for a term of one year
commencing June 23, 2008 to June 23, 2009 for an aggregate liability of
$5,000,000.   We have paid a premium of $42,436 for the
policy.  We do not have any other insurance.





Intellectual
Property





We have applied to register the
following trademarks with the Trademark Bureau of the State Administration for
Industry & Commerce





Trademark
                      
                      Class
                      
                      RegistrantUTG
                      
                      16,
      39, 43
                      
                      Shenzhen
      Yu Zhi Lu Aviation Service Company LimitedTRIPEASY
                      
                      39,
      42
                      
                      Shenzhen
      Yu Zhi Lu Aviation Service Company
Limited





We,
through our subsidiary, XGN, have the  “古都之旅” trademark
registered under Class 39 with the Trademark Burean of the State Administration
for Industry & Commerce.  The term of the registration is valid
from January 7, 2005 through to January 6, 2015.




Class 16
(Paper goods and printed matter) covers paper, cardboard and goods made from
these materials, not included in other classes; printed matter; bookbinding
material; photographs; stationery; adhesives for stationery or household
purposes; artists' materials; paint brushes; typewriters and office requisites
(except furniture); instructional and teaching material (except apparatus);
plastic materials for packaging (not included in other classes); playing cards;
printers' type; printing blocks.




Class 39
covers transport, packaging and storage of goods and travel
arrangements.




Class 42
(Computer, scientific & legal) covers scientific and technological services
and research and design relating thereto: industrial analysis and research
services; design and development of computer hardware and software; legal
services.




Class 43
(Hotels and Restaurants) covers services for providing food and drink; temporary
accommodations.





We have also registered the following
domain names:





Domain
      Name
                                                  
                                                  Owner
                                                  
                                                  Registration
                                                    Date
                                                  
                                                  Expiration Datewww.cnutg.com
                                                  
                                                  Shenzhen
      Yuzhilu Aviation Service Company Ltd
                                                  
                                                  2006-05-05
                                                  
                                                  2011-05-05www.cnutg.com.cn
                                                  
                                                  Shenzhen
      Yuzhilu Aviation Service Company Ltd
                                                  
                                                  2006-07-27
                                                  
                                                  2013-07-27www.cnutg.cn
                                                  
                                                  Shenzhen
      Yuzhilu Aviation Service Company Ltd
                                                  
                                                  2006-07-27
                                                  
                                                  2012-07-27www.cnutg.net
                                                  
                                                  Shenzhen
      Yuzhilu Aviation Service Company Ltd
                                                  
                                                  2006-07-27
                                                  
                                                  2012-07-27www.cnutg.net.cn
                                                  
                                                  Shenzhen
      Yuzhilu Aviation Service Company Ltd
                                                  
                                                  2006-07-27
                                                  
                                                  2012-07-27


10





Customers





Our
customer base is very diversified and numerous.  Almost all our
customers are individuals and none of our customers comprise more than 1% of our
revenue.  The loss of any one of our customer will not have a material
adverse effect on any segment of our business or our business, as a
whole.





Revenue
Breakdown





Packaged
Tours





Below is
a breakdown the number of sales of our packaged tours for the past three
years:





Year
                                        
                                        Visitors
                                        
                                        
                                        Number of visitors multiplied by
                                          the number of days comprising the tour2006
                                        
                                        
                                        65,981
                                        
                                        
                                        238,9242007
                                        
                                        
                                        93,984
                                        
                                        
                                        364,6762008
                                        
                                        
                                        139,242
                                        
                                        
                                        521,270





Air-ticketing





Below is a breakdown of the number of
air tickets sold for the past three years:





Year
                    
                    Number
      of Tickets2006
                    
                    601,
      0002007
                    
                    1,084,0002008
                    
                    1,720,000





Hotel
Reservations





Below is a breakdown of the number of
hotel room nights booked through us for the past three years:





Year
                  
                  Number
      of Room Nights2006
                  
                  352,0002007
                  
                  680,0002008
                  
                  1,466,000





Cargo





Below is a breakdown of the volume of
cargo shipped through us for the past three years.





Year
                  
                  Tons2006
                  
                  8692007
                  
                  3,6122008
                  
                  2,089





The
management of the Company uses these performance metrics to monitor the
performance of each of its business segments on a continuing basis and to
assess, discern and anticipate any trends or cycles in the
industry.  With such tools, the Company is able to make calculated
decisions and take any pre-emptive measures to safeguard the Company’s
interests.


11





However,
because of a confluence of other pertinent factors affecting the segments, the
actual results of each segment may differ materially from what the metrics would
suggest and any undue weight on these metrics in isolation is
discouraged.  For example, an increase in the number of room nights
booked should conceivably mean an increase in revenue and hence an increase on
commissions earned.  However, this may be offset by lower room rates
and lower commission rates .





Suppliers





For our
air-ticketing and air cargo business, our major suppliers are mainly the PRC
domestic airlines.  We contract directly and individually with each
hotel and supplier of the various components of our packaged tours.





We do not
have long term contracts with any one of our suppliers.  We typically
signed one year contracts which renew for successive one-year terms unless
earlier terminated by either party.  The main terms of such contracts
would typically comprise terms pertaining to authorizations, trade deposits and
payment method.





We are
not dependent on any one supplier and most of our suppliers are competitors
against each other within their own industry.  Accordingly, we are
able to choose the supplier with the most favorable terms to contract with and
because such terms vary from time to time, our list of suppliers constantly
changes too.





Our
online reservation database is managed in-house and we are not dependent on a
third party service provider to maintain our database and ensure that it is
stable and secure.





Sales
and Marketing





We
advertise our services for the general public through roadside billboards,
brochures, internet ads, cell phone message ads, newspapers and magazines
ads.





Sales and
marketing for the past three years account for very small percentage of our
revenue, and as our TRIPEASY Travel Service
Kiosks will be serving as an effective media platform in coming years and a
marketing tool for us, we believe our sales and marketing expenses will not
increase materially.





Below is
the breakdown of sales and marketing expenses for our various subsidiaries for
the past year:





Subsidiary
                      
                      Amount
      (RMB)/ (US$)Foshan
      Overseas International Travel Service Co., Ltd.
                      
                      119,669
      / $17,496Shenzhen
      Speedy Dragon Enterprise Limited
                      
                      11,000
      / $1,608Shenzhen
      Yu Zhi Lu Aviation Service Company Limited
                      
                      870,000
      / $127,193 (Media Advertisement expenses)862,000 /
      $126,024  (Airport Marketing expenses)Shanghai
      Lanbao Travel Service Company Limited
                      
                      15,000
      / $2,192 (Advertisements)
                        25,000
      / $3,655 (Website)
                        17,000
      / $2,486
(Promotions)





We anticipate that our sales and
marketing expenses for fiscal year 2009 would remain roughly the
same.





Competition





Our
main competitors in China in the online booking industry for air-tickets and
hotel reservations include Ctrip.com International, Ltd. and eLong,
Inc.


12





It is very difficult to assess our
competitors in the packaged tour business as there are numerous packaged tour
providers in the PRC that operate different routes every year.





Our main competitors for the cargo
agency business stem from the direct sales departments operated by the various
airlines companies themselves.





Many of
our competitors, particularly those engaged in the online booking industry, are
better established than us, are more widely known to consumers, and have larger
infrastructures and greater capital resources.





Our
Competitive Advantage





We believe that we have the following
advantages over our competitors:





●
            our
      business model and sources of revenue are diversified in that we are
      involved in the air ticketing, hotel reservations, packaged tours, and air
      cargo agency businesses and any negative impact on one line of business
      may buffered by our other lines of
businesses;





●
            our
      businesses and presence are spread out throughout the PRC, which makes us
      less susceptible to a total loss or interruption to our business in the
      event of a natural calamity; and





●
            we
      plan to roll out more of the TRIPEASY Travel Service
      Kiosks (“Kiosks”) in 2009 in certain selected cities in the
      PRC.  The Kiosks would enable our customer to make travel
      related inquiries and book their travel without a computer or an internet
      connection.  They should appeal to computer users who do not
      make travel related transactions over the internet from their computers
      and non-computer owners.





Our
Future Goals and Expansion Plans





We are planning a nationwide
rollout of theTRIPEASYTravel Service Kioskswithin the next two years. The Kiosks will be located everywhere
including hotels, office buildings, banks, shopping malls and MTR stations. The
Company will promote the Kiosks via local media such as newspapers, billboards
and internet ads, including its own award-winning website, www.cnutg.com, as
well as other related websites, which will in turn further the Company’s brand
recognition. The Kiosks themselves will provide a strong media platform to
strengthen Universal Travel Group’s franchise. Additionally, the Kiosks’
interface will feature the same look, feel and functionality as Universal Travel
Group’s new website, www.cnutg.com.cn,
which integrates the Company’s diversified services into a new platform with
selected value- added features and functionality.





The
Kiosks are interactive terminals placed in strategically targeted public areas.
They will enable convenient, fast and easy to use, real-time air ticketing
inquiries, reservations and purchases, as well as hotel and tour reservations.
The Kiosks will provide full 360° views of hotels and travel destinations and
accept payment via bank cards, debit cards and VISA. According to Credit Suisse
Research, the number of domestic travelers in the PRC that use online travel
services continues to rise, accounting for 16% of users in 2007, up from 12% in
2005. The Company initially plans to introduce the Kiosks in selected major
cities in the PRC, with approximately 600 Kiosks to be rolled out in 2009. Major
cities such as Shanghai and Shenzhen have a higher proportion of people using
online travel services as compared to the rest of the PRC, representing 23% and
20% of the users in 2007, respectively. According to the China Internet Network
Information Center, the PRC is the world’s largest market for internet users.
Despite this, 95% of internet users still do not make purchases over the
internet. The TRIPEASY Kiosks will eliminate the need for a personal computer or
online access in order to make travel arrangements and are specifically targeted
at this demographic of users.





Our beta testing of the Kiosks has
shown promising results. The TRIPEASY Kiosks will serve, together with our
website and call center, to integrate our air ticket sales, hotel room sales,
and packaged tours businesses. We are working on a cost-effective way for a
potential rollout by bundling it with Byte Power (CQ) Info Tech Limited's (a
subsidiary of Byte Power Group Limited - ASE: BPG.AX) E-Kiosks. This will allow
us to enter a new market in Chongqing quickly and efficiently.


13





Employees





At
the current time, in addition to our officers, we have approximately 200
full-time employees. None of our employees is a member of a union and our
relationships with our employees are generally satisfactory. In accordance with
Chinese Labor Law, we provide social security and medical insurance to all our
employees.





Government
Regulations




General
Regulation of Businesses




Air-ticketing.
The air-ticketing business is subject to the supervision of China National
Aviation Transportation Association, or CNATA, and its regional branches. Prior
to March 31, 2006, the principal regulation governing air-ticketing in China is
the Administration on Civil Aviation Transporting Marketing Agency Business
Regulations (1993). The said regulation was abolished by PRC government on
January 24, 2008. Currently the principal regulation governing air-ticketing in
the PRC is the Rules on Cognizance of Qualification for Civil Aviation
Transporting Marketing Agencies (2006) which became effective on March 31,
2006.




Under
these regulations, prior to May 19, 2005, an air-ticketing agency was required
to obtain a permit from CAAC or its regional branch in every city in which the
agency propose to conduct its air-ticketing business. On and after May 19, 2005,
any entity that wishes to conduct the air-ticketing business in the PRC must
apply for an air-ticketing permit from CNATA. The regulations provide for a
transitional grace period for air-ticketing agencies that have obtained a valid
license from CAAC or its regional branch prior to the promulgation of the new
rules. These agencies are permitted to use their original licenses until such
licenses expire.




Travel
Agency. The travel industry is subject to the supervision of the China
National Tourism Administration and local tourism administrations. The principal
regulations governing travel agencies in the PRC include:




•
            
            Administration
      of Travel Agencies Regulations (1996), as amended in December 2001;
      and





•
            
            Administration
      of Travel Agencies Regulations Implementing Rules
  (2001).




Under
these regulations, a travel agency must obtain a license from the China National
Tourism Administration to conduct cross-border travel business, and a license
from the provincial-level tourism administration to conduct domestic travel
agency business.




Advertising.
The State General Administration of Industry and Commerce is responsible for
regulating advertising activities in the PRC. The principal regulations
governing advertising (including online advertising) in China
include:





•
            
            Advertising
      Law (1994);





•
            
            Administration
      of Advertising Regulations (1987);
and





•
            
            Implementing
      rules of the Administration of Advertising Regulations
    (2004).




Under
these regulations, any entity conducting advertising activities must obtain an
advertising permit from the local Administration of Industry and
Commerce.


14




Value-added
Telecommunications Business and Online Commerce. Our provision of
travel-related content on our websites is subject to PRC laws and regulations
relating to the telecommunications industry and Internet, and regulated by
various government authorities, including the Ministry of Information Industry
and the State General Administration of Industry and Commerce. The principal
regulations governing the telecommunications industry and Internet
include:




•
            
            Telecommunications
      Regulations (2000);





•
            
            The
      Administrative Measures for Telecommunications Business Operating Licenses
      (2001); and





•
            
            The
      Internet Information Services Administrative Measures
    (2000).





Under
these regulations, Internet content provision services are classified as
value-added telecommunications businesses, and a commercial operator of such
services must obtain a value-added telecommunications business license from the
appropriate telecommunications authorities to conduct any commercial value-added
telecommunications operations in the PRC.




With
respect to online commerce, there are no specific PRC laws at the national level
governing online commerce or defining online commerce activities, and no
government authority has been designated to regulate online commerce. There are
existing regulations governing retail business that require companies to obtain
licenses to engage in the business. However, it is unclear whether these
existing regulations will be applied to online commerce.




Regulation
of Foreign Currency Exchange and Dividend Distribution




Foreign Currency
Exchange. The principal regulation governing foreign currency exchange
in  the PRC is the Foreign Currency Administration Rules (1996), as
amended. Under these Rules, RMB is freely convertible for trade and
service-related foreign exchange transactions, but not for direct investment,
loan or investment in securities outside China unless the prior approval of the
State Administration for Foreign Exchange of the People’s Republic of
China is obtained.




Pursuant
to the Foreign Currency Administration Rules, foreign investment enterprises in
the PRC may purchase foreign currency without the approval of the State
Administration for Foreign Exchange of the PRC for trade and service-related
foreign exchange transactions by providing commercial documents evidencing these
transactions. They may also retain foreign exchange (subject to a cap approved
by the State Administration for Foreign Exchange of the PRC) to satisfy foreign
exchange liabilities or to pay dividends. In addition, if a foreign company
acquires a company in the PRC, the acquired company will also become a foreign
investment enterprise. However, the relevant PRC government authorities may
limit or eliminate the ability of foreign investment enterprises to purchase and
retain foreign currencies in the future. In addition, foreign exchange
transactions for direct investment, loan and investment in securities outside
the PRC are still subject to limitations and require approvals from the State
Administration for Foreign Exchange of the PRC.




Dividend
Distribution. The principal regulations governing distribution of
dividends of wholly foreign-owned companies include:




•
            
            The
      Foreign Investment Enterprise Law (1986), as amended in October
      2000;





•
            
            Administrative
      Rules under the Foreign Investment Enterprise Law
  (2001);


15





•
            
            Company
      Law of the PRC (2005); and





•
            
            Enterprise
      Income Tax Law and its Implementation Rules
  (2007).




Under
these regulations, foreign investment enterprises in the PRC may pay dividends
only out of their accumulated profits, if any, determined in accordance with PRC
accounting standards and regulations. In addition, wholly foreign-owned
enterprises in the PRC are required to set aside at least 10% of their
respective accumulated profits each year, if any, to fund certain reserve funds,
unless such reserve funds have reached 50% of their respective registered
capital. These reserves are not distributable as cash dividends.




Under the
new EIT Law, dividends, interests, rent, royalties and gains on transfers of
property payable by a foreign-invested enterprise in the PRC to its foreign
investor who is a non-resident enterprise will be subject to a 10% withholding
tax, unless such non-resident enterprise’s jurisdiction of
incorporation has a tax treaty with the PRC that provides for a reduced rate of
withholding tax.




Under
the new EIT Law, an enterprise established outside the PRC with its “de facto
management body” within the PRC is
considered a resident enterprise and will be subject to the enterprise income
tax at the rate of 25% on its worldwide income. The “de facto
management body” is defined as the
organizational body that effectively exercises overall management and control
over production and business operations, personnel, finance and accounting, and
properties of the enterprise. It remains unclear how the PRC tax authorities
will interpret such a board definition.




According to the new EIT law,
enterprises that currently enjoy a preferential tax rate will transition to the
statutory enterprise income tax rate of 25% over five years.  The
applicable tax rate will increase to 18% for 2008, 20% in 2009, 22% in 2010, 24%
in 2011 and 25% in 2012.  Enterprises who are currently subject to an
enterprise income tax rate of 24% will have their rates increased to 25% in
2008,




The current tax rates of our various
subsidiaries are: for YZL (Shenzhen Yu Zhi Lu Aviation Service Company Limited
), 15%; for SSD (,Shenzhen Speedy Dragon Enterprise Limited) 15%, for SLB
(Shanghai Lanbao Travel Service Company Limited, 33% and for  XGN
(Xi'an Golden Net Travel Serve Service Company Limited), 33% and for FOI (Foshan
Overseas International Travel Service Co., Ltd.), 33%. For 2008, these rates
will be adjusted to 18%, 18%, 25%, 25% and 25% respectively.




Notwithstanding
the foregoing provision, the new EIT Law also provides that, if a resident
enterprise directly invests in another resident enterprise, the dividends
received by the investing resident enterprise from the invested enterprise are
exempted from income tax, subject to certain conditions.




Moreover,
under the new EIT Law, foreign ADS holders may be subject to a 10% withholding
tax upon dividends payable by a Chinese entity and gains realized on the sale or
other disposition of ADSs or ordinary shares, if such income is sourced from
within the PRC and we are classified as a PRC resident enterprise.





Approvals,
licenses and certificates





We have received the following licenses
and approvals:





•
            “First
      Class Air-Ticketing Agency” awarded by the CAAC and IATA to
      YZL;


•
            “Second
      Class Air Cargo Agency” awarded by the CAAC and IATA to
    SSD;


•
            “International
      Travel Agency” awarded by the China Travel Bureau to FOI;
    and


•
            “Domestic
      Travel Agency” awarded by the China Travel Bureau to
  XGN.


16





Item
1A.             Risk
Factors.




The
reader should carefully consider each of the risks described below. If any of
the following risks described below should occur, our business, financial
condition or results of operations could be materially adversely affected and the
trading price of our common stock could decline significantly.





An
investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and the other information contained
in this prospectus before deciding to invest in our common stock.





Risks
Related to the Company





Risks
associated with business declines or disruptions in the travel industry
generally could reduce our revenue.


A large
part of our revenue is driven by the trends that occur in the travel industry in
the PRC, including the hotel, airline and packaged-tour industries. As the
travel industry is highly sensitive to business and personal discretionary
spending levels, it tends to decline during general economic downturns. Other
adverse trends or events that tend to reduce travel and are likely to reduce our
revenue include the following:


·
            an
      outbreak of political or economic unrest in
  China;





·
            a
      recurrence of SARS or any other serious contagious
    diseases;





·
            increased
      prices in the hotel, airline, or other  travel-related
      industries;





·
            increased
      occurrence of travel-related
accidents;





·
            outbreak
      of war or conflict in the Asia-Pacific
region;





·
            increases
      in terrorism or the occurrence of a terrorist attack  in the
      Asia-Pacific region;





·
            poor
      weather conditions; and





·
            natural
      disasters.





We
could be severely affected by changes in the travel industry and will, in many
cases, have little or no control over those changes. As a result of any of these
events, our operating results and financial conditions could be materially and
adversely affected.





Loss
of key personnel could affect our ability to successfully grow our
business.





We
are highly dependent upon the services of our senior management team. The
permanent loss for any of the key executives could have a material adverse
effect upon our operating results.





Our
management is comprised almost entirely of individuals residing in the PRC with
very limited English skills





Our
management is comprised almost entirely of individuals born and raised in the
PRC. As a result of differences in culture, educational background and business
experiences, our management may analyze, evaluate and present business
opportunities and results of operations differently from the way they are
analyzed, evaluated and presented by management teams of public companies in
Europe and the United States. In addition, our management has very limited
skills in English. Consequently, it is possible that our management team will
emphasize or fail to emphasize aspects of our business that might customarily be
emphasized in a different manner by comparable public companies from different
geographical and political areas.


17





Our
management is not familiar with the United States securities laws.





Our
management and the former owners of the businesses we acquire are generally
unfamiliar with the requirements of the United States securities laws and may
not appreciate the need to devote the resources necessary to comply with such
laws. A failure to adequately respond to applicable securities laws could lead
to investigations by the Securities and Exchange Commission and other regulatory
authorities that could be costly, divert management's attention and disrupt our
business.





Our
operating history is not an adequate basis to judge our future
prospects.





We
have encountered and will continue to encounter risks and difficulties
frequently experienced by companies in evolving industries such as the travel
service industry in the PRC. Some of the risks relate to our ability
to:





·
            attract
      and retain customers and encourage our customers to engage in repeat
      transactions;





·
            retain
      our existing agreements with travel suppliers such as hotels and airlines
      and to expand our service offerings on satisfactory terms with our travel
      suppliers;





·
            operate,
      support, expand and develop our operations, our call center, our website,
      and our communications and other
systems;





·
            diversify
      our sources of revenue;





·
            maintain
      effective control of our expenses;
and





·
            respond
      to changes in our regulatory
environment.





If we are
not successful in addressing any or all of these risks, our business may be
materially affected in an adverse manner.





The
travel industry in China is seasonal.





Our
business travel operations experience seasonal fluctuations, reflecting seasonal
variations in demand for travel services. During the first quarter, demand for
travel services generally declines in the PRC and the number of
bookings flattens or decreases, in part due to a slowdown in business activity
during the Chinese New Year holiday. Demand for travel services generally peaks
during the second half of the year and there may be seasonal fluctuations
in allocations of travel services made available to us by travel suppliers.
Consequently, our revenue  may fluctuate from quarter to
quarter.





Our
business depends on the technology infrastructure of third parties.





We
rely on third-party computer systems and other service providers, including the
computerized reservation systems of airlines and hotels to make reservations and
confirmations. Other third parties provide, for instance, our back-up data
center, telecommunications access lines, significant computer systems and
software licensing, support and maintenance service and air-ticket delivery. Any
interruption in these or other third-party services or deterioration in their
performance could impair the quality of our service.


18


Risks
Related to our Common Stock





There
is a limited public market for our Common Stock.





There is currently a limited public
market for our Common Stock. Holders of our Common Stock may, therefore, have
difficulty selling their Common Stock, should they decide to do so. In addition,
there can be no assurances that such markets will continue or that any shares of
Common Stock, which may be purchased, may be sold without incurring a loss. Any
such market price of the Common Stock may not necessarily bear any relationship
to our book value, assets, past operating results, financial condition or any
other established criteria
of value, and may not be indicative of the market price for the Common Stock in
the future. Further, the market price for the Common Stock may be volatile
depending on a number of factors, including business performance, industry
dynamics, and news announcements or changes in general economic
conditions.





Ownership
of our Common Stock is concentrated.





Our
Common Stock is owned by a relatively small number of holders, some of whom have
business relationships in the PRC. A determination by any of such holders to
sell all or a substantial portion of its holdings could depress the trading
price of our Common Stock.





We
have not and do not anticipate paying any dividends on our Common
Stock.





We have
paid no dividends on our Common Stock to date and it is not anticipated that any
dividends will be paid to holders of our Common Stock in the foreseeable future.
While our future dividend policy will be based on the operating results and
capital needs of the business, it is currently anticipated that any earnings
will be retained to finance our future expansion and for the implementation of
our business plan. As an investor, you should take note of the fact that a lack
of a dividend can further affect the market value of our stock, and could
significantly affect the value of any investment in our Company.





We
will incur significant costs as a result of operating as a public company and
our management will be required to devote substantial time to compliance
requirements.





As a
public company we incur significant legal, accounting and other expenses under
the Sarbanes-Oxley Act of 2002, together with rules implemented by the
Securities and Exchange Commission and applicable market regulators. These rules
impose various requirements on public companies, including requiring certain
corporate governance practices. Our management and other personnel will need to
devote a substantial amount of time to these compliance
requirements.





In
addition, the Sarbanes-Oxley Act requires, among other things, that we maintain
effective internal controls for financial reporting and disclosure controls and
procedures. In particular, commencing in 2007, we must perform system and
process evaluations and testing of our internal controls over financial
reporting to allow management to report on the effectiveness of our internal
controls over financial reporting, as required by Section 404 of the
Sarbanes-Oxley Act. Our testing may reveal deficiencies in our internal controls
over financial reporting that are deemed to be material weaknesses. Compliance
with Section 404 may require that we incur substantial accounting expenses and
expend significant management efforts. If we are not able to comply with the
requirements of Section 404 in a timely manner, or if our accountants later
identify deficiencies in our internal controls over financial reporting that are
deemed to be material weaknesses, the market price of our stock could decline
and we could be subject to sanctions or investigations by the SEC or other
applicable regulatory authorities.





Our
Board of Directors has the authority, without stockholder approval, to issue
preferred stock with terms that may not be beneficial to common stock
holders.





Our
Amended and Restated Articles of incorporation authorizes the issuance of
preferred shares which may be issued with dividend, liquidation, voting and
redemption rights senior to our Common Stock without prior approval by the
stockholders. The Preferred Stock may be issued for such consideration as may be
fixed from time to time by the Board of Directors. The Board of Directors may
issue such shares of Preferred Stock in one or more series, with such
designations, preferences and rights or qualifications, limitations or
restrictions thereof as shall be stated in the resolution of
resolutions.





The
issuance of preferred stock could adversely affect the voting power and other
rights of the holders of common stock. Preferred stock may be issued quickly
with terms calculated to discourage, make more difficult, delay or prevent a
change in control of our Company or make removal of management more difficult.
As a result, the Board of Directors' ability to issue preferred stock may
discourage the potential hostile acquirer, possibly resulting in beneficial
negotiations. Negotiating with an unfriendly acquirer may result in, among other
things, terms more favorable to us and our stockholders. Conversely, the
issuance of preferred stock may adversely affect any market price of, and the
voting and other rights of the holders of the Common Stock. We presently have no
plans to issue any preferred stock.


19


Our
Common Stock is subject to the Penny Stock Regulations




Our
Common Stock and will likely be subject to the SEC's “penny stock” rules to the
extent that the price remains less than $5.00. Those rules, which require
delivery of a schedule explaining the penny stock market and the associated
risks before any sale, may further limit your ability to sell your
shares.




The SEC
has adopted regulations which generally define “penny stock” to be an equity
security that has a market price of less than $5.00 per share. Our Common Stock,
when and if a trading market develops, may fall within the definition of penny
stock and subject to rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000, or annual incomes exceeding $200,000 or $300,000, together with
their spouse).




For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of such securities and have received
the purchaser's prior written consent to the transaction. Additionally, for any
transaction, other than exempt transactions, involving a penny stock, the rules
require the delivery, prior to the transaction, of a risk disclosure document
mandated by the Commission relating to the penny stock market. The broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, current quotations for the securities and, if the
broker-dealer is the sole market-maker, the broker-dealer must disclose this
fact and the broker-dealer's presumed control over the market. Finally, monthly
statements must be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks.
Consequently, the `penny stock` rules may restrict the ability of broker-dealers
to sell our Common Stock and may affect the ability of investors to sell their
Common Stock in the secondary market.





As
an issuer of “penny stock” the protection provided by the federal securities
laws relating to forward-looking statements does not apply to us and as a result
we could be subject to legal action.





Although
federal securities laws provide a safe harbor for forward-looking statements
made by a public company that files reports under the federal securities laws,
this safe harbor is not available to issuers of penny stocks. As a result, if we
are a penny stock, we will not have the benefit of this safe harbor protection
in the event of any legal action based upon a claim that the material provided
by us contained a material misstatement of fact or was misleading in any
material respect because of our failure to include any statements necessary to
make the statements not misleading. Such an action could hurt our financial
condition.





For more
information about penny stocks, contact the Office of Filings, Information and
Consumer Services of the U.S. Securities and Exchange Commission, 100 F Street,
N.E., Washington, D.C. 20549, or by telephone at 1-800-732-0330.




The
issuance of shares through our stock compensation plans may dilute the value of
existing stockholders and may affect the market price of our stock.




Although
we do not have an option or other equity-based incentive plan at present, in the
future we may use stock options, stock grants and other equity-based incentives,
to provide motivation and compensation to our officers, employees and key
independent consultants. The award of any such incentives will result in an
immediate and potentially substantial dilution to our existing stockholders and
could result in a decline in the value of our stock price. The exercise of these
options and the sale of the underlying shares of common stock and the sale of
stock issued pursuant to stock grants may have an adverse effect upon the price
of our stock.


20





Risks
Related to Doing Business in The People’s Republic of China





It
may be difficult for our stockholders to enforce their rights against the
Company or its officers or directors.





Because
our principal assets are located outside of the United States and some of our
directors and all of our executive officers reside outside of the United States,
it may be difficult for you to enforce your rights based on the United States
Federal securities laws against us and our officers and directors in the United
States or to enforce judgments of United States courts against us or them in the
People's Republic of China.





In
addition, our operating subsidiaries and substantially all of our assets are
located outside of the United States. You will find it difficult to enforce your
legal rights based on the civil liability provisions of the United States
Federal securities laws against us in the courts of either the United States or
the People's Republic of China and, even if civil judgments are obtained in
courts of the United States, to enforce such judgments in the courts of the
People's Republic of China. In addition, it is unclear if extradition treaties
in effect between the United States and the People's Republic of China would
permit effective enforcement against us or our officers and directors of criminal
penalties, under the United States Federal securities laws or
otherwise.





Our
business operations take place primarily in the PRC. Because Chinese laws,
regulations and policies are continually changing, our operations will face
numerous risks.





Because
our operations primarily take place outside of the United States and are subject
to Chinese laws, regulations and policies affecting any change of Chinese laws
may adversely affect our business, such as exchange controls and currency
restrictions, currency fluctuations and devaluations, changes in local economic
conditions, changes in Chinese laws and regulations, exposure to possible
expropriation or other Chinese government actions, and unsettled political
conditions. These factors may have a material adverse effect on our operations
or on our business, results of operations and financial condition.





China's
economy differs from the economies of most developed countries in many respects,
including substantial governmental regulation, development, growth rate, control
of foreign exchange, significant restrictions on property rights, taxation
levels, and permitted allocation of resources. While the People's Republic of
China economy has experienced significant growth in the past 20 years, growth
has been uneven across different regions and among various economic sectors of
China. The government of the People's Republic of China has implemented various
measures to encourage economic development and guide the allocation of
resources, which may or may not achieve the desired results or stated goals.
Some of these measures may benefit the overall economy of People's Republic
of China, but may also have a negative effect on us or on the economy in
general. For example, our financial condition and results of operations may be
adversely affected by government control over capital investments or changes in
tax regulations that are applicable to us. Since early 2004, the government of
the People's Republic of China has implemented certain measures to control the
pace of economic growth. Such measures may cause a decrease in the level of
economic activity in the People’s Republic of China, which could adversely
affect our results of operations and financial condition.





Limitations
on Chinese economic market reforms may discourage foreign investment in Chinese
businesses.





The value
of investments in Chinese businesses could be adversely affected by political,
economic and social uncertainties in China. The economic reforms in China in
recent years are regarded by China's central government as a way to introduce
economic market forces into China. Given the overriding desire of the central
government leadership to maintain stability in China amid rapid social and
economic changes in the country, the economic market reforms of recent years
could be slowed, or even reversed.


21


We
face economic risks in doing business in the PRC.





As a
developing nation, the PRC's economy is more volatile than that of developed
Western industrial economies. It differs significantly from that of the U.S. or
a Western European country in such respects as structure, level of development,
capital reinvestment, resource allocation and self-sufficiency. Only in recent
years has the Chinese economy moved from what had been a command economy through
the 1970s to one that during the 1990s encouraged substantial private economic
activity. In 1993, the Constitution of China was amended to reinforce such
economic reforms. The trends of the 1990s indicate that future policies of the
Chinese government will emphasize greater utilization of market forces. For
example, in 1999 the Government announced plans to amend the Chinese Constitution
to recognize private property, although private business will officially remain
subordinated to the state-owned companies, which are the mainstay of the Chinese
economy. However, there can be no assurance that, under some
circumstances, the government's pursuit of economic reforms will not be
restrained or curtailed. Actions by the central government of the PRC could have
a significant adverse effect on economic conditions in the country as a whole
and on the economic prospects for our Chinese operations.





Any
slowdown of economic growth in the PRC could have a negative effect on our
business. There can be no assurance that the growth of the economy in the PRC
will continue or that any slowdown will not have a negative effect on our
business.





Our
online business relies on the existence of an
adequate  telecommunications infrastructure for continued growth of
China's internet market.





Although
private sector Internet service providers currently exist in the PRC, almost all
access to the Internet is maintained through a network owned by China Netcom
under the regulatory supervision of China's Ministry of Information Industry. In
addition, the national networks in the PRC connect to the Internet through a
government-controlled international gateway. This international gateway is the
only channel through which a domestic Chinese user can connect to the
international Internet network. We rely on this infrastructure and China Netcom
to provide data communications capacity, primarily through local
telecommunications lines. We cannot assure you that this infrastructure will be
further developed. In addition, we will have no access to alternative networks
and services, on a timely basis if at all, in the event of any infrastructure
disruption or failure. The Internet infrastructure in the PRC may not support
the demands associated with continued growth in Internet usage.





We
may suffer currency exchange losses if the Renminbi depreciates relative to the
U.S. Dollar.





Our
reporting currency is the U.S. dollar. However, a substantial portion of our
assets and revenues are denominated in the Chinese currency, Renminbi, commonly
referred to as RMB. Our assets and revenues expressed in our U.S. dollar
financial statements will decline in value of the Renminbi depreciates relative
to the U.S. dollar. Any such depreciation could adversely affect the market
price of our Common Stock. Very limited hedging transactions are available in
the PRC to reduce our exposure to exchange rate fluctuations and we do not
intend to engage in any such transactions. In addition, our currency exchange
losses may be magnified by Chinese exchange control regulations that restrict
our ability to convert Renminbi into U.S. Dollars.





We
may not be able to freely convert Renminbi into foreign currency.





A portion
of our revenues and operating expenses will be denominated in Renminbi while a
portion of our capital expenditures are denominated in U.S.
dollars.





Under
current Chinese regulations, the payment of dividends, trade and service-related
foreign transactions to a foreign investor of a foreign-invested enterprise is
treated as a "current account" payment for which the approval of the State
Administration of Foreign Exchange is not required. However, in order to
distribute dividends we may be required to file documentation to a designated
foreign exchange bank. The Bank must certify that all requirements have been
met, such as payment of taxes, directors' approval and a capital verification
report issued by an accounting firm. If a foreign-invested enterprise dissolves,
a return of capital, which includes foreign direct investment, is treated as a
"capital account" payment. This typically requires approval of the State
Administration of Foreign Exchanges' in addition to the filing of
documentation.


22


We may
currently convert Renminbi for transactions under the "current account" without
the approval of the State Administration of Foreign Exchange for settlement of
"current account" transactions, including payment of dividends, by providing
commercial documents evidencing these transactions. They may also retain foreign
exchange in their current accounts (subject to a ceiling approved by the State
Administration of Foreign Exchange) to satisfy foreign exchange liabilities or
to pay dividends. However, the relevant Chinese governmental authorities may
limit or eliminate the ability to purchase and retain foreign currencies in the
future. Such change of policy would materially and adversely affect our
business, financial condition and results of operations.





The
Chinese legal and judicial system may negatively impact foreign
investors.





In 1982,
the National Peoples Congress amended the Constitution of China to authorize
foreign investment and guarantee the "lawful rights and interests" of foreign
investors in the PRC. However, the PRC's system of laws is not yet
comprehensive. The legal and judicial systems in the PRC are still rudimentary,
and enforcement of existing laws is inconsistent. Many judges in the PRC lack
the depth of legal training and experience that would be expected of a judge in
a more developed country. Because the Chinese judiciary is relatively
inexperienced in enforcing the laws that do exist, anticipation of judicial
decision-making is more uncertain than would be expected in a more developed
country. It may be impossible to obtain swift and equitable enforcement of
laws  that do exist, or to obtain enforcement of the judgment of one
court by a court of another jurisdiction. The PRC's legal system is based on
written statutes; a decision by one judge does not set a legal precedent that is
required to be followed by judges in other cases. In addition, the
interpretation of Chinese laws may be varied to reflect domestic political
changes.





The
promulgation of new laws, changes to existing laws and the pre-emption of local
regulations by national laws may adversely affect foreign investors. However,
the trend of legislation over the last 20 years has significantly enhanced the
protection of foreign investment and allowed for more control by foreign parties
of their investments in Chinese enterprises. There can be no assurance that a
change in leadership, social or political disruption, or unforeseen
circumstances affecting the PRC’s political, economic or social life, will not
affect the Chinese government's ability to continue to support and pursue these
reforms. Such a shift could have a material adverse effect on our business and
prospects.





The
practical effect of the Peoples Republic of China legal system on our business
operations in the PRC can be viewed from two separate but intertwined
considerations. First, as a matter of substantive law, the Foreign Invested
Enterprise laws provide significant protection from government interference. In
addition, these laws guarantee the full enjoyment of the benefits of corporate
Articles and contracts to Foreign Invested Enterprise participants. These laws,
however, do impose standards concerning corporate formation and governance,
which are not qualitatively different from the general corporation laws of the
several states. Similarly, the Peoples Republic of China accounting laws mandate
accounting practices, which are not consistent with U.S. Generally Accepted
Accounting Principles. The PRC's accounting laws require that an annual
"statutory audit" be performed in accordance with the PRC accounting standards
and that the books of account of Foreign Invested Enterprises are maintained in
accordance with Chinese accounting laws. Article 14 of the Peoples Republic of
China Wholly Foreign-Owned Enterprise Law requires a Wholly Foreign-Owned
Enterprise to submit certain periodic fiscal reports and statements to designate
financial and tax authorities, at the risk of business license revocation.
Second, while the enforcement of substantive rights may appear less clear than
United States procedures, the Foreign Invested Enterprises and Wholly
Foreign-Owned Enterprises are Chinese registered companies, which enjoy the same
status as other Chinese registered companies in business-to-business dispute
resolution. Generally, the Articles of Association provide that all business
disputes pertaining to Foreign Invested Enterprises are to be resolved by the
Arbitration Institute of the Stockholm Chamber of Commerce in Stockholm, Sweden,
applying Chinese substantive law. Any award rendered by this arbitration
tribunal is, by the express terms of the respective Articles of Association,
enforceable in accordance with the "United Nations Convention on the Recognition
and Enforcement of Foreign Arbitral Awards (1958)." Therefore, as a practical
matter, although no assurances can be given, the Chinese legal infrastructure,
while different in operation from its United States counterpart, should not
present any significant impediment to the operation of Foreign Invested
Enterprises.





Item
      1B.
            Unresolved
      Staff Comments.




Not applicable.


23


Item
      2.
            Properties.




All land
in the PRC is owned by the government and cannot be sold to any individual or
entity. Instead, the government grants landholders a "land use right" after a
purchase price for such "land use right" is paid to the government. The "land
use right" allows the holder the right to use the land for a specified long-term
period of time and enjoys all the incidents of ownership of the land. The
following are the details regarding Universal travel Group’s
land  use rights with regard to the land that it
uses  in its business.





Our
principal executive offices are located at Shennan Road, Hualian Center Room 301
- 304, Shenzhen, People's Republic of China. The offices contain approximately
8,600 square feet of usable space and are subject to a lease which expires
October 2010. The monthly rent payable for these offices is $5,400.





In
addition to our headquarters, YZL  maintains offices at the locations
listed below which require aggregate monthly payments of $14,760.





1.
            Baoan
      Airport Branch: BT61-62, Area B, Shenzhen Baoan
  Airport.


2.
            Fuyong
      Branch: No. 129. Bai Shi Sha Blvd, Fuyong Zhen, Shenzhen
    City.


3.
            Longhua
      Zhuojing Branch: No.11 Sheng Di Long Quan, Ban Ren Min Bei Road, Longhua
      Blvd, Shenzhen City.


4.
            Xinzhou
      Branch: 1st Floor Business Center, Chu Tian Hotel, Hubei Building, Bin He
      Road, Shenzhen City.


5.
            No.
      2008 Shennan Road, Hua Lian Building Suite 305-309, Shenzhen
      City.




FOI
maintains 9 offices around the Guangzhou area which require aggregate monthly
payments of $4430;




XGN
maintains 3 offices in Xi’an which require aggregate monthly payments of
$707;




SLB
maintains its main office in Shanghai and makes aggregate monthly payments of
$5630;




SSD’s
headquarter is in Shenzhen Baoan Airport and it makes aggregate monthly payments
of $4379.




We plan
to expand our operations and lease more office space in the near
future.  We anticipate that our monthly rental expenses will increase
to about  $50,000, including the rentals for our TRIPEASY Travel Service
Kiosks.




Item
      3.
            Legal
      Proceedings.




We know
of no material, active, pending or threatened proceeding against us or our
subsidiaries, nor are we, or any subsidiary, involved as a plaintiff or
defendant in any material proceeding or pending litigation.





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




None.




PART
II




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


Equity
Securities.




Market
Information


24





Our
common stock is traded on the OTC Bulletin Board under the symbol “UTVG.OB”.
Prior to August 21, 2006, the date we changed our name from TAM of Henderson,
Inc. to Universal Travel Group, our Common Stock was quoted under the symbol
"TMHN.OB".





The
prices set forth below reflect the quarterly high and low bid price information
for shares of our Common Stock for the periods indicated. These quotations are
taken from the OTC Bulletin Board. They reflect inter-dealer prices, without
retail markup, markdown or commission, and may not represent actual
transactions.




Calendar Quarter
                  
                  Low Bid
                  
                  
                  High Bid2007
      First Quarter
                  
                  $
                  0.40
                  
                  
                  $
                  1.802007
      Second Quarter
                  
                  $
                  1.57
                  
                  
                  $
                  3.602007
      Third Quarter
                  
                  $
                  1.85
                  
                  
                  $
                  4.082007
      Fourth Quarter
                  
                  $
                  2.75
                  
                  
                  $
                  5.722008
      First Quarter
                  
                  $
                  1.45
                  
                  
                  $
                  3.822008
      Second Quarter
                  
                  $
                  1.12
                  
                  
                  $
                  2.862008
      Third Quarter
                  
                  $
                  0.87
                  
                  
                  $
                  1.652008
      Fourth Quarter
                  
                  $
                  0.45
                  
                  
                  $
                  1.10




Holders
of Securities




As of
March 3, 2009, there were approximately 37 holders of record of our Common
Stock, including shares held in street name by brokerage firms.  The
holders of Common Stock are entitled to one vote for each share held of record
on all matters submitted to a vote of stockholders.  Holders of the
Common Stock have no preemptive rights and no right to convert their Common
Stock into any other securities.  There are no redemption or sinking
fund provisions applicable to the Common Stock.





Our
Common Stock is covered by a Commission rule that imposes additional sales
practice requirements on broker-dealers who sell such securities to persons
other than established customers and accredited investors, which are generally
institutions with assets in excess of $5,000,000 or individuals with net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. For transactions covered by the rule, the broker-dealer must
make a special suitability determination for the purchaser and transaction prior
to the sale. Consequently, the rule may affect the ability of broker-dealers to
sell our securities and also may affect the ability of purchasers of our Common
Stock to sell their shares in the secondary market. It may also cause fewer
broker-dealers to be willing to make a market in our Common Stock, and it may
affect the level of news coverage we receive.





Dividends





We have
not declared or paid any cash dividends on our Common Stock since our inception,
and our board of directors currently intends to retain all earnings for use in
the business for the foreseeable future. Any future payment of dividends will
depend upon our results of operations, financial condition, cash requirements
and other factors deemed relevant by our board of directors. There are currently
no restrictions that limit our ability to declare cash dividends on its common
stock and we do not believe that there are any that are likely to do so in the
future.





Securities
Authorized for Issuance Under Equity Compensation Plans





In
January 2007, we adopted the Universal Travel Group 2007 Equity Incentive Plan.
In the first quarter of 2007, we issued 3,770,000 shares of our Common Stock
pursuant to the Plan for services rendered from October 2, 2006, through
February 28, 2007.  At the time of issuance the 3,770,000 shares were
valued at $1,583,400, of which $950,040 was charged against earnings in 2006 and
$633,360 was charged against earnings for 2007.





There are
no longer any shares available for issuance pursuant to the Universal Travel
Group 2007 Equity Incentive Plan.


25


During 2007 we issued options to
purchase 100,000 shares to each of three newly appointed directors. The options
are exercisable for a period of approximately 10 years from the date of issuance
and are exercisable at prices of $1.95; $2.85 and $3.75, respectively. All three
directors have to date ceased to be directors of the
Company.  Accordingly, only an aggregate of options to purchase
66,666  shares of our Common Stock has vested amongst these three
ex-directors.





Additionally, on June 24, 2008, we
granted an option to purchase 100,000 shares of our Common Stock to our newly
appointed director, Yizhao Zhang.  His option is exercisable for a
period of approximately 10 years from the date of issuance and are exercisable
at $1.52 per share.The
option holder has no voting or dividend rights. We record the expense of the
stock options over the related vesting period. The options were valued using the
Black-Scholes option-pricing model at the model at the date of grant stock
option pricing.





In
January 2009, we adopted the Universal Travel Group 2009 Incentive Stock
Plan.  On January 20, 2009, we issued options to purchases 6,000,000
shares of common stock to our Chief Executive Officer, Ms. Jiangping Jiang at an
exercise price of $1.28.  The remaining options to purchase 600,000
shares of common stock were issued on the same date to various employees at an
exercise price of $0.90.  The term of each option was for 10
years.  The options vest in six annual equal
installments.  However, in the event (i) the Company reports an after
tax Net Income of $14,000,000  in its Annual Report on Form 10-K filed with
the SEC for its fiscal year 2008, then options to purchase one-third of the
shares granted shall vest and become immediately exercisable and each grantee of
such options shall be entitled to exercise his/her options rateably, (ii) 
the Company reports an after tax Net Income of $18,000,000  in its Annual
Report on Form 10-K filed with the SEC for its fiscal year 2009, then options to
purchase another one-third of the shares  granted shall vest and
become immediately exercisable and each grantee of such options shall be
entitled to exercise his/her options rateably and (iii) the Company reports an
after tax Net Income of $22,000,000  in its Annual Report on Form 10-K
filed with the SEC for its fiscal year 2010, then options to purchase another
one-third of the shares granted shall vest and become immediately exercisable
and each grantee of such options shall be entitled to exercise his/her options
rateably.   As of the date of this Annual Report, all the
6,600,000 options to purchase our common stock under the Universal Travel Group
2009 Incentive Stock Plan have been issued and there are no longer any shares
available for issuance under the said Plan.





The
following table provides information as of the date hereof our outstanding
equity compensation


plans and
arrangements.





Equity
Compensation Plan Information





Number of securities to beissued upon exercise of
                              outstanding options,
                              warrants and rights
                            
                            
                            Weighted average exercise
                              price of outstanding options,
                              warrants and rights
                            
                            
                            Number of securities
                              remaining available for
                              future issuance under equity
                              compensation plans
                              (excluding securities
                              reflected in column (a))Plan Category
                            
                            (a)
                            
                            
                            (b)
                            
                            
                            (c)Equity
      compensation plans approved by security holders
                            
                            
                            6,600,000
                            
                            
                            $
                            1.24
                            
                            
                            
                            0Equity
      compensation plans not approved by security holders
                            
                            
                            166,666
                            
                            
                            $
                            2.232
                            
                            
                            
                            0Total
                            
                            
                            166,666
                            
                            
                            $
                            2.232
                            
                            
                            
                            0


26


Warrants





On August
28, 2008, we  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
4,588,708 shares of Common Stock and warrants to purchase 2,294,356 shares of
Common Stock for an aggregate purchase price of $7,112,500.   The
Financing closed on August 29, 2008.





Each
warrant has an Exercise Price of $2.71 and a term of 5 years from the date of
issuance. We shall have the right at any time, on written notice given not less
than forty five (45) days prior to the Redemption Date (which is the date the
warrants are to be redeemed), to redeem the outstanding warrants at the
Redemption Price of one cent ($.01) per share of Common Stock issuable upon
exercise of the warrants, provided (i) the Market Price (as defined in the
warrant) of the Common Stock shall equal or exceed $8.13 for at least thirty
(30) Trading Days prior to the call for redemption by the Company, (ii) the
shares of Common Stock are trading on a recognized U.S. share exchange, which
shall mean the New York Stock Exchange, the American Stock Exchange or the
Nasdaq Stock Market (including the Global Select, Global and Capital Markets)
and (iii) we are current in all our reporting obligations under the Securities
Exchange Act of 1934. All warrants must be redeemed if any warrants are
redeemed.





We may
only exercise the right of redemption of the warrants if a registration
statement covering the sale by the holder(s) of the shares of Common Stock
issuable upon exercise of the warrants is current and effective on each day in
the period commencing on the first day of call for redemption and ending sixty
(60) days after the Redemption Date. In the event that, at any time subsequent
to the date on which the warrants are called for redemption and before the
Redemption Date, the shares of Common Stock issuable upon exercise or conversion
of the warrants are not subject to a current and effective registration
statement, our right to call the warrants for redemption shall terminate with
respect to all warrants that have not then been exercised or converted. The
Redemption Date shall be postponed for two (2) Trading Days for each day after
the warrants are called for redemption that the Market Price of the Common Stock
is less than the $8.13; provided, however, that if the Market Price shall be
less than $8.13 for ten (10) consecutive Trading Days or fifteen (15) Trading
Days during the period from the date the warrants are called for redemption to
the Redemption Date, our right to redeem any warrants not theretofore exercised
or converted shall terminate, subject to the right of the Company to call the
remaining warrants for redemption.





If we
were to sell or issue Common Stock at a price which is less than the Exercise
Price then in effect, or warrants, options, convertible debt or equity
securities with an exercise price per share or a conversion price which is less
than the Exercise Price then in effect, the Exercise Price shall be adjusted
immediately thereafter so that it shall equal the price determined by
multiplying the Exercise Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to the issuance of such additional
shares and the number of shares of Common Stock which the aggregate
consideration received or receivable for the issuance of such additional shares
would purchase at the Exercise Price then in effect, and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares (including a pro forma adjustment
as though all such options, warrants and other convertible securities had been
exercised or converted). Such adjustment shall be made successively whenever
such an issuance is made. An adjustment shall not result in any change in the
number of shares of Common Stock issuable upon exercise of this
Warrant.




Penny
Stock Regulations





Our
shares of Common Stock are subject to the "penny stock" rules of the Securities
Exchange Act of 1934 and various rules under this Act. In general terms, "penny
stock" is defined as any equity security that has a market price less than $5.00
per share, subject to certain exceptions. The rules provide that any equity
security is considered to be a penny stock unless that security is registered
and traded on a national securities exchange meeting specified criteria set by
the SEC, issued by a registered investment company, and excluded from the
definition on the basis of price (at least $5.00 per share), or based on the
issuer's net tangible assets or revenues. In the last case, the issuer's net
tangible assets must exceed $3,000,000 if in continuous operation for at least
three years or $5,000,000 if in operation for less than three years, or the
issuer's average revenues for each of the past three years must exceed
$6,000,000.


27





Trading
in shares of penny stock is subject to additional sales practice requirements
for broker-dealers who sell penny stocks to persons other than established
customers and accredited investors. Accredited investors, in general, include
individuals with assets in excess of $1,000,000 or annual income exceeding
$200,000 (or $300,000 together with their spouse), and certain institutional
investors. For transactions covered by these rules, broker-dealers must make a
special suitability determination for the purchase of the security and must have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, the rules
require the delivery, prior to the first transaction, of a risk disclosure
document relating to the penny stock. A broker-dealer also must disclose the
commissions payable to both the broker-dealer and the registered representative,
and current quotations for the security. Finally, monthly statements must be
sent disclosing recent price information for the penny stocks. These rules may
restrict the ability of broker-dealers to trade or maintain a market in our
Common Stock, to the extent it is penny stock, and may affect the ability of
shareholders to sell their shares.





Purchases
of Equity Securities by the Company and Affiliated Purchasers





During the fourth quarter of our fiscal
year ended December 31, 2008, neither we nor any "affiliated purchaser" (as
defined in Rule 10b-18(a)(3) under the Exchange Act) purchased any shares of our
Common Stock, the only class of our outstanding equity securities registered
pursuant to section 12 of the Exchange Act.





Recent
Sales of Unregistered Securities




The
following sets forth recent sales by the Company of unregistered securities
during the fiscal year ended December 31, 2008:





On
February 4, 2008, we received a commitment for $3.5 million in financing from
three Chinese financial institutions, namely Total Shine Group Limited, Victory
High Investments Limited and Think Big Trading Limited, in exchange for
1,301,481 shares of our Common Stock, a price of $2.70 per share. The proceeds
were to be used exclusively to reduce debt from past acquisitions. The funds
were to be paid in three installments: $600,000 was paid upon execution of the
equity financing agreement, $1,400,000 is to be paid no later than February 28,
2008 and the balance of $1,514,000 is to be paid no later than ten days after
the filing of our Annual report. The first round of financing closed on February
7, 2008.  Proceeds from the first closing amounting to $599,994 were
paid directly to the shareholders of  Foshan Overseas International
Travel Service Co., Ltd. (FOI) to satisfy an amount due to them under a note and
we issued 222,222 shares of our Common Stock to Total Shine Group Limited,
Victory High Investments Limited and Think Big Trading Limited.  On
May 7, 2008 we terminated the equity financing agreement with the financial
institutions due to their failure to provide the remaining amounts according to
the agreement.





On August
28, 2008, we 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
4,588,708 shares of common stock, of the Company and warrants to purchase
2,294,356 shares of common stock for an aggregate purchase price of $7,112,500.
Each warrant has an exercise price of $2.71 and a term of 5 years from the date
of issuance.





The
private placements were exempt from registration under the Securities Act under
Section 4(2) of the Securities Act and Rule 506 promulgated thereunder because
the securities were offered only to nine purchasers, all of which were
accredited investors, no general advertisement of the sale of securities was
made, and all other requirements of the exemption were
satisfied.





The
following sets forth recent sales by the Company of unregistered securities
during the fiscal year ending December 31, 2007:


28





On April 10, 2007, we, Full Power
Enterprise Global Limited ("Full Power"), Shenzhen Yu Zhi Lu Aviation Service
Company Limited (“YZL”), Shenzhen Speedy Dragon Enterprise Limited (“SSD”) and
Song, entered into a share exchange agreement pursuant to which YZL acquired
100% of SSD in a stock and cash transaction valued at approximately US
$4,000,000. Under the share exchange agreement, in exchange for his shares in
SSD, Song received both stock consideration and cash consideration. The stock
consideration consisted of 714,285
newly issued shares of our Common Stock.





On August
6, 2007, pursuant to a share exchange agreement, in exchange for the shares of
Xi'an Golden Net Travel Serve Service Company Limited (“XGN”), we issued to the
shareholders of XGN an aggregate of 151,765 shares of our Common Stock, which
were divided proportionally among the shareholders in accordance with their
respective ownership interests in XGN immediately before the closing of the
share exchange agreement.





On August
8, 2007, pursuant to a share exchange agreement, in exchange for the shares of
Shanghai Lanbao Travel Service Company Limited (“SLB”), we issued to the
shareholders of SLB an aggregate of 600,000 shares of our Common Stock, which
were divided proportionally among the shareholders in accordance with their
respective ownership interests in SLB immediately before the closing of the
share exchange agreement.





On
October 29, 2007, pursuant to a share exchange agreement, in exchange for the
shares of Foshan Overseas International Travel Service Co., Ltd. (“FOI”), we
issued to the shareholders of FOI an aggregate of 1,122,986 shares of our Common
Stock, which were divided proportionally among the shareholders in accordance
with their respective ownership interests in FOI immediately before the closing
of the share exchange agreement.





The shares of the our Common Stock were
issued to Song and the shareholders without registration under Section 5 of the
Securities Act in reliance on the exemption from registration contained in
Section 4(2) of the Securities Act.Specifically,
(1) we had determined that Song and the shareholders are knowledgeable and
experienced in finance and business matters and thus they are able to evaluate
the risks and merits of acquiring our securities; (2) Song and the shareholders
have advised us that they are able to bear the economic risk of purchasing our
common stock; (3) we have provided Song the shareholders with access to the type
of information normally provided in a prospectus; and (4) we did not use any
form of public solicitation or general advertising in connection with the
issuance of the shares.





In
addition, the shares of our Common Stock were issued to Song and the
shareholders without registration under Section 5 of the Securities Act, in
reliance on the exemption from registration contained in Regulation S under the
Securities Act.      We believe that the issuance
of our Common Stock to Song and the shareholders (the "Offshore Shareholders")
constituted an offshore transaction. Each of the Offshore Shareholders is a
resident of China. At the time the Registrant offered to issue its shares to the
Offshore Shareholders, each of the Offshore Shareholders was located in China.
Furthermore, at the time we issued our Common Stock to the Offshore
Shareholders, we reasonably believed that each of the Offshore Shareholders was
outside the United States. As a result, we believed that these facts enable us
to also rely on Regulation S for an exemption from the registration requirements
of Section 5 of the Securities Act with respect to the issuances to the Offshore
Shareholders.





The
following sets forth recent sales by the Company of unregistered securities
during the fiscal year ended December 31, 2006:





None.





No
underwriter was involved in any of the above issuances of securities. All of the
above securities were issued in reliance upon the exemptions set forth in
Section 4(2) of the Securities Act on the basis that they were issued under
circumstances not involving a public offering.





Other
than the securities mentioned above, we have not issued or sold any securities
without registration for the past three years from the date of this registration
statement.


29




Item
6. Selected Financial Data.




The
following selected consolidated financial data presented below are derived from
our Consolidated Financial Statements and related Notes of the Company, and
should be read in connection with those statements, some of which are included
herein.The
information set forth below is not necessarily indicative of future results and
should be read in conjunction with Item 7, “Management’s Discussion and Analysis
of Financial Condition and Results of Operations.”




UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
STATEMENTS OF INCOME


FOR
THE THREE YEARS ENDED DECEMBER 31,




2008
                    
                    
                    2007
                    
                    
                    2006Gross
      revenues,
                    
                    $
                    76,759,411
                    
                    
                    $
                    44,294,853
                    
                    
                    $
                    10,013,788Cost
      of services
                    
                    
                    52,660,138
                    
                    
                    
                    30,242,330
                    
                    
                    
                    4,928,570Gross
      Profit
                    
                    
                    24,099,273
                    
                    
                    
                    14,052,523
                    
                    
                    
                    5,085,218Selling,
      general and administrative expenses
                    
                    
                    5,231,994
                    
                    
                    
                    3,452,111
                    
                    
                    
                    1,969,280Total
      expenses
                    
                    
                    5,231,994
                    
                    
                    
                    3,452,111
                    
                    
                    
                    1,969,280Income
      from operations
                    
                    
                    18,867,279
                    
                    
                    
                    10,600,412
                    
                    
                    
                    3,115,938Other
      Income (Expense)Loss
      on disposal of assets
                    
                    
                    (1,105
                    )
                    
                    
                    -Other
      income
                    
                    
                    8,402
                    
                    
                    
                    25,105
                    
                    
                    
                    36,383Interest
      income
                    
                    
                    39,416
                    
                    
                    
                    3,293
                    
                    
                    
                    11,994Interest
      expense
                    
                    
                    (106,163
                    )
                    
                    
                    (80,847
                    )
                    
                    
                    (2,754
                    )Total
      Other Income (Expense)
                    
                    
                    (59,450
                    )
                    
                    
                    52,449
                    
                    
                    
                    (45,623
                    )Income
      before income taxes
                    
                    
                    18,807,829
                    
                    
                    
                    10,547,963
                    
                    
                    
                    3,161,561Provision
      for income taxes
                    
                    
                    (4,275,652
                    )
                    
                    
                    (1,852,069
                    )
                    
                    
                    (603,083
                    )Net
      income
                    
                    $
                    14,532,177
                    
                    
                    $
                    8,695,894
                    
                    
                    $
                    2,558,478Net
      income per common share
                    
                    $
                    .38
                    
                    
                    $
                    .26
                    
                    
                    $
                    .07Basic
                    
                    $
                    .38
                    
                    
                    $
                    .26
                    
                    
                    $
                    .07DilutedWeighted
      average common shares outstandingBasic
                    
                    
                    38,562,155
                    
                    
                    
                    33.629,518
                    
                    
                    
                    30,450,000Diluted
                    
                    
                    38,562,155
                    
                    
                    
                    33,629,518
                    
                    
                    
                    30,450,000Net
      income
                    
                    $
                    14,532,177
                    
                    
                    $
                    8,695,894
                    
                    
                    $
                    2,558,478Other
      comprehensive income-foreign currencyTranslation
                    
                    
                    975,002
                    
                    
                    
                    441,353
                    
                    
                    
                    89,763Comprehensive
      income
                    
                    
                    15,507,179
                    
                    
                    
                    9,137,247
                    
                    
                    
                    2,648,241




30





UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
BALANCE SHEETS


DECEMBER
31, 2008 and 2007




2008
                              
                              
                              2007ASSETSCurrent
      AssetsCash
      and cash equivalents
                              
                              $
                              16,204,531
                              
                              
                              $
                              2,671,684Accounts
      receivable, net
                              
                              
                              10,715,206
                              
                              
                              
                              5,403,820Other
      receivables and deposits, net
                              
                              
                              141,413
                              
                              
                              
                              1,297,426Refundable
      acquisition deposit
                              
                              
                              -
                              
                              
                              
                              1,453,050Due
      from shareholder
                              
                              
                              -
                              
                              
                              
                              1,444,818Trade
      deposit
                              
                              
                              6,737,521
                              
                              
                              
                              2,650,744Advances
                              
                              
                              438,468
                              
                              
                              
                              616,861Escrow
      deposits
                              
                              
                              762,800
                              
                              
                              
                              -Prepaid
      expenses
                              
                              
                              319,257
                              
                              
                              
                              713,668Total
      Current Assets
                              
                              
                              35,319,196
                              
                              
                              
                              16,252,071Property
      & equipment, net
                              
                              
                              273,340
                              
                              
                              
                              127,393Intangible
      assets
                              
                              
                              307,335
                              
                              
                              
                              18,626Goodwill
                              
                              
                              13,526,809
                              
                              
                              
                              13,526,80914,107,484
                              
                              
                              
                              13,672,828Total Assets
                              
                              $
                              49,426,680
                              
                              
                              $
                              29,924,899LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesNotes
      payable – bank
                              
                              $
                              -
                              
                              
                              $
                              1,288,554Note
      payable – others
                              
                              
                              -
                              
                              
                              
                              1,576,750Accounts
      payable and accrued expenses
                              
                              
                              2,219,156
                              
                              
                              
                              3,604,666Customer
      deposits
                              
                              
                              1,047,250
                              
                              
                              
                              1,132,886Income
      tax payable
                              
                              
                              1,759,402
                              
                              
                              
                              664,995Total
      Current Liabilities
                              
                              
                              5,025,808
                              
                              
                              
                              8,267,851Stockholders'
      EquityCommon
      stock, $.001 par value, 70,000,000shares authorized,41,619,966
      and 36,809,036 issued and outstanding
                              
                              
                              41,621
                              
                              
                              
                              36,810Additional
      paid in capital
                              
                              
                              15,833,368
                              
                              
                              
                              8,601,534Other
      comprehensive income-foreign currency translation
                              
                              
                              1,520,166
                              
                              
                              
                              545,164Statutory
      reserve
                              
                              
                              372,144
                              
                              
                              
                              372,144Retained
      earnings
                              
                              
                              26,633,573
                              
                              
                              
                              12,101,396Total
      Stockholders' Equity
                              
                              
                              44,400,872
                              
                              
                              
                              21,657,048Total
      Liabilities and Stockholders' Equity
                              
                              $
                              49,426,680
                              
                              
                              $
                              29,924,899




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




Forward-Looking
Statements: No Assurances Intended





In
addition to historical information, this Annual 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.


31





Business
Overview





We are a
travel services provider in the People’s Republic of China engaged in providing
air ticketing and hotel booking services as well as domestic and international
packaged tourism services throughout the People’s Republic of China via both the
internet and customer representatives.





Under the
theme "Wings towards a more colorful life", our core services revolve around
travel services but we also provide  air cargo agency services through
our subsidiary, SSD.





In 2007,
we completed the acquisitions of SSD,  XGN , which specializes in
domestic packaged tour services,  SLB, which specializes in hotel
reservations and FOI,, which  handles both domestic and international
travel inquiries.





In 2008,
we successfully integrated our packaged tours, air-ticketing and hotel
reservation businesses onto our newly developed on-line
platform,  which provides rich and comprehensive travel information to
primarily leisure travelers.





In
October 2008, we successfully rolled out our TRIPEASY Kiosks. We believe that
the Kiosks are innovate self-service terminals capable of hnalding a full
ranging of booking services including packaged tours through a secured built in
payment function that  accepts all major Chinese bank
cards.  As of the end of fiscal year 2008, we had 20 Kiosks
manufactured and operating through a pilot program, and based on the initial
interest of the concept industry-wide, we plan to roll additional TRIPEASY
Kiosks at selected locations.





We
currently have four discrete lines of business and revenue, and each is carried
out by one or two subsidiaries of the Company: (i) air-ticketing (Shenzhen Yu
Zhi Lu Aviation Service Company Limited), (ii) hotel reservations (Shanghai
Lanbao Travel Service Company Limited), (iii) packaged tours (Xi'an Golden Net
Travel Serve Service Company Limited and Foshan Overseas International Travel
Service Co., Ltd) and (iv) air cargo agency services (Shenzhen Speedy Dragon
Enterprise Limited). Operations of each segment are exclusive to the operations
of the associated subsidiary company.





Major
Factors Affecting the Travel Industry





A variety
of factors affect the travel industry in the People’s Republic of China, and we
shall be discussing these together with analysis of our results of operations
and financial condition.





Some of
these factors include:





(i)
            Growth
      in the Domestic Economy and Demand for Travel Services in the People’s
      Republic of China.





We expect
that our financial results will continue to be affected by the overall growth of
the domestic economy and demand for travel services in the People’s Republic of
China and internationally.





According
to the statistics from the website of the National Bureau of Statistics of
China, the People’s Republic of China’s gross domestic product (or “GDP”)
increased from RMB13.6 trillion (US$1.7 trillion) in 2003 to RMB24.7 trillion
(US$3.4 trillion) in 2007, representing a compound annual growth rate of 16%.
China's GDP increased from RMB24.7 trillion(US$3.4 trillion ) in 2007 to RMB30.1
trillion(US$4.3 trillion) in 2008, representing a annual growth rate of 9%. Per
capita, GDP rose from RMB10,542 (US$1,273) in 2003 to RMB18,665 (US$2,559) in
2007, representing a 15% compound annual growth rate; and from 2007 to 2008,
grew from RMB18,665(US$2,559) to RMB22,609(US$3,308), representing year over
year growth of 21%.





Such
unprecedented growth has led to a significant increase in the demand for travel
services.


32





According
to statistics from the website of the National Tourism Administration of
People's Republic of China, domestic tourism expenditure grew from RMB344.2
billion (US$41.6 billion) in 2003 to RMB777.1 billion (US$106.5 billion) in
2007, representing a compound annual growth of 23%. Expenditure increased from
RMB777.1 billion (US$106.5 billion) in 2007 to RMB874.9 billion
(US$120.0billion) in fiscal 2008, representing year over year growth of
12.6%.  These figures include a 1.4% year over year decline in inbound
travel volume totaling #13.0 billion, which was affected by the global
recession.





The
number of outbound travelers (from the PRC to other countries) totaled
4.6million in 2008,  an increase of 11.9% due to among other factors,
the depreciation of foreign currencies versus the RMB.





According
to the statistics from the website of the Civil Aviation Administration of
China, domestic passenger transportation volume grew 3.3% in 2008 compared to
2007; and domestic air cargo volume grew 0.3% in 2008 versus 2007.
Notably,  fiscal 2008 was a  period that saw several major
events take  hold including, but not limited to, the snow storms that
battered numerous parts of the country throughout the Lunar New Year holiday
period, the Tibetan political crisis, the major Sichuan earthquake and the
Beijing Olympic games.  Notwithstanding the unexpected events or
drastic fluctuations in the social and economic environment, we believe that
demand for travel services in the People’s Republic of China should continue to
increase at a healthy rate over the next several years as the overall economy
and per capita income continue to grow and show improvements.





(ii)
            Seasonality
      in the Travel Service Industry.





The
domestic travel services industry is characterized by seasonal fluctuations, and
accordingly, our revenue patterns may vary from quarter to quarter. Since
inception, revenue generated during the latter half of each calendar year has
generally been higher than in the first half, due primarily to the fact that the
latter half coincides with the peak domestic business and leisure travel.
However, given that the central government modifies public holiday policies from
time to time, and the fact that the Lunar New Year vacation period falls on
varying days each year, seasonality is subject to minor inconsistencies on a
comparable year over year basis. For example,  the government
authorized three new 3-day public holiday period during calendar 2008 to
incentive domestic travel, and has further plans to further increase holiday
periods in both 2009 and 2010.  Such seasonality is difficult
to discern throughout our operating history as our revenue stream has evolved
and become more diversified as a result of our decision to gain scale through
acquisitions, particularly over the last several years. Going forward, however,
we anticipate that seasonality within our overall business will more closely
relate to industry standards, as we focus more on organic growth, particularly
with respect to theTRIPEASY Kiosk rollout, and less so on acquisitive
expansion.





(iii)
            Disruptions
      in the Travel Industry.





Because
travel patterns are typically sensitive to inclement weather, one-time events
and as previously mentioned, seasonality issues, travelers tend to modify their
travel plans in advance or in many cases with minimal notice depending on the
situation foreseen or unforeseen.





Examples
of specific events that occurred during 2008 and hence altered travel patterns
include:





• snow
storms which affected a large part of the country during the Lunar New Year
Holiday period;





• the
summer Olympics in August which led to an increase in both travel product
offerings as well as hotel, airline and other travel-related
pricing;





• the
major earthquakes in May 2008 and the aftermath which heavily affected travel in
the Sichuan area;





• the
threat of terrorist attacks and increased security over international events,
which affected our cargo agency business; and


33





• a
sharp downturn throughout the major international financial centers such as the
United States and Europe.




RESULTS
OF OPERATIONS





THREE
MONTHS ENDED DECEMBER 31, 2008 AND 2007





The
following table presents certain consolidated statement of operations
information derived from the consolidated statements of income for the three
months ended December 31, 2008 and 2007.





Revenue
Segment Analysis:





Three months
                          ended December
                          31, 2008
                        
                        
                        Three months
                          Ended
                          December 31,
                          2007
                        
                        
                        Increase / Decrease
                        
                        
                        PercentageGrossRevenues
                        
                        $
                        29,434,725
                        
                        
                        $
                        17,495,408
                        
                        
                        $
                        11,939,317
                        
                        
                        
                        68.2
                        %Cost
      of Services
                        
                        
                        (19,499,842
                        )
                        
                        
                        (12,287,414
                        )
                        
                        
                        (7,212,428
                        )
                        
                        
                        58.7
                        %Gross
      Profit
                        
                        
                        9,934,883
                        
                        
                        
                        5,207,994
                        
                        
                        
                        4,726,889
                        
                        
                        
                        90.8
                        %SG&A
                        
                        
                        (1,746,087
                        )
                        
                        
                        (1,131,825
                        )
                        
                        
                        (614,262
                        )
                        
                        
                        54.3
                        %Income
      from Operations
                        
                        
                        8,188,796
                        
                        
                        
                        4,076,169
                        
                        
                        
                        4,112,627
                        
                        
                        
                        100.9
                        %Other
      income
                        
                        
                        (1,461
                        )
                        
                        
                        25,105
                        
                        
                        
                        (26,566
                        )
                        
                        
                        -105.8
                        %Interest
      income
                        
                        
                        17,535
                        
                        
                        
                        (14,490
                        )
                        
                        
                        32,025
                        
                        
                        
                        -221.0
                        %Interest
      expenses
                        
                        
                        (27,638
                        )
                        
                        
                        (38,123
                        )
                        
                        
                        10,485
                        
                        
                        
                        -27.5
                        %Provision
      for income taxes
                        
                        
                        (1,850,938
                        )
                        
                        
                        (724,763
                        )
                        
                        
                        (1,126,175
                        )
                        
                        
                        155.4
                        %Net
      income
                        
                        $
                        6,326,293
                        
                        
                        $
                        3,323,898
                        
                        
                        $
                        3,002,395
                        
                        
                        
                        90.3
                        %
  For
      the three months ended December 31, 2008:Revenue
      Segment
                          
                          Air-tickets
                          
                          
                          (%)
      of
                          
                          
                          Cargo
                          
                          
                          (%)
      of
                          
                          
                          Hotel
                          
                          
                          (%)
      of
                          
                          
                          Tours
                          
                          
                          (%)
      ofAnalysis:
                          
                          (YZL)
                          
                          
                          sector
                          
                          
                          (SSD)
                          
                          
                          sector
                          
                          
                          (SLB)
                          
                          
                          sector
                          
                          
                          (XGN
      & FOI)
                          
                          
                          sector
                          
                          
                          TotalRevenue
                          
                          
                          5,082,405
                          
                          
                          
                          17.27
                          %
                          
                          
                          2,417,551
                          
                          
                          
                          8.21
                          %
                          
                          
                          3,775,754
                          
                          
                          
                          12.83
                          %
                          
                          
                          18,159,015
                          
                          
                          
                          61.69
                          %
                          
                          
                          29,434,725Cost
      of Services
                          
                          
                          419,605
                          
                          
                          
                          2.15
                          %
                          
                          
                          2,087,509
                          
                          
                          
                          10.71
                          %
                          
                          
                          1,248,335
                          
                          
                          
                          6.40
                          %
                          
                          
                          15,744,393
                          
                          
                          
                          80.74
                          %
                          
                          
                          19,499,842Gross
      Profit
                          
                          
                          4,662,800
                          
                          
                          
                          46.93
                          %
                          
                          
                          330,042
                          
                          
                          
                          3.32
                          %
                          
                          
                          2,527,419
                          
                          
                          
                          25.44
                          %
                          
                          
                          2,414,622
                          
                          
                          
                          24.30
                          %
                          
                          
                          9,934,883Gross
      Margin
                          
                          
                          91.74
                          %
                          
                          
                          -
                          
                          
                          
                          13.65
                          %
                          
                          
                          -
                          
                          
                          
                          66.94
                          %
                          
                          
                          -
                          
                          
                          
                          13.30
                          %
                          
                          
                          -
                          
                          
                          
                          33.75
                          %Segment
      effect
                          
                          
                          15.84
                          %
                          
                          
                          +
                          
                          
                          
                          1.12
                          %
                          
                          
                          +
                          
                          
                          
                          8.59
                          %
                          
                          
                          +
                          
                          
                          
                          8.20
                          %
                          
                          
                          =
                          
                          
                          
                          33.75
                          %in
      Gross Margin (*)For
      the three months ended December 31, 2007:Revenue
      Segment
                          
                          Air-tickets
                          
                          
                          (%)
      of
                          
                          
                          Cargo
                          
                          
                          (%)
      of
                          
                          
                          Hotel
                          
                          
                          (%)
      of
                          
                          
                          Tours
                          
                          
                          (%)
      ofAnalysis:
                          
                          (YZL)
                          
                          
                          sector
                          
                          
                          (YZL
      & SSD)
                          
                          
                          sector
                          
                          
                          (SLB)
                          
                          
                          sector
                          
                          
                          (XGN
      & FOI)
                          
                          
                          sector
                          
                          
                          TotalRevenue
                          
                          
                          2,055,915
                          
                          
                          
                          11.75
                          %
                          
                          
                          5,081,455
                          
                          
                          
                          29.04
                          %
                          
                          
                          1,467,664
                          
                          
                          
                          8.39
                          %
                          
                          
                          8,890,374
                          
                          
                          
                          50.82
                          %
                          
                          
                          17,495,408Cost
      of Services
                          
                          
                          198,132
                          
                          
                          
                          1.61
                          %
                          
                          
                          3,649,736
                          
                          
                          
                          29.70
                          %
                          
                          
                          558,680
                          
                          
                          
                          4.55
                          %
                          
                          
                          7,880,866
                          
                          
                          
                          64.14
                          %
                          
                          
                          12,287,414Gross
      Profit
                          
                          
                          1,857,783
                          
                          
                          
                          35.67
                          %
                          
                          
                          1,431,719
                          
                          
                          
                          27.49
                          %
                          
                          
                          908,984
                          
                          
                          
                          17.45
                          %
                          
                          
                          1,009,508
                          
                          
                          
                          19.38
                          %
                          
                          
                          5,207,994Gross
      Margin
                          
                          
                          90.36
                          %
                          
                          
                          -
                          
                          
                          
                          28.18
                          %
                          
                          
                          -
                          
                          
                          
                          61.93
                          %
                          
                          
                          -
                          
                          
                          
                          11.36
                          %
                          
                          
                          -
                          
                          
                          
                          29.77
                          %Segment
      effect
                          
                          
                          10.62
                          %
                          
                          
                          +
                          
                          
                          
                          8.18
                          %
                          
                          
                          +
                          
                          
                          
                          5.20
                          %
                          
                          
                          +
                          
                          
                          
                          5.77
                          %
                          
                          
                          =
                          
                          
                          
                          29.77
                          %in
      Gross Margin (*)
  (*)
"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.


34




Revenue





We
currently have four discrete lines of business and revenue, and each is carried
out by one or two subsidiaries of the Company: (i) air-ticketing (Shenzhen Yu
Zhi Lu Aviation Service Company Limited), (ii) hotel reservations (Shanghai
Lanbao Travel Service Company Limited), (iii) packaged tours (Xi'an Golden Net
Travel Serve Service Company Limited and Foshan Overseas International Travel
Service Co., Ltd) and (iv) air cargo agency services (Shenzhen Speedy Dragon
Enterprise Limited). Operations of each segment are exclusive to the operations
of the associated subsidiary company. In addition to air-ticking services,
Shenzhen Yu Zhi Lu Aviation Service Company Limited also operated air cargo
business during the year ended December 31, 2007, however, it had transferred
all its air cargo agency business to Shenzhen Speedy Dragon Enterprise Limited
at the beginning of fiscal year 2008.





Revenue
for the three months ended December 31, 2008 was $29,434,725 compared to
$17,495,408 for the same period in 2007, an increase of approximately 68.2%.
This increase was primarily due to the successful integration and cross selling
among our newly diversified business segments that increased the group’s
competitiveness, as well as an increase in public holiday periods i.e. the
Chinese National Day vacation period increased from 3 days to 7 days,
easing  of foreign travel restrictions on October 29, 2008 and air
cargo security restrictions, reduced air fuel surcharges and a favorable year
over year comparison with respect to timing of the Lunar New Year Holiday
period.





The
impact on the Company’s business by the abovementioned factors are derived from
management’s good faith beliefs and experience.  The exact extent of
the impact of each factor is impossible to quantify as a myriad of other factors
also influence the outcome.  Also, these factors are by their nature
unquantifiable.  For example, it is impossible to calculate how many
more people in China would be travelling because of the Lunar New Year and what
this would translate in terms of increased ticket sales or hotel room
bookings.





Revenue
from air-ticketing was $5,082,405 for the three months ended December 31, 2008
compared to $2,055,915 for the same period last year, an increase of
approximately 147.2%. This increase is generally driven by the same factors
mentioned above, but more specifically to the increased demand for air passenger
transportation.





Revenue
generated by the air cargo agency segment for the three months ended December
31, 2008 decreased 52.4% year over year to $2,417,551 from $5,081,455. This
decrease is largely because of the negative effect of global economy slowdown
affecting air cargo volume and demand to the operation of SSD.





Revenue
generated by hotel reservations and bookings for the three month period ended
December 31, 2008 totaled $3,775,754 versus $1,467,664, a year over increase of
approximately 157.3%. This increase is generally driven by the factors mentioned
above for our increase in revenue, but more specifically, due to the successful
integration of the various business segments of the Company.





Revenue
generated through packaged travel services for the three months ended December
31, 2008 was $18,159,015, compared to $8,890,374 for the same period 2007, an
increase of approximately 104.3%. This increase is generally driven by the
factors mentioned above for our increase in revenue, but more specifically due
to the increase in tourism demand and successful integration of the Company’s
various business segments and marketing channels.




Cost of
Services




Costs of
services for air tickets cover mainly business and revenue related
taxes.  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
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.


35


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
expenses such as stock-based compensation and corporate professional fees are
not allocated to any segment as costs of sales. Instead, the Company disclosed
these two numbers in Others (Corporate Expense) of its Segment Information
footnote (Note 14) and these expenses were included in the selling, general, and
administrative expenses.




Gross
Profit




Gross
profit for the three months ended December 31, 2008 was $9,934,883 compared to
$5,207,994 for the three months ended December 31, 2007, an increase of
approximately 90.8%. The increase in gross profit partially reflects then
Company’s success in implementing its online strategy, an increase in packaged
tour services as a percentage of overall revenue and to a lesser
degree,  the rollout of our TRIPEASY Kiosks, which have
relatively lower variable costs associated with it.




Gross
profit in air-ticketing was $4,662,800 for the three months ended December 31,
2008 compared to $1,857,783 for the same period last year, an increase of
approximately 151.0%.  Gross profit margin in this segment for the
three months ended December 31, 2008 was 91.7% compared to 90.4% for the same
period 2007.  As the cost of service is at a similar percentage of the
revenue for the comparable period, the gross profit increase is in tandem with
the increase in our air-ticketing business operated by YZL.




Gross
profit in air cargo agency was $330,042 for the three months ended December 31,
2008 compared to $1,431,719 for the same period last year, a decrease of
approximately 77.0%. Gross profit margin in this segment for the three months
ended December 31, 2008 was 13.7% compared to 28.2% for the same period 2007, a
decrease of approximately 14.5%. The gross profit margin decrease was mainly due
to weakened air cargo demand as a result of financial crisis and the associated
weakened pricing power to our customers, while our fixed overhead costs remained
high.  These factors together resulted in the significant decrease in
the gross profit of this segment.




Gross
profit in hotel reservations was $2,527,419 for the three month ended December
31, 2008 compared to $908,984 for the same period last year, an increase of
approximately 178.0%. Gross profit margin in this segment for the three months
ended December 31, 2008 was 66.9% compared to 61.9% for the same period 2007, an
increase of approximately 5.0%.  The gross profit margin increase was
mainly due to the increase in commission revenue as a result of increased
reservation volume while our associated cost of services is increased at a
lesser extent.  These factors together resulted in the significant
increase in the gross profit of this segment.




Gross
profit in packaged travel was $2,414,621 for the three months ended December 31,
2008 compared to $1,009,508 for the same period 2007, an increase of
approximately 139.2%. Gross profit margin in this segment for the three months
ended December 31, 2008 was 13.3% compared to 11.4% for the same period 2007. As
the cost of service is at a similar percentage of the revenue for the comparable
period, the gross profit increase is in tandem with the increase in our packaged
travel businesses operated by XGN and FOI.




Consolidated
gross margin for three months ended December 31, 2008 came in at 33.8%, a 4.0%
improvement over the 29.8% the Company posted in the same period last year. As
outlined in the above tables, gross profit for air-ticketing improved the total
gross margin by 5.2%, gross profit for air cargo agency reduced the total gross
margin by 7.1%, gross profit for hotel reservations improved the total gross
margin by 3.4%, gross profit for packaged travel improved the total gross margin
by 2.4%, which in total, improved the total gross profit by
4.0%.


36




Our
air-ticketing and hotel reservation have much higher gross margin than our cargo
agency and 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 cargo agency business include the
costs of warehousing and delivery charges, and 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,
that all together are much substantial fixed overheads.





Selling, General and
Administrative Expenses




Major
selling, general, and administrative expenses for the three months ended
December 31, 2008 and 2007 are as follows:




For
      the three months ended December 31,2008
                  
                  
                  2007Business
      related tax
                  
                  $
                  49,438
                  
                  
                  $
                  21,906Salary
      and commission paid
                  
                  
                  989,787
                  
                  
                  
                  406,682Professional
      fees
                  
                  
                  190,541
                  
                  
                  
                  2,464Marketing
                  
                  
                  42,416
                  
                  
                  
                  16,451Rent
                  
                  
                  23,186
                  
                  
                  
                  107,074Depreciation
      and amortization
                  
                  
                  1,803
                  
                  
                  
                  2,220Stock-based
      compensation
                  
                  
                  51,786
                  
                  
                  
                  312,543Other
      general and administrative expenses
                  
                  
                  397,130
                  
                  
                  
                  262,485Total
                  
                  $
                  1,746,087
                  
                  
                  $
                  1,131,825




Selling,
general and administrative expenses for three months ended December 31, 2008
totaled $1,746,087 compared to $1,131,825for three months ended December 31,
2007, an increase of approximately 54.3%.




Selling,
general and administrative expenses reflected 5.9% of revenue versus 6.5% last
year, a 0.6% of improvement reflecting management's efficient cost
control.





Net
Income





Net
income for the three months ended December 31, 2008 grew 90.3% year over year to
$6,326,293 representing 21.5% of revenue, compared to $3,323,898 or 19.0% of
revenue for the three months ended December 31, 2007.





The
increase in net income reflects the previously mentioned growth in our overall
operating platform, continued strength within the PRC domestic tourism market
and cost synergies associated with our online strategy and integration of
acquired businesses.


37





FISCAL
YEARS ENDED DECEMBER 31, 2008 AND 2007




The
following table presents certain consolidated statement of operations
information derived from the consolidated statements of income for the fiscal
years ended December 31, 2008 and same period 2007.





Revenue
Segment Analysis:




Fiscal year
                        2008
                      
                      
                      Fiscal year 2007
                      
                      
                      Increase / Decrease
                      
                      
                      PercentageGross
      Revenues
                      
                      $
                      76,759,411
                      
                      
                      $
                      44,294,853
                      
                      
                      $
                      32,464,558
                      
                      
                      
                      73.3
                      %Cost
      of Services
                      
                      
                      (52,660,138
                      )
                      
                      
                      (30,242,330
                      )
                      
                      
                      (22,417,808
                      )
                      
                      
                      74.1
                      %Gross
      Profit
                      
                      
                      24,099,273
                      
                      
                      
                      14,052,523
                      
                      
                      
                      10,046,750
                      
                      
                      
                      71.5
                      %SG&A
                      
                      
                      (5,231,994
                      )
                      
                      
                      (3,452,111
                      )
                      
                      
                      (1,779,883
                      )
                      
                      
                      51.6
                      %Income
      from Operations
                      
                      
                      18,867,279
                      
                      
                      
                      10,600,412
                      
                      
                      
                      8,266,867
                      
                      
                      
                      78.0
                      %Loss
      on disposal of assets
                      
                      
                      (1,105
                      )
                      
                      -
                      
                      
                      
                      (1,105
                      )Other
      income
                      
                      
                      8,402
                      
                      
                      
                      25,105
                      
                      
                      
                      (16,703
                      )
                      
                      
                      -66.5
                      %Interest
      income
                      
                      
                      39,416
                      
                      
                      
                      3,293
                      
                      
                      
                      36,123
                      
                      
                      
                      1097.0
                      %Interest
      expense
                      
                      
                      (106,163
                      )
                      
                      
                      (80,847
                      )
                      
                      
                      (25,316
                      )
                      
                      
                      31.3
                      %Provision
      for income taxes
                      
                      
                      (4,275,652
                      )
                      
                      
                      (1,852,069
                      )
                      
                      
                      (2,423,583
                      )
                      
                      
                      130.9
                      %Net
      income
                      
                      $
                      14,532,177
                      
                      
                      $
                      8,695,894
                      
                      
                      $
                      5,836,283
                      
                      
                      
                      67.1
                      %




For the
fiscal year ended December 31, 2008:
  Revenue
      Segment
                                                                                    
                                                                                    Air-tickets
                                                                                    
                                                                                    
                                                                                    (%)
      of
                                                                                    
                                                                                    
                                                                                    Cargo
                                                                                    
                                                                                    
                                                                                    (%)
      of
                                                                                    
                                                                                    
                                                                                    Hotel
                                                                                    
                                                                                    
                                                                                    (%)
      of
                                                                                    
                                                                                    
                                                                                    Tours
                                                                                    
                                                                                    
                                                                                    (%)
      of
                                                                                    
                                                                                    
                                                                                    TotalAnalysis:
                                                                                    
                                                                                    (YZL)
                                                                                    
                                                                                    
                                                                                    sector
                                                                                    
                                                                                    
                                                                                    (SSD)
                                                                                    
                                                                                    
                                                                                    sector
                                                                                    
                                                                                    
                                                                                    (SLB)
                                                                                    
                                                                                    
                                                                                    sector
                                                                                    
                                                                                    
                                                                                    (XGN
      &
                                                                                      FOI)
                                                                                    
                                                                                    
                                                                                    sectorRevenue
                                                                                    
                                                                                    $
                                                                                    12,333,527
                                                                                    
                                                                                    
                                                                                    
                                                                                    16.07
                                                                                    %
                                                                                    
                                                                                    $
                                                                                    10,937,573
                                                                                    
                                                                                    
                                                                                    
                                                                                    14.25
                                                                                    %
                                                                                    
                                                                                    $
                                                                                    8,340,519
                                                                                    
                                                                                    
                                                                                    
                                                                                    10.87
                                                                                    %
                                                                                    
                                                                                    $
                                                                                    45,147,792
                                                                                    
                                                                                    
                                                                                    
                                                                                    58.82
                                                                                    %
                                                                                    
                                                                                    $
                                                                                    76,759,411Cost
      of Services
                                                                                    
                                                                                    $
                                                                                    1,166,155
                                                                                    
                                                                                    
                                                                                    
                                                                                    2.21
                                                                                    %
                                                                                    
                                                                                    $
                                                                                    9,347,312
                                                                                    
                                                                                    
                                                                                    
                                                                                    17.75
                                                                                    %
                                                                                    
                                                                                    $
                                                                                    3,209,777
                                                                                    
                                                                                    
                                                                                    
                                                                                    6.10
                                                                                    %
                                                                                    
                                                                                    $
                                                                                    38,936,894
                                                                                    
                                                                                    
                                                                                    
                                                                                    73.94
                                                                                    %
                                                                                    
                                                                                    $
                                                                                    52,660,138Gross
      Profit
                                                                                    
                                                                                    $
                                                                                    11,167,372
                                                                                    
                                                                                    
                                                                                    
                                                                                    46.34
                                                                                    %
                                                                                    
                                                                                    $
                                                                                    1,590,261
                                                                                    
                                                                                    
                                                                                    
                                                                                    6.60
                                                                                    %
                                                                                    
                                                                                    $
                                                                                    5,130,742
                                                                                    
                                                                                    
                                                                                    
                                                                                    21.29
                                                                                    %
                                                                                    
                                                                                    $
                                                                                    6,210,898
                                                                                    
                                                                                    
                                                                                    
                                                                                    25.77
                                                                                    %
                                                                                    
                                                                                    $
                                                                                    24,099,273Gross
      Margin
                                                                                    
                                                                                    
                                                                                    90.54
                                                                                    %
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    14.54
                                                                                    %
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    61.52
                                                                                    %
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    13.76
                                                                                    %
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    31.40
                                                                                    %Segment
      effectin
      Gross Margin
                                                                                    
                                                                                    
                                                                                    14.55
                                                                                    %
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    2.07
                                                                                    %
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    6.68
                                                                                    %
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    8.09
                                                                                    %
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    31.40
                                                                                    %(*)
  For the
fiscal year ended December 31, 2007:




Revenue
      Segment
                                                                                            
                                                                                            Air-tickets
                                                                                            
                                                                                            
                                                                                            (%)
      of
                                                                                            
                                                                                            
                                                                                            Cargo
                                                                                            
                                                                                            
                                                                                            (%)
      of
                                                                                            
                                                                                            
                                                                                            Hotel
                                                                                            
                                                                                            
                                                                                            (%)
      of
                                                                                            
                                                                                            
                                                                                            Tours
                                                                                            
                                                                                            
                                                                                            (%)
      of
                                                                                            
                                                                                            
                                                                                            TotalAnalysis:
                                                                                            
                                                                                            (YZL)
                                                                                            
                                                                                            
                                                                                            sector
                                                                                            
                                                                                            
                                                                                            (YZL)
                                                                                            
                                                                                            
                                                                                            (SSD)
                                                                                            
                                                                                            
                                                                                            sector
                                                                                            
                                                                                            
                                                                                            (SLB)
                                                                                            
                                                                                            
                                                                                            sector
                                                                                            
                                                                                            
                                                                                            (XGN
      &
                                                                                              FOI)
                                                                                            
                                                                                            
                                                                                            sectorRevenue
                                                                                            
                                                                                            $
                                                                                            7,811,823
                                                                                            
                                                                                            
                                                                                            
                                                                                            17.64
                                                                                            %
                                                                                            
                                                                                            $
                                                                                            8,948,216
                                                                                            
                                                                                            
                                                                                            $
                                                                                            11,739,272
                                                                                            
                                                                                            
                                                                                            
                                                                                            46.70
                                                                                            %
                                                                                            
                                                                                            $
                                                                                            2,383,129
                                                                                            
                                                                                            
                                                                                            
                                                                                            5.38
                                                                                            %
                                                                                            
                                                                                            $
                                                                                            13,412,413
                                                                                            
                                                                                            
                                                                                            
                                                                                            30.28
                                                                                            %
                                                                                            
                                                                                            $
                                                                                            44,294,853Cost
      of Services
                                                                                            
                                                                                            $
                                                                                            1,067,394
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.53
                                                                                            %
                                                                                            
                                                                                            $
                                                                                            6,980,680
                                                                                            
                                                                                            
                                                                                            $
                                                                                            9,631,553
                                                                                            
                                                                                            
                                                                                            
                                                                                            54.93
                                                                                            %
                                                                                            
                                                                                            $
                                                                                            1,014,578
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.35
                                                                                            %
                                                                                            
                                                                                            $
                                                                                            11,548,125
                                                                                            
                                                                                            
                                                                                            
                                                                                            38.19
                                                                                            %
                                                                                            
                                                                                            $
                                                                                            30,242,330Gross
      Profit
                                                                                            
                                                                                            $
                                                                                            6,744,429
                                                                                            
                                                                                            
                                                                                            
                                                                                            47.99
                                                                                            %
                                                                                            
                                                                                            $
                                                                                            1,967,536
                                                                                            
                                                                                            
                                                                                            $
                                                                                            2,107,719
                                                                                            
                                                                                            
                                                                                            
                                                                                            29.00
                                                                                            %
                                                                                            
                                                                                            $
                                                                                            1,368,551
                                                                                            
                                                                                            
                                                                                            
                                                                                            9.74
                                                                                            %
                                                                                            
                                                                                            $
                                                                                            1,864,288
                                                                                            
                                                                                            
                                                                                            
                                                                                            13.27
                                                                                            %
                                                                                            
                                                                                            $
                                                                                            14,052,523Gross
      Margin
                                                                                            
                                                                                            
                                                                                            86.34
                                                                                            %
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            19.70%
                                                                                            
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            57.43
                                                                                            %
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            13.90
                                                                                            %
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            31.72
                                                                                            %Segment
      effectin
      Gross Margin
                                                                                            
                                                                                            
                                                                                            15.23
                                                                                            %
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            9.20%
                                                                                            
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.09
                                                                                            %
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            4.21
                                                                                            %
                                                                                            
                                                                                            
                                                                                            -
                                                                                            
                                                                                            
                                                                                            
                                                                                            31.72
                                                                                            %(*)




(*) "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.


38


Revenue





We
currently have four discrete lines of business and revenue, and each is carried
out by one or two subsidiaries of the Company: (i) air-ticketing (Shenzhen Yu
Zhi Lu Aviation Service Company Limited), (ii) hotel reservations (Shanghai
Lanbao Travel Service Company Limited), (iii) packaged tours (Xi'an Golden Net
Travel Serve Service Company Limited and Foshan Overseas International Travel
Service Co., Ltd) and (iv) air cargo agency services (Shenzhen Speedy Dragon
Enterprise Limited). Operations of each segment are exclusive to the operations
of the associated subsidiary company. In addition to air-ticking services,
Shenzhen Yu Zhi Lu Aviation Service Company Limited also operated air cargo
business during the year ended December 31, 2007, however, it had transferred
all its air cargo agency business to Shenzhen Speedy Dragon Enterprise Limited
at the beginning of fiscal year 2008.





Revenue
for fiscal year 2008 totaled $76,759,411 compared to $44,294,853 in the same
period last year, reflecting a year over year increase of approximately73.3%.
The increase was attributable to both organic growth, as well as our expansion
into, successful integration and cross selling of the Company’s newly
diversified business segments related to packaged tours and hotel booking
services through the acquisitions of Xi’an Golden Net Travel Service Company
Limited, Shanghai Lanbao Travel Service Company Limited and Foshan Overseas
International Travel Service Co., Ltd.





More
specifically, revenue from air-ticketing was $12,333,527 for fiscal year 2008
compared to $7,811,823 for the fiscal year 2007, an increase of approximately
57.9%. This increase is driven by the organic growth of YZL, and the increase in
air passenger transportation.  It is also a result of successful
integration of the Company’s acquisitions of various complementary business
segments, the synergies among these segments and the consolidation of marketing
channels among the subsidiaries in major domestic cities.




Revenue
from air cargo agency was $10,937,573 for the fiscal year 2008 compared to
$20,687,488 for the fiscal year 2007, a decrease of approximately 47.1%. This
decrease is due to the decrease air cargo demand as a result of global economy
slowdown, that affects mostly on manufacturing industry in China.




Revenue
from hotel reservations was $8,340,519 for the fiscal year 2008 compared to
$2,383,129 for the fiscal year 2007, an increase of approximately 250.0%. SLB
was acquired in August 2007. Therefore, revenues for the fiscal year 2007 only
included SLB revenues from the acquisition to the year end of 2007, as compared
to the whole year of 2008. The revenue increase is also attributable to SLB’s
own organic growth during the fiscal 2008.  Our organic growth was
driven by the successful integration and the synergies among our various
business segments and also the consolidation of marketing channels among the
subsidiaries in major domestic cities.




Revenue
from packaged travel was $45,147,792 for the fiscal year 2008 compared to
$13,412,413 for the fiscal year 2007, an increase of approximately 236.6%. XGN
was acquired in August 2007. Therefore, revenues for the fiscal year 2007 only
included XGN revenues from the acquisition to the year end of 2007, as compared
to the whole year of 2008. The revenue increase is also attributable to XGN’s
own organic growth during the fiscal 2008. In addition, the Company acquired FOI
in October 2007, therefore revenues for the fiscal year 2007 only included FOI
revenues from the acquisition to the year end of 2007, as compared to the whole
year of 2008. The revenue increase is also attributable to FOI’s own organic
growth during the fiscal 2008. The growth in these two subsidiaries were driven
by the successful integration, the synergies among segments and also the
consolidation of marketing channels among the subsidiaries in major domestic
cities.




The
changes of revenue mix resulted from various acquisitions in
2007.  The following data presents pro forma revenues, costs of sales
and operating results for the Company as if the acquisitions discussed above,
had occurred on January 1, 2007. The Company has prepared these pro forma
financial results for analytic and comparative purposes only. These pro forma
financial results may not be indicative of the results that would have occurred
if the Company had completed the acquisitions at the beginning of the periods
shown below or the results that will be attained in the future.


39




2008 (as
                  Reported) ($)
                
                
                2007 (as
                  Reported) ($)
                
                
                Pro forma
                  adjustments
                  (XGN) ($)
                
                
                Pro forma
                  adjustments
                  (SLB) ($)
                
                
                Pro forma
                  adjustments
                  (FOI) ($)
                
                
                2007 (Pro
                  forma) ($)Sales
                
                
                76,759,411
                
                
                
                44,294,853
                
                
                
                4,292,574
                
                
                
                2,024,296
                
                
                
                16,433,062
                
                
                
                67,044,785Cost
      of Services
                
                
                52,660,138
                
                
                
                30,242,330
                
                
                
                3,818,546
                
                
                
                699,660
                
                
                
                14,086,607
                
                
                
                48,847,143Gross
      Profit
                
                
                24,099,273
                
                
                
                14,052,523
                
                
                
                474,028
                
                
                
                1,324,636
                
                
                
                2,346,455
                
                
                
                18,197,642Selling,
      General and Administrative
                
                
                5,231,994
                
                
                
                3,452,111
                
                
                
                83,652
                
                
                
                195,862
                
                
                
                453,808
                
                
                
                4,185,433Operating
      Income
                
                
                18,867,279
                
                
                
                10,600,412
                
                
                
                390,376
                
                
                
                1,128,774
                
                
                
                1,892,647
                
                
                
                14,012,209




Excluding
the impact of acquisitions, organic revenue growth is approximately 14.5% in
fiscal 2008. Meanwhile, as the average price of our travel products and
commission rates were fairly stable in 2008, we believe the greatest impact to
our financial performance is from the growth of our business
volume.




Management
does not have a conscious strategy over revenue mix.  Instead, the
revenue mix is the end product of the acquisitions of the various business
segments in 2007 and the impact of market forces on these segments.




Cost of
services




Costs of
services for air tickets cover mainly business and revenue related
taxes.  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
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.




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
expenses such as stock-based compensation and corporate professional fees are
not allocated to any segment as costs of sales. Instead, the Company disclosed
these two numbers in Others (Corporate Expense) of its Segment Information
footnote (Note 14) and these expenses were included in the selling, general, and
administrative expenses.


40


A
detailed breakdown of Cost of Services by subsidiary is set forth
below:





Shenzhen Yuzhilu
      Aviation Service Co., Ltd. (YZL)
                    
                    2008
                    
                    
                    2007Franchise
      system cost sharing
                    
                    $
                    4,264
                    
                    
                    $
                    87,201Staff
      salaries
                    
                    
                    345,519
                    
                    
                    
                    305,604Telecommunication
      expenses
                    
                    
                    29,866
                    
                    
                    
                    33,871Rental
      expenses
                    
                    
                    95,317
                    
                    
                    
                    68,032Utilities
                    
                    
                    12,875
                    
                    
                    
                    16,363Website
      maintenance
                    
                    
                    21,457
                    
                    
                    
                    -Depreciation
      and amortization
                    
                    
                    39,052
                    
                    
                    
                    58,645Business
      tax
                    
                    
                    617,805
                    
                    
                    
                    497,678sub-total
                    
                    
                    1,166,155
                    
                    
                    
                    1,067,394Cargo
      Services
                    
                    
                    -
                    
                    
                    
                    6,980,680
                    **Total
                    
                    $
                    1,166,155
                    
                    
                    $
                    8,048,074Shenzhen
      Speedy Dragon Enterprises Limited.(SSD)Depreciation
      and amortization
                    
                    $
                    9,343
                    
                    
                    $
                    6,046Cargo
      Services
                    
                    
                    9,337,969
                    
                    
                    
                    9,625,507Total
                    
                    $
                    9,347,312
                    
                    
                    $
                    9,631,553Shanghai
      Lanbao Travel Service Co., Ltd. (SLB)Business
      Tax
                    
                    $
                    448,973
                    
                    
                    $
                    184,472Staff
      salaries and Staff welfare
                    
                    
                    43,165
                    
                    
                    
                    31,306Rental
      expenses
                    
                    
                    51,660
                    
                    
                    
                    26,079Telecommunication
      expenses
                    
                    
                    6,713
                    
                    
                    
                    2,185Utilities
                    
                    
                    5,585
                    
                    
                    
                    1,807Depreciation
      and amortization
                    
                    
                    3,965
                    
                    
                    
                    3,954Franchise
      commission paid
                    
                    
                    2,649,716
                    
                    
                    
                    764,774Total
                    
                    $
                    3,209,777
                    
                    
                    $
                    1,014,577Foshan
      International Travel Service Co., Ltd. (FOI)Depreciation
      and amortization
                    
                    $
                    12,072
                    
                    
                    $
                    10,712Cost
      of Services (Package Tours)
                    
                    
                    23,930,685
                    
                    
                    
                    4,240,160Total
                    
                    $
                    23,942,757
                    
                    
                    $
                    4,250,872Xian
      Golden Net Travel Serve Services  (XGN)Depreciation
      and amortization
                    
                    $
                    475
                    
                    
                    $
                    583Cost
      of Services (Package Tours)
                    
                    
                    14,993,662
                    
                    
                    
                    7,296,670Total
                    
                    $
                    14,994,137
                    
                    
                    $
                    7,297,253





(**) YZL
has a cost of service of $6,980,680 for running air cargo agency business in
2007. Beginning 2008, YZL transferred all its air cargo agency business to
SSD.


41





Please
see below a summary of accounts that were previously reported as selling,
general and administrative expenses that have been allocated and reclassified to
costs of services for the years ended December 31, 2008 and 2007.




Account
                  
                  2008
                  
                  
                  2007Staff
      salaries
                  
                  $
                  348,435
                  
                  
                  $
                  285,133Rent
                  
                  
                  150,942
                  
                  
                  
                  97,527Depreciation
                  
                  
                  40,249
                  
                  
                  
                  51,777Utilities
                  
                  
                  18,457
                  
                  
                  
                  18,708Telecommunication
                  
                  
                  36,580
                  
                  
                  
                  44,493Website
      maintenance and amortization
                  
                  
                  60,511
                  
                  
                  
                  50,209Business
      taxes
                  
                  
                  448,973
                  
                  
                  
                  184,471Total
                  
                  $
                  1,104,147
                  
                  
                  $
                  732,318





Gross
Profit





Gross
profit for the fiscal year 2008 was $24,099,273 compared to $14,052,523 for the
fiscal year 2007, an increase of approximately 73.3%. The increase in gross
profit partially reflects the Company’s success in implementing its online
strategy, an increase in packaged tour services as a percentage of overall
revenue and to a lesser degree, the rollout of our TRIPEASY Kiosks, which have
relatively lower variable costs associated with it.




Gross
profit in air-ticketing was $11,167,372 for the twelve months ended December 31,
2008 compared to $6,744,429 for the same period last year, an increase of
approximately 65.6%. Gross profit margin in this segment for the year ended
December 31, 2008 was 90.5% compared to 86.3% for the same period 2007, an
increase of approximately 4.2%.  The gross profit margin increase was
mainly due to the increase in commission revenue as a result of increased
reservation volume while our associated cost of services is increased at a
lesser extent.  These factors together resulted in the significant
increase in the gross profit of our air-ticketing business operated by
YZL.




Gross
profit in air cargo agency was $1,590,261 for the twelve months ended December
31, 2008 compared to $4,075,255 for the same period last year, a decrease of
approximately 61.0%. Gross profit margin in this segment for the year ended
December 31, 2008 was 14.5% compared to 19.7% for the same period 2007, a
decrease of approximately 5.2%. The gross profit margin decrease was mainly due
to weakened air cargo demand as a result of financial crisis and the associated
weakened pricing power to our customers, while our fixed overheads remained
high. These factors together resulted in the decrease in the gross profit of
this segment.




Gross
profit in hotel reservations was $5,130,742 for the twelve month ended December
31, 2008 compared to $1,368,551 for the same period last year, an increase of
approximately 274.9%. Gross profit margin in this segment for the year ended
December 31, 2008 was 61.5% compared to 57.4% for the same period 2007, an
increase of approximately 4.1%. The gross profit margin increase was mainly due
to the increase in commission revenue as a result of increased reservation
volume while our associated cost of services is increased at a lesser
extent.  These factors together resulted in the significant increase
in the gross profit of our hotel reservation business operated by
SLB.




Gross
profit in packaged travel was $6,210,898 for the twelve months ended December
31, 2008 compared to $1,864,286 for the same period 2007, an increase of
approximately 233.2%. Gross profit margin in this segment for the year ended
December 31, 2008 was 13.8% compared to 13.9% for the same period 2007. As the
cost of service is at a similar percentage to the revenue for the comparable
period last year, the gross profit increase is in tandem with the increase in
our packaged travel businesses operated by XGN and FOI.


42


Consolidated
gross margin for year ended December 31, 2008 came in at 31.4%, a 0.3% decrease
from the 31.7% the Company posted in the same period last year. As outlined in
the above tables, gross profit for air-ticketing reduced the total gross margin
by 0.7%, gross profit for air cargo agency reduced the total gross margin by
7.1%, gross profit for hotel reservations improved the total gross margin by
3.6%, gross profit for packaged travel improved the total gross margin by 3.9%,
which in total, reduced the total gross profit by 0.3%.





Selling, General and
Administrative Expenses





Major
selling, general, and administrative expenses for the twelve months ended
December 31, 2008 and 2007 are as follows:




For
      the twelve months ended December
                    31,2008
                  
                  
                  2007Business
      related tax
                  
                  $
                  246,250
                  
                  
                  $
                  113,006Salary
      and commission paid
                  
                  
                  3,007,092
                  
                  
                  
                  1,510,503Professional
      fees
                  
                  
                  250,751
                  
                  
                  
                  4,375Marketing
                  
                  
                  148,903
                  
                  
                  
                  88,519Rent
                  
                  
                  190,212
                  
                  
                  
                  103,444Depreciation
      and amortization
                  
                  
                  7,212
                  
                  
                  
                  8,879Stock-based
      compensation
                  
                  
                  207,588
                  
                  
                  
                  945,903Other
      general and administrative expenses
                  
                  
                  1,173,986
                  
                  
                  
                  677,482Total
                  
                  $
                  5,231,994
                  
                  
                  $
                  3,452,111




Selling,
general and administrative expenses for fiscal year 2008 totaled $5,231,994
compared to $3,452,111for fiscal year 2007, reflecting approximately 6.8% and
7.8% of total revenue, respectively. The increase in operating expenses was
mainly a result of increase in business volume. For the years ended December 31,
2008 and 2007, the Company recorded $464,917 and $945,903 as stock-based
compensation expense and corporate professional fees, respectively.




Other
Income (Expenses)




Interest
expense for the year totaled $106,163 compared to $80,847 for the fiscal year
2007, an increase of approximately 31.3%. This increase was due to a new short
term bank loan, however this loan was paid off in August 2008.





Net
Income





Net
income was $14,532,177 or 18.9% of revenue for the fiscal year 2008, compared to
$8,695,894 or 19.6% of revenue for the fiscal year 2007. Excluding the effect of
provision for income taxes, the increase in net income reflects the
overall  continued growth in most of our operating segments both on an
organic and acquisitive basis, and the slight decrease as a percentage of
revenue reflects the acquisitions of lower margin businesses as previously
noted.


43





LIQUIDITY
AND CAPITAL RESOURCES




Cash and Cash
Equivalent




Cash and
liquidity needs have been funded primarily through cash flows from operations,
short-term borrowings, and a private investment of equity securities. At the end
of December 31, 2008, cash and cash equivalents totaled $16,204,531, while
working capital, current assets of $35,319,196 less current liabilities of
$5,025,808 came in at $ $30,293,388. We believe that our current liquidity
profile and cash from operations, which totaled $6,765,484 will be sufficient to
meet our operating needs in fiscal 2009.




Capital
expenditure




Total
capital expenditure for the fiscal year ended December 31, 2008 was $192,436,
mainly to purchase fixed assets, such as machinery and equipment. Management
may, from time to time, increase such expenditure to support new initiatives and
developments such as the rollout of our  TRIPEASY Travel Service
Kiosks, which management estimates could cost up to $6,000,000 should its
year-end 2009 target of 600 additional Kiosks be met.




Working Capital
Requirements




As
previously mentioned, cash flow from operations and short term financing have
been adequate to meet our cash needs and we believe this will be the case for at
least the next 12 months. However, our actual working capital needs will still
be dependent upon several key factors, including but not limited to,
the  competitive environment, acquisition opportunities, new business
development initiatives, and the availability of credit, none of which can be
predicted with certainty. As a result, the need for additional capital may
arise, which may require the issuance of debt or equity if necessary, assurances
of which may or may not be available on terms acceptable to us.




Inflation





In the
opinion of management, inflation will not have an impact on our financial
condition and results of its operations.




Off Balance Sheet
Arrangements




We have
never entered into any off-balance sheet financing arrangements, have never
established any special purpose entities to fulfill such obligations and have
not made any debt or related commitments to other entities.




Critical
Accounting Policies and Estimates





The
preparation of our financial statements requires that we adopt and follow
certain accounting policies. Certain amounts presented in the financial
statements have been determined in accordance with such policies, based upon
estimates and assumptions. Although we believe that our estimates and
assumptions are reasonable, actual results may differ.




We have
included below a discussion of the accounting policies that we believe are
affected by the more significant judgments and estimates used in the preparation
of our financial statements, how we apply such policies and how results
differing from our estimates and assumptions would affect the amounts
presented in our financial statements. Other accounting policies also have a
significant effect on our financial statements, and some of these policies also
require the use of estimates and assumptions.


44




Revenue
Recognition




The
Company’s revenue recognition policies are in compliance with Staff accounting
bulletin (SAB) 104. 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 has 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
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.).




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.




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.


45




Air
Cargo Business




The
Company receives fees from its air cargo business.  The Company
basically brokers air cargo spaces and resell them to local logistic companies
to generate revenue.  The Company has contracted with Chinese domestic
airlines as its vendors to carry out its cargo services.  Revenues
generated from air cargo business are recognized on a gross basis in the
statements of income when service is rendered, 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
air cargo services rendered and collections are reasonably
assured.  Customers are 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 business and revenue related
taxes.  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
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.




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 Income.




Accounts Receivable




We
evaluate the collectibility of our accounts receivable based on a combination of
factors. In circumstances where we are aware of a specific customer's inability
to meet its financial obligations to us, we record a specific reserve for bad
debts against amounts due to reduce the net recognized receivable to the amount
we reasonably believe will be collected. For all other customers, we recognize
reserves for bad debts based on past write-off history, average percentage of
receivables written off historically and the length of time the receivables are
past due. We believe that we have appropriately considered the factors, as well
as any other known customer liquidity issues, on the ability of our customers to
pay amounts due to us. However, if demand for travel  softens, due to
prevailing economic conditions, the financial condition of our customers may be
adversely impacted. If we believe that we will begin to experience higher than
expected defaults on amounts due us, our estimates of the amounts which we will
ultimately collect will be re-evaluated.




46




Asset
Impairments.




The
Company adopted Statement of Financial Accounting Standards No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets (SFAS 144), 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
SFAS 144. SFAS 144 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 December 31,
2008 and December 31, 2007 there were no significant impairments of its
long-lived assets.





Goodwill





In
connection with our acquisitions, we recorded a significant amount of goodwill.
Goodwill represents the excess cost of a business acquisition over the fair
value of the net assets acquired.  In accordance with Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets
(Statement 142), indefinite-life identifiable intangible assets and goodwill are
not amortized. Under the provisions of Statement 142, 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 8, Purchase of Subsidiary, for additional
information regarding goodwill. As of December 31, 2008 there has been no
impairment losses or gain or loss on disposal of Goodwill amounts.





Reclassification




The
Company has reclassified and included all costs directly associated with the
generation of revenue in its cost of services. These costs were previously
classified as selling, general, and administrative expenses in the consolidated
financial statements.  This reclassification has resulted in no change
in the Company’s reported Consolidated Balance Sheets as of December 31, 2008
and 2007 and Consolidated Statements of Cash Flows for each of the years in the
three-year period ended December 31, 2008.  The reclassification did
affect the individual components of the Company’s Consolidated Statements of
Income for each of the years in the three-year period ended December 31,
2008. Costs of services that were reclassified from the Company’s selling,
general, and administrative expenses amounted to $1,104,147, $723,318, and
$334,194 for the years ended December 31, 2008, 2007 and 2006,
respectively.  However, this reclassification had no effect on the
reported consolidated net income.




Recent Accounting
Pronouncements




In July
2006, the FASB issued Interpretation No. 48 (FIN 48). “Accounting for uncertainty
in Income Taxes- an
interpretation of FASB Statement 109”(“FIN No. 48”). FIN 48 clarifies the
accounting for Income Taxes by prescribing the minimum recognition threshold a
tax position is required to meet before being recognized in the financial
statements. It also provides guidance on de-recognition, measurement,
classification, interest and penalties, accounting in interim periods,
disclosure and transition and clearly scopes income taxes out of SFAS No. 5,
“Accounting for
Contingencies”. FIN 48
is effective for fiscal years beginning after December 15, 2006. Based on the
Company’s evaluation of this issue, the adoption of this accounting requirement
has no effect on the Company’s financial statements.


47




In
September, 2006, FASB issued SFAS 157 ‘Fair Value Measurements’.  This
Statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements.  This Statements applies under other
accounting pronouncements that require or permit fair value measurements, the
Board having previously concluded in those accounting pronouncements that fair
value is the relevant measurement attribute.  Accordingly, this
Statement does not require any new fair value measurements.  However,
for some entities, the application of this Statement will change current
practice.  This Statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. Based on the Company’s evaluation of this issue, the
adoption of this accounting requirement has no effect on the Company’s financial
statements.




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, provided the entity also elects to apply the provisions of
FASB Statement No. 157, Fair
Value Measurements. Based on the Company’s evaluation of this issue, the
adoption of this accounting requirement has no effect on the Company’s 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). Earlier adoption is prohibited. Based on the Company’s evaluation of
this issue, the adoption of this accounting requirement has no effect on the
Company’s 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. Management is
currently evaluating the effect of this pronouncement on financial
statements.




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.  The Company is currently assessing the impact of
SFAS No. 162 on its financial position and results of
operations.


48




In
June 2008, the FASB ratified the consensus reached on Emerging Issues Task
Force (“EITF”) Issue No. 07-05, Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity’s Own Stock (“EITF
No. 07-05”). 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. The Company is currently assessing the impact of EITF
No. 07-05 on its financial position and results of operations.





Item
7A. Quantitative and Qualitative Disclosures About Market Risk.




Not
Applicable.




Item 8. Financial
Statements and Supplementary Data.




49




UNIVERSAL
TRAVEL GROUP
 
 CONSOLIDATED
FINANCIAL STATEMENTS
 
 DECEMBER
31, 2008
  
 
 TABLE
OF CONTENTS
 
 Report
      of Independent Registered Public Accounting Firm
                      3Consolidated
      Balance Sheets
                      4Consolidated
      Statements of Income
                      5Consolidated
      Statements of Cash Flows
                      6Consolidated
      Statements of Stockholders’ Equity
                      7Notes
      to Consolidated Financial Statements
                      8-28
  2
  MORGENSTERN,
SVOBODA & BAER, CPA’s, P.C.
 
 CERTIFIED
PUBLIC ACCOUNTANTS
 40
Exchange Place, Suite 1820
 New York,
N.Y.10005
 TEL:  (212)
925-9490
 FAX:
(212) 226-9134
 E-MAIL:  MSBCPAS@gmail.com
 
 Report of Independent
Registered Public Accounting Firm
 
 Board of
Directors and Stockholders of
 Universal
Travel Group
  We have
audited the accompanying balance sheets of Universal Travel Group as of
December, 31 2008 and 2007, and the related statements of income, stockholders’
equity and comprehensive income, and cash flows for each of the years in the
three-year period ended December 31, 2008
  Universal
Travel Group’s management is responsible for these financial statements. Our
responsibility is to express an opinion on these financial statements based on
our audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
  In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Universal Travel group as of
December 31, 2008 and 2007, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 2008 in
conformity with accounting principles generally accepted in the United States of
America.
 
 /s/Morgenstern,
Svoboda & Baer CPA’s P.C.
 Certified
Public Accountants
 
 New York,
N.Y.
 March 3,
2009
  3
 
 UNIVERSAL
TRAVEL GROUP
 CONSOLIDATED
BALANCE SHEETS
 DECEMBER
31, 2008 and 2007
 
 2008
                      
                      
                      2007ASSETSCurrent
      AssetsCash
      and cash equivalents
                      
                      $
                      16,204,531
                      
                      
                      $
                      2,671,684Accounts
      receivable, net
                      
                      
                      10,715,206
                      
                      
                      
                      5,403,820Other
      receivables and deposits, net
                      
                      
                      141,413
                      
                      
                      
                      1,297,426Refundable
      acquisition deposit
                      
                      
                      -
                      
                      
                      
                      1,453,050Due
      from shareholder
                      
                      
                      -
                      
                      
                      
                      1,444,818Trade
      deposit
                      
                      
                      6,737,521
                      
                      
                      
                      2,650,744Advances
                      
                      
                      438,468
                      
                      
                      
                      616,861Escrow
      deposits
                      
                      
                      762,800
                      
                      
                      
                      -Prepaid
      expenses
                      
                      
                      319,257
                      
                      
                      
                      713,668Total
      Current Assets
                      
                      
                      35,319,196
                      
                      
                      
                      16,252,071Property
      & equipment, net
                      
                      
                      273,340
                      
                      
                      
                      127,393Intangible
      assets
                      
                      
                      307,335
                      
                      
                      
                      18,626Goodwill
                      
                      
                      13,526,809
                      
                      
                      
                      13,526,80914,107,484
                      
                      
                      
                      13,672,828Total
      Assets
                      
                      $
                      49,426,680
                      
                      
                      $
                      29,924,899LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesNotes
      payable – bank
                      
                      $
                      -
                      
                      
                      $
                      1,288,554Note
      payable – others
                      
                      
                      -
                      
                      
                      
                      1,576,750Accounts
      payable and accrued expenses
                      
                      
                      2,219,156
                      
                      
                      
                      3,604,666Customer
      deposits
                      
                      
                      1,047,250
                      
                      
                      
                      1,132,886Income
      tax payable
                      
                      
                      1,759,402
                      
                      
                      
                      664,995Total
      Current Liabilities
                      
                      
                      5,025,808
                      
                      
                      
                      8,267,851Stockholders'
      EquityCommon
      stock, $.001 par value, 70,000,000shares
      authorized, 41,619,966 and 36,809,036 issued and
    outstanding
                      
                      
                      41,621
                      
                      
                      
                      36,810Additional
      paid in capital
                      
                      
                      15,833,368
                      
                      
                      
                      8,601,534Other
      comprehensive income-foreign currency translation
                      
                      
                      1,520,166
                      
                      
                      
                      545,164Statutory
      reserve
                      
                      
                      372,144
                      
                      
                      
                      372,144Retained
      earnings
                      
                      
                      26,633,573
                      
                      
                      
                      12,101,396Total
      Stockholders' Equity
                      
                      
                      44,400,872
                      
                      
                      
                      21,657,048Total
      Liabilities and Stockholders' Equity
                      
                      $
                      49,426,680
                      
                      
                      $
                      29,924,899
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  4
 
 UNIVERSAL
TRAVEL GROUP
 CONSOLIDATED
STATEMENTS OF INCOME
 FOR THE THREE YEARS ENDEDDECEMBER 31,
  2008
                                                      
                                                      
                                                      2007
                                                      
                                                      
                                                      2006Gross
      revenues,
                                                      
                                                      $
                                                      76,759,411
                                                      
                                                      
                                                      $
                                                      44,294,853
                                                      
                                                      
                                                      $
                                                      10,013,788Cost
      of services
                                                      
                                                      
                                                      52,660,138
                                                      
                                                      
                                                      
                                                      30,242,330
                                                      
                                                      
                                                      
                                                      4,928,570Gross
      Profit
                                                      
                                                      
                                                      24,099,273
                                                      
                                                      
                                                      
                                                      14,052,523
                                                      
                                                      
                                                      
                                                      5,085,218Selling,
      general and administrative expenses
                                                      
                                                      
                                                      5,231,994
                                                      
                                                      
                                                      
                                                      3,452,111
                                                      
                                                      
                                                      
                                                      1,969,280Total
      expenses
                                                      
                                                      
                                                      5,231,994
                                                      
                                                      
                                                      
                                                      3,452,111
                                                      
                                                      
                                                      
                                                      1,969,280Income
      from operations
                                                      
                                                      
                                                      18,867,279
                                                      
                                                      
                                                      
                                                      10,600,412
                                                      
                                                      
                                                      
                                                      3,115,938Other
      Income (Expense)Loss
      on disposal of assets
                                                      
                                                      
                                                      (1,105
                                                      )
                                                      
                                                      
                                                      -Other
      income
                                                      
                                                      
                                                      8,402
                                                      
                                                      
                                                      
                                                      25,105
                                                      
                                                      
                                                      
                                                      36,383Interest
      income
                                                      
                                                      
                                                      39,416
                                                      
                                                      
                                                      
                                                      3,293
                                                      
                                                      
                                                      
                                                      11,994Interest
      expense
                                                      
                                                      
                                                      (106,163
                                                      )
                                                      
                                                      
                                                      (80,847
                                                      )
                                                      
                                                      
                                                      (2,754
                                                      )Total
      Other Income (Expense)
                                                      
                                                      
                                                      (59,450
                                                      )
                                                      
                                                      
                                                      (52,449
                                                      )
                                                      
                                                      
                                                      45,623Income
      before income taxes
                                                      
                                                      
                                                      18,807,829
                                                      
                                                      
                                                      
                                                      10,547,963
                                                      
                                                      
                                                      
                                                      3,161,561Provision
      for income taxes
                                                      
                                                      
                                                      (4,275,652
                                                      )
                                                      
                                                      
                                                      (1,852,069
                                                      )
                                                      
                                                      
                                                      (603,083
                                                      )Net
      income
                                                      
                                                      $
                                                      14,532,177
                                                      
                                                      
                                                      $
                                                      8,695,894
                                                      
                                                      
                                                      $
                                                      2,558,478Net
      income per common shareBasic
                                                      
                                                      $
                                                      .38
                                                      
                                                      
                                                      $
                                                      .26
                                                      
                                                      
                                                      $
                                                      .07Diluted
                                                      
                                                      $
                                                      .38
                                                      
                                                      
                                                      $
                                                      .
      .26
                                                      
                                                      
                                                      $
                                                      .07Weighted
      average common shares outstandingBasic
                                                      
                                                      
                                                      38,562,155
                                                      
                                                      
                                                      
                                                      33.629,518
                                                      
                                                      
                                                      
                                                      30,450,000Diluted
                                                      
                                                      
                                                      38,562,155
                                                      
                                                      
                                                      
                                                      33,629,518
                                                      
                                                      
                                                      
                                                      30,450,000Net
      income
                                                      
                                                      $
                                                      14,532,177
                                                      
                                                      
                                                      $
                                                      8,695,894
                                                      
                                                      
                                                      $
                                                      2,558,478Other
      comprehensive income-foreign currency Translation
                                                      
                                                      
                                                      975,002
                                                      
                                                      
                                                      
                                                      441,353
                                                      
                                                      
                                                      
                                                      89,763Comprehensive
      income
                                                      
                                                      
                                                      15,507,179
                                                      
                                                      
                                                      
                                                      9,137,247
                                                      
                                                      
                                                      
                                                      2,648,241
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  5
 
 UNIVERSAL
TRAVEL GROUP
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR THE THREE YEARS ENDEDDECEMBER 31,
  2008
                                        
                                        
                                        2007
                                        
                                        
                                        2006CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      Income
                                        
                                        $
                                        14,532,177
                                        
                                        
                                        $
                                        8,695,894
                                        
                                        
                                        $
                                        2,558,478Adjustments
      to reconcile net income to net cashprovided
      by operating activities:Depreciation
      and amortization
                                        
                                        
                                        72,118
                                        
                                        
                                        
                                        88,792
                                        
                                        
                                        
                                        48,031Provision
      for doubtful accounts
                                        
                                        
                                        137,024
                                        
                                        
                                        
                                        42,900
                                        
                                        
                                        
                                        -Stock
      based compensation
                                        
                                        
                                        207,588
                                        
                                        
                                        
                                        945,903
                                        
                                        
                                        
                                        950,040Loss
      on asset disposal
                                        
                                        
                                        1,105
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -(Increase)
      / decrease in assets:Accounts
      receivable
                                        
                                        
                                        (5,448,410
                                        )
                                        
                                        
                                        (1,816,023
                                        )
                                        
                                        
                                        (18,788
                                        )Other
      receivable
                                        
                                        
                                        1,156,013
                                        
                                        
                                        
                                        (546,172
                                        )
                                        
                                        
                                        (661,158
                                        )Advances
                                        
                                        
                                        178,393
                                        
                                        
                                        
                                        1,214,697
                                        
                                        
                                        
                                        (1,831,558
                                        )Due
      from shareholder
                                        
                                        
                                        1,444,818
                                        
                                        
                                        
                                        747,471
                                        
                                        
                                        
                                        642,608Prepaid
      expenses
                                        
                                        
                                        (289,026
                                        )
                                        
                                        
                                        4,896
                                        
                                        
                                        
                                        (26,061
                                        )Trade
      deposits
                                        
                                        
                                        (4,086,777
                                        )
                                        
                                        
                                        1,177,822
                                        
                                        
                                        
                                        (397,041
                                        )Customer
      deposits
                                        
                                        
                                        -
                                        
                                        
                                        
                                        34,004
                                        
                                        
                                        
                                        (15,298
                                        )Escrow
      deposits
                                        
                                        
                                        (762,800
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Increase
      / (decrease) in current liabilities:Accounts
      payable and accrued expenses
                                        
                                        
                                        (1,385,510
                                        )
                                        
                                        
                                        (1,504,385
                                        )
                                        
                                        
                                        76,406Customer
      deposits
                                        
                                        
                                        (85,636
                                        )
                                        
                                        
                                        275,247
                                        
                                        
                                        
                                        -Income
      tax payable
                                        
                                        
                                        1,094,407
                                        
                                        
                                        
                                        97,657
                                        
                                        
                                        
                                        106.873Total
      Adjustments
                                        
                                        
                                        (7,766,693
                                        )
                                        
                                        
                                        (1,592,835
                                        )
                                        
                                        
                                        (1,125,846
                                        )Net
      cash provided by(used in) operating activities
                                        
                                        
                                        6,765,484
                                        
                                        
                                        
                                        7,103,059
                                        
                                        
                                        
                                        1,432,632CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of property & equipment
                                        
                                        
                                        (192,436
                                        )
                                        
                                        
                                        (57,930
                                        )
                                        
                                        
                                        (60,406
                                        )Purchase
      of  intangibles
                                        
                                        
                                        (316,106
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Proceeds
      from asset disposals
                                        
                                        
                                        663
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Acquisition
      deposits
                                        
                                        
                                        1,453,050
                                        
                                        
                                        
                                        1,428,773
                                        
                                        
                                        
                                        (1,580,740
                                        )Paid
      for acquisition – net of cash acquired
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (10,008,642
                                        )
                                        
                                        
                                        -Net
      cash used by Investing activities
                                        
                                        
                                        945,171
                                        
                                        
                                        
                                        (8,637,799
                                        )
                                        
                                        
                                        (1,641,146
                                        )CASH
      FLOWS FROM FINANCING ACTIVITIES(Repayments)
      Proceeds of bank loan
                                        
                                        
                                        (1,288,554
                                        )
                                        
                                        
                                        1,288,554
                                        
                                        
                                        
                                        -Proceeds
      of equity financing
                                        
                                        
                                        7,712,494
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Note
      payable – others
                                        
                                        
                                        (1,576,750
                                        )
                                        
                                        
                                        1,576,750
                                        
                                        
                                        
                                        -Net
      cash provided by financing activities
                                        
                                        
                                        4,847,190
                                        
                                        
                                        
                                        2,865,304
                                        
                                        
                                        
                                        -Effect
      of exchange rate changes on cash and cash equivalents
                                        
                                        
                                        975,002
                                        
                                        
                                        
                                        297,565
                                        
                                        
                                        
                                        89,763Net
      change in cash and cash equivalents
                                        
                                        
                                        13,532,847
                                        
                                        
                                        
                                        1,628,129
                                        
                                        
                                        
                                        (118,751
                                        )Cash
      and cash equivalents, beginning balance
                                        
                                        
                                        2,671,684
                                        
                                        
                                        
                                        1,043,555
                                        
                                        
                                        
                                        1,162,306Cash
      and cash equivalents, ending balance
                                        
                                        $
                                        16,204,531
                                        
                                        
                                        $
                                        2,671,684
                                        
                                        
                                        $
                                        1,043,555SUPPLEMENTAL
      DISCLOSURES:Cash
      paid during the year for:Interest
      payments
                                        
                                        $
                                        106,163
                                        
                                        
                                        $
                                        80,847
                                        
                                        
                                        $
                                        2754Income
      Taxes
                                        
                                        $
                                        3,181,245
                                        
                                        
                                        $
                                        1,450,924
                                        
                                        
                                        $
                                        496,110Other
      non-cash transactionsPurchased
      Goodwill
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        (13,526,809
                                        )
                                        
                                        $
                                        -Fair
      value of assets purchased less cash acquired
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2,178,333
                                        )
                                        
                                        
                                        -Acquisition
      financed with stock issuance
                                        
                                        
                                        -
                                        
                                        
                                        
                                        5,696,500
                                        
                                        
                                        
                                        -Acquisition
      paid for with cash – net of acquired
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        (10,008,642
                                        )
                                        
                                        $
                                        -
  6
 
 UNIVERSAL
TRAVEL GROUP
 CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY
 FOR
THE THREE  YEARS ENDED DECEMBER 31, 2008
  Common Stock
                                    
                                    
                                    Additional
                                      Paid In
                                      Capital
                                    
                                    
                                    Other
                                      Comprehensive
                                      Income
                                    
                                    
                                    Retained
                                      Earnings
                                    
                                    
                                    Statutory
                                      Reserve
                                    
                                    
                                    Total
                                      Stockholders’
                                      EquityShares
                                    
                                    
                                    AmountBalance
      December 31, 2005
                                    
                                    
                                    30,450,000
                                    
                                    
                                    $
                                    30,450
                                    
                                    
                                    $
                                    332,013
                                    
                                    
                                    $
                                    14,048
                                    
                                    
                                    $
                                    883,995
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    1,260,506Foreign
      currency translation adjustments
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    89,763
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    89,763Income
      for the year ended December 31, 2006
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    2,558,478
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    2,558,478Balance
      December 31, 2006
                                    
                                    
                                    30,450,000
                                    
                                    
                                    
                                    30,450
                                    
                                    
                                    
                                    332,013
                                    
                                    
                                    
                                    103,811
                                    
                                    
                                    
                                    3,442,473
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    3,908,747Stock
      Paid for Acquisitions
                                    
                                    
                                    2,589,036
                                    
                                    
                                    
                                    2,590
                                    
                                    
                                    
                                    5,593,910
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    5,696,500Foreign
      currency translation adjustments
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    441,353
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    441,353Stock
      Based Compensation
                                    
                                    
                                    3,770,000
                                    
                                    
                                    
                                    3,770
                                    
                                    
                                    
                                    1579,630
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    1,583,400Warrants
      issued
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    995,981
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    995,981Reflect
      acquisition
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    335,173
                                    
                                    
                                    
                                    335,173Transfer
      to statutory reserve
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (36,971
                                    )
                                    
                                    
                                    36,971
                                    
                                    
                                    
                                    -Income
      for the year ended December 31, 2007
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    8,695,894
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    8,695,894Balance
      December 31, 2007
                                    
                                    
                                    36,809,036
                                    
                                    
                                    
                                    36,810
                                    
                                    
                                    
                                    8,601,534
                                    
                                    
                                    
                                    545,164
                                    
                                    
                                    
                                    12,101,396
                                    
                                    
                                    
                                    372,144
                                    
                                    
                                    
                                    21,657,048Foreign
      currency translation adjustments
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    975,002
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    975,002Forfeited
      options
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (683,437
                                    )
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (683,437
                                    )Stock
      Based Compensation
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    207,588
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    207,588Equity
                                    
                                    
                                    222,222
                                    
                                    
                                    
                                    222
                                    
                                    
                                    
                                    599,772
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    599,994Financings
                                    
                                    
                                    4,588,708
                                    
                                    
                                    
                                    4,589
                                    
                                    
                                    
                                    7,107,911
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    7,112,500Income
      for the year ended December 31, 2008
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    14,532,177
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    14,532,177Balance
      December 31, 2008
                                    
                                    
                                    41,619,966
                                    
                                    
                                    $
                                    41,621
                                    
                                    
                                    $
                                    15,833,368
                                    
                                    
                                    $
                                    1,520,166
                                    
                                    
                                    $
                                    26,633,573
                                    
                                    
                                    $
                                    372,144
                                    
                                    
                                    $
                                    44,400,872
  The
accompanying notes are an integral part of these consolidated financial
statements.
  7
  UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008
 
 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. Full Power Enterprise
Global Limited owns 100% of the Shenzhen Yuzhilu Aviation Service Co., Ltd.
Collectively the seven corporations are referred to herein as the
Company.
 
 The
Company is now engaged in the travel business, including airline ticketing,
hotel reservation services and air cargo transportation services, technological
solutions to travel reservations, and tour planning and tour guide
services.
 
 Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
 
 Basis of
Presentation
 
 The
accompanying 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 consolidated financial statements have been translated and
presented in United States Dollars.
 
 Reclassification
 
 The
Company has reclassified and included all costs directly associated with the
generation of revenue in its cost of services. These costs were previously
classified as selling, general, and administrative expenses in the consolidated
financial statements.  This reclassification has resulted in no change
in the Company’s reported Consolidated Balance Sheets as of December 31, 2008
and 2007 and Consolidated Statements of Cash Flows for each of the years in the
three-year period ended December 31, 2008.  The reclassification did
affect the individual components of the Company’s Consolidated Statements of
Income for each of the years in the three-year period ended December 31,
2008. Costs of services that were reclassified from the Company’s selling,
general, and administrative expenses amounted to $1,104,147, $723,318, and
$334,194 for the years ended December 31, 2008, 2007 and 2006,
respectively.  However, this reclassification had no effect on the
reported consolidated net income.
 
 Translation
Adjustment
 
 As of
December 31, 2008 and December 31, 2007 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 Statement of Financial Accounts Standards (SFAS) No.
52, Foreign Currency Translation 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 SFAS No. 130, Reporting Comprehensive
Income as a component of shareholders equity. Transaction gains and losses are
reflected in the income statement.
  8
 
 UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008
 
 Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
 
 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. and Full Power Enterprise Global Limited collectively
referred to herein as the Company. 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.
 
 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.
  9
 
 UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008
 
 Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
 
 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 $ 210,139 and $73,115 as of December 31, 2008 and December 31, 2007,
respectively.
 
 Property, Plant &
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
      yearsTransportation
      equipment
                      5
      yearsOffice
      equipment
                      5
      yearsLeasehold
      Improvements
                      5 –
      10 years
 
 As of
December 31, 2008 and 2007 Property, Plant & Equipment consist of the
following:
 
 2008
                          
                          
                          2007Furniture
      & fixture
                          
                          $
                          18,247
                          
                          
                          $
                          18,247Transportation
      equip
                          
                          
                          183,024
                          
                          
                          
                          301,308Office
      equipment
                          
                          
                          369,440
                          
                          
                          
                          177,004Leasehold
      improve
                          
                          
                          31,374
                          
                          
                          
                          31,374602,085
                          
                          
                          
                          527,933Accumulated
      depreciation
                          
                          
                          (328,745
                          )
                          
                          
                          (400,540
                          )273,340
                          
                          
                          
                          127,393
 
 Depreciation
expense for the years ended December, 31, 2008, 2007, and 2006 was $44,721,
$57,530 and $18,665, respectively, of which $40,249, $51,777, and $16,799 was
included as part of cost of services for the years ended December 31, 2008, 2007
and 2006, respectively.
  10
  UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008
 
 Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
 
 Goodwill
 
 Goodwill
represents the excess cost of a business acquisition over the fair value of the
net assets acquired.  In accordance with Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets (Statement
142), indefinite-life identifiable intangible assets and goodwill are not
amortized. Under the provisions of Statement 142, 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 8, Purchase of Subsidiary, for additional
information regarding goodwill. As of December 31, 2008 there has been no
impairment losses or gain or loss on disposal of Goodwill amounts.
 
 As of
December 31, 2008 and 2007 Goodwill consists of the following:
 
 2008
                      
                      
                      2007Shenzhen Speedy Dragon EnterprisesLtd.
                      
                      $
                      3,630,539
                      
                      
                      $
                      3,630,539Shanhai Lanbao Travel Service Co.,
      Ltd.
                      
                      
                      3,081,799
                      
                      
                      
                      3,081,799Foshan International Travel
      Service Co., Ltd.
                      
                      
                      6,049,576
                      
                      
                      
                      6,049,576Xian Golden Net Travel Serve
      Services
                      
                      
                      764,895
                      
                      
                      
                      764,895$
                      13,526,809
                      
                      
                      $
                      13,526,809
 
 Long-Lived
Assets
  The
Company adopted Statement of Financial Accounting Standards No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets (SFAS 144), 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
SFAS 144. SFAS 144 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 December 31,
2008 and December 31, 2007 there were no significant impairments of its
long-lived assets.
 
 Fair Value of Financial
Instruments
 
 Statement
of financial accounting standard No. 107, Disclosures about Fair Value of
Financial Instruments, 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.
  11
  UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 
 Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
 
 Revenue
Recognition
 
 The
Company’s revenue recognition policies are in compliance with Staff accounting
bulletin (SAB) 104. 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 has 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
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.).
 
 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.
 
 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.
  12
  UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
  Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
 
 Air
Cargo Business
 
 The
Company receives fees from its air cargo business.  The Company
basically brokers air cargo spaces and resell them to local logistic companies
to generate revenue.  The Company has contracted with Chinese domestic
airlines as its vendors to carry out its cargo services.  Revenues
generated from air cargo business are recognized on a gross basis in the
statements of income when service is rendered, 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
air cargo services rendered and collections are reasonably
assured.  Customers are 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 business and revenue related
taxes.  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
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.
 Other direct costs such assystems 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 allocatescosts 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 Income. For the years ended December 31, 2008,
2007 and 2006, such expenses amounted $464,917, $945,903 and $950,040,
respectively.
 
 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 SFAS No. 109, Accounting for Income Taxes, 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 ateach 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.
  13
 
 UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 
 Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
 
 Statement of Cash
Flows
 
 In
accordance with SFAS No. 95, Statement of Cash Flows, cash flows from the
Company’s operations is 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. These definitive lived intangible assets are being amortized
over their useful lives.  Expenditures of $316,107 were capitalized in
2008 and will be amortized over a 3 year life.  The Company recorded
amortization expense for definitive lived intangible assets of $27,397, $31,262,
and $29,366 for the years ended December 31, 2008, 2007 and 2006, respectively.
The company will record approximately $105,369, $105,369, and $96,588 over the
next three years, respectively.
 
 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 Per
Share
 
 The
Company accounts for net income (loss) per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (“EPS”), 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.
  14
 
 UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 
 Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
 
 The
following table sets forth the computation of basic and diluted earnings per
share of common stock:
 
 The
      year ended December 31,2008
                  
                  
                  2007
                  
                  
                  2006Basic
      net income per share:Numerator:Net
      income used in computing basic net income per share
                  
                  $
                  14,532,177
                  
                  
                  $
                  8,695,894
                  
                  
                  $
                  2,558,478Net
      income applicable to common shareholders
                  
                  $
                  14,532,177
                  
                  
                  $
                  8,695,894
                  
                  
                  $
                  2,558,478Denominator:Weighted
      average common shares outstanding
                  
                  
                  38,562,155
                  
                  
                  
                  33,629,518
                  
                  
                  
                  30,450,000Basic
      net income per share
                  
                  $
                  0.38
                  
                  
                  $
                  0.26
                  
                  
                  $
                  0.07Diluted
      net income per share:Numerator:Net
      income used in computing diluted net income per share
                  
                  $
                  14,532,177
                  
                  
                  $
                  8,695,894
                  
                  
                  $
                  2,558,478Net
      income applicable to common shareholders
                  
                  $
                  14,532,177
                  
                  
                  $
                  8,695,894
                  
                  
                  $
                  2,558,478Denominator:Weighted
      average common shares outstanding
                  
                  
                  38,562,155
                  
                  
                  
                  33,629,518
                  
                  
                  
                  30,450,000Weighted
      average effect of dilutive securities:Stock
      options and warrants
                  
                  
                  182,237
                  
                  
                  
                  150,000
                  
                  
                  
                  -Shares
      used in computing diluted net income per share
                  
                  
                  38,744,392
                  
                  
                  
                  33,779,518
                  
                  
                  
                  30,450,000Diluted
      net income per share
                  
                  $
                  0.38
                  
                  
                  $
                  0.26
                  
                  
                  $
                  0.07
  15
  UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 
 Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
  Recent Accounting
Pronouncements
 
 In July
2006, the FASB issued Interpretation No. 48 (FIN 48). “Accounting for uncertainty
in Income Taxes- an
interpretation of FASB Statement 109”(“FIN No. 48”). FIN 48 clarifies the
accounting for Income Taxes by prescribing the minimum recognition threshold a
tax position is required to meet before being recognized in the financial
statements. It also provides guidance on de-recognition, measurement,
classification, interest and penalties, accounting in interim periods,
disclosure and transition and clearly scopes income taxes out of SFAS No. 5,
“Accounting for
Contingencies”. FIN 48
is effective for fiscal years beginning after December 15, 2006. Based on the
Company’s evaluation of this issue, the adoption of this accounting requirement
has no effect on the Company’s financial statements.
 
 In
September, 2006, FASB issued SFAS 157 ‘Fair Value Measurements’.  This
Statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements.  This Statements applies under other
accounting pronouncements that require or permit fair value measurements, the
Board having previously concluded in those accounting pronouncements that fair
value is the relevant measurement attribute.  Accordingly, this
Statement does not require any new fair value measurements.  However,
for some entities, the application of this Statement will change current
practice.  This Statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. Based on the Company’s evaluation of this issue, the
adoption of this accounting requirement has no effect on the Company’s financial
statements.
 
 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, provided the entity also elects to apply the provisions of
FASB Statement No. 157, Fair
Value Measurements. Based on the Company’s evaluation of this issue, the
adoption of this accounting requirement has no effect on the Company’s 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). Earlier adoption is prohibited.Based
on the Company’s evaluation of this issue, the adoption of this accounting
requirement has no effect on the Company’s 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. Management is
currently evaluating the effect of this pronouncement on financial
statements.
  16
  UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 
 Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Recent Accounting
Pronouncements (Continued)
 
 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 ofSFAS No. 162, the GAAP hierarchy for
nongovernmental entities will move from auditing literature to accounting
literature.  The Company is currently assessing the impact of SFAS No. 162
on its financial position and results of operations.
 
 In
June 2008, the FASB ratified the consensus reached on Emerging Issues Task
Force (“EITF”) Issue No. 07-05, Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity’s Own Stock (“EITF
No. 07-05”). 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. The Company is currently assessing the impact ofEITF No. 07-05 on its financial position
and results of operations.
 
 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.
 
 Note
3 – TRADE DEPOSITS AND
ADVANCES
  Trade
deposits represents amount held by Airlines and deposits. As of December 31,
2008 and 2007 the Company had paid $6,737,520 and $2,650,744 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 December 31, 2008
and 2007:
  17
 
 UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 
 Note
3 – TRADE DEPOSITS AND
ADVANCES (Continued)
 
 2008
                                
                                
                                2007Shenzhen
      Yuzhilu Aviation Service Co., Ltd:Deposit for 600 setsof kiosk.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.
                                
                                $
                                3,171,851
                                
                                
                                $
                                -CRM System Design.This wasa prepayment to the design of CRM
      system, and the Company will start record of intangible asset and amortize
      over 5 year period when the CRM system begin to
      operate.
                                
                                
                                41,216
                                
                                
                                
                                -Designfee forkiosk. The Company will start
      amortization at the percentage ofactual number of kiosk operative
      over total 600 set of kiosk at the time the actual number of kiosk starts
      operation.
                                
                                
                                103,479
                                
                                
                                
                                -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.
                                
                                
                                674,277
                                
                                
                                
                                411,240Deposit 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
                                
                                
                                21,631
                                
                                
                                
                                -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.
                                
                                
                                1,096,170
                                
                                
                                
                                -Subtotal
                                
                                $
                                5,108,624
                                
                                
                                $
                                411,240Shenzhen
      Speedy Dragon Enterprises Limited:Deposit for Air China Cargo. This
      was a credit based for selling air cargo spaces, and the full amount is
      returnable if the company discontinues air-ticket
      business.
                                
                                $
                                21,923
                                
                                
                                $
                                -Deposit for China Southern
      Airlines.  This was a credit based for selling air cargo
      spaces, and the full amount is returnable if the company discontinues
      air-ticket business.
                                
                                
                                114,744
                                
                                
                                
                                -Other. This was a rental bond for
      office space, and is returnable when ceasing rental
                                
                                
                                29,572
                                
                                
                                
                                -Deposit to CAAC. This
      will be transferred
      to Annual subscription expenses to CAAC.
                                
                                
                                118
                                
                                
                                
                                -Subtotal
                                
                                $
                                166,357
                                
                                
                                $
                                -
  18
 
 UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 
 Note
3 – TRADE DEPOSITS AND
ADVANCES (Continued)
 
 (Continued)
                                    
                                    2008
                                    
                                    
                                    2007Foshan
      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.
                                    
                                    $
                                    632,726
                                    
                                    
                                    $
                                    1,901,950Advance payment totour guides forexpenses during leading the tour.
      This will be transferred to costs when the tour
      guide return from tour and provide supporting
    evidence.
                                    
                                    
                                    230,573
                                    
                                    
                                    
                                    337,554Subtotal
                                    
                                    $
                                    863,299
                                    
                                    
                                    $
                                    2,239,504Xian
      Golden Net Travel Serve Services, Ltd.:Deposit for Luoyang 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
                                    
                                    $
                                    292,312
                                    
                                    
                                    $
                                    -Deposit for Henan 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.
                                    
                                    
                                    219,234
                                    
                                    
                                    
                                    -Deposit fortransportations.  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.
                                    
                                    
                                    87,694
                                    
                                    
                                    
                                    -Subtotal
                                    
                                    $
                                    599,240
                                    
                                    
                                    $
                                    -Total
                                    
                                    $
                                    6,737,520
                                    
                                    
                                    $
                                    2,650,744
 
 The
Company has entered into a co-operation agreement with an unrelated company, to
assist  that companyin their business
development by participating in that business operations and providing working
capital funding. As of December 31, 2008 and 2007 the Company has advanced this
company $438,468 and  $616,861 respectively.
 
 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.
  19
  UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 
 Note
5 - INCOME
TAXES
 
 The
Company through its subsidiary ShenzhenYuzhilu Aviation Service
Co. is governed by the Income Tax Laws of the PRC. Operations in the United
States of America have incurred net accumulated operating losses for income tax
purposes.
  Pursuant
to the PRC Income Tax Laws, the Enterprise Income Tax (EIT) the Company has a
statutory rate of 25%.
 
 The
following is a reconciliation of income tax expense as of December 31, 2008 and
2007.
 
 2008
                                
                                
                                2007Current
                                
                                $
                                4,275,652
                                
                                
                                $
                                1,852,069Deferred
                                
                                
                                -
                                
                                
                                
                                -Total
                                
                                $
                                4,275,652
                                
                                
                                $
                                1,852,069
 
 Note 6 -COMMITTMENTS
  The
Company leases various office facilities under month-to-month arrangements.
Rental expense for leases consisted of $ 339,032 and $184,552 for years ended
December 31, 2008 and 2007 respectively. The Company has future minimum lease
obligations as of December 31, 2008 as follows:
 
 2009
                          
                          $
                          242,4852010
                          
                          $
                          110,4592011
                          
                          $
                          16,5652012
                          
                          $
                          14,3292013
                          
                          $
                          14,329Thereafter
                          
                          $
                          30,858Total
                          
                          $
                          429,025
 
 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 – NOTES
PAYABLE
 
 The
following table summarizes notes payable as of December 31, 2008:
 
 Lender
                            
                            Due Date
                            
                            Interest Rate
                            
                            OutstandingChina
      Construction Bank
                            
                            July
      29, 2008
                            
                            8.55%
      per Annum
                            
                            $
                            -0-
 
 On
September 20, 2007, the Company entered into a share exchange agreement with
Foshan Overseas International Travel Service Co. Ltd. (“FOI”), and the
shareholders of FOI. The shareholders of FOI received a promissory note from the
Company totaling $3,153,500. The promissory note bears no interest, with a
maturity date of one year. Balance at December 31, 2008 and 2007 was $-0- and $
1,576,750 respectively.
  20
 
 UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 
 Note
8 – COMMON
STOCK
 
 In
January 2007 the company adopted the Universal Travel Group 2007 Equity
Incentive Plan. Under the terms of this Plan the Company issued 3,770,000 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. As of June 30, 2007 the
financial Statements include a charge $633,360 with the remaining $950,040 being
expensed as of December 31, 2006.
 
 Pursuant
to a share exchange agreement, the Company issued 714,285 shares of newly issued
shares of Common Stock to the former shareholders of Shenzhen Speedy Dragon
Enterprises Limited. The shares were valued at $1,000,000, 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.
 
 On April
10, 2007 the Company consummated the acquisition of a 100% interest in Shenzhen
Speedy Dragon Enterprises Limited ("SSD") for a cash and stock transaction
valued at approximately US$4 million. This amount is included in the cost of net
assets and goodwill purchased.
 
 The stock
consideration consisted of 714,285 newly issued shares of the Registrant’s
common stock, which were given to SSD’s sole Shareholder immediately before the
completion of the Share Exchange Transaction. The cash consideration consisted
of $3,000,000 in cash and payable no later than the first anniversary of the
Merger Transaction. The obligation to pay the cash consideration is evidenced by
a interest-free promissory notes between the Registrant and  the SSD
Shareholder.
  SSD is
engaged in the business of air freight forwarding. The purchase price was
determined based on arms' length negotiations between Universal Travel Group and
the shareholder of SSD.
 
 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
                    
                    $
                    17,800Loans
      receivable
                    
                    
                    90,096Loans
      shareholder
                    
                    
                    251,184Property
      Plant & Equipment
                    
                    
                    22,995Goodwill
                    
                    
                    3,630,539Total
      assets acquired
                    
                    
                    4,012,614Liabilities
      assumedAccounts
      & Income Taxes payable
                    
                    
                    3,587Other
      payable
                    
                    
                    9,026Total
                    
                    $
                    4,000,000
 
 The
excess of purchase price over tangible assets acquired and liabilities assumed
of $3,630,539 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 SFAS 141.
 
 Prior to
the acquisition, Shenzhen Speedy Dragon Enterprises Limited prepared its
financial statements under accounting principles generally accepted in the
United States of America.
  Pursuant
to a share exchange agreement, the Company issued 151,765 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.
  21
 
 UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 
 Note
8 – COMMON STOCK
(CONTINUED)
 
 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. This amount is included in the cost of
net assets and goodwill purchased.
 
 The stock
consideration consisted of 151,765 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
a interest-free promissory notes 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.
 
 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
                    
                    $
                    45,356Accounts
      Receivable
                    
                    
                    142,462Loans
      Shareholder
                    
                    
                    1,075,504Property
      Plant & Equipment
                    
                    
                    773Goodwill
                    
                    
                    764,895Total
      assets acquired
                    
                    
                    2,028,990Liabilities
      assumedAccounts
      & Income Taxes payable
                    
                    
                    131,875Other
      payable
                    
                    
                    97,115Total
                    
                    $
                    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 SFAS 141.
 
 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 600,000 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.
 
 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. This amount is included in the cost of net
assets and goodwill purchased.
  The stock
consideration consisted of 600,00 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.
  22
 
 UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 
 Note
8 – COMMON STOCK
(CONTINUED)
  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
                    
                    $
                    28,510Accounts
      Receivable
                    
                    
                    1,265,352Loans
      shareholders
                    
                    
                    178,665Property
      Plant & Equipment
                    
                    
                    9,376Goodwill
                    
                    
                    3,081,799Total
      assets acquired
                    
                    
                    4,563,702Liabilities
      assumedAccounts
      & Income Taxes payable
                    
                    
                    566,809Other
      payable
                    
                    
                    76,893Total
                    
                    $
                    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 SFAS 141.
 
 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 1,122,986 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. This amount is
included in the cost of net assets and goodwill purchased.
  The stock
consideration consisted of 1,122,965 newly issued shares of the Registrant’s
common stock, immediately before the completion of the Share Exchange
Transaction. The cash consideration consisted of $3,153,000 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.
  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.
  23
 
 UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 
 Note
8 – COMMON STOCK
(CONTINUED)
 
 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
                    
                    $
                    423,292Accounts
      Receivable
                    
                    
                    2,204,094Loans
      Shareholders
                    
                    
                    686,936Trade
      Deposits
                    
                    
                    513,317Prepaid
      Expenses
                    
                    
                    3,285Property
      Plant & Equipment
                    
                    
                    42,244Goodwill
                    
                    
                    6,049,576Total
      assets acquired
                    
                    
                    9,922,744Liabilities
      assumedAccounts
      & Income Taxes payable
                    
                    
                    3,126,718Other
      payable
                    
                    
                    296,026Total
                    
                    $
                    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 SFAS 141.
 
 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.
  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 4,588,708 shares of common stock, par value
$0.001 of the Company (“Common Stock”) and warrants to purchase 2,294,356 shares
of Common Stock for an aggregate purchase price of $7,112,500 (the
“Financing”).
 
 Pursuant
to the Registration Rights Agreement, also dated August 28, 2008, the company is
liable for damages equal to 2% of the aggregate purchase price, should the
Company fail to meet the Filing, Effectiveness, and
maintenance deadlines. Defaults in these payments shall bear interest at
the rate of one-half (1.5%) per month, until paid in
full.
 
 Note
9 – STOCK WARRANTS,
OPTIONS, AND COMPENSATION
 
 On
February 4, 2008, under the terms of an equity financing commitment, the company
issued 222,222 shares of common stock at the closing price of
$2.70.  The proceeds of $599,994 were paid directly to the
shareholders of Foshan Overseas International Travel Service Co, for amount due
them under Note obligation of the company.
 
 On May 7,
2007, the Company issued, to a newly appointed Board member, an option grant to
purchase 100,000 shares of common stock at the closing price at $ 1.95. The
exercisable period is two years from issuance. On June 23, 2008, upon
resignation, Board member has forfeited all options.
 
 On
September 6, 2007, the Company issued, to a newly appointed Board member, an
option grant to purchase 100,000 shares of common stock at the closing price at
$ 2.85. The options are exercisable until June 1, 2017. On June 23, 2008, upon
resignation, Board member has forfeited 66,667 options.
  24
 
 UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 
 Note
9 – STOCK WARRANTS,
OPTIONS, AND COMPENSATION (CONTINUED)
 
 On
December 7, 2007, the Company issued, to another newly appointed Board member,
an option grant to purchase 100,000 shares of common stock at the closing price
of $ 3.75. The options are exercisable until November 1, 2017.
 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 model at the
date of grant stock option pricing. On May 28, 2008, upon resignation, Board
member has forfeited 66,667 options.
 
 On June
24, 2008, the Company issued, to another newly appointed Board member, an option
grant to purchase 100,000 shares of common stock at the closing price of $ 1.52.
The options are exercisable until July 1, 2018. 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 model at the date of grant stock
option pricing.
  For
      the year endedDecember
      31, 2008Expected
      Volatility
                            
                            
                            146
                            %Expected
      term (in years)Richard
      P. Randall
                            
                            
                            8.5James
      Treacy
                            
                            
                            8.5Yizhao
      Zhang
                            
                            
                            9.5Expected
      dividends
                            
                            
                            -Risk-free
      rate of return (weighted average)
                            
                            
                            2.92
                            %Weighted
      average grant-date fair value
                            
                            $
                            1.52-3.75
  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, as EITF 96-18, the Company recorded a service
period expense of $207,588 for the year ending December 31, 2008.
 
 AggregateExercise
                            
                            
                            Remaining
                            
                            
                            IntrinsicTotal
                            
                            
                            Price
                            
                            
                            Life
                            
                            
                            ValueOutstanding,
      December 31, 2007
                            
                            
                            300,000
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Granted
      in 2008
                            
                            
                            100,000
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Forfeited
      in 2008
                            
                            
                            (233,334
                            )Exercised in
      2008
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Outstanding,
      December 31, 2008
                            
                            
                            166,666
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
  25
  UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 
 Note
9 – STOCK WARRANTS,
OPTIONS, AND COMPENSATION (CONTINUED)
 
 Pursuant
to the Securities Purchase Agreement entered into On August 28, 2008, the
Company issued warrants to purchase 2,294,356 shares of Common Stock. The unit
purchase price was $1.55per 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 $1.35. Each warrant has an Exercise Price of $2.71 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 its
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 beginning
January 1, 2009, the warrants will be reclassified from equity to
derivative liability for the then relative fair market value and marked to
market.
 
 Note
10 - OTHER
COMPREHENSIVE INCOME
 
 Balances
of related after-tax components comprising accumulated other comprehensive
income, included in stockholders equity, at December 31, 2008 and 2007 are as
follows:
 
 Foreign
      Currency
                            Translation
                            Adjustment
                          
                          
                          Accumulated
                            Other
                            Comprehensive
                            IncomeBalance December 31,
      2006
                          
                          
                          103,811
                          
                          
                          
                          103,811Changes for year ended December
      31, 2007
                          
                          
                          441,353
                          
                          
                          
                          441,353Balance December 31,
      2007
                          
                          $
                          545,164
                          
                          
                          $
                          545,164Changes for year ended December
      31, 2008
                          
                          
                          975,002
                          
                          
                          
                          975,002Balance at December 31,
      2008
                          
                          $
                          1,520,166
                          
                          
                          $
                          1,520,166
 
 Note
11 - 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
12 – MAJOR CUSTOMERS
AND CREDIT RISK
 
 The
Company derives a portion of its income from various Airlines. Most revenue is
cleared thru IATA, a centralized reporting platform.
  26
 
 UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 
 Note
13 – ESCROW
DEPOSITS
 
 Pursuant
to the Securities Purchase Agreement entered into On August 28, 2008, the
Company agreed that it will deposit $500,000 of the proceeds in escrow to pay
the fees and expenses in connection with a public relations and investor
relations campaign. The Company also agreed that it engage a Chief Financial
Officer who shall be fluent in English and Mandarin, who understands and has a
working knowledge of United States generally accepted accounting principles, who
has had significant responsibility for the preparation and filing of quarterly,
annual and current reports with the SEC and who has experience working with or
in United States capital market participants. The Company agreed that it would
deposit $600,000 of the proceeds in escrow under the Escrow Agreement, to be
released only upon the dual signatures of the CEO of the Company and the
representative of the Buyers designated in the
Escrow Agreement following the engagement of a Chief Financial Officer. As of
December 31, 2008 $337,200 has been prepaid out of this escrow account in
connection with the public and investor relations campaign for services covering
a one year period. This prepayment is being amortized accordingly.
 
 Note
14 -   SEGMENT
INFORMATION
 
 We
currently have four discrete lines of business and revenue, and each is carried
out by one or two subsidiaries of the Company: (i) air-ticketing (Shenzhen Yu
Zhi Lu Aviation Service Company Limited), (ii) hotel reservations (Shanghai
Lanbao Travel Service Company Limited), (iii) packaged tours (Xi'an Golden Net
Travel Serve Service Company Limited and Foshan Overseas International Travel
Service Co., Ltd) and (iv) air cargo agency services (Shenzhen Speedy Dragon
Enterprise Limited). Operations of each segment are exclusive to the operations
of the associated subsidiary company. In addition to air-ticking services,
Shenzhen Yu Zhi Lu Aviation Service Company Limited also operated air cargo
business during the year ended December 31, 2007, however, it had transferred
all its air cargo agency business to Shenzhen Speedy Dragon Enterprise Limited
at the beginning of fiscal year 2008. We separately operate and prepare
accounting and other financial reports to management for these five major
business organizations. The
company uses the management approach of segment reporting. Pursuant to the SFAS
131 they disclose segmentson a single basis, which in their case
is the legal entity. Management monitors these segments regularly to make
decisions about resources to be allocated to the segment and assess its
performance.
 
 The
following tables’ present summarized information by segment and by
subsidiary:
  Year Ended December 31, 2008Shenzhen
                              Yuzhilu
                              Aviation
                              Service
                              Co., Ltd.
                              (air-
                              ticketing)
                            
                            
                            Shenzhen
                              Speedy
                              Dragon
                              Enterprises
                              Limited
                              (air cargo
                              Business)
                            
                            
                            Shanghai
                              Lanboa
                              Travel
                              Service Co.,
                              Ltd.
                              (Hotel
                              Reservation)
                            
                            
                            Foshan
                              International
                              Travel Service
                              Co., Ltd.
                              (packaged
                              Tours)
                            
                            
                            Xian
                              Golden Net
                              Travel
                              Serve
                              Services
                              (Packaged
                              tours)
                            
                            
                            Other
                              (corporate
                              Expense)
                            
                            
                            TotalSales,
      net
                            
                            $
                            12,333,527
                            
                            
                            $
                            10,937,573
                            
                            
                            $
                            8,340,519
                            
                            
                            $
                            27,549,267
                            
                            
                            $
                            17,598,525
                            
                            
                            $
                            -
                            
                            
                            $
                            76,759,411Cost
      of sales
                            
                            $
                            1,166,155
                            
                            
                            $
                            9,347,312
                            
                            
                            $
                            3,209,777
                            
                            
                            $
                            23,942,757
                            
                            
                            $
                            14,994,137
                            
                            
                            $
                            -
                            
                            
                            $
                            52,660,138Gross
      profit
                            
                            $
                            11,167,372
                            
                            
                            $
                            1,590,261
                            
                            
                            $
                            5,130,742
                            
                            
                            $
                            3,606,510
                            
                            
                            $
                            2,604,388
                            
                            
                            $
                            -
                            
                            
                            $
                            24,099,273Income
      from operations
                            
                            $
                            7,839,219
                            
                            
                            $
                            950,170
                            
                            
                            $
                            5,032,193
                            
                            
                            $
                            3,176,248
                            
                            
                            $
                            2,334,366
                            
                            
                            $
                            (464,917
                            )
                            
                            $
                            18,867,279Depreciation
                              &Amortization
                            
                            $
                            43,391
                            
                            
                            $
                            10,381
                            
                            
                            $
                            4,405
                            
                            
                            $
                            13,413
                            
                            
                            $
                            528
                            
                            
                            $
                            -
                            
                            
                            $
                            72,118Asset
      Expenditures
                            
                            $
                            184,415
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            5,647
                            
                            
                            $
                            2,374
                            
                            
                            $
                            -
                            
                            
                            $
                            192,436Total
      assets
                            
                            $
                            24,303,306
                            
                            
                            $
                            3,075,033
                            
                            
                            $
                            7,402,560
                            
                            
                            $
                            5,917,701
                            
                            
                            $
                            4,225,493
                            
                            
                            $
                            4,502,587
                            
                            
                            $
                            49,426,680
  Year Ended December 31, 2007Sales,
      net
                          
                          $
                          16,760,039
                          
                          
                          $
                          11,739,272
                          
                          
                          $
                          2,383,129
                          
                          
                          $
                          4,863,423
                          
                          
                          $
                          8,548,989
                          
                          
                          $
                          -
                          
                          
                          $
                          44,294,853Cost
      of sales
                          
                          $
                          8,048,074
                          
                          
                          $
                          9,631,553
                          
                          
                          $
                          1,014,577
                          
                          
                          $
                          4,250,872
                          
                          
                          $
                          7,297,253
                          
                          
                          $
                          -
                          
                          
                          $
                          30,242,330Gross
      profit
                          
                          $
                          8,711,965
                          
                          
                          $
                          2,107,719
                          
                          
                          $
                          1,368,552
                          
                          
                          $
                          612,551
                          
                          
                          $
                          1,251,735
                          
                          
                          $
                          -
                          
                          
                          $
                          14,052,523Income
      from operations
                          
                          $
                          7,170,695
                          
                          
                          $
                          1,396,464
                          
                          
                          $
                          1,396,557
                          
                          
                          $
                          491,187
                          
                          
                          $
                          1,091,411
                          
                          
                          $
                          (945,903
                          )
                          
                          $
                          10,600,411Depreciation
      &Amortization
                          
                          $
                          65,161
                          
                          
                          $
                          6,718
                          
                          
                          $
                          4,363
                          
                          
                          $
                          11,902
                          
                          
                          $
                          648
                          
                          
                          $
                          -
                          
                          
                          $
                          88,792Asset
      Expenditures
                          
                          $
                          26,376
                          
                          
                          $
                          24,737
                          
                          
                          $
                          2,513
                          
                          
                          $
                          4,304
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          57,930Total
      assets
                          
                          $
                          17,797,460
                          
                          
                          $
                          2,297,301
                          
                          
                          $
                          2,597,624
                          
                          
                          $
                          4,414,204
                          
                          
                          $
                          2,134,874
                          
                          
                          $
                          683,436
                          
                          
                          $
                          29,924,899
  Year Ended December 31, 2006Sales,
      net
                          
                          $
                          10,013,788
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          10,013,788Cost
      of sales
                          
                          $
                          4,928,570
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          4,928,570Gross
      profit
                          
                          $
                          5,085,218
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          5,085,218Income
      from operations
                          
                          $
                          4,065,978
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          (950,040
                          )
                          
                          $
                          3,115,938Depreciation
      &Amortization
                          
                          
                          48,031
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          48,031Asset
      Expenditures
                          
                          
                          60,406
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          60,406Total
      assets
                          
                          $
                          7,563,826
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          7,563,826
  27
 
 UNIVERSAL
TRAVEL GROUP
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 
 Note
15 -   SUBSEQUENT
EVENTS
 
 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 entitles the grant of up to 6,600,000 shares of common stock of
Universal Travel Group, par value $0.001 to certain employees of the Company
either as stock or stock options, and the subsequent exercise of any stock
options. Aggregate value at the grant date was $.89 per share or
$5,874,000.
 
 February
13, 2009, also pursuant to the Securities Purchase Agreement entered into on
August 28, 2008, the holders of a majority of the Company’s outstanding shares
of Common Stock (the “Majority Shareholders”), agreed to effect a three-for-one
(3:1) reverse split (“Reverse Split”) of the Company’s issued and outstanding
shares of common stock, which would decrease the number of outstanding common
stock from 41,619,966 to 13,873,322.
 
 On February 17, 2009 the Company
appointed a new Chief Financial Officer, Jing XIE, pursuant to an employmentagreement dated February
17, 2009 and the appointment was effective that date.The Company has
received $600,000 from the proceeds of the Financing in escrow under the Escrow
Agreement as a result of Mr. Xie’s engagement as the Company’s Chief Financial
Officer.
  28




Item
9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure.




None.




Item
9A. Controls and Procedures.




(a)     
Evaluation of disclosure controls and procedures
  The
term  "disclosure  controls and procedures"  (defined in SEC Rule
13a-15(e)) refers to the  controls and other  procedures  of a
company that are designed to ensure that  information  required to
be  disclosed  by a company in the reports that it files under the
Securities  Exchange Act of 1934 (the "Exchange Act") is recorded, 
processed,  summarized and reported, within time periods specified in the
rules and  forms of the  Securities  and  Exchange 
Commission. "Disclosure controls and procedures"  include,  without
limitation,  controls and procedures designed
to ensure that information required to be disclosed by a company in the
reports  that it files or submits  under the  Exchange  Act
is  accumulated  and communicated to the company's management, 
including its principal executive and principal  financial 
officers,  or persons  performing  similar  functions, 
as appropriate to allow timely decisions regarding required
disclosure.
  The
Company's management, with the participation of the Chief Executive Officer
and  the  Chief  Financial  Officer,  has 
evaluated  the  effectiveness  of the Company's disclosure
controls and procedures as of the end of the period covered by this annual
report (the "Evaluation  Date").  Management  determined that, at
the Evaluation Date, the Company had a material weakness because it did not have
a sufficient  number of personnel with an appropriate  level of
knowledge of and experience in generally accepted  accounting 
principles in the United States of America (U.S.  GAAP) that are
appropriate to the Company's  financial  reporting requirements. 
In particular, it identified a material weakness in the Company’s internal
control over financial reporting with respect to, among other things, the proper
classification of all its costs directly associated with the generation in its
cost of services.  Based on that evaluation,  the Company's Chief
Executive  Officer and Chief Financial Officer have concluded that, as of
the Evaluation Date, such controls and procedures were ineffective.
  (b)     
Changes in internal controls
  The
term  "internal  control  over  financial 
reporting"  (defined  in SEC Rule 13a-15(f))  refers to the 
process  of a company  that is  designed  to  provide
reasonable  assurance  regarding the reliability of financial 
reporting and the preparation  of financial  statements for
external  purposes in accordance  with generally accepted
accounting  principles.  The Company's  management,  with
the participation of the Chief Executive  Officer and Chief Financial 
Officer,  has evaluated any changes in the Company's internal control over
financial reporting that  occurred  during the fourth 
quarter  of the year  covered by this  annual report,  and
they have  concluded  that  there  was no  change to
the  Company's internal control over financial  reporting that has
materially  affected,  or is reasonably  likely to
materially  affect,  the Company's  internal  control over
financial reporting.
  50
  (c)     
Management's Report on Internal Control over Financial
Reporting
  Management 
of the  Company is  responsible  for  establishing 
and  maintaining adequate internal control over financial  reporting
as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. We have
assessed the effectiveness of those  internal  controls  as
of  December  31,  2008,  using the  Committee  of
Sponsoring  Organizations of the Treadway Commission ("COSO") Internal
Control - Integrated Framework as a basis for our assessment.
  Because
of inherent  limitations,  internal control over financial reporting
may not  prevent  or  detect  
misstatements.   Projections  of  any  evaluation 
of effectiveness to future periods are subject to the risk that controls may
become inadequate  because of changes in  conditions,  or that
the degree of compliance with the policies and procedures may deteriorate. 
All internal control systems, no matter how well designed,  have inherent
limitations.  Therefore, even those systems  determined to be
effective can provide only  reasonable  assurance with respect to
financial statement preparation and presentation.
  A
material weakness in internal controls is a deficiency in internal control, or
combination  of control  deficiencies,  that 
adversely  affects  the  Company's ability to initiate, 
authorize,  record,  process, or report external financial data
reliably in accordance with accounting principles generally accepted in the
United States of America such that there is more than a remote likelihood that a
material  misstatement of the Company's annual or interim 
financial  statements that is more than  inconsequential  will
not be prevented  or  detected.  In the course of making our
assessment of the  effectiveness of internal  controls over
financial  reporting,  we  identified  one 
material  weakness  related  to  the Company's 
control  environment,  in that the Company did not have a 
sufficient number  of  personnel  with an  appropriate 
level of U.S.  GAAP  knowledge  and experience  appropriate
to its financial  reporting  requirements.  Accordingly,
management's  assessment is that the Company's  internal controls over
financial reporting were ineffective as of December 31, 2008.
  This 
annual  report  does not include an  attestation  report of
the  Company's registered  public  accounting  firm
regarding  internal  control over financial reporting. 
Management's  report was not subject to attestation by the Company's
registered  public accounting firm pursuant to temporary rules of the
Securities and Exchange  Commission  that permit the Company to
provide  only  management's report in this annual report.
  In
light of this material weakness, we performed additional analyses and procedures
in order to conclude that our consolidated financial statements for the year
ended December 31, 2008 included in this Annual Report on Form 10-K were
fairly stated in accordance with US GAAP. Accordingly, management believes that
despite our material weaknesses, our consolidated financial statements for the
year ended December 31, 2008 are fairly stated, in all material respects, in
accordance with US GAAP.
  Management
intends to strengthen its accounting and compliance proceduresfurther
in 2009.




Item
9B. Other Information.




None.




PART
III




Item
10. Directors, Executive Officers and Corporate Governance.




The
following are our officers and directors as of the date of this prospectus. All
our officers and directors are residents of the PRC and, therefore, it may be
difficult for investors to effect service of process within the U.S. upon them
or to enforce judgments against them obtained from the U.S. courts.




The following table sets forth certain
information concerning our directors and executive officers:




Directors and Executive
      Officers
              
              Position/Title
              
              AgeJiangping
      Jiang
              
              Chief
      Executive Officer, Chairman
              
              47Jing
      Xie
              
              Secretary,
      Chief Financial Officer and a director
              
              27Hujie
      Gao
              
              Vice
      President of Corporate Finance and a director
              
              28Yizhao
      Zhang
              
              Director
              
              39Jiduan
      Yuan
              
              Director
              
              64Lizong
      Wang
              
              Director
              
              44Liquan
      Wang
              
              Director
              
              37




The following is a summary of the
biographical information of our directors and officers:


51




Jiangping Jiang, 47, has been
serving as our Chairwoman and Chief Executive Officer since July 12, 2006. Prior
to founding the Yu Zhi Lu Aviation Service Company, in 1998, Jiangping Jiang
held positions in the airline industry and in government. From 1991 to 1998, she
was the manager of Shenzhen International Airlines Agency. From 1982-1991, she
served as a member of the Chongqing municipal government planning committee.
From 1979 to 1982, she was employed by Chengdu airport.





Jing Xie, 27,  has
been serving as our director and Secretary since December 29,
2006.  From March 2005 to December 29, 2006, he served as a Deputy
General Manager of Shenzhen Yu Zhi Lu Aviation Service Company Limited. Mr. Xie
has a Doctor of Business Administration from People's University of China; and
he graduated from Economics & Business Faculty, University of Sydney,
located in Sydney, Australia, with a Bachelor of Commerce degree, major in
Accounting and E-Commerce in 2005. Mr.Xie is also a member of Association of
Credited Chartered Accountants.  Mr. Xie was appointed our Chief
Financial Officer with effective from February 17, 2009.





Hujie Gao, 28 , has been our
Vice President of Corporate Finance  since 2005. From 2002 – 2005, he
was a Senior General Accountant for Hubei Da Xin Accounting firm.  Mr.
Gao is experienced in many different industries, having audited several Chinese
public companies, including Shandong Yanfa Industry, Lu Neng Tai Shan Group, and
etc.   Mr. Gao has a Bachelor of Economics from Wuhan
University.





Yizhao
Zhang,39,
 has over 13 years of experiences in portfolio investment, corporate
finance, and accounting. He joined us as our independent director and audit
chairman on June 24, 2008. From August 2008 to January 2009, he was the Chief
Financial Officer of Energroup Holdings Corp.  From May 2007 through May
2008, he was Chief Financial Officer of Shengtai Pharmaceutical Inc., an OTCBB
company. From April 2006 through December 2006, he was the Deputy Chief
Financial Officer of China Natural Resources, Inc., a NASDAQ-listed company.
From April 2005 through April 2006, he was the vice president and senior manager
in Chinawe Asset Management Consultancy Limited, a US public company which
mainly manages non-performing loan assets in China. He was a financial
consultant with Hendrickson Asset Management Assistance LLP from January 2004
through November 2004. Prior to that, he worked from a foreign exchange and
common stock trader to a portfolio manager in the South Financial Service
Corporation from 1993 to 1999.  Mr. Zhang is a certified public
accountant of Delaware, and a member of the American Certified Accountants
(AICPA).  Mr. Zhang received a Bachelor degree in Economics from Fudan
University, Shanghai in 1992 and obtained an MBA degree with Financial Analysis
and Accounting concentrations from the State University of New York, University
at Buffalo in 2003.





Jiduan Yuan, 64, is a
postgraduate, senior economist and an expert with the China Civil Aviation. From
1965 to 1992 Mr. Yuan worked in the Guangzhou Civil Aviation Management Bureau,
holding the positions of Transportation Service Director and Vice Chief
Economist. From 1992 to 1999 he worked in the South Center Aviation Management
Bureau, where his positions included Enterprise Management Director, Communist
Committeeman and Vice President.





Lizong Wang, 44,  is
an experienced strategic consultant with over 10 years of experience as an
independent director for numerous companies, whose expertise encompasses
leadership and advisory services to business and political organizations.
Currently, he serves as an independent director of the Rui De Feng Agrochemical
Company, Ltd. and 3NOD Co., Ltd., the first KOSDAQ Chinese company. Since 2001,
he has also been serving as Secretary General of Guangdong High Tech Industry
Chamber of Commerce, Deputy Secretary General of Guangdong Private Enterprise
Cultural Association, and Deputy Secretary General of Shenzhen Tax
Administration. In these positions, his responsibilities include providing
information, financial consulting, fundraising techniques, and investment
services to more than 6,000 members.


52





Liquan Wang, 37, has an MBA,
is a Certified Public Accountant and Senior Partner of Shenzhen Hongxin CPA. Mr.
Wang is an expert in General Financial Administration and building of complete
and cost effective internal control systems. He has extensive executive
experience in corporate strategy, budgeting and tax administration. From August
1994 to January 1999 he served as an accountant and vice head of the financial
department at Liaoning Industrial Manufacture Projecting Co., Ltd. (Shanghai
Stock Exchange: 600758). From February 1999 to April 2004 he served as financial
manager of Shenzhen Guisu Enterprise Development Co., Ltd. (Shanghai Stock
Exchange: 600722). From May 2004 to date Mr. Wang has been a Partner of Shenzhen
Hongxin CPA.





The
directors will serve until our next annual meeting, or until their successors
are duly elected and qualified. The officers serve at the pleasure of the
Board.




Save as
otherwise reported above, none of our directors hold directorships in other
reporting companies.




None of
our directors is an “independent director” under the Rules of NASDAQ,
Marketplace Rule 4200(a)(15).





There are
no family relationships among our directors or officers.





To our
knowledge, during the last five years, none of our directors and executive
officers (including those of our subsidiaries) has:





·
            Had a bankruptcy petition filed
      by or against any business of which such person was a general partner or
      executive officer either at the time of the bankruptcy or within two years
      prior to that time.





·
            Been convicted in a criminal
      proceeding or been subject to a pending criminal proceeding, excluding
      traffic violations and other minor
  offenses.





·
            Been subject to any order,
      judgment or decree, not subsequently reversed, suspended or vacated, of
      any court of competent jurisdiction, permanently or temporarily enjoining,
      barring, suspending or otherwise limiting his involvement in any type of
      business, securities or banking
  activities.





·
            Been found by a court of
      competent jurisdiction (in a civil action), the SEC, or the Commodities
      Futures Trading Commission to have violated a federal or state securities
      or commodities law, and the judgment has not been reversed, suspended or
      vacated.





Audit
Committee and Audit Committee Financial Expert





Our board
of directors established an audit committee in May 2007. The audit committee is
responsible for (i) recommending independent accountants to the Board, (ii)
reviewing our financial statements with management and the independent
accountants, (iii) making an appraisal of our audit effort and the effectiveness
of our financial policies and practices and (iv) consulting with management and
our independent accountants with regard to the adequacy of internal accounting
controls.    Our audit committee members are Yizhao Zhang,
Jiduan Yuan and Liquan Wang.





Our board
of directors has determined that it has an "audit committee financial expert" as
defined by Item 401(h) of Regulation S-K as promulgated by the Securities and
Exchange Commission. Our audit committee financial expert is Yizhao Zhang. The
directors who serve on the audit committee are "independent" directors based on
the definition of independence in the listing standards of the National
Association of Securities Dealers. Our Board of Directors has adopted a written
charter for the Audit Committee. The Charter is not currently available on our
website.


53


Compensation
Committee





Our board
of directors established a compensation committee in June 2008.





The
compensation committee of the board of directors is responsible for (i)
determining the general compensation policies, (ii) establishing compensation
plans, (iii) determining senior management compensation and (iv) administering
our stock option plans. The members of the compensation committee currently are
Jiduan Yuan, Lizong Wang and Liquan Wang with Liquan Wang as its
chairman.





Our board
of directors have adopted a written compensation committee
charter.  The charter is currently not available on our website. The
directors who serve on the compensation committee are "independent" directors
based on the definition of independence in the listing standards of the National
Association of Securities Dealers.





Nominating
Committee





Our board of directors established a
nominating committee in June 2008.





The
purpose of the nominating committee of the board of directors is to assist the
board of directors in identifying and recruiting qualified individuals to become
board members and select director nominees to be presented for board and/or
stockholder approval. The members of the nominating committee currently are
Lizong Wang, Jiduan Yang and Liquan Wang and Lizong Wang is the chairman of the
nominating committee.





The
directors who serve on the nominating committee are "independent" directors
based on the definition of independence in the listing standards of the National
Association of Securities Dealers. The nominating committee has a written
charter. The charter is not currently available on our website. The nominating
committee will consider qualified director candidates recommended by
stockholders if such recommendations for director are submitted in writing to
our Secretary at Universal Travel Group, 3/F Hualian Building, No. 2008 Shennan
Road Central, Fulian District, Shenzhen, People’s Republic of China 518031,
provided such recommendation has been made in accordance with the relevant
by-laws.





At this
time, no additional specific procedures to propose a candidate for consideration
by the nominating committee, nor any minimum criteria for consideration of a
proposed nomination to the board, have been adopted.




Compliance
with Section 16(a) of Exchange Act





Section
16(a) of the Exchange Act requires our executive officers and directors and
persons who own more than 10% of a registered class of our equity securities to
file with the SEC initial statements of beneficial ownership, reports of changes
in ownership and annual reports concerning their ownership of our common stock
and other equity securities, on Form 3, 4 and 5 respectively. Executive
officers, directors and greater than 10% shareholders are required by the SEC
regulations to furnish our company with copies of all Section 16(a) reports they
file.





Based
solely on our review of the copies of such reports received by us and on written
representations by our officers and directors regarding their compliance with
the applicable reporting requirements under Section 16(a) of the Exchange Act,
we believe that, with respect to the fiscal year ended December 31, 2008, our
officers and directors, and all of the persons known to us to own more than 10%
of our common stock, filed all required reports on a timely basis.





Item
11. Executive Compensation.




The
following table sets forth information with respect to the compensation of each
of the named executive officers for services provided in all capacities to the
Company and its subsidiaries in the fiscal years ended December
31, 2008 and 2007  in their capacity as such officers.  Ms.
Jiang who is also the Chairwoman and director of the Company
receives  no additional compensation for her services in her capacity
as director. No other executive officer or former executive officer received
more than $100,000 in compensation in the fiscal years reported
below.


54




Name and
                Principal
                Position
              
              Fiscal
                Year
              
              Salary ($)
              
              
              Bonus ($)
              
              
              Stock
                Awards
                ($)
              
              
              Option
                Awards
                ($)
              
              
              Non-equity
                Incentive Plan
                Compensation
                ($)
              
              
              Change in
                Pension
                Value and
                Nonqualified
                Deferred
                Compensation
                Earnings ($)
              
              
              All Other
                Compensation
                ($)
              
              
              Total ($)Jiangping
      Jiang
              
              2008
              
              $
              9,230
              
              
              $
              1,411
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              $
              10,641Chief
      Executive Officer (principal executive officer)
              
              2007
              
              $
              9,230
              
              
              $
              1,411
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              $
              10,641Hujie
      Gao
              
              2008
              
              $
              5,384
              
              
              $
              461
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              $
              5,845Vice
      President of Corporate Finance (principal financial
      officer)(1)
              
              2007
              
              $
              5,384
              
              
              $
              461
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              $
              5,845Jing
      Xie
              
              2008
              
              $
              11,034
              
              
              $
              849
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              $
              11,883Chief
      Financial Officer (principal financial officer) (1)
              
              2007
              
              $
              7,947
              
              
              $
              795
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              $
              8,742





(1)
            Mr.
      Jing Xie assumed the position of our Chief Financial Officer with effect
      from February 17, 2009 and accordingly, is our  principal
      financial officer from that date.





Outstanding
Equity Awards at 2008 Fiscal Year End





There
were no option exercises or options outstanding in 2008.




Employment
Agreements




Mr. Xie’s
appointment as our Chief Financial Officer is set forth in an employment
agreement between Mr. Xie and us dated  February 17,
2009.  Under that agreement, Mr. Xie is to receive compensation
consisting of the following: (i) an  annual salary of $30,000, (ii)
eligibility to receive bonus compensation and stock options or other
equity-based incentives as the discretion of the compensation committee of the
Board of Directors, and (iii) medical and dental insurance, (iv)social
insurance.





Apart
from Mr. Xie, there are no current employment agreements between the Company and
its executive officers. Our executive officers have agreed to work without
remuneration until such time as we receive sufficient revenues necessary to
provide proper salaries to the officer and compensate the director for
participation.


55


Compensation
Discussion and Analysis





We strive
to provide our named executive officers (as defined in Item 402 of Regulation
S-K) with a competitive base salary that is in line with their roles and
responsibilities when compared to peer companies of comparable size in similar
locations.





It is not
uncommon for PRC private companies in the PRC to have base salaries as the sole
form of compensation. The base salary level is established and reviewed based on
the level of responsibilities, the experience and tenure of the individual and
the current and potential contributions of the individual. The base salary is
compared to the list of similar positions within comparable peer companies and
consideration is given to the executive’s relative experience in his or her
position.  Base salaries are reviewed periodically and at the time of
promotion or other changes in responsibilities.





We plan
to implement a more comprehensive compensation program, which takes into account
other elements of compensation, including, without limitation, short and long
term compensation, cash and non-cash, and other equity-based compensation such
as stock options. We expect that this compensation program will be comparable to
the programs of our peer companies and aimed to retain and attract talented
individuals.





We will
also consider forming a compensation committee to oversee the compensation of
our named executive officers. The majority of the members of the compensation
committee would be independent directors.





Director
Compensation





Mr.
Zhang’s compensation as director of the Company is set forth in an appointment
letter with the Company dated June 24, 2008. He is being paid a monthly fee of
$2,000. He has also been granted options to purchase a total of 100,000 shares
of common stock of the Company, par value $0.001 at $1.52 per share. Options to
purchase 33,333 shares may be exercised immediately, options to purchase an
additional 33,333 shares may be exercised commencing July 1, 2009, and options
to purchase the remaining 33,334 shares may be exercised commencing July 1,
2010, provided that in the case of the options to vest in 2009 and 2010 Mr.
Zhang is still a director of or otherwise engaged by the Company. The options
may be exercised until July 1, 2018.




The
following table sets forth a summary of compensation paid to Messrs. Yizhao
Zhang  during the fiscal year ended December 31, 2008:





Fees earned or paidName
                      
                      in cash
                      
                      
                      Option awards
                      
                      
                      All other compensation
                      
                      
                      TotalYizhao
      Zhang
                      
                      $
                      12,000
                      
                      
                      $
                      70,616
                      
                      
                      
                      N/A
                      
                      
                      $
                      82,617





On January 20, 2009, Mr. Jiduan Yuan
and Mr. Lizong Wang were each granted options to purchase 100,000 shares of our
Common Stock and  Mr Liquan Wang was each granted options to purchase
30,000 share of our Common Stock under the Universal Travel Group 2009 Incentive
Stock Plan.  The options have an exercise price of $0.90 and a term of
10 years. The options vest in six annual equal installments.  However,
in the event (i) the Company reports an after tax Net Income of
$14,000,000  in its Annual Report on Form 10-K filed with the SEC for its
fiscal year 2008, then options to purchase one-third of the shares granted shall
vest and become immediately exercisable and each grantee of such options shall
be entitled to exercise his/her options rateably, (ii)  the Company reports
an after tax Net Income of $18,000,000  in its Annual Report on Form 10-K
filed with the SEC for its fiscal year 2009, then options to purchase another
one-third of the shares  granted shall vest and become immediately
exercisable and each grantee of such options shall be entitled to exercise
his/her options rateably and (iii) the Company reports an after tax Net Income
of $22,000,000  in its Annual Report on Form 10-K filed with the SEC for
its fiscal year 2010, then options to purchase another one-third of the shares
granted shall vest and become immediately exercisable and each grantee of such
options shall be entitled to exercise his options
rateably.


56


Item
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.





The
following table sets forth certain information with respect to the beneficial
ownership of our voting securities by (i) any person or group owning more than
5% of any class of voting securities, (ii) each director, (iii) our chief
executive officer  and (iv) all executive officers and directors as a
group as of  March 10, 2009.





Title of Class
                                  
                                  Name and Address of
                                    Beneficial Owner
                                  
                                  Amount and Nature of
                                    Beneficial 
      Ownership (1)
                                  
                                  
                                  Percentage of 
Common
                                    Stock (1)Owner
      of More than 5% of ClassCommon
      Stock
                                  
                                  Pope
      Investments II LLC
                                  
                                  
                                  4,935,484
                                  
                                  
                                  
                                  13.86
                                  %5100
      Poplar Avenue, Suite 805, Memphis, TN 38137Warrant
                                  
                                  Pope
      Investments II LLC
                                  
                                  
                                  967,742
                                  (2)5100
      Poplar Avenue, Suite 805, Memphis, TN 38137Directors
      and Executive OfficersCommon
      Stock
                                  
                                  Jiangping
      Jiang
                                    3/F
      Hualian Building, No. 2008 Shennan Road Central,
                                    Fulian
      District, Shenzhen, People’s Republic of China 518031
                                  
                                  
                                  12,000,000
                                  
                                  
                                  
                                  28.83
                                  %Common
      Stock
                                  
                                  Yizhao
      Zhang
                                    3/F
      Hualian Building, No. 2008 Shennan Road Central,
                                    Fulian
      District, Shenzhen, People’s Republic of China 518031
                                  
                                  
                                  33,333
                                  (3)
                                  
                                  
                                  *Common
      Stock
                                  
                                  Jing
      Xie
                                    3/F
      Hualian Building, No. 2008 Shennan Road Central,
                                    Fulian
      District, Shenzhen, People’s Republic of China 518031
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —Common
      Stock
                                  
                                  Hujie
      Gao
                                    3/F
      Hualian Building, No. 2008 Shennan Road Central,
                                    Fulian
      District, Shenzhen, People’s Republic of China 518031
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —Common
      Stock
                                  
                                  Jiduan
      Yuan
                                    3/F
      Hualian Building, No. 2008 Shennan Road Central,
                                    Fulian
      District, Shenzhen, People’s Republic of China 518031
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —Common
      Stock
                                  
                                  Lizong
      Wang
                                    3F
      Hualian Building, No. 2008 Shennan Road Central,
                                    Fulian
      District, Shenzhen, People’s Republic of China 518031
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —Common
      Stock
                                  
                                  Liquan
      Wang
                                    3/F
      Hualian Building, No. 2008 Shennan Road Central,
                                    Fulian
      District, Shenzhen, People’s Republic of China 518031
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —Officers
      and Directors as a group
                                  
                                  
                                  12,033,333
                                  
                                  
                                  
                                  28.89
                                  %


*Represents
less than 1%


57


(1)              In
determining beneficial ownership of our common stock as of a given date, the
number of shares shown includes shares of common stock which may be acquired on
exercise of warrants or options or conversion of convertible securities within
60 days of that date. In determining the percent of common stock owned by a
person or entity on March 10, 2009, (a) the numerator is the number of shares of
the class beneficially owned by such person or entity, including shares which
may be acquired within 60 days on exercise of warrants or options and conversion
of convertible securities, and (b) the denominator is the sum of (i) the total
shares of common stock outstanding on March 10, 2009 (22,112,500), and (ii) the
total number of shares that the beneficial owner may acquire upon conversion of
the preferred and on exercise of the warrants and options. Unless otherwise
stated, each beneficial owner has sole power to vote and dispose of its
shares.





(2)           On August 28, 2008,
we  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
4,588,708 shares of Common Stock and warrants to purchase 2,294,356 shares of
Common Stock for an aggregate purchase price of $7,112,500.   The
Financing closed on August 29, 2008. Pope Investments II LLC received 4,935,484
shares of our common stock and a warrant to purchase 967,742 shares of our
common stock.  The warrant has an exercise price of $2.71 and a term
of 5 years from the date of issuance.





(3)              Represents
shares issuable pursuant to options which are currently exercisable. Excludes
66,667 shares of Common Stock underlying options not exercisable within 60 days
of this report.


58





Item
13. Certain Relationships and Related Transactions, and Director
Independence.




Except
for the ownership of our securities, and except as set forth below, none of the
directors, executive officers, holders of more than five percent of the
Company’s outstanding common stock, or any member of the immediate family of any
such person have, to our knowledge, had a material interest, direct or indirect,
in any transaction or proposed transaction which may materially affect the
Company.




·
            In
      connection with the merger of our Company and Full Power, Ms. Jiang, then
      a shareholder of Full Power was issued 11,800,000 shares of our Common
      Stock; and





·
            In
      connection with the Financing, Ms. Jiangping Jiang entered into (i) a Make
      Good Securities Escrow Agreement with the Company, the Buyers and
      Sichenzia Ross Friedman Ference LLP, as escrow agent dated August 28,
      2008, (ii) an Escrow Agreement with the Company, the Buyers and Sichenzia
      Ross Friedman Ference LLP, as escrow agent dated August 28, 2008 and (iii)
      a Lock-Up Agreement dated August 28, 2008 with the
  Company.





Director
Independence.





The OTC Bulletin Board, on which our
common stock is currently traded, does not maintain director independence
standards, however, Messrs. Zhang, Wang, Yuan and Wang qualify as independent
directors under the guidelines of the NYSC Alternext.





Item
14. Principal Accounting Fees and Services.




In
connection with our change in control effective pursuant to a merger
transaction, as disclosed as disclosed on our Current Report on Form 8-K filed
on July 12, 2006, our Board of Directors approved the engagement of Morgenstern,
Svoboda, & Baer, CPA's, P.C. for all audit and permissible non-audit
services, and
dismissed Moore & Associates, Chartered the Company's prior certifying
accountant, in each case effective as of June 23, 2006.





Our Audit
Committee annually reviews the audit and permissible non-audit services
performed by our principal accounting firm and reviews and approves the fees
charged by our principal accounting firm. Our Audit Committee has considered the
role of Morgenstern, Svoboda, & Baer in providing tax and audit services and
other permissible non-audit services to us and has concluded that the provision
of such services, if any, was compatible with the maintenance of such firm's
independence in the conduct of its auditing functions.





During
fiscal years 2007 and 2008, the aggregate fees which we paid to or were billed
by Morgenstern, Svoboda & Baer, CPA's P.C. and Moore & Associates for
professional services were as follows:





Fiscal
      year ended December 31,2008
                    
                    
                    2007Audit
      fees
                    
                    $
                    161,000
                    
                    
                    $
                    54,000Audit-related
      fees
                    
                    $
                    0
                    
                    
                    $
                    193,000Tax
      fees
                    
                    $
                    0
                    
                    
                    $
                    0All
      other fees
                    
                    $
                    0
                    
                    
                    $
                    0


59


PART
IV
  Item
15. Exhibits, Financial Statement Schedules.
  Exhibit
                        Footnote
                      
                      Exhibit No.
                      
                      Description(1)
                      
                      2.1
                      
                      Agreement
      and Plan of Merger between TAM of Henderson, Inc. and the
      Company(2)
                      
                      3.1
                      
                      Articles
      of Incorporation(3)
                      
                      3.2
                      
                      By-laws(4)
                      
                      3.3
                      
                      Articles
      of Merger between TAM of Henderson, Inc. and Company(5)
                      
                      3.4
                      
                      Amended
      and Restated Articles of Incorporation, changing our name from Tam of
      Henderson, Inc. to Universal Travel Group(6)
                      
                      4.1
                      
                      2007
      Equity Incentive Plan(7)
                      
                      4.2
                      
                      Form
      of Warrant(8)
                      
                      10.1
                      
                      Shareholder
      Agreement between Registrant and Doreen E. Zimmerman(9)
                      
                      10.2
                      
                      Share
      Purchase Agreement between Marcus Luna, Esq. representing acertain
      selling shareholder of Company  and Xiao Jun(10)
                      
                      10.3
                      
                      Agreement
      and Plan of Merger by and among Registrant, Full Power Enterprise Global
      Limited ("Full Power"), and the shareholders of Full
  Power.(11)
                      
                      10.4
                      
                      Share
      Exchange Agreement among the Company, Full Power Enterprise Global
      Limited, Shenzhen Yu Zhi Lu Aviation Service Company Limited, Shenzhen
      Speedy Dragon Enterprise Limited and the  shareholders of
      Shenzhen Speedy Dragon Enterprise Limited(12)
                      
                      10.5
                      
                      Share
      Exchange Agreement among Company, Shenzhen Yu Zhi Lu Aviation Service
      Company Limited, Xi'an Golden Net Travel Serve Service Company Limited,
      and the shareholders of Xi'an Golden Net Travel Serve Service Company
      Limited(13)
                      
                      10.6
                      
                      Share
      Exchange Agreement among Company, Shenzhen Yu Zhi Lu Aviation Service
      Company Limited, Shanghai Lanbao Travel Service Company Limited, and the
      shareholders of Shanghai Lanbao Travel Service Company
    Limited(14)
                      
                      10.7
                      
                      Agreement
      by and between Company and Richard P. Randall(15)
                      
                      10.8
                      
                      Share
      Exchange Agreement among Company, Shenzhen Yu Zhi Lu  Aviation
      Service Company Limited, Foshan Overseas International  Travel
      Service Co., Ltd., and the shareholders of Foshan
      Overseas  International Travel Service Co.,
  Ltd.(16)
                      
                      10.9
                      
                      Share
      Exchange Agreement among Company, Shenzhen Yu Zhi LuAviation
      Service Company Limited, Tianjin Golden DragonInternational
      Travel Service Co., Ltd., and the shareholders ofTianjin
      Golden Dragon International Travel Service Co., Ltd.,(17)
                      
                      10.10
                      
                      Agreement
      by and between Registrant and James Treacy(18)
                      
                      10.11
                      
                      Subscription
      Agreement by and among Company and Total Shine Group Limited, Victory High
      Investments and Think Big Trading Limited(19)
                      
                      10.12
                      
                      Rescission
      And Release Agreement by and among Company,  Shenzhen Yu Zhi Lu
      Aviation Service Company Limited, a wholly  owned subsidiary of
      Registrant, Tianjin Golden Dragon  International Travel Service
      Co., Ltd., and the shareholders of Tianjin Golden Dragon International
      Travel Service Co.,
Ltd
  60
 
 (20)
                  
                  10.12
                  
                  Securities
      Purchase Agreement dated August 28, 2008 between the Company and the
      Buyers(21)
                  
                  10.13
                  
                  Make
      Good Securities Escrow Agreement dated August 28, 2008 between the
      Company, the Buyers, the Principal Shareholder and the Escrow
      Agent(22)
                  
                  10.14
                  
                  Escrow
      Agreement dated August 28, 2008 between the Company, the Buyers, the
      Principal Shareholder and the Escrow Agent(23)
                  
                  10.15
                  
                  Registration
      Rights Agreement between the Company and the Buyers dated August 28,
      2009(24)
                  
                  10.16
                  
                  Lock-Up
      Agreement between Company and the Principal Shareholder dated August 28,
      2008.(25)
                  
                  21.1
                  
                  List
      of Subsidiaries31.1
                  
                  Certification
      of the Principal Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of200231.2
                  
                  Certification
      of the Principal Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of200232.1
                  
                  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
      200232.2
                  
                  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
 
 (1)
              Incorporated
      herein by reference to Exhibit 2.1 to the Company’s  Current
      Report on Form 8-K filed on March 20,
2006.
 
 (2)
              Incorporated
      herein by reference to Exhibit 3.1 to the Company’s Registration Statement
      on Form 10SB12G filed on September 6,
2005.
 
 (3)
              Incorporated
      herein by reference to Exhibit 3.2 to the Company’s Registration Statement
      on Form 10SB12G filed on September 6,
2005.
 
 (4)
              Incorporated
      herein by reference to Exhibit 3.3 to the Company’s Current Report on Form
      8-K filed on March 27, 2006.
 
 (5)
              Incorporated
      herein by reference to Exhibit 3.1 to the Company’s Current Report on Form
      8-K filed on August 23, 2006.
 
 (6)
              Incorporated
      herein by reference to Exhibit 4.1 to the Company’s Registration Statement
      on Form S-8 (No. 333-140130) declared effective on January 22,
      2007.
 
 (7)
              Incorporated
      by reference to Exhibit 4.1 on the  Company’s Current Report on
      Form 8-K filed on September 3,
2008.
 
 (8)
              Incorporated
      herein by reference to Exhibit 10.1 to the Company’s Registration
      Statement on Form 10SB12G filed on September 6,
  2005.
 
 (9)
              Incorporated
      herein by reference to Exhibit 10.1 to the Company’s Current Report on
      Form 8-K filed on June 22, 2006.
 
 (10)
              Incorporated
      herein by reference to Exhibit 10.1 to the Company’s Current Report on
      Form 8-K filed on June 27, 2006.
 
 (11)
              Incorporated
      herein by reference to Exhibit 10.1 to the Company’s Current Report on
      Form 8-K filed on April 12,
2007.
  61
 
 (12)
              Incorporated
      herein by  reference to Exhibit 10.1 to the Company’s Current
      Report on Form 8-K filed on August 7,
2007.
 
 (13)
              Incorporated
      herein by reference to Exhibit 10.1 to the Company’s Current Report on
      Form 8-K filed on August 10, 2007.
 
 (14)
              Incorporated
      herein by reference to Exhibit 10.1 to the Company’s Current Report on
      Form 8-K filed on September 10,
2007.
 
 (15)
              Incorporated
      herein by  reference to Exhibit 10.1 to the Company’s Current
      Report on Form 8-K filed on September 25,
2007.
 
 (16)
              Incorporated
      herein by reference to Exhibit 10.1 to  Company’s Current Report
      on Form 8-K filed on October 23,
2007.
 
 (17)
              Incorporated herein by
      reference to Exhibit 10.1 to Company’s Current Report on Form 8-K filed on
      December 12,  2007.
 
 (18)
              Incorporated
      herein by reference to Exhibit 99.1 to Company’s Current Report on Form
      8-K filed on February 11, 2008.
 
 (19)
              Incorporated
      herein by reference to Exhibit 99.1 to Company’s Current Report on Form
      8-K filed on February 15, 2008.
 
 (20)
              Incorporated
      by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K
      filed on September 3, 2008.
 
 (21)
              Incorporated
      by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K
      filed on September 3, 2008.
 
 (22)
              Incorporated
      by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K
      filed on September 3, 2008.
 
 (23)
              Incorporated
      by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K
      filed on September 3, 2008.
 
 (24)
              Incorporated
      by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K
      filed on September 3, 2008.
 
 (25)
              Incorporated
      by reference to Exhibit 21.1 of the Company’s Annual Report on Form 10-K
      filed on March 31, 2008
  62
  SIGNATURES
 
 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
 
 UNIVERSAL
      TRAVEL GROUPBy:
                /s/ Jiangping JiangJiangping
      JiangChief
      Executive Officer (principal executive officer)Date:By:
                /s/ Yizhao ZhangYizhao
      ZhangChief  Financial
      Officer (principal accounting and financial officer)Date:
 
 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
  Name and Title
                    
                    Date/s/ Jiangping Jiang
                    
                    October 28,
      2009By:
      Jiangping JiangChief
      Executive Officer and Director(principal
      executive officer)/s/ Yizhao Zhang
                    
                    October 28,
      2009By:  Yizhao
      ZhangChief
      Financial Officer (principal accounting and financial
    officer)/s/ Jing Xie
                    
                    October 28,
      2009By:
      Jing XieSecretary
      and a director/s/ Hujie Gao
                    
                    October 28,
      2009By:
      Hujie GaoVice
      President of Corporate Finance and a director/s/ Liquan Wang
                    
                    October 28,
      2009By:
      Liquan WangDirector/s/ Jiduan Yuan
                    
                    October 28,
      2009By:
      Jiduan YuanDirector
  63
 
 /s/
      Lizong Wang
                  
                  October 28,
      2009By:
      Lizong WangDirector/s/
      Lawrence Lee
                  
                  October 28,
      2009By:
      Lawrence LeeDirector
  64