UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





Amendment
No. 2





FORM
10-Q/A




(Mark
One)





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





For the
quarterly period ended March 31, 2009





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





For the
transition period from ______________ to _____________




Commission
file number: 000-51516





UNIVERSAL TRAVEL
GROUP


(Exact
name of registrant as specified in its charter)




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




Shennan
      Road, Hualian Center
                Room
      301 - 309
                Shenzhen, People’s Republic of
      China(Address
      of principal executive offices)
              
              (Zip
      Code)





86 755 836
68489


(Registrant’s
telephone number, including area code)




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





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





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  ̈
              
              Accelerated
      filer  ̈Non-accelerated
      filer  ̈
              
              Smaller
      reporting company x





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





APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS





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





APPLICABLE
ONLY TO CORPORATE ISSUERS





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





As of May
6, 2009, there are 13,873,969 shares of $0.001 par value common stock issued and
outstanding.











EXPLANATORY
NOTE





In this Amendment No. 2 to Quarterly
Report on Form 10-Q/A (this “Form 10Q/A”), we refer to  Universal
Travel Group, a Nevada corporation, as “we,” “us,” “our” or “our
company.”




We are
filing this Amendment No. 2 to Quarterly Report on Form 10-Q/A to amend certain
disclosures in our Quarterly Report on Form 10-Q for the quarter ended March 31,
2009, as originally filed with the Securities and Exchange Commission (the
“SEC”) on May 6, 2009 and Amendment No. 1 to our Quarterly Report on Form 10-Q/A
for the quarter ended March 31, 2009, as originally filed with the SEC on May 7,
2009 (our “Report”).  The principal changes to our Report in this
amendment are as follows:




We have
identified certain accounting errors related to the omission of the accounting
for a derivative liability upon the adoption of EITF 07-5 effective January 1,
2009, and the subsequent accounting for the changes in the associated liability
from the marked to market. We also identified an error in our dilutive weighted
average common shares computation.  The net effect of the correction of
these errors resulted in an increase in the Company’s reported total liabilities
as of March 31, 2009 by $1,441,697, a decrease in the Company’s reported
additional paid in capital as of March 31, 2009 by $2,091,738, an increase in
the Company’s reported net incomes for the three months ended March 31, 2009 by
$113,265, an increase in the Company’s reported retained earnings as of March
31, 2009 by $650,041, a decrease in the dilutive weighted average common shares
outstanding by 1,754,913 shares, and an increase in the dilutive net income per
common share by $0.03.





The
Company also has reclassified and included all costs directly associated with
the generation of revenue in its cost of services. These costs were erroneously
classified as selling, general, and administrative expenses in the consolidated
financial statements previously filed.  This reclassification has
resulted in no change in the Company’s reported Consolidated Balance Sheet as of
March 31, 2009 and Consolidated Statement of Cash Flows for the three months
ended March 31, 2009.  The reclassification did affect the individual
components of the Company’s cost of services and selling, general and
administrative expenses as reported on its Consolidated Statement of Income for
the three months ended March 31, 2009.  However, this reclassification
had no effect on the reported consolidated net income.





We have
added Note 14 to our consolidated financial statements to disclose the effect
and further information regarding the above changes.





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
      incorporated the correction of errors as described
  above,









·
            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,





·
            Derivative
      Liability accounting policy was added to disclose the accounting for a
      derivative liability upon the adoption of EITF 07-5 effective January 1,
      2009, and the subsequent accounting for the changes in the associated
      liability from the marked to market. The addition of disclosures of
      derivative liability incorporated the correction of errors as described
      above,





·
            Reclassification
      accounting policy was added to clarify that certain reclassifications have
      been made to prior periods’ data to conform with the current year’s
      presentation, and the reclassifications had no effect on the result of
      operations.





The
Company also added the presentation of comprehensive income for each period
presented in an acceptable form set forth in accordance with 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,





The
Company has revised its Management’s Discussion and Analysis Results of
Operations included its Form 10Q/A for the quarter ended March 31, 2009
accordingly to reflect all the above changes. In addition, the Company expended
its analysis of the changes in revenues, costs of services, gross profit and
gross profit margin for each of the segments for all periods presented,
including the relative impact of each segment to the Company’s consolidated
results as well as the factors affecting the results of each segment, including
adding a tabular presentation outlining the segment effect in gross
margin.




The
Company has amended Item 4 Controls and Procedures to disclose ineffectiveness
in its disclosure controls and procedures as of March 31,
2009.




As
required by Rule 12b-15 of the Securities Exchange Act of 1934, as amended, new
certifications by our principal executive officer and principal financial
officer are being filed as exhibits herewith, and as such, we have included Item
6 of Part II, “Exhibits,” as part of this Form 10-Q/A.  As further
required by Rule 12-b-15, this Form 10-Q/A sets forth the complete text of each
item as amended.




This
Amendment No. 2 to Quarterly Report on Form 10-Q/A does not contain our
auditor’s review report as it is not required pursuant to SEC Reg
S-X.T.Rule10-01(d).





Other
than the correction of typographical and the errors described above, all other
information in our original Form 10-Q remains unchanged. For the convenience of
the reader, this amendment includes, in their entirety, those items in our
original filing not being amended and restated. Except to the extent relating to
the restatement of our consolidated financial statements and other financial
information 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-Q/A
should be read in conjunction with our other filings made with the SEC
subsequent to the filing of our Report.










FORM
10-Q/A


UNIVERSAL
TRAVEL GROUP


INDEX





PagePART
      I.
                    Financial
      Information
                    
                    
                    4Item
      1.  Financial Statements ( Unaudited)
                    
                    
                    4Consolidated
      Balance Sheets as of  March 31, 2009 (Unaudited) and December
      31, 2008
                    
                    
                    7Consolidated
      Statements of Income for the Three Months Ended March 31, 2009 and 2008
      (Unaudited)
                    
                    
                    8Consolidated
      Statements of Cash Flows for the Three Months Ended March 31, 2009 and
      2008 (Unaudited)
                    
                    
                    9Consolidated
      Statements of Stockholders' Equity
                    
                    
                    10Notes
      to Consolidated Financial Statements as of  March 31, 2009
      (Unaudited)
                    
                    
                    11-36Item
      2.  Management’s Discussion and Analysis of Financial Condition or
      Plan of Operation
                    
                    
                    37Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk.
                    
                    
                    43Item
      4.  Controls and Procedures
                    
                    
                    44PART
      II.
                    Other
      Information
                    
                    
                    45Item
      1.  Legal Proceedings
                    
                    
                    45Item
      1A. Risk Factors
                    
                    
                    45Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
                    
                    
                    45Item
      3.  Defaults Upon Senior Securities
                    
                    
                    45Item
      4.  Submission of Matters to a Vote of Security
    Holders.
                    
                    
                    45Item
      5.  Other Information
                    
                    
                    45Item
      6.  Exhibits
                    
                    
                    45Signatures
                    
                    
                    46




2




(Inapplicable
items have been omitted)




3





PART
I - FINANCIAL INFORMATION





Item
1. Financial Statements (Unaudited)




4





UNIVERSAL
TRAVEL GROUP





CONSOLIDATED
FINANCIAL STATEMENTS





MARCH
31, 2009




5




TABLE
OF CONTENTS





Consolidated Balance Sheets
                          
                          
                          7Consolidated Statements of
      Income
                          
                          
                          8Consolidated Statements of Cash
      Flows
                          
                          
                          9Consolidated Statements of Stockholders’
      Equity
                          
                          
                          10Notes to Consolidated Financial
      Statements
                          
                          
                          11-36




6





UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
BALANCE SHEETS


MARCH
31, 2009 AND DECEMBER 31, 2008





3/31/2009
                                            
                                            
                                            12/31/2008(Unaudited)
                                              (As Restated)ASSETSCurrent
      AssetsCash
      and cash equivalents
                                            
                                            $
                                            19,171,277
                                            
                                            
                                            $
                                            16,204,531Accounts
      receivable, net
                                            
                                            
                                            12,913,177
                                            
                                            
                                            
                                            10,715,206Other
      and deposits, net
                                            
                                            
                                            431,979
                                            
                                            
                                            
                                            141,413Trade
      deposit
                                            
                                            
                                            4,567,822
                                            
                                            
                                            
                                            6,737,521Advances
                                            
                                            
                                            438,981
                                            
                                            
                                            
                                            438,468Escrow
      deposits
                                            
                                            
                                            162,301
                                            
                                            
                                            
                                            762,800Prepaid
      expenses
                                            
                                            
                                            196,154
                                            
                                            
                                            
                                            319,257Total
      Current Assets
                                            
                                            
                                            37,881,691
                                            
                                            
                                            
                                            35,319,196Property
      & equipment, net
                                            
                                            
                                            1,473,656
                                            
                                            
                                            
                                            273,340Intangible
      assets
                                            
                                            
                                            280,134
                                            
                                            
                                            
                                            307,335Goodwill
                                            
                                            
                                            13,526,809
                                            
                                            
                                            
                                            13,526,80915,280,599
                                            
                                            
                                            
                                            14,107,484Total
      Assets
                                            
                                            $
                                            53,162,290
                                            
                                            
                                            $
                                            49,426,680LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable and accrued expenses
                                            
                                            $
                                            2,912,427
                                            
                                            
                                            $
                                            2,219,156Customer
      deposits
                                            
                                            
                                            1,405,967
                                            
                                            
                                            
                                            1,047,250Income
      tax payable
                                            
                                            
                                            975,038
                                            
                                            
                                            
                                            1,759,402Total
      Current Liabilities
                                            
                                            
                                            5,293,432
                                            
                                            
                                            
                                            5,025,808Derivative
      Liability
                                            
                                            
                                            1,441,697
                                            
                                            
                                            
                                            -Total
      Liabilities
                                            
                                            
                                            6,735,129
                                            
                                            
                                            
                                            5,025,808Stockholders'
      EquityCommon
      stock, $.001 par value, 70,000,000 shares authorized,13,873,969
      shares issued and outstanding at March 31, 2009
                                              andDecember
      31, 2008 respectively
                                            
                                            
                                            13,873
                                            
                                            
                                            
                                            13,873Additional
      paid in capital
                                            
                                            
                                            13,934,378
                                            
                                            
                                            
                                            15,861,116Other
      comprehensive income
                                            
                                            
                                            1,554,873
                                            
                                            
                                            
                                            1,520,166Statutory
      reserve
                                            
                                            
                                            372,144
                                            
                                            
                                            
                                            372,144Retained
      earnings
                                            
                                            
                                            30,551,893
                                            
                                            
                                            
                                            26,633,573Total
      Stockholders' Equity
                                            
                                            
                                            46,427,161
                                            
                                            
                                            
                                            44,400,872Total
      Liabilities and Stockholders' Equity
                                            
                                            $
                                            53,162,290
                                            
                                            
                                            $
                                            49,426,680





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





7





UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
STATEMENTS OF INCOME


FOR
THE THREE MONTHS ENDED MARCH
31,


(UNAUDITED)




2009
                                          
                                          
                                          2008(As
      Restated)Gross
      revenues,
                                          
                                          $
                                          17,369,678
                                          
                                          
                                          $
                                          10,076,304Cost
      of services
                                          
                                          
                                          11,343,173
                                          
                                          
                                          
                                          7,388,434Gross
      Profit
                                          
                                          
                                          6,026,505
                                          
                                          
                                          
                                          2,687,870Selling,
      general and administrative expenses
                                          
                                          
                                          1,642,605
                                          
                                          
                                          
                                          809,858Income
      from operations
                                          
                                          
                                          4,383,900
                                          
                                          
                                          
                                          1,878,012Other
      Income (Expense)Loss
      on disposal of assets
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (1,104
                                          )Other
      income
                                          
                                          
                                          3,828
                                          
                                          
                                          
                                          2,874Unrealized
      gain on derivative liability
                                          
                                          
                                          113,265
                                          
                                          
                                          
                                          -Interest
      income
                                          
                                          
                                          25,816
                                          
                                          
                                          
                                          1,415Interest
      expense
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (36,707
                                          )Total
      Other Income (Expense)
                                          
                                          
                                          142,909
                                          
                                          
                                          
                                          (33,522
                                          )Income
      before income taxes
                                          
                                          
                                          4,526,809
                                          
                                          
                                          
                                          1,844,490Provision
      for income taxes
                                          
                                          
                                          1,145,266
                                          
                                          
                                          
                                          380,625Net
      income
                                          
                                          $
                                          3,381,543
                                          
                                          
                                          $
                                          1,463,865Comprehensive
      IncomeNet
      Income
                                          
                                          
                                          3,381,543
                                          
                                          
                                          
                                          1,463,865Foreign
      currency translation gains
                                          
                                          
                                          34,707
                                          
                                          
                                          
                                          351,171Total
      Comprehensive income
                                          
                                          
                                          3,416,250
                                          
                                          
                                          
                                          1,815,036Net
      income per common shareBasic
                                          
                                          $
                                          0.24
                                          
                                          
                                          $
                                          0.12Diluted
                                          
                                          $
                                          0.24
                                          
                                          
                                          $
                                          0.12Weighted
      average common shares outstandingBasic
                                          
                                          
                                          13,873,969
                                          
                                          
                                          
                                          12,306,715Diluted
                                          
                                          
                                          13,885,722
                                          
                                          
                                          
                                          12,306,715





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





8





UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE THREE MONTHS ENDED MARCH
31,


(UNAUDITED)




2009
                                    
                                    
                                    2008(Restated)CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      Income
                                    
                                    $
                                    3,381,543
                                    
                                    
                                    $
                                    1,463,865Adjustments
      to reconcile net income to net cashprovided
      by operating activities:Depreciation
      and amortization
                                    
                                    
                                    87,283
                                    
                                    
                                    
                                    19,489Provision
      for doubtful accounts
                                    
                                    
                                    9,205
                                    
                                    
                                    
                                    2,961Stock
      based compensation
                                    
                                    
                                    165,000
                                    
                                    
                                    
                                    110,011Unrealized
      gain on derivative liability
                                    
                                    
                                    (113,265
                                    )
                                    
                                    
                                    -Loss
      on asset disposal
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,105(Increase)
      / decrease in assets:Accounts
      receivable
                                    
                                    
                                    (2,207,176
                                    )
                                    
                                    
                                    455,846Other
      receivable
                                    
                                    
                                    (290,566
                                    )
                                    
                                    
                                    751,258Advances
                                    
                                    
                                    (513
                                    )
                                    
                                    
                                    (24,896
                                    )Due
      from shareholder
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,309,981Prepaid
      expenses
                                    
                                    
                                    123,103
                                    
                                    
                                    
                                    (2,492
                                    )Trade
      deposits
                                    
                                    
                                    2,169,699
                                    
                                    
                                    
                                    (938,405
                                    )Escrow
      deposits
                                    
                                    
                                    600,499
                                    
                                    
                                    
                                    -Increase
      / (decrease) in current liabilities:Accounts
      payable and accrued expenses
                                    
                                    
                                    693,272
                                    
                                    
                                    
                                    (343,884
                                    )Customer
      deposits
                                    
                                    
                                    358,717
                                    
                                    
                                    
                                    (120,045
                                    )Income
      tax payable
                                    
                                    
                                    (784,364
                                    )
                                    
                                    
                                    (311,101
                                    )Total
      Adjustments
                                    
                                    
                                    810,894
                                    
                                    
                                    
                                    909,828Net
      cash provided by operating activities
                                    
                                    
                                    4,192,437
                                    
                                    
                                    
                                    2,373,693CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of property & equipment
                                    
                                    
                                    (1,260,398
                                    )
                                    
                                    
                                    (5,647
                                    )Proceeds
      from asset disposals
                                    
                                    
                                    -
                                    
                                    
                                    
                                    663Acquisition
      deposits
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,453,050Net
      cash (used in) provided by Investing activities
                                    
                                    
                                    (1,260,398
                                    )
                                    
                                    
                                    1,448,066CASH
      FLOWS FROM FINANCING ACTIVITIESRepayments
      of bank loan
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (78,347
                                    )Proceeds
      of equity financing
                                    
                                    
                                    -
                                    
                                    
                                    
                                    599,994Note
      payable - others
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (977,019
                                    )Net
      cash used in financing activities
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (453,372
                                    )Effect
      of exchange rate changes on cash and cash equivalents
                                    
                                    
                                    34,707
                                    
                                    
                                    
                                    351,171Net
      change in cash and cash equivalents
                                    
                                    
                                    2,966,746
                                    
                                    
                                    
                                    3,719,558


Cash
      and cash equivalents, beginning balance
                          
                          
                          16,204,531
                          
                          
                          
                          2,671,684Cash
      and cash equivalents, ending balance
                          
                          $
                          19,171,277
                          
                          
                          $
                          6,391,242


SUPPLEMENTAL
      DISCLOSURES:Cash
      paid during the  period for:Interest
      payments
                          
                          $
                          -
                          
                          
                          $
                          36,707Income
      Taxes
                          
                          $
                          1,929,630
                          
                          
                          $
                          691,726





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




9




UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND THE YEAR ENDED DECEMBER 31,
2008


(RESTATED)





Common
      Stock
                                                
                                                
                                                Additional
                                                  Paid
      In
                                                  Capital
                                                
                                                
                                                Other
                                                  Comprehensive
                                                  Income
                                                
                                                
                                                Retained
                                                  Earnings
                                                
                                                
                                                Statutory
                                                  Reserve
                                                
                                                
                                                Total
                                                  Stockholders’
                                                  EquityShares
                                                
                                                
                                                AmountBalance
                                                  December
      31, 2008
                                                
                                                
                                                13,873,969
                                                
                                                
                                                $
                                                13,873
                                                
                                                
                                                $
                                                15,861,116
                                                
                                                
                                                $
                                                1,520,166
                                                
                                                
                                                $
                                                26,633,573
                                                
                                                
                                                $
                                                372,144
                                                
                                                
                                                $
                                                44,400,872Cumulative
      effect of a change in accounting principle-adoption of EITF 07-05
      effective January 1, 2009
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                (2,091,738
                                                )
                                                
                                                
                                                
                                                
                                                
                                                
                                                536,777
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                (1,554,961
                                                )Foreign
      currency translation adjustments
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                34,707
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                34,707Stock
      Based Compensation
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                165,000
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                165,000Income
      for the three months ended March 31, 2009
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                3,381,543
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                3,381,543Balance
      March 31, 2009
                                                
                                                
                                                13,873,969
                                                
                                                
                                                $
                                                13,873
                                                
                                                
                                                $
                                                13,934,378
                                                
                                                
                                                $
                                                1,554,873
                                                
                                                
                                                $
                                                30,551,893
                                                
                                                
                                                $
                                                372,144
                                                
                                                
                                                $
                                                46,427,161Balance
                                                  December
      31, 2007
                                                
                                                
                                                12,270,326
                                                
                                                
                                                $
                                                12,269
                                                
                                                
                                                $
                                                8,626,075
                                                
                                                
                                                $
                                                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
                                                  Financings
                                                
                                                
                                                74,074
                                                
                                                
                                                
                                                74
                                                
                                                
                                                
                                                599,920
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                599,994Equity
                                                  Financings
                                                
                                                
                                                1,529,569
                                                
                                                
                                                
                                                1,530
                                                
                                                
                                                
                                                7,110,970
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                7,112,500Income
      for the year ended December 31, 2008
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                14,532,177
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                14,532,177Balance
      December 31, 2008
                                                
                                                
                                                13,873,969
                                                
                                                
                                                $
                                                13,873
                                                
                                                
                                                $
                                                15,861,116
                                                
                                                
                                                $
                                                1,520,166
                                                
                                                
                                                $
                                                26,633,573
                                                
                                                
                                                $
                                                372,144
                                                
                                                
                                                $
                                                44,400,872





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





10





UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





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.





Translation
Adjustment





As of
March 31, 2009 and December 31, 2008 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.





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.





11





UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)





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.




12





UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





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 $ 219,344 and $210,139 as of March 31, 2009 and December 31, 2008,
respectively.




Description
                      
                      Balance
                        at
                        beginning
                        of
                        year
                      
                      
                      (1) Charged
                        to
                        expenses
                      
                      
                      Deductions
                      
                      
                      Balance at end
                        of periodAllowance
      for doubtful receivables
                      
                      $
                      210,139
                      
                      
                      $
                      9,205
                      
                      
                      $
                      -
                      
                      
                      $
                      219,344





Reverse
Split





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





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





13





UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)





Property, Plant &
Equipment (Continued)





As of
March 31, 2009 and December 31, 2008 Property, Plant & Equipment consist of
the following:





March 31,
                                  2009
                                  (As
                                  restated)
                                
                                
                                December
                                  31, 2008Furniture
      & fixture
                                
                                $
                                18,247
                                
                                
                                $
                                18,247Transportation
      equip
                                
                                
                                183,024
                                
                                
                                
                                183,024Office
      equipment
                                
                                
                                1,629,838
                                
                                
                                
                                369,440Leasehold
      improve
                                
                                
                                31,374
                                
                                
                                
                                31,3741,862,483
                                
                                
                                
                                602,085Accumulated
      depreciation
                                
                                
                                (388,827
                                )
                                
                                
                                (328,745
                                )$
                                1,473,656
                                
                                
                                $
                                273,340





Depreciation
expense for the three months ended March, 31, 2009 and 2008 was $60,082 and
$11,103, respectively, of which $54,074 and $9,993 was included as part of cost
of services for the three months ended March 31, 2009 and 2008,
respectively.





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 7, Purchase of Subsidiary, for additional
information regarding goodwill.





14





UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)





Goodwill
(Continued)





As of
March 31, 2009 and December 31, 2008, Goodwill consists of the
following:





March31,
                          2009(As
                          Restated)
                        
                        
                        December31,
                          2008Shenzhen
      Speedy Dragon Enterprises Ltd.
                        
                        $
                        3,630,539
                        
                        
                        $
                        3,630,539Shanghai
      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 March 31, 2009
and December 31, 2008 there were no significant impairments of its long-lived
assets.





Derivative
Liability





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





15




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)





Derivative Liability
(Continued)





Upon the
Company’s adoption of EITF No. 07-05 on January 1, 2009, the Company
determined that the warrants did not qualify for a scope exception under SFAS
No. 133 as they were determined to not be indexed to the Company’s stock as
prescribed by EITF No. 07-05.  On January 1, 2009, the warrants,
under EITF No. 07-05, were reclassified from equity to derivative liability for
the then relative fair market value of $2,091,738 and marked to market. 
The value of the warrants decreased by $536,776 from the warrants issuance date
to the adoption date of EITF No. 07-05, January 1, 2009.  As of
January 1, 2009, the cumulative effect in adopting EITF No. 07-05 was a
reduction to additional paid in capital of $2,091,738 to reclassify the warrants
from equity to derivative liability and an increase in retained earnings of
$536,776 as a cumulative effect of a change in accounting principle to reflect
the change in the value of the warrants between their issuance date and January
1, 2009.  For the three month period ended March 31, 2009, the Company
recorded a gain on change in fair value of derivative liability of $113,265 to
mark to market for the decrease in fair value of the warrants for the quarter
ended March 31, 2009.  Under EITF 07-05, the warrants will be carried
at fair value and adjusted at each reporting period.





The
Company determined the fair value of the reset provisions at January 1, 2009 was
$1,554,962 as the initial fair value at the adoption date of EITF No.
07-05.  The fair value was determined using the Black Scholes Option
Pricing Model based on the following assumptions:  dividend
yield: 0%; volatility: 136%, risk free rate: 1.55%, expected term: 4.66
years.





The
Company determined the fair value of the reset provisions at March 31, 2009 was
$1,441,697.  The fair value was determined using the Black Scholes
Option Pricing Model based on the following assumptions: dividend yield:
-0-%; volatility: 131%, risk free rate: 1.67%, expected term: 4.41
years.





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.





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.).


16


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Revenue Recognition
(Continued)





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.





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 the 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.




17


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Revenue Recognition
(Continued)





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. For the three months ended March 31, 2009
and 2008, such expenses amounted to $420,934 and $110,011,
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.





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.


18


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





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 $27,201 and
$8,386 for the three months ended March 31, 2009 and 2008, respectively. The
Company will record approximately $108,804, $108,804, and $62,526 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.


19


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Net Income Per Share
(Continued)





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





Three months ended March 31,2009
                  
                  
                  2008Basic
      net income per share:Numerator:Net
      income used in computing basic net income per share
                  
                  $
                  3,381,543
                  
                  
                  $
                  1,463,865Net
      income applicable to common shareholders
                  
                  $
                  3,381,543
                  
                  
                  $
                  1,463,865Denominator:Weighted
      average common shares outstanding
                  
                  
                  13,873,969
                  
                  
                  
                  12,306,715Basic
      net income per share
                  
                  $
                  0.24
                  
                  
                  $
                  0.12Diluted
      net income per share:Numerator:Net
      income used in computing diluted net income per share
                  
                  $
                  3,381,543
                  
                  
                  $
                  1,463,865Net
      income applicable to common shareholders
                  
                  $
                  3,381,543
                  
                  
                  $
                  1,463,865Denominator:Weighted
      average common shares outstanding
                  
                  
                  13,873,969
                  
                  
                  
                  12,306,715Weighted
      average effect of dilutive securities:Stock
      options and warrants
                  
                  
                  11,753
                  
                  
                  
                  -Shares
      used in computing diluted net income per share
                  
                  
                  13,885,722
                  
                  
                  
                  12,306,715Diluted
      net income per share
                  
                  $
                  0.24
                  
                  
                  $
                  0.12





Reclassification





Certain
reclassifications have been made to prior periods’ data to conform with the
current year’s presentation. These reclassifications had no effect on reported
income or losses.




20


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Recent Accounting
Pronouncements





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.The
Company adopted SFAS 160 on January 1, 2009. The adoption of this statement had
no effect on the Company’s consolidated financial statements.





In March
2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The new standard also improves transparency about the location and
amounts of derivative instruments in an entity’s financial statements; how
derivative instruments and related hedged items are accounted for under
Statement 133; and how derivative instruments and related hedged items affect
its financial position, financial performance, and cash flows. Management has
evaluated, the effect of this pronouncement and concluded that it has no
material effect on consolidated financial statements.


21


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





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 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.





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. Based on the Company’s evaluation of this issue, the
adoption of this accounting requirement has a material effect on the Company’s
financial statements, please see note above under “Derivative
Liability”.





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 March 31, 2009
and December 31, 2008 the Company had paid $4,567,822 and $6,737,521 as trade
deposits respectively.


22


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
3 – TRADE DEPOSITS AND
ADVANCES (Continued)





The
following summaries the Company’s deposits outstanding by each of its
subsidiaries and the nature and purpose of each deposit as of March 31, 2009 and
December 31, 2008:





March 31,
                                      2009
                                    
                                    
                                    December 31,
                                      2008Shenzhen
      Yuzhilu Aviation Service Co., Ltd:Deposit
      for 600 sets of 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.
                                    
                                    $
                                    1,948,962
                                    
                                    
                                    $
                                    3,171,851CRM
      System Design.  This was a 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.
                                    
                                    
                                    -
                                    
                                    
                                    
                                    41,216Design
      fee for kiosk. The Company will start amortization at the percentage of
      actual number of kiosk operative over total 600 set of kiosk at the time
      the actual number of kiosk starts operation.
                                    
                                    
                                    69,066
                                    
                                    
                                    
                                    103,479Deposit
      for airlines. This was a credit based for issuing air-tickets, and the
      full amount is returnable if the Company discontinues air-ticket
      business.
                                    
                                    
                                    519,722
                                    
                                    
                                    
                                    674,277Deposit
      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
                                    
                                    
                                    21,656
                                    
                                    
                                    
                                    21,631Deposit
      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.
                                    
                                    
                                    1,097,454
                                    
                                    
                                    
                                    1,096,170Subtotal
                                    
                                    $
                                    3,656,860
                                    
                                    
                                    $
                                    5,108,624Shenzhen
      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.
                                    
                                    
                                    21,949
                                    
                                    
                                    $
                                    21,923Deposit
      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.
                                    
                                    
                                    114,879
                                    
                                    
                                    
                                    114,744Other.
      This was a rental bond for office space, and is returnable when ceasing
      rental
                                    
                                    
                                    29,607
                                    
                                    
                                    
                                    29,572Deposit
      to CAAC. This will be transferred to Annual subscription expenses to
      CAAC.
                                    
                                    
                                    118
                                    
                                    
                                    
                                    118Subtotal
                                    
                                    $
                                    166,553
                                    
                                    
                                    $
                                    166,357




23


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
3 – TRADE DEPOSITS AND
ADVANCES (Continued)





(Continued)
                                  
                                  March 31,
                                    2009
                                  
                                  
                                  December 31,
                                    2008Foshan
      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.
                                  
                                  $
                                  500,932
                                  
                                  
                                  $
                                  632,726Advance
      payment to tour guides for expenses during leading the tour. This will be
      transferred to costs when the tour guide return from tour and provide
      supporting evidence.
                                  
                                  
                                  82,517
                                  
                                  
                                  
                                  230,574Subtotal
                                  
                                  $
                                  583,449
                                  
                                  
                                  $
                                  863,300Xian
      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
                                  
                                  $
                                  102,429
                                  
                                  
                                  $
                                  292,312Deposit
      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.
                                  
                                  
                                  43,898
                                  
                                  
                                  
                                  219,234Deposit
      for transportations.  This was a credit based for co-operate
      transportation  suppliers, and is deductible against
      transportation payments, the balance is returnable when cease doing
      business with these agencies.
                                  
                                  
                                  14,633
                                  
                                  
                                  
                                  87,694Subtotal
                                  
                                  
                                  160,960
                                  
                                  
                                  $
                                  599,240Total
                                  
                                  $
                                  4,567,822
                                  
                                  
                                  $
                                  6,737,521





The
Company has entered into a co-operation agreement with an unrelated company, to
assist that company in their business development by participating in that
business operations and providing working capital funding. As of March 31, 2009
and December 31, 2008 the Company has advanced this company $438,981 and
$438,468 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.


24


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
5 - INCOME
TAXES





The
Company through its subsidiary Shenzhen Yuzhilu 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 provision for income tax expense for the three
months ended March 31, 2009 and 2008.





2009
                  
                  
                  2008Current
                  
                  $
                  1,145,266
                  
                  
                  $
                  380,625Deferred
                  
                  
                  -
                  
                  
                  
                  -Total
                  
                  $
                  1,145,266
                  
                  
                  $
                  380,625





Note 6 -COMMITMENTS




The
Company leases various office facilities under month-to-month arrangements.
Rental expense for leases consisted of $ 94,937 and $83,589 for three months
ended March 31, 2009 and 2008 respectively. The Company has future minimum lease
obligations as of March 31, 2009 as follows:





2010
                  
                  $
                  159,4102011
                  
                  $
                  61,9882012
                  
                  $
                  10,9392013
                  
                  $
                  11,1852014
                  
                  $
                  11,185Thereafter
                  
                  $
                  24,698Total
                  
                  $
                  279,405





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





Note
7 – COMMON
STOCK





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


25


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
7 – COMMON STOCK
(CONTINUED)





Pursuant
to a share exchange agreement, the Company issued 238,095 shares of newly issued
shares of its 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 in aggregate. This amount is included in
the cost of net assets and goodwill purchased.





The stock
consideration consisted of 238,095 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
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 $3,630,359 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 50,588 shares of newly issued
shares of its 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.


26


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
7 – 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 in aggregate. This amount is included in
the cost of net assets and goodwill purchased.





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





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





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 200,000 shares of newly issued
shares of its 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 in aggregate. This amount is included in the
cost of net assets and goodwill purchased.




27


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
7 – COMMON STOCK
(CONTINUED)





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




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





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





Cash
      acquired
                    
                    $
                    28,510Accounts
      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 374,329 shares of newly issued
shares of its Common Stock and a promissory note to the former shareholders of
Foshan Overseas International Travel Service Co., Ltd. The shares were valued at
$ 3,346,500, which was the fair value of the shares at the date of exchange
agreement. This amount is included in the cost of net assets and goodwill
purchased.





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


28





UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
7 – COMMON STOCK
(CONTINUED)





The stock
consideration consisted of 374,329 newly issued shares of the Registrant’s
common stock, immediately before the completion of the Share Exchange
Transaction. The cash consideration consisted of $3,153,000 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.





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 1,529,569 shares of common stock, par value
$0.001 of the Company (“Common Stock”) and warrants to purchase 764,785 shares
of Common Stock for an aggregate purchase price of $7,112,500 (the “Financing”).
(See footnote 2 Derivative Liability)


29


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
8 – STOCK WARRANTS,
OPTIONS, AND COMPENSATION





On
February 4, 2008, under the terms of an equity financing commitment, the Company
issued 74,074 shares of common stock at the closing price of $8.10 per
share.  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 33,333 shares of common stock at the closing price at $ 5.85 per share.
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 33,333 shares of common stock at the closing price at $
8.55 per share. The options are exercisable until June 1, 2017. On June 23,
2008, upon resignation, Board member has forfeited 22,222 options.





On
December 7, 2007, the Company issued, to another newly appointed Board member,
an option grant to purchase 33,333 shares of common stock at the closing price
of $ 11.25 per share. The options are exercisable until November 1, 2017. 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 22,222 options.





On June
24, 2008, the Company issued, to another newly appointed Board member, an option
grant to purchase 33,333 shares of common stock at the closing price of $ 4.56
per share. 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.





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 2,200,000 shares of common stock of
Universal Travel Group, par value $0.001 to certain employees of the Company
either as stock or stock options, and the subsequent exercise of any stock
options.  The options are exercisable until January 19, 2019, with a
vesting period of six years. Average purchase price for the options is $3.73 per
share.





Three months
                    endedMarch 31, 2009Expected
      Volatility
                  
                  
                  
                  
                  
                  
                  87.09
                  %Expected
      term (in years)Richard
      P. Randall
                  
                  
                  
                  
                  
                  
                  8.25James
      Treacy
                  
                  
                  
                  
                  
                  
                  8.25Yizhao
      Zhang
                  
                  
                  
                  
                  
                  
                  9.25Jiangping
      Jiang
                  
                  
                  
                  
                  
                  
                  10.00Others
                  
                  
                  
                  
                  
                  
                  10.00Expected
      dividends
                  
                  
                  
                  
                  
                  
                  -Risk-free
      rate of return (weighted average)
                  
                  
                  
                  
                  
                  
                  2.71
                  %Weighted
      average grant-date fair value
                  
                  $
                  2.77
                  
                  
                  Range    $ 2.67-11.25




30


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
8 – STOCK WARRANTS,
OPTIONS, AND COMPENSATION (CONTINUED)





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 $165,000 for the three months ending March 31,
2009.





AggregateExercise
                    
                    
                    Remaining
                    
                    
                    IntrinsicTotal
                    
                    
                    Price
                    
                    
                    Life
                    
                    
                    ValueOutstanding,
      December 31, 2008
                    
                    
                    55,555
                    
                    
                    $
                    4.56-11.25
                    
                    
                    8.25-9.75yrs
                    
                    
                    
                    -Granted
      in 2009
                    
                    
                    2,200,000
                    
                    
                    $
                    2.70-3.84
                    
                    
                    10yrs
                    
                    
                    
                    -Exercised
      in 2008
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Outstanding,
      March 31, 2009
                    
                    
                    2,255,555
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -





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





Note
9 - OTHER
COMPREHENSIVE INCOME





Balances
of related after-tax components comprising accumulated other comprehensive
income, included in stockholders equity, at March 31, 2009  and
December 31, 2008 are as follows:





Foreign
      CurrencyTranslationAdjustment
                        
                        
                        AccumulatedOtherComprehensiveIncomeBalance
      December 31, 2007
                        
                        
                        545,164
                        
                        
                        
                        545,164Changes
      for year ended December 31, 2008
                        
                        
                        975,002
                        
                        
                        
                        975,002Balance
      December 31, 2008
                        
                        $
                        1,520,166
                        
                        
                        $
                        1,520,166Changes
      for three months  ended March 31, 2009
                        
                        
                        34,707
                        
                        
                        
                        34,707Balance
      at March 31, 2009
                        
                        $
                        1,554,873
                        
                        
                        $
                        1,554,873




31


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
10 - CURRENT
VULNERABILITY DUE TO CERTAIN RISK FACTORS





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





Note
11 – MAJOR CUSTOMERS
AND CREDIT RISK





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





Note 12 –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. As of September 30, 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.


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 Chief
Executive Officer of the Company and the representative of the Buyers designated
in the Escrow Agreement following the engagement of a Chief Financial Officer.
During the three months ended March 31. 2009, $600,000 was released from escrow
to the Company’s checking account.





Note
13 -   SEGMENT
INFORMATION





We
separately operate and prepare accounting and other financial reports to
management for five major business organizations (Shenzhen Yuzhilu Aviation
Service Co., Ltd., Shenzhen Speedy Dragon Enterprises Limited, Shanghai Lanbao
Travel Service Co., Ltd., Foshan International Travel Service Co., Ltd., and
Xian Golden Net Travel Serve Services. The Company uses the management approach
of segment reporting. Pursuant to the SFAS 131 they disclose segments on a
single basis, which in their case is the legal entity. Our air-ticketing segment
relates to the segment reporting of Shenzhen Yuzhilu Aviation Service Co., Ltd.,
cargo agency segment relates to the segment reporting of Shenzhen Speedy Dragon
Enterprises Limited, hotel reservation segment relates to Shanghai Lanbao Travel
Service Co., Ltd, packaged tours segment relates to Foshan International Travel
Service Co., Ltd and Xi’an Golden Net Travel Serve Service Company Limited.
Management monitors these segments regularly to make decisions about
resources to be allocated to the segment and assess its
performance.




32


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





Note
13 -   SEGMENT INFORMATION
(CONTINUED)





The
following tables’ present summarized information by segment and by
subsidiaries:




Three Months Ended March 31, 2009Shenzhen
                                                                                    Yuzhilu
                                                                                    Aviation
                                                                                    Service
                                                                                    Co., Ltd.
                                                                                    (Air -ticketing)
                                                                                  
                                                                                  
                                                                                  Shenzhen
                                                                                    Speedy
                                                                                    Dragon
                                                                                    Enterprises
                                                                                    Limited
                                                                                    (Air Cargo)
                                                                                  
                                                                                  
                                                                                  Shanghai
                                                                                    Lanboa
                                                                                    Travel
                                                                                    Service
                                                                                    Co., Ltd.
                                                                                    (Hotel
                                                                                    Reservation)
                                                                                  
                                                                                  
                                                                                  Foshan
                                                                                    International
                                                                                    Travel Service
                                                                                    Co., Ltd.
                                                                                    (Packaged
                                                                                    Tours)
                                                                                  
                                                                                  
                                                                                  Xian
                                                                                    Golden Net
                                                                                    Travel
                                                                                    Serve
                                                                                    Services
                                                                                    (Pachaged
                                                                                    Tours)
                                                                                  
                                                                                  
                                                                                  Other
                                                                                    (Corporate
                                                                                    Expenses)
                                                                                  
                                                                                  
                                                                                  TotalSales, net
                                                                                  
                                                                                  $
                                                                                  2,751,128
                                                                                  
                                                                                  
                                                                                  $
                                                                                  1,858,999
                                                                                  
                                                                                  
                                                                                  $
                                                                                  2,516,831
                                                                                  
                                                                                  
                                                                                  $
                                                                                  6,586,427
                                                                                  
                                                                                  
                                                                                  $
                                                                                  3,656,293
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  17,369,678Cost
      of sales
                                                                                  
                                                                                  $
                                                                                  302,806
                                                                                  
                                                                                  
                                                                                  $
                                                                                  1,604,303
                                                                                  
                                                                                  
                                                                                  $
                                                                                  773,463
                                                                                  
                                                                                  
                                                                                  $
                                                                                  5,555,409
                                                                                  
                                                                                  
                                                                                  $
                                                                                  3,107,192
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  11,343,173Gross
      profit
                                                                                  
                                                                                  $
                                                                                  2,448,322
                                                                                  
                                                                                  
                                                                                  $
                                                                                  254,696
                                                                                  
                                                                                  
                                                                                  $
                                                                                  1,743,368
                                                                                  
                                                                                  
                                                                                  $
                                                                                  1,031,018
                                                                                  
                                                                                  
                                                                                  $
                                                                                  549,101
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  6,026,505Income
      from operations
                                                                                  
                                                                                  $
                                                                                  1,574,790
                                                                                  
                                                                                  
                                                                                  $
                                                                                  144,887
                                                                                  
                                                                                  
                                                                                  $
                                                                                  1,699,296
                                                                                  
                                                                                  
                                                                                  $
                                                                                  890,717
                                                                                  
                                                                                  
                                                                                  $
                                                                                  495,144
                                                                                  
                                                                                  
                                                                                  $
                                                                                  (420,934
                                                                                  )
                                                                                  
                                                                                  $
                                                                                  4,383,900Depreciation&
      Amortization
                                                                                  
                                                                                  $
                                                                                  79,629
                                                                                  
                                                                                  
                                                                                  $
                                                                                  2,627
                                                                                  
                                                                                  
                                                                                  $
                                                                                  1,061
                                                                                  
                                                                                  
                                                                                  $
                                                                                  3,762
                                                                                  
                                                                                  
                                                                                  $
                                                                                  204
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  87,283Asset
      Expenditures
                                                                                  
                                                                                  $
                                                                                  1,260,398
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  1,260,398Total
      assets
                                                                                  
                                                                                  $
                                                                                  28,210,039
                                                                                  
                                                                                  
                                                                                  $
                                                                                  3,177,337
                                                                                  
                                                                                  
                                                                                  $
                                                                                  8,294,048
                                                                                  
                                                                                  
                                                                                  $
                                                                                  6,140,964
                                                                                  
                                                                                  
                                                                                  $
                                                                                  4,406,897
                                                                                  
                                                                                  
                                                                                  $
                                                                                  2,933,005
                                                                                  
                                                                                  
                                                                                  $
                                                                                  53,162,290Three Months Ended March 31, 2008Sales,
      net
                                                                                  
                                                                                  $
                                                                                  1,428,880
                                                                                  
                                                                                  
                                                                                  $
                                                                                  3,123,926
                                                                                  
                                                                                  
                                                                                  $
                                                                                  612,477
                                                                                  
                                                                                  
                                                                                  $
                                                                                  3,090,563
                                                                                  
                                                                                  
                                                                                  $
                                                                                  1,820,458
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  10,076,304Cost
      of sales
                                                                                  
                                                                                  $
                                                                                  172,930
                                                                                  
                                                                                  
                                                                                  $
                                                                                  2,608,620
                                                                                  
                                                                                  
                                                                                  $
                                                                                  250,919
                                                                                  
                                                                                  
                                                                                  $
                                                                                  2,724,983
                                                                                  
                                                                                  
                                                                                  $
                                                                                  1,630,982
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  7,388,434Gross
      profit
                                                                                  
                                                                                  $
                                                                                  1,255,950
                                                                                  
                                                                                  
                                                                                  $
                                                                                  515,305
                                                                                  
                                                                                  
                                                                                  $
                                                                                  361,558
                                                                                  
                                                                                  
                                                                                  $
                                                                                  365,580
                                                                                  
                                                                                  
                                                                                  $
                                                                                  189,476
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  2,687,870Income
      from operations
                                                                                  
                                                                                  $
                                                                                  910,360
                                                                                  
                                                                                  
                                                                                  $
                                                                                  353,693
                                                                                  
                                                                                  
                                                                                  $
                                                                                  343,607
                                                                                  
                                                                                  
                                                                                  $
                                                                                  231,276
                                                                                  
                                                                                  
                                                                                  $
                                                                                  149,087
                                                                                  
                                                                                  
                                                                                  $
                                                                                  (110,011
                                                                                  )
                                                                                  
                                                                                  $
                                                                                  1,878,012Depreciation
      & Amortization
                                                                                  
                                                                                  $
                                                                                  12,200
                                                                                  
                                                                                  
                                                                                  $
                                                                                  2,510
                                                                                  
                                                                                  
                                                                                  $
                                                                                  1,111
                                                                                  
                                                                                  
                                                                                  $
                                                                                  3,668
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  19,489Asset
      Expenditures
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  5,647
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  -
                                                                                  
                                                                                  
                                                                                  $
                                                                                  5,647Total
      assets
                                                                                  
                                                                                  $
                                                                                  18,019,415
                                                                                  
                                                                                  
                                                                                  $
                                                                                  2,743,779
                                                                                  
                                                                                  
                                                                                  $
                                                                                  2,789,517
                                                                                  
                                                                                  
                                                                                  $
                                                                                  4,173,970
                                                                                  
                                                                                  
                                                                                  $
                                                                                  2,211,433
                                                                                  
                                                                                  
                                                                                  $
                                                                                  573,425
                                                                                  
                                                                                  
                                                                                  $
                                                                                  30,511,539




NOTE
14 – RESTATEMENTAND RECLASSIFICATION OF
FINANCIAL
STATEMENTS





The
Company has restated its consolidated financial statements of the period ended
March 31, 2009 to correct the following errors in the consolidated financial
statements previously filed:





·
            The
      Company omitted the accounting for a derivative liability upon the
      adoption of EITF 07-5 effective January 1, 2009, and the subsequent
      accounting for the changes in the associated liability from the marked to
      market.


·
            The
      Company erroneously used pre-reverse stock split exercise prices of its
      outstanding options and warrants in its dilutive weighted average common
      shares computation.


33


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





NOTE
14 – RESTATEMENTAND RECLASSIFICATION OF
FINANCIAL
STATEMENTS (CONTINUED)





·
              The
      net effect of the correction of the errors was
  to:




·
            Increase
      the Company’s reported total liabilities as of March 31, 2009 by
      $1,441,697 from $0 to $1,441,697.


·
            Decrease
      the Company’s reported additional paid in capital as of March 31, 2009 by
      $2,091,738 from $16,026,116 to $13,934,378 resulting from the cumulative
      effect of a change in accounting principle adoption of EITF 07-05
      effective January 1, 2009.


·
            Increase
      the Company’s reported net incomes for the three months ended March 31,
      2009 by $113,265 from $3,268,278 to
$3,381,543.


·
            Increase
      the Company’s reported retained earnings as of March 31, 2009 by $650,041
      from $29,901,852 to $30,551,893.


·
            Decrease
      the dilutive weighted average common shares outstanding by 1,754,913
      shares from 15,640,635 to 13,885,722
shares.


·
            Increase
      the dilutive net income per common share by $0.03 from $0.21 to
      $0.24.





The
Company also has reclassified and included all costs directly associated with
the generation of revenue in its cost of services. These costs were erroneously
classified as selling, general, and administrative expenses in the consolidated
financial statements previously filed.  This reclassification has
resulted in no change in the Company’s reported Consolidated Balance Sheet as of
March 31, 2009 and Consolidated Statement of Cash Flows for the three months
ended March 31, 2009.  The reclassification did affect the individual
components of the Company’s cost of services and selling, general and
administrative expenses as reported on its Consolidated Statement of Income for
the three months ended March 31, 2009.  However, this reclassification
had no effect on the reported consolidated net income.  Costs of
services that were reclassified from the Company’s selling, general, and
administrative expenses amounted to $322,274 and $155,676 for the three month
periods ended March 31, 2009 and 2008, respectively.





Following
are reconciliations of the Company’s restatement and reclassification of the
Consolidated Balance Sheet as of March 31, 2009 and Consolidated Statement of
Income for the three months ended March 31, 2009.




34





CONSOLIDATED
BALANCE SHEET


MARCH
31, 2009





As Reported
                  
                  
                  Net Change
                  
                  
                  As RestatedASSETSCurrent
      AssetsCash
      and cash equivalents
                  
                  $
                  19,171,277
                  
                  
                  
                  
                  
                  $
                  19,171,277Accounts
      receivable, net
                  
                  
                  12,913,177
                  
                  
                  
                  
                  
                  
                  12,913,177Other
      and deposits, net
                  
                  
                  431,979
                  
                  
                  
                  
                  
                  
                  431,979Trade
      deposit
                  
                  
                  4,567,822
                  
                  
                  
                  
                  
                  
                  4,567,822Advances
                  
                  
                  438,981
                  
                  
                  
                  
                  
                  
                  438,981Escrow
      deposits
                  
                  
                  162,301
                  
                  
                  
                  
                  
                  
                  162,301Prepaid
      expenses
                  
                  
                  196,154
                  
                  
                  
                  
                  
                  
                  196,154Total
      Current Assets
                  
                  
                  37,881,691
                  
                  
                  
                  
                  
                  
                  37,881,691Property
      & equipment, net
                  
                  
                  1,473,656
                  
                  
                  
                  
                  
                  
                  1,473,656Intangible
      assets
                  
                  
                  280,134
                  
                  
                  
                  
                  
                  
                  280,134Goodwill
                  
                  
                  13,526,809
                  
                  
                  
                  
                  
                  
                  13,526,80915,280,599
                  
                  
                  
                  
                  
                  
                  15,280,599Total
      Assets
                  
                  $
                  53,162,290
                  
                  
                  
                  
                  
                  $
                  53,162,290LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable and accrued expenses
                  
                  $
                  2,912,427
                  
                  
                  
                  
                  
                  $
                  2,912,427Customer
      deposits
                  
                  
                  1,405,967
                  
                  
                  
                  
                  
                  
                  1,405,967Income
      tax payable
                  
                  
                  975,038
                  
                  
                  
                  
                  
                  
                  975,038Total
      Current Liabilities
                  
                  
                  5,293,432
                  
                  
                  
                  
                  
                  
                  5,293,432Derivative
      Liability
                  
                  $
                  -
                  
                  
                  
                  1,441,697
                  
                  
                  $
                  1,441,697Stockholders'
      EquityCommon
      stock
                  
                  
                  13,873
                  
                  
                  
                  
                  
                  
                  
                  13,873Additional
      paid in capital
                  
                  
                  16,026,116
                  
                  
                  
                  (2,091,738
                  )
                  
                  
                  13,934,378Other
      comprehensive income
                  
                  
                  1,554,873
                  
                  
                  
                  
                  
                  
                  
                  1,554,873Statutory
      reserve
                  
                  
                  372,144
                  
                  
                  
                  
                  
                  
                  
                  372,144Retained
      earnings
                  
                  
                  29,901,852
                  
                  
                  
                  650,041
                  
                  
                  
                  30,551,893Total
      Stockholders' Equity
                  
                  
                  47,868,857
                  
                  
                  
                  (1,441,697
                  )
                  
                  
                  46,427,161Total
      Liabilities and Stockholders' Equity
                  
                  $
                  53,162,290
                  
                  
                  
                  
                  
                  
                  $
                  53,162,290


35


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009


(UNAUDITED
AND RESTATED)





NOTE
14 – RESTATEMENTAND RECLASSIFICATION OF
FINANCIAL
STATEMENTS (CONTINUED)





CONSOLIDATED
STATEMENT OF INCOME


FOR
THE THREE MONTHS ENDED MARCH 31, 2009





As Reported
                                
                                
                                Net Change
                                
                                
                                As restatedGross
      revenues,
                                
                                $
                                17,369,678
                                
                                
                                
                                
                                
                                $
                                17,369,678Cost
      of services
                                
                                
                                11,020,899
                                
                                
                                
                                322,274
                                
                                
                                
                                11,343,173Gross
      Profit
                                
                                
                                6,348,779
                                
                                
                                
                                (322,274
                                )
                                
                                
                                6,026,505Selling,
      general and administrative expenses
                                
                                
                                1,964,879
                                
                                
                                
                                (322,274
                                )
                                
                                
                                1,642,605Income
      from operations
                                
                                
                                4,383,900
                                
                                
                                
                                
                                
                                
                                
                                4,383,900Other
      Income (Expense)Other
      income
                                
                                
                                3,828
                                
                                
                                
                                
                                
                                
                                
                                3,828Unrealized
      gain on derivative liability
                                
                                
                                -
                                
                                
                                
                                113,265
                                
                                
                                
                                113,265Interest
      income
                                
                                
                                25,816
                                
                                
                                
                                
                                
                                
                                
                                25,816Total
      Other Income (Expense)
                                
                                
                                29,644
                                
                                
                                
                                113,265
                                
                                
                                
                                142,909Income
      before income taxes
                                
                                
                                4,413,544
                                
                                
                                
                                113,265
                                
                                
                                
                                4,526,809Provision
      for income taxes
                                
                                
                                1,145,266
                                
                                
                                
                                
                                
                                
                                
                                1,145,266Net
      income
                                
                                $
                                3,268,278
                                
                                
                                
                                113,265
                                
                                
                                $
                                3,381,543Net
      Income per common share:Basic
                                
                                $
                                0.24
                                
                                
                                
                                
                                
                                
                                $
                                0.24Dilutive
                                
                                $
                                0.21
                                
                                
                                
                                0.03
                                
                                
                                $
                                0.24





The
correction of the errors has resulted in no net change in the net cash provided
by or used in the operating activities, investing activities, and financing
activities on the Company’s reported Consolidated Statement of Cash Flows for
the three months ended March 31, 2009.





Note
15 -   SUBSEQUENT
EVENTS





On April
14, 2009 the Company filed form 8-A to register its common stock, $0.001 par
value, under Section 12(b) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) and the listing of Common Stock on the NYSE Amex (formerly
known as the American Stock Exchange LLC). The Common Stock had been registered
under Section 12(g) of the Exchange Act.


36





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


Forward-Looking
Statements: No Assurances Intended




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





Business
Overview





We are a
travel services provider in the People’s Republic of China and are engaged in
providing reservation, booking, and domestic and international travel and
tourism services throughout the People’s Republic of China via the internet and
through customer representatives.





Under the
theme "Wings towards a more
colorful life", our core services include tour packaging, booking
services for air tickets and hotels as well as air cargo agency.





In 2007,
we completed the acquisitions of Speedy Dragon, specializing in air cargo
agency; Xi'an Golden Net, specializing in travel packaged tours; Shanghai
LanBao, specializing in hotel reservations and Foshan Overseas International, a
PRC-based company that handles both domestic and international travel
inquiries.





Our goal
is to become the foremost leading online travel services provider in all fields
of the tourism industry including the aviation service, cargo agency, hotel
booking and tour packaging segments in the People’s Republic of
China.





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 Overall 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 economy and demand for travel services in the People’s Republic of China and
the rest of the world.





According
to the statistics from the website of National Bureau of Statistics of China, in
April 2009, the People’s Republic of China’s first quarter gross domestic
product (or “GDP”) grew to US$960 billion(RMB6.574 trillion), representing a
6.1% growth year over year.


37




According
to the statistics from the website of National Tourism Administration of
People's Republic of China in April 2009, domestic tourism spending grew to
US$41.4billion (approximately RMB283.4 billion), representing a 12.9% growth
year over year.





According
to the statistics from the website of Civil Aviation Administration of
China:




·
            domestic air passenger
      transportation volume grew 19.1% in the first 2 months 2009 compared to
      2008;





·
            domestic cargo transportation
      volume dropped 12.2% in the first 2 months 2009 compared to
      2008;




Subject
to slight fluctuations, we believe that demand for travel services in the
People’s Republic of China will continue to increase in the foreseeable future
as the economy in the People’s Republic of China continues to grow. However, any
adverse changes in economic conditions of the People’s Republic of China and the
rest of the world, such as a slow-down of the Chinese economy, could have a
material and adverse effect on the travel industry in the People’s Republic of
China, which in turn would adversely affect our business.





(ii)
            Seasonality
      in the Travel Service Industry.





The
travel service industry is characterized by seasonal fluctuations and
accordingly our revenue may vary from quarter to quarter. To date, revenue
generated during the summer season of each year generally is higher than those
generated during the winter season, mainly because the summer season coincides
with the domestic peak business and leisure travel season. By contrast, the
winter season includes the Chinese New Year holiday, during which our customers
reduce their business activities.




These
seasonal trends are difficult to discern in our historical results because our
revenue structure has changed due to our expansion over the years into more
diversified fields and our revenue have grown substantially since
inception.





However,
the impact of seasonal fluctuations in the travel industry is likely to have a
more apparent impact on our future results.





(iii)
            Disruptions
      in the Travel Industry.





Because
the travel industry is sensitive to the weather, events and seasons, travelers
tend to modify their travel plans according to such factors.





Examples
of some events which affected our travel industry this year are:





·
            the snow storms which
      affected the People’s Republic of China during the Spring Festival last
      year;


·
            the Olympics in August 2008 which
      led to an increase in prices for hotels, airline and other travel-related
      costs and accordingly, a similar increase in travel
      products;


·
            the earthquakes in May 2008 which
      affected travel in the Sichuan
area;


·
            the threat of terrorist attacks
      and increased security over international events, such as the Olympics,
      which affected our cargo agency business;
  and


·
            a downturn in international
      economies such as in the United
States.


38




RESULTS
OF OPERATIONS




THREE
MONTHS ENDED MARCH 31 2009 AND 2008




The
following table presents certain consolidated statement of operations
information derived from the consolidated statements of income for three months
ended March 31, 2009 and same period 2008.




Revenue Segment
Analysis





Three months ended
                                  March 31, 2009
                                
                                
                                Three months ended
                                  March 31, 2008
                                
                                
                                Increase /
                                  Decrease
                                
                                
                                PercentageGross
      Revenues
                                
                                $
                                17,369,678
                                
                                
                                $
                                10,076,304
                                
                                
                                $
                                7,293,374
                                
                                
                                
                                72.4
                                %Cost
      of Services
                                
                                
                                (11,343,173
                                )
                                
                                
                                (7,388,434
                                )
                                
                                
                                (3,954,739
                                )
                                
                                
                                53.5
                                %Gross
      Profit
                                
                                
                                6,026,505
                                
                                
                                
                                2,687,870
                                
                                
                                
                                3,338,635
                                
                                
                                
                                124.2
                                %SG&A
                                
                                
                                (1,642,605
                                )
                                
                                
                                (809,858
                                )
                                
                                
                                (832,747
                                )
                                
                                
                                102.8
                                %Income
      from Operations
                                
                                
                                4,383,900
                                
                                
                                
                                1,878,012
                                
                                
                                
                                2,505,888
                                
                                
                                
                                133.4
                                %Loss
      on asset disposal
                                
                                -
                                
                                
                                
                                (1,104
                                )
                                
                                
                                1,104
                                
                                
                                
                                -100.0
                                %Other
      income
                                
                                
                                3,828
                                
                                
                                
                                2,874
                                
                                
                                
                                954
                                
                                
                                
                                33.2
                                %Unrealized
      gain on derivative liability
                                
                                
                                113,265
                                
                                
                                -
                                
                                
                                
                                113,265
                                
                                
                                -Interest
      income
                                
                                
                                25,816
                                
                                
                                
                                1,415
                                
                                
                                
                                24,401
                                
                                
                                
                                1724.5
                                %Interest
      expenses
                                
                                -
                                
                                
                                
                                (36,707
                                )
                                
                                
                                36,707
                                
                                
                                
                                -100.0
                                %Provision
      for income taxes
                                
                                
                                (1,145,266
                                )
                                
                                
                                (380,625
                                )
                                
                                
                                (764,641
                                )
                                
                                
                                200.9
                                %Net
      income
                                
                                $
                                3,381,543
                                
                                
                                $
                                1,463,865
                                
                                
                                $
                                1,917,678
                                
                                
                                
                                131.0
                                %




For
      the three months ended March 31, 2009:Revenue
      Segment
              
              Air-tickets
              
              
              (%)
      of
              
              
              Cargo
              
              
              (%)
      of
              
              
              Hotel
              
              
              (%)
      of
              
              
              Tours
              
              
              (%)
      of
              
              
              TotalAnalysis:
              
              (YZL)
              
              
              sector
              
              
              (SSD)
              
              
              sector
              
              
              (SLB)
              
              
              sector
              
              
              (XGN
      & FOI)
              
              
              sectorRevenue
              
              
              2,751,128
              
              
              
              15.84
              %
              
              
              1,858,999
              
              
              
              10.70
              %
              
              
              2,516,831
              
              
              
              14.49
              %
              
              
              10,242,720
              
              
              
              58.97
              %
              
              
              17,369,678Cost
      of Services
              
              
              302,806
              
              
              
              2.67
              %
              
              
              1,604,303
              
              
              
              14.14
              %
              
              
              773,463
              
              
              
              6.82
              %
              
              
              8,662,601
              
              
              
              76.37
              %
              
              
              11,343,173Gross
      Profit
              
              
              2,448,322
              
              
              
              40.63
              %
              
              
              254,696
              
              
              
              4.23
              %
              
              
              1,743,368
              
              
              
              28.93
              %
              
              
              1,580,119
              
              
              
              26.22
              %
              
              
              6,026,505Gross
      Margin
              
              
              88.99
              %
              
              
              -
              
              
              
              13.70
              %
              
              
              -
              
              
              
              69.27
              %
              
              
              -
              
              
              
              15.43
              %
              
              
              -
              
              
              
              34.70
              %Segment
      effect in
      Gross Margin (*)
              
              
              14.10
              %
              
              
              -
              
              
              
              1.47
              %
              
              
              -
              
              
              
              10.04
              %
              
              
              -
              
              
              
              9.10
              %
              
              
              -
              
              
              
              34.70
              %




For
      the three months ended March 31, 2008:Revenue
      Segment
              
              Air-tickets
              
              
              (%)
      of
              
              
              Cargo
              
              
              (%)
      of
              
              
              Hotel
              
              
              (%)
      of
              
              
              Tours
              
              
              (%)
      of
              
              
              TotalAnalysis:
              
              (YZL)
              
              
              sector
              
              
              (SSD)
              
              
              sector
              
              
              (SLB)
              
              
              sector
              
              
              (XGN
      & FOI)
              
              
              sectorRevenue
              
              
              1,428,880
              
              
              
              14.18
              %
              
              
              3,123,926
              
              
              
              31.00
              %
              
              
              612,477
              
              
              
              6.08
              %
              
              
              4,911,021
              
              
              
              48.74
              %
              
              
              10,076,304Cost
      of Services
              
              
              172,930
              
              
              
              2.34
              %
              
              
              2,608,620
              
              
              
              35.31
              %
              
              
              250,919
              
              
              
              3.40
              %
              
              
              4,355,965
              
              
              
              58.96
              %
              
              
              7,388,434Gross
      Profit
              
              
              1,255,950
              
              
              
              46.73
              %
              
              
              515,306
              
              
              
              19.17
              %
              
              
              361,558
              
              
              
              13.45
              %
              
              
              555,056
              
              
              
              20.65
              %
              
              
              2,687,870Gross
      Margin
              
              
              87.90
              %
              
              
              -
              
              
              
              16.50
              %
              
              
              -
              
              
              
              59.03
              %
              
              
              -
              
              
              
              11.30
              %
              
              
              -
              
              
              
              26.68
              %Segment
      effect in Gross Margin (*)
              
              
              12.46
              %
              
              
              -
              
              
              
              5.11
              %
              
              
              -
              
              
              
              3.59
              %
              
              
              -
              
              
              
              5.51
              %
              
              
              -
              
              
              
              26.68
              %




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





Revenue





Our
air-ticketing segment relates to the segment reporting of Shenzhen Yuzhilu
Aviation Service Co., Ltd., cargo agency segment relates to the segment
reporting of Shenzhen Speedy Dragon Enterprises Limited, hotel reservation
segment relates to Shanghai Lanbao Travel Service Co., Ltd, packaged tours
segment relates to Foshan International Travel Service Co., Ltd and Xi’an Golden
Net Travel Serve Service Company Limited.


39




Revenue
for the three months ended March 31, 2009 were $17,369,678 compared to
$10,076,304 for the same period 2008, an increase of approximately
72.4%.  The increase in revenue was due to the improved weather
condition in the first quarter 2009 as compared to the heavy snow storm
that struck most area of China last year. The growth in revenue was
further supported by the Chinese government's economic stimulus plans, the
creation of new holiday policy to include a 3-day public holiday – the
"April Tomb-sweeping Day", the successful introduction of our TRIPEASY Kiosks,
and increased brand awareness.





Revenue
from air-ticketing was $2,751,128 for the three months ended March 31, 2009
compared to $1,428,880for the same period last year, an increase of
approximately 92.5%. This increase is due to: 1) the result of our continuous
search for new distribution channels and end-consumers, leading to not only an
increase in club members but also an increase in our agents; 2) we formed
partnerships with premium agents and obtained higher commissions from many
airlines; 3) 15.3% growth of the air passenger transport industry in the
previous two months, and the 19.1% increase in domestic
flights.




Revenue
generated by cargo agency for the three months ended March 31, 2009 was
$1,858,999 compared to $3,123,926 for the same period 2008, a decrease of
approximately 40.5%. This decrease is due to reduced cargo volume as a result of
the global finance crisis, where the overall industry fell by 16.6%. We
foresee that there will be further contraction in the domestic and international
air cargo business in light of the current global economic
crisis.  However we anticipate continued profitability in such a
challenging environment in the short to medium term but will continually adapt
and strategize to counteract the effects of such a negative
environment.




Revenue
generated by hotel reservation for the three months ended March 31, 2009 was
$2,516,831compared to $612,477 for the same period 2008, an increase of
approximately 310.9%. This increase is due to the successful cross marketing and
selling strategy within the Company's service chain, and increased brand
awareness.





Revenue
generated by packaged tours for the three months ended March 31, 2009 was
$10,242,720 compared to $4,911,021for the same period 2008, an increase of
approximately 108.6%. This increase is primarily due to the tremendous growth of
the domestic travel industry. First quarter travelers reached 560 million,
and tourism income receipt grew by 12.9%. This was further enhanced by the
successful integration within our travel service chain, expansion of businesses
lines, and increased brand awareness.




Costs 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 13) and these expenses were included in the selling, general, and
administrative expenses.


40




Gross
Profit
  Gross
profit for the three months ended March 31, 2009 was $6,026,505 compared to
$2,687,870 for the three months ended March 31, 2008, an increase of
approximately 124.2%. 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 TRIPEASYKiosks, which have relatively lower variable costs associated with
it.




Gross
profit in air-ticketing was $2,448,322 for the three months ended March 31, 2009
compared to $1,255,950 for the same period last year, an increase of
approximately 94.5%.  Gross profit margin in this segment for the
three months ended March 31, 2009 was 89.0% compared to 87.9% for the same
period 2008.  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 $254,696 for the three months ended March 31,
2009 compared to $515,306 for the same period last year, a decrease of
approximately 50.6%.  Gross profit margin in this segment for the
three months ended March 31, 2009 was 13.7% compared to 16.5% for the same
period 2008, a decrease of approximately 2.8%. 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 $1,743,368 for the three months ended March 31,
2009 compared to $361,558 for the same period last year, an increase of
approximately 382.2%. Gross profit margin in this segment for the three months
ended March 31, 2009 was 69.3% compared to 59.0% for the same period 2008, an
increase of approximately 10.3%. 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 SLB.





Gross
profit in packaged travel was $1,580,119 for the three months ended March 31,
2009 compared to $555,056 for the same period 2008, an increase of approximately
184.7%. Gross profit margin in this segment for the three months ended March 31,
2009 was 15.4% compared to 11.3% for the same period 2008, an increase of
approximately 4.1%. The gross profit margin increase was mainly due to the
increase in revenue as a result of significant increased packaged tour volume
while our associated costs of meals, transportations, lodging, and tickets
to local attractions and tours services increased at a lesser extent. These
factors together resulted in the significant increase in the gross profit of XGN
and FOI.





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 variable and fixed
overheads.





Consolidated
gross margin for the three months ended March 31, 2009 came in at 34.7%, a 8.0%
increase from the 26.7% 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 1.6%, gross profit for air cargo agency reduced the total gross
margin by 3.6%, gross profit for hotel reservations improved the total gross
margin by 6.4%, gross profit for packaged travel improved the total gross margin
by 3.6%, which in total, increased the total gross profit by
8.0%.


41




Selling, General and
Administrative Expenses




Major
selling, general, and administrative expenses for the three months ended March
31, 2009 and 2008 are as follows:





ForthethreemonthsendedMarch31,2009
                  
                  
                  2008Business
      related tax
                  
                  $
                  102,058
                  
                  
                  $
                  63,594Salary
      and commission
                  
                  
                  749,683
                  
                  
                  
                  398,091Marketing
                  
                  
                  38,347
                  
                  
                  
                  29,541Rent
                  
                  
                  53,458
                  
                  
                  
                  42,468Depreciation
      and amortization
                  
                  
                  8,728
                  
                  
                  
                  1,949Professional
      fees
                  
                  
                  255,934
                  
                  
                  
                  28,168Stock-based
      compensation
                  
                  
                  165,000
                  
                  
                  
                  110,011Other
      general and administrative expenses
                  
                  
                  269,397
                  
                  
                  
                  136,036Total
                  
                  $
                  1,642,605
                  
                  
                  $
                  809,858





Selling,
general and administrative expenses for three months ended March 31, 2009
totaled $1,642,605 compared to $809,858 for three months ended March 31, 2008,
an increase of approximately 102.8%.




Selling,
general and administrative expenses were approximately 9.5% of revenue for three
months ended March 31, 2009 as compared to 8.0% for three months ended March 31,
2008.




The
increase in selling, general and administrative expenses reflects the expansion
in our businesses and the increase in selling, general and administrative
expenses as a percentage of revenue reflects the increased effort to increase
company awareness in both our operations and capital
market segments.





Stock-based
compensation reflects options issued as a result of our 2009 stock option
incentive plan executed on January 20, 2009.





Other Income
(Expenses)





Interest
expense for three months ended March 31, 2009 totaled $0 compared to $36,707 for
three months ended March 31, 2008. The decrease in interest expense reflects the
fact that we paid off all our bank loans in July 2008 and our ability to manage
our cash flow.




Unrealized
gain on derivative liability for the three months ended March 31, 2009 was
$113,265 compared to $0 for the three months ended March 31, 2008. The Company
adopted EITF No. 07-05 on January 1, 2009 and the warrants issued in
connection with the “Securities Purchase Agreement” dated August 28, 2008 were
reclassified from equity to derivative liability and marked to market.  The
Company recorded a gain on change in fair value of derivative liability of
$113,265 on March 31, 2009 to mark to market for the decrease in fair value of
the warrants from January 1, 2009 to March 31, 2009.





Net
Income




Net
income was $3,381,543 or 19.5% of revenue for three months ended March 31, 2009,
compared to$1,463,865 or 14.5% of revenue for three months ended March 31,
2008.


42




The
increase in net income reflects the continued growth in our business, and the
improved weather condition for travel in first quarter of 2009, compared to the
heavy snow storm that struck most of China last year.




The
increase in net income as a percentage of revenue is due to the change of
revenue mix, where we took advantage of the booming domestic tourism industry,
drove synergies with our air ticketing and hotel reservation businesses; shifted
our focus away from the low margin cargo segment, and further improved cash flow
management and resource allocation.




LIQUIDITY
AND CAPITAL RESOURCES




Cash for
operations and liquidity needs are funded primarily through cash flow from
operations and debt and equity financing. Cash and cash equivalents were
$19,171,277 at March 31, 2009. Current assets and current liabilities as of
March 31, 2009, were $37,881,691 and $5,293,432, yielding working capital of
$32,588,258. We believe that the funds available to us from operations are
adequate to meet our operating needs in recent future. For the three months
ended March 31, 2009, net cash provided by operating activities was $4,192,437,
which resulted primarily from our organic operations and effective management of
cash flow.




Capital
expenditure




Total
capital expenditure for three months ended March 31, 2009 was $1,260,398 to
purchase fixed assets, primarily machinery and equipment. Management is
considering a substantial increase in equipment or other supporting
machinery expenditure to support the fast development and expansion of our
business.  We anticipate spending about $1.4 million in the second
quarter.




Working Capital
Requirements




Historically,
operations and short term financing have been sufficient to meet our cash needs.
We believe that we will be able to generate revenue from operations to provide
the necessary cash flow to meet anticipated working capital requirements for the
immediate future. However, our actual working capital needs for the long and
short term will depend upon numerous factors, including operating results,
competition, the opportunity to acquire or start-up new businesses, and the
availability of credit facilities, none of which can be predicted with
certainty. Due to our rapid growth and expansion, our need for additional
capital may arise, and management will seek to raise capital for the
maintenance and expansion of our operations through the issuance of debt or
equity if necessary. There can be no assurance that such financing will be
available or, if available, will be on terms acceptable to us. Future expansion
will be limited by the availability of financing.




Item 3.
              Quantitative and Qualitative
      Disclosures About Market
Risk.





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





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


43





Item 4.
            Controls
      and Procedures.




a)Evaluation of Disclosure Controls
and Procedures: As of March 31, 2009, our management carried out an
evaluation, under the supervision of our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's system of disclosure controls and procedures pursuant to the Exchange
Act and Rules 13a-15(e) and 15d-15(e) promulgated thereunder.  Based
upon that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that the disclosure controls and procedures were not effective, as of
the date of their evaluation, for the purposes of recording, processing,
summarizing and timely reporting material information required to be disclosed
in reports filed under the Exchange Act.


As a
result of comments raised by the SEC, we determined that accounting errors were
made in connection with:
  ·
              the
      accounting for a derivative liability upon the adoption of EITF 07-5
      effective January 1, 2009, and the subsequent accounting for the changes
      in the associated liability from the marked to
  market;
 
 ·
              the
      dilutive weighted average common shares computation;
  and
 
 ·
              the
      classification of costs directly associated with the generation of revenue
      of our costs of services
 
 Based on
the impact of the aforementioned accounting errors, we determined to restate our
consolidated financial statements as of March 31, 2009, June 30, 2009  and
for the year ended December 31, 2008.
  b)Changes in internal control over
financial reporting:  There were no changes in internal
controls over financial reporting that occurred during the period covered by
this report that have materially affected, or are reasonably likely to
materially effect, our internal control over financial reporting.


44





PART
II - OTHER INFORMATION





Item
      1.
            Legal
      Proceedings.





There is
no material legal proceeding pending against us.





Item
      1A.
            Risk
      Factors.





Not
applicable.





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





None.





Item 3.
            Defaults Upon Senior
      Securities





None.




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





None.





Item 5.
            Other
      Information





Not
applicable.





Item 6.
            Exhibits





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





Exhibit No.
              
              SEC Ref. No.
              
              Title of Document1
              
              31.1
              
              Certification
      of the Principal Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 20022.
              
              31.2
              
              Certification
      of the Principal Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 20023
              
              32.1
              
              Certification
      of the Principal Executive Officer pursuant to U.S.C. Section 1350 as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002*4
              
              32.2
              
              Certification
      of the Principal Financial Officer pursuant to U.S.C. Section 1350 as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002*





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


45





SIGNATURES





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




Date:
October 28, 2009




UNIVERSAL
      TRAVEL GROUPBy:
              /s/ Jiangping JiangJiangping
      JiangChairman
      and Chief Executive Officer(Principal
      Executive Officer)





By:
              /s/ Yizhao ZhangYizhao
      ZhangChief
      Financial Officer(Principal
      Financial Officer)


46