UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q




(Mark
One)





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





For the
quarterly period ended March 31, 2010





 ̈
            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.)




5th
      Floor, South Block, Building 11, Shenzhen
                Software
      Park, Zhongke 2nd Road,
                Nanshan
      District, Shenzhen, China
              
              518000(Address
      of principal executive offices)
              
              (Zip
      Code)





86 755 836
68489


(Registrant’s
telephone number, including area code)




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





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


Yes x  No  ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).    Yes    ̈  No   ̈





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









FORM
10-Q


.UNIVERSAL
TRAVEL GROUP


INDEX





PagePART
      I.
                  
                  Financial
      Information
                  
                  3Item
      1.  Financial Statements ( Unaudited)
                  
                  3Report
      of  Independent Registered Public Accounting
Firm
                  
                  4Consolidated
      Balance Sheets as of March 31, 2010 (Unaudited) and December 31,
      2009
                  
                  6Consolidated
      Statements of Income for the Three Months Ended March 31, 2010 and 2009
      (Unaudited)
                  
                  7Consolidated
      Statements of Cash Flows for the Three Months Ended March 31, 2010 and
      2009 (Unaudited)
                  
                  8Consolidated
      Statements of Stockholders' Equity
                  
                  9Notes
      to Consolidated Financial Statements as of March 31, 2010
      (Unaudited)
                  
                  10Item
      2.  Management’s Discussion and Analysis of Financial Condition or
      Plan of Operation
                  
                  39Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk.
                  
                  45Item
      4.  Controls and Procedures
                  
                  46PART
      II.
                  
                  Other
      Information
                  
                  46Item
      1.  Legal Proceedings
                  
                  46Item
      1A. Risk Factors.
                  
                  46Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
                  
                  46Item
      3.  Defaults Upon Senior Securities
                  
                  46Item
      4.  (Removed and Reserved).
                  
                  46Item
      5.  Other Information
                  
                  46Item
      6.  Exhibits
                  
                  47


2





PART
I - FINANCIAL INFORMATION





Item
1. Financial Statements (Unaudited)




UNIVERSAL
TRAVEL GROUP




CONSOLIDATED
FINANCIAL STATEMENTS




MARCH  31,
2010




3




ACSB
      Acquavella,
      Chiarelli, Shuster, Berkower & Co., LLP517
      Route one
              1
      Penn PlazaIselin,
      New Jersey, 08830
              36the
      Floor732.855.9600
              New
      York, NY 10119





Report of Independent
Registered Public Accounting Firm





To the
Board of Directors and Stockholders of


Universal
Travel Group




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




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




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




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




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




Certified
Public Accountant


New York,
N.Y.


May 10,
2010




4




TABLE
OF CONTENTS




Consolidated Balance Sheets
                        6Consolidated Statements of
      Income
                        7Consolidated Statements of Cash
      Flows
                        8Consolidated Statements of Stockholders’
      Equity
                        9Notes to Consolidated Financial
      Statements
                        10-38




5




UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
BALANCE SHEETS


MARCH
31, 2010 AND DECEMBER 31, 2009





3/31/2010
                      
                      
                      12/31/2009RestatedASSETSCash
      and cash equivalents
                      
                      $
                      37,833,072
                      
                      
                      $
                      36,677,422Accounts
      receivable, net
                      
                      
                      18,832,395
                      
                      
                      
                      17,321,174Other
      receivables and deposits, net
                      
                      
                      1,282,919
                      
                      
                      
                      257,907Trade
      deposit
                      
                      
                      10,580,801
                      
                      
                      
                      9,775,735Advances
                      
                      
                      439,504
                      
                      
                      
                      440,063Prepaid
      expenses
                      
                      
                      49,076
                      
                      
                      
                      216,727Note
      receivable
                      
                      
                      738,457
                      
                      
                      
                      1,711,392Acquisition
      Deposits
                      
                      
                      -
                      
                      
                      
                      4,077,921Total
      Current Assets
                      
                      
                      69,756,224
                      
                      
                      
                      70,478,341Property,
      plant & equipment, net
                      
                      
                      5,465,481
                      
                      
                      
                      4,992,677Intangible
      assets
                      
                      
                      2,235,259
                      
                      
                      
                      339,240Goodwill
                      
                      
                      19,155,866
                      
                      
                      
                      9,896,270Total
      Noncurrent Assets
                      
                      
                      26,856,606
                      
                      
                      
                      15,228,187Total
      Assets
                      
                      $
                      96,612,830
                      
                      
                      $
                      85,706,528LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable and accrued expenses
                      
                      $
                      8,187,468
                      
                      
                      $
                      2,615,730Customer
      deposits
                      
                      
                      1,555,445
                      
                      
                      
                      2,000,117Income
      tax payable
                      
                      
                      1,299,373
                      
                      
                      
                      1,654,475Total
      Current Liabilities
                      
                      
                      11,042,286
                      
                      
                      
                      6,270,322Derivative
      liability
                      
                      
                      1,705,868
                      
                      
                      
                      1,815,319Total  Liabilities
                      
                      
                      12,748,154
                      
                      
                      
                      8,085,641Stockholders'
      EquityCommon
      stock, $.001 par value, 70,000,000 shares authorized, 16,930,221 and
      16,714,457 issued and outstanding at March 31, 2010 and December
      31,  2009, respectively
                      
                      
                      16,929
                      
                      
                      
                      16,714Additional
      paid in capital
                      
                      
                      40,043,651
                      
                      
                      
                      37,671,645Other
      comprehensive income
                      
                      
                      1,228,675
                      
                      
                      
                      1,645,133Statutory
      reserve
                      
                      
                      570,329
                      
                      
                      
                      372,144Retained
      earnings
                      
                      
                      42,005,092
                      
                      
                      
                      37,915,251Total
      Stockholders' Equity
                      
                      
                      83,864,676
                      
                      
                      
                      77,620,887Total
      Liabilities and Stockholders' Equity
                      
                      $
                      96,612,830
                      
                      
                      $
                      85,706,528





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




6





UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
STATEMENTS OF INCOME


FOR
THE THREE MONTHS ENDED MARCH 31,




2010
                                        
                                        
                                        2009RestatedGross
      revenues,
                                        
                                        $
                                        26,130,007
                                        
                                        
                                        $
                                        15,510,679Cost
      of services
                                        
                                        
                                        17,628,033
                                        
                                        
                                        
                                        9,738,870Gross
      Profit
                                        
                                        
                                        8,501,974
                                        
                                        
                                        
                                        5,771,809Selling,
      general and administrative expenses
                                        
                                        
                                        3,063,641
                                        
                                        
                                        
                                        1,532,797Income
      from operations
                                        
                                        
                                        5,438,333
                                        
                                        
                                        
                                        4,239,012Other
      income (expense)Other
      income
                                        
                                        
                                        3,554
                                        
                                        
                                        
                                        3,828Gain
      on change in fair value of derivative liabilities
                                        
                                        
                                        109,451
                                        
                                        
                                        
                                        113,265Interest
      income
                                        
                                        
                                        23,631
                                        
                                        
                                        
                                        10,939Total
      other income (expense)
                                        
                                        
                                        136,636
                                        
                                        
                                        
                                        128,032Income
      before income taxes - continuing operation
                                        
                                        
                                        5,574,969
                                        
                                        
                                        
                                        4,367,044Provision
      for income taxes
                                        
                                        
                                        1,485,128
                                        
                                        
                                        
                                        1,117,196Net
      income - continuing operation
                                        
                                        
                                        4,089,841
                                        
                                        
                                        
                                        3,249,848Income
      from discontinued operations
                                        
                                        
                                        -
                                        
                                        
                                        
                                        131,693Net
      income (loss) from discontinued operation
                                        
                                        
                                        -
                                        
                                        
                                        
                                        131,693Net
      Income
                                        
                                        $
                                        4,089,841
                                        
                                        
                                        $
                                        3,381,541Net
      income per common share - continuing operationsBasic
                                        
                                        $
                                        0.24
                                        
                                        
                                        $
                                        0.23Diluted
                                        
                                        $
                                        0.23
                                        
                                        
                                        $
                                        0.23Net
      income per common share - discontinued operationsBasic
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        0.01Diluted
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        0.01Weighted
      average common shares outstandingBasic
                                        
                                        
                                        16,822,339
                                        
                                        
                                        
                                        13,873,969Diluted
                                        
                                        
                                        18,019,257
                                        
                                        
                                        
                                        13,885,722Net
      income
                                        
                                        $
                                        4,089,841
                                        
                                        
                                        $
                                        3,249,848Translation
                                        
                                        
                                        (416,458
                                        )
                                        
                                        
                                        34,707Comprehensive
      income
                                        
                                        $
                                        3,673,383
                                        
                                        
                                        $
                                        3,284,555




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




7




UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE THREE MONTHS ENDED MARCH 31,


2010
                    
                    
                    2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
                    
                    $
                    4,089,841
                    
                    
                    $
                    3,249,850Add
      (deduct):Net
      income (loss) from discontinued operations
                    
                    
                    -
                    
                    
                    
                    131,693Income
      from continuing operations
                    
                    
                    4,089,841
                    
                    
                    
                    3,381,543Adjustments
      to reconcile net income to net cashprovided
      by operating activities:Depreciation
      and amortization
                    
                    
                    411,849
                    
                    
                    
                    87,283Provision
      for doubtful accounts
                    
                    
                    24,931
                    
                    
                    
                    9,205Stock
      based compensation
                    
                    
                    336,632
                    
                    
                    
                    165,000Gain
      on change in fair value of derivative liabilities
                    
                    
                    (109,451
                    )
                    
                    
                    (113,265
                    )(Increase)
      / decrease in assets:Accounts
      receivable
                    
                    
                    (1,132,812
                    )
                    
                    
                    (2,279,625
                    )Other
      receivable
                    
                    
                    (195,058
                    )
                    
                    
                    (176,658
                    )Advances
                    
                    
                    559
                    
                    
                    
                    (513
                    )Prepaid
      expenses
                    
                    
                    213,586
                    
                    
                    
                    123,111Trade
      deposits
                    
                    
                    (805,066
                    )
                    
                    
                    2,003,342Escrow
      deposits
                    
                    
                    -
                    
                    
                    
                    600,499Increase
      / (decrease) in current liabilities:Accounts
      payable and accrued expenses
                    
                    
                    5,238,163
                    
                    
                    
                    718,269Customer
      deposits
                    
                    
                    (444,672
                    )
                    
                    
                    366,025Income
      tax payable
                    
                    
                    (869,498
                    )
                    
                    
                    (784,295
                    )6,759,004
                    
                    
                    
                    4,099,921Net
      cash provided by discontinued operations
                    
                    
                    -
                    
                    
                    
                    92,516Net
      cash provided by operating activities
                    
                    
                    6,759.004
                    
                    
                    
                    4,192,437CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of property & equipment
                    
                    
                    (619,616
                    )
                    
                    
                    (1,260,398
                    )Purchase
      of  intangibles
                    
                    
                    (29,298
                    )
                    
                    
                    -Proceeds
      from collection of notes
                    
                    
                    972,935
                    
                    
                    
                    -Acquisition
      deposits
                    
                    
                    4,077,921
                    
                    
                    
                    -Paid
      for acquisition – net of cash acquired
                    
                    
                    (9,588,838
                    )
                    
                    
                    -Net
      cash (used in) provided by continuing operations
                    
                    
                    (5,186,896
                    )
                    
                    
                    (1,260,398
                    )Net
      cash (used in) provided by discontinued operations
                    
                    
                    -
                    
                    
                    
                    -Net
      cash (used in) provided by Investing activities
                    
                    
                    (5,186,896
                    )
                    
                    
                    (1,260,398
                    )Effect
      of exchange rate changes on cash and cash equivalents
                    
                    
                    (416,458
                    )
                    
                    
                    34,707Net
      change in cash and cash equivalents
                    
                    
                    1,155,650
                    
                    
                    
                    2,966,746Cash
      and cash equivalents, beginning balance
                    
                    
                    36,677,422
                    
                    
                    
                    16,204,531Cash
      and cash equivalents, ending balance
                    
                    $
                    37,833,072
                    
                    
                    $
                    19,171,277SUPPLEMENTAL
      DISCLOSURES:Cash
      paid during the year for:Interest
      payments
                    
                    $
                    -
                    
                    
                    $
                    -Income
      taxes
                    
                    $
                    1,840,230
                    
                    
                    $
                    1,929,630Other
      non-cash transactionsPurchased
      goodwill
                    
                    $
                    (9,259,596
                    )
                    
                    $
                    -Purchased
      intangible assets
                    
                    
                    (1,982,354
                    )
                    
                    
                    -Fair
      value of assets purchased less cash acquired
                    
                    
                    (382,477
                    )
                    
                    
                    -Acquisition
      financed with stock issuance
                    
                    
                    2,035,589
                    
                    
                    
                    -Acquisition
      paid for with cash – net of acquired
                    
                    $
                    (9,588,838
                    )
                    
                    $
                    -


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


8


UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY


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





Common
      Stock
                                
                                
                                Additional
                                  Paid
      In
                                
                                
                                Other
                                  Comprehensive
                                
                                
                                Retained
                                
                                
                                Statutory
                                
                                
                                Total
                                  Stockholders’Shares
                                
                                
                                Amount
                                
                                
                                Capital
                                
                                
                                Income
                                
                                
                                Earnings
                                
                                
                                Reserve
                                
                                
                                EquityBalance
      December 31, 2008
                                
                                
                                13,873,969
                                
                                
                                $
                                13,873
                                
                                
                                $
                                15,861,116
                                
                                
                                $
                                1,520,166
                                
                                
                                $
                                26,633,573
                                
                                
                                $
                                372,144
                                
                                
                                $
                                44,400,872RestatedCumulative
      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
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                124,967
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                124,967Stock
      based compensation – Net of warrants exercise
                                
                                
                                41,120
                                
                                
                                
                                42
                                
                                
                                
                                1,154,367
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                1,154,409Fair
      market value Of treasury stock received and retired
                                
                                
                                (238,095
                                )
                                
                                
                                (239
                                )
                                
                                
                                (2,780,711
                                )
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                (2,780,950
                                )Warrants
      exercised
                                
                                
                                811,941
                                
                                
                                
                                813
                                
                                
                                
                                6,571,017
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                6,571,830Options
      exercised
                                
                                
                                3,300
                                
                                
                                
                                3
                                
                                
                                
                                9,567
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                9,570Stock
      Subscription
                                
                                
                                2,222,222
                                
                                
                                
                                2,222
                                
                                
                                
                                18,948,027
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                18,950,249Income
      for the year  ended December 31, 2009
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                10,744,901
                                
                                
                                
                                
                                
                                
                                
                                10,744,901Balance
      December 31, 2009
                                
                                
                                16,714,457
                                
                                
                                
                                16,714
                                
                                
                                
                                37,671,645
                                
                                
                                
                                1,645,133
                                
                                
                                
                                37,915,251
                                
                                
                                
                                372,144
                                
                                
                                
                                77,620,887Balance
      December 31, 2009
                                
                                
                                16,714,457
                                
                                
                                
                                16,714
                                
                                
                                
                                37,671,645
                                
                                
                                
                                1,645,133
                                
                                
                                
                                37,915,251
                                
                                
                                
                                372,144
                                
                                
                                
                                77,620,887RestatedForeign
      currency translation adjustments
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                (416,458
                                )
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                (416,458
                                )Acquisition
      adjust
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                198,185
                                
                                
                                
                                198,185Stock
      issued for acquisitions
                                
                                
                                215,764
                                
                                
                                
                                215
                                
                                
                                
                                2,035,374
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                2,035,589Stock
      based compensation
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                336,632
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                336,632Income
      for the  three months ended March 31, 2010
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                4,089,841
                                
                                
                                
                                
                                
                                
                                
                                4,089,841Balance
      March 31, 2010
                                
                                
                                16,930,221
                                
                                
                                $
                                16,929
                                
                                
                                $
                                40,043,651
                                
                                
                                $
                                1,228,675
                                
                                
                                $
                                42,005,092
                                
                                
                                $
                                570,329
                                
                                
                                $
                                83,864,676





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




9




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




Note
1 - ORGANIZATION




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




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




Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES




Basis of
Presentation




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




Reclassification




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




10




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




Discontinued
Operations




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




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




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




11




UNIVERSAL TRAVEL
GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




Translation
Adjustment




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




Use of
Estimates




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




Principles of
Consolidation




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




Risks and
Uncertainties




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




12




UNIVERSAL TRAVEL
GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




Contingencies




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




If the
assessment of a contingency indicates that it is probable that a material loss
has been incurred and the amount of the liability can be estimated, then the
estimated liability would be accrued in the Company’s financial statements. If
the assessment indicates that a potential material loss contingency is not
probable but is reasonably possible, or is probable but cannot be estimated,
then the nature of the contingent liability, together with an estimate of the
range of possible loss if determinable and material would be disclosed. Loss
contingencies considered to be remote by management are generally not disclosed
unless they involve guarantees, in which case the guarantee would be
disclosed.




Cash and Cash
Equivalents




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




Accounts
Receivable




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




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




13




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




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




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




March 31,
                              2010
                            
                            
                            December 31,
                              2009Furniture
      & fixtures
                            
                            $
                            52,600
                            
                            
                            $
                            23,560Transportation
      equipment
                            
                            
                            237,672
                            
                            
                            
                            150,232Office
      equipment
                            
                            
                            4,856,620
                            
                            
                            
                            4,146,637Leasehold
      improvements
                            
                            
                            1,439,270
                            
                            
                            
                            1,385,4816,586,162
                            
                            
                            
                            5,705,910Accumulated
      depreciation
                            
                            
                            (1,120,681
                            )
                            
                            
                            (713,233
                            )$
                            5,465,481
                            
                            
                            $
                            4,992,677




Depreciation
expense for the three months ended March 31, 2010 and 2009 was $296,216 and
$60,082, respectively, of which $48,192 and $54,074 was included as part of cost
of services for the three months ended March 31, 2010 and 2009,
respectively.




14





UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




Goodwill




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




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




March 31, 2010
                    
                    
                    December 31,2009Shanghai
      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 Co.,Ltd
                    
                    
                    764,895
                    
                    
                    
                    764,895Zhengzhou
      Yulongkang Agency Co., Ltd
                    
                    
                    4,102,061
                    
                    
                    
                    -Hebei
      Taiyuan Travel Agency Co., Ltd
                    
                    
                    3,208,455
                    
                    
                    
                    -Huangshan
      Holiday Travel Service Co., Ltd
                    
                    
                    1,949,080
                    
                    
                    
                    -$
                    19,155,866
                    
                    
                    $
                    9,896,270




15




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




Long-Lived
Assets




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




Derivative
Liability




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




Upon the
Company’s adoption of the Derivative and Hedging Topic of the FASB Accounting
Standards Codification (“ASC 815”) on January 1, 2009, the Company
determined that the warrants did not qualify for a scope exception under ASC 815
as they were determined to not be indexed to the Company’s stock as prescribed
by ASC 815.  On January 1, 2009, the warrants, under ASC 815, were
reclassified from equity to derivative liability 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
ASC 815, January 1, 2009.  As of January 1, 2009, the cumulative
effect in adopting ASC 815 was a reduction to additional paid in capital of
$2,091,738 to reclassify the warrants from equity to derivative liability and an
increase in retained earnings of $536,776 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 ended
March 31, 2010, the Company recorded a gain on change in fair value of
derivative liability of $109,451 to mark to market for the increase in fair
value of the warrants during the year ended December 31,
2009.   Under ASC 815, 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
$1,554,961 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, 2010 was
$1,705,868. The fair value was determined using the Black Scholes Option Pricing
Model based on the following assumptions: dividend yield: -0-%; volatility:
117%, risk free rate: 2.55%, expected term: 3.91years.




16




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




Fair Value of Financial
Instruments




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




Revenue
Recognition




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




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




Air-ticketing
services




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




17




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




Revenue Recognition
(Continued)




Hotel reservation
services




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




Packaged-tour




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




Air Cargo
Business




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




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




18




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




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 Operations. For the three month ended March 31,
2010 and for the years ended December 31, 2009, such expenses amounted $336,632
and $2,393,958.




Advertising




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




Income
Taxes




The
Company utilizes FASB Accounting Standards Codification Topic on Income Taxes
(“ASC 740”), which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts 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 FASB Accounting Standards Codification Topic on Statement of
Cash flows (“ASC 230”), cash flows from the Company’s operations are based upon
the local currencies. As a result, amounts related to assets and liabilities
reported on the statement of cash flows will not necessarily agree with changes
in the corresponding balances on the balance sheet.




19




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




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, CRM systems software, and Organization cost of new
companies. These definitive lived intangible assets are being amortized over
their useful lives.  Expenditures of $26,298 and $0 were capitalized
for the three months ended March 31, 2010 and 2009 and will be amortized over a
5 year life.  In conjunction the acquisitions during the three months
ended March 31, 2010, the Company capitalized $1,982,355 of Identifiable
Intangible Assets, which are being amortized over 5 years. The Company recorded
amortization expense for definitive lived intangible assets of $115,633 and
$27,201, for the three months ended March 31, 2010 and 2009, respectively. The
Company will record approximately $68,013, $68,013, and $68,013 over the next
three years, respectively.




Concentration of Credit
Risk




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




Net Income (Loss) Per
Share




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




20




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




Net Income (Loss) Per Share
(Continued)




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




Three months ended March 31,2010
                  
                  
                  2009RestatedBasic
      earnings  from continuing operations per share:Numerator:Income
      from continuing operations  used in computing basic
      earnings  per share
                  
                  $
                  4,089,841
                  
                  
                  $
                  3,249,848Income  from
      continuing operations applicable to common shareholders
                  
                  $
                  4,089,841
                  
                  
                  $
                  3,249,848Denominator:Weighted
      average common shares outstanding
                  
                  
                  16,822,339
                  
                  
                  
                  13,873,969Basic
      earnings (losses) per share from continuing operations
                  
                  $
                  0.24
                  
                  
                  $
                  0.23Diluted
      earnings (losses) per share from continuing operations:Numerator:Income
      (loss) from continuing operations used in computing diluted earnings
      (losses) per share
                  
                  $
                  4,089,841
                  
                  
                  $
                  3,249,848Income
      (loss) from continuing operations applicable to common
      shareholders
                  
                  $
                  4,089,841
                  
                  
                  $
                  3,249,848Denominator:Weighted
      average common shares outstanding
                  
                  
                  16,822,339
                  
                  
                  
                  13,873,969Weighted
      average effect of dilutive securities:Stock
      options and warrants
                  
                  
                  1,196,918
                  
                  
                  
                  11,753.00Shares
      used in computing diluted net income  per share
                  
                  
                  18,019,257
                  
                  
                  
                  13,885,722Diluted
      earnings  per share from continuing operations
                  
                  $
                  0.23
                  
                  
                  $
                  0.23




21





UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




Net Income (Loss) Per Share
(Continued)




The three months ended March 31,2010
                      
                      
                      2009RestatedBasic
      losses(earnings) from discontinuing operations per share:Numerator:Income
      (loss) from discontinuing operations  used incomputing basic
      earnings per share
                      
                      $
                      -
                      
                      
                      $
                      131,693Income
      (loss) from discontinuing operations applicable to common
      shareholders
                      
                      $
                      -
                      
                      
                      $
                      131,693Denominator:Weighted
      average common shares outstanding
                      
                      
                      16,822,339
                      
                      
                      
                      13,873,969Basic
      losses(earnings) earnings per share from discontinuing
      operations
                      
                      $
                      -
                      
                      
                      $
                      0.01Diluted  losses(earnings)
      per share from discontinuing operations:Numerator:Income
      (loss) from discontinuing operations used in computing diluted earnings
      (losses) per share
                      
                      $
                      -
                      
                      
                      $
                      131,693Income
      (loss) from discontinuing operations applicable to common
      shareholders
                      
                      $
                      -
                      
                      
                      $
                      131,693Denominator:Weighted
      average common shares outstanding
                      
                      
                      16,822,339
                      
                      
                      
                      13,873,969Weighted
      average effect of dilutive securities:Stock
      options and  warrants
                      
                      
                      1,196,918
                      
                      
                      
                      11,753Shares
      used in computing diluted net income (loss) per share
                      
                      
                      18,019,257
                      
                      
                      
                      13,885,722Diluted
      losses(earnings) earnings per share from discontinuing
      operations
                      
                      $
                      -
                      
                      
                      $
                      0.01Total
      net income (loss) per common shareBasic
                      
                      $
                      -
                      
                      
                      $
                      0.01Diluted
                      
                      $
                      -
                      
                      
                      $
                      0.01




Recent Accounting
Pronouncements




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




22




UNIVERSAL
TRAVEL GROUP




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




Recent Accounting
Pronouncements – (Continued)




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




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




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




23




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)





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.  SFAS No 162 was superseded by the General
Accounting Principle Topic of FASB Accounting Standards Codification (“ASC
105”).




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




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




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




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




24





UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




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




Merger and Corporate
Restructure




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




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




25





UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)





Note
3 – TRADE DEPOSITS AND
ADVANCES




Trade
deposits represents amount held by Airlines and deposits. As of March 31, 2010
and December 31, 2009 the Company had paid $10,024,096 and $9,775,735 as trade
deposits respectively.




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




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





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




26


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




Note
4 - COMPENSATED
ABSENCES


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




Note
5 - INCOME
TAXES




The
Company through its subsidiary Shenzhen Yuzhilu Aviation Service Co..Ltd is
governed by the Income Tax Laws of the PRC. Operations in the United States of
America have incurred net accumulated operating losses for income tax purposes.
Pursuant to the PRC Income Tax Laws, the Enterprise Income Tax (EIT) the Company
has a statutory rate of 25%. The following is a reconciliation of income tax
expense for the three month ended March 31, 2010 and 2009.




March
      31,
                      
                      
                      March
      31,2010
                      
                      
                      2009Current
                      
                      $
                      1,485,128
                      
                      
                      $
                      1,117,196Deferred
                      
                      
                      -
                      
                      
                      
                      -Total
                      
                      $
                      1,485,128
                      
                      
                      $
                      1,117,196




Note
6 – COMMITMENTS




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




2011
                    
                    $
                    429,9172012
                    
                    
                    264,3222013
                    
                    
                    245,5822014
                    
                    
                    217,3132015
                    
                    
                    83,575There
      after
                    
                    
                    10,987Total
                    
                    $
                    1,251,696




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




27


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




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 stock, valued at $1,583,400, for services rendered during the
period from October 2, 2006 through February 28, 2007.




On March
29, 2010 the Company consummated the acquisition of a 100% interest in Zhengzhou
Yulongkang Travel agency Co. Ltd ("ZYT") for a cash and stock transaction valued
at approximately US$4 million in aggregate. This amount is included in the cost
of net assets and goodwill purchased.




The stock
consideration consisted of 60,634 newly issued shares of the Registrant’s common
stock, which were given to ZYT’s Shareholder immediately before the completion
of the Share Exchange Transaction. The cash consideration consisted of
$5,141,764.




ZYT
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 ZYT.




The
acquisition had been accounted for as a purchase business combination and the
results of operations from the acquisition date have been included in the
Company's consolidated financial statements in accordance with ASC810. The
allocation of the purchase price is as follows:




Cash
      acquired
                      
                      $
                      1,147,303Loans
      receivable
                      
                      
                      32,286Other
      assets
                      
                      
                      5,926Property
      Plant & Equipment
                      
                      
                      31,308Identifiable
      Intangibles
                      
                      
                      805,626Goodwill
                      
                      
                      4,102,061Total
      assets acquired
                      
                      
                      6,124,510Liabilities
      assumedAccounts
      & Income Taxes payable
                      
                      
                      364,999Other
      payable
                      
                      
                      46,575Total
                      
                      $
                      5,712,936




The
excess of purchase price over tangible assets acquired and liabilities assumed
was $4,907,687 of which 4,102,041 was recorded as goodwill. At the time of the
acquisition $885,626 of identifiable intangibles assets existed under the
contractual-legal or the reparability criterion as required under ASC
805.




28


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




Note
7 – COMMON STOCK
(CONTINUED)




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




On March
26, 2010 the Company consummated the acquisition of a 100% interest in Huangshan
Holiday Travel Service Co., Ltd ("HHT") for a cash and stock transaction valued
at approximately US$4 million in aggregate. This amount is included in the cost
of net assets and goodwill purchased.




The stock
consideration consisted of 61,847 newly issued shares of the Registrant’s common
stock, which were given to HHTs Shareholder immediately before the completion of
the Share Exchange Transaction. The cash consideration consisted of
$2,343,824.




HHT 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 HHT.




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 ASC810. The
allocation of the purchase price is as follows:




Cash
      acquired
                    
                    $
                    87,867Loans
      receivable
                    
                    
                    204,435Other
      assets
                    
                    
                    404,929Property
      Plant & Equipment
                    
                    
                    75,788Identifiable
      Intangibles
                    
                    
                    479,870Goodwill
                    
                    
                    1,949,080Total
      assets acquired
                    
                    
                    3,201,969Liabilities
      assumedAccounts
      & Income Taxes payable
                    
                    
                    223,734Other
      payable
                    
                    
                    48,720Total
                    
                    $
                    2,929,515




The
excess of purchase price over tangible assets acquired and liabilities assumed
was $2,428,450 of which 1,949,080 was recorded as goodwill. At the time of the
acquisition $885,626 of identifiable intangibles assets existed under the
contractual-legal or the separability criterion as required under ASC
805.




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




On March
29, 2010 the Company consummated the acquisition of a 100% interest in Hebei
Tianyuan Travel Agency Co., Ltd ("HTT") for a cash and stock transaction valued
at approximately US$4.4 million in aggregate. This amount is included in the
cost of net assets and goodwill purchased.




The stock
consideration consisted of 93,283 newly issued shares of the Registrant’s common
stock, which were given to ZYT’s Shareholder immediately before the completion
of the Share Exchange Transaction. The cash consideration consisted of
$3,517,736.




29




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




Note
7 – COMMON STOCK
(CONTINUED)




HTT
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 HTT.




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 ASC810. The
allocation of the purchase price is as follows:




Cash
      acquired
                    
                    $
                    181,316Loans
      receivable
                    
                    
                    166,618Other
      assets
                    
                    
                    405,034Property
      Plant & Equipment
                    
                    
                    42,308Identifiable
      Intangibles
                    
                    
                    696,858Goodwill
                    
                    
                    3,208,455Total
      assets acquired
                    
                    
                    4,760,589Liabilities
      assumedAccounts
      & Income Taxes payable
                    
                    
                    238,525Other
      payable
                    
                    
                    123,602Total
                    
                    $
                    4,398,462




The
excess of purchase price over tangible assets acquired and liabilities assumed
was $3,905,317 of which 3,208,455 was recorded as goodwill. At the time of the
acquisition $696,858 of identifiable intangibles assets existed under the
contractual-legal or the separability criterion as required under ASC
805.




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




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




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




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




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




30




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




Note
7 – COMMON STOCK
(CONTINUED)




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




Cash
      acquired
                  
                  $
                  45,356Accounts
      Receivable
                  
                  
                  142,462Loans  to
      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 ASC 805.




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




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




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




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




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




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




31




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




Note
7 – COMMON STOCK
(CONTINUED)




Cash
      acquired
                    
                    $
                    28,510Accounts
      Receivable
                    
                    
                    1,265,352Loans  to  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 ASC 825.




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




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




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




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




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




32




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




Note
7 – COMMON STOCK
(CONTINUED)




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 ASC 805.




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




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




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




33




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




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.




Stock
options— the option holder has no voting or dividend rights. The company records
the expense of the stock options over the related vesting period. The options
were valued using the Black-Scholes option-pricing model at the model at the
date of grant stock option pricing. On May 28, 2008, upon resignation, Board
member has forfeited 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. The options were valued using the Black-Scholes option-pricing
model at the date of grant stock option pricing.  The total fair
market value at grant date is $5,483,865. On July 23, 2009 3,300 were exercised
at $2.90.




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




On
September 1, 2009, the Company issued, to the newly appointed CFO an option
grant to purchase 105,000 shares of common stock at the closing price of $ 8.82
per share. The options are exercisable until August 2019.




34




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




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




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.




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




AggregateExercise
                      
                      
                      Remaining
                      
                      
                      IntrinsicTotal
                      
                      
                      Price
                      
                      
                      Life
                      
                      
                      ValueOutstanding,
      December 31, 2009
                      
                      
                      1,600,588
                      
                      
                      $
                      2.70–11.25
                      
                      
                      7.44-9.67yrs
                      
                      
                      
                      -Outstanding,
      March 31, 2010
                      
                      
                      1,600,588
                      
                      
                      $
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -




35


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)





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




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 fair market value and marked to
market (see Note 2 Derivative Liability).  On August 20, 2009 322,580
warrants valued at $3,398,135 as of that date, were exercised under the cashless
exercise provisions of the warrants. The Company issued 132,251 shares of common
stock. On October 15, 2009, 215,054 warrants valued at $2,888,495 as of that
date were exercised under the cashless exercise provision of the warrants. The
company issued 103,318 shares of common stock.




Note
9 - OTHER
COMPREHENSIVE INCOME




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




Foreign Currency
                        Translation
                        Adjustment
                      
                      
                      Accumulated Other
                        Comprehensive
                        IncomeBalance
      December 31, 2008
                      
                      $
                      1,520,166
                      
                      
                      $
                      1,520,166Changes
      for year ended December 31, 2009
                      
                      
                      124,967
                      
                      
                      
                      124,967Balance
      December 31, 2009
                      
                      
                      1,645,133
                      
                      
                      
                      1,645,133Changes
      for  the three months ended March 31, 2010
                      
                      
                      (416,458
                      )
                      
                      
                      (416,458
                      )Balance
      at March31, 2010
                      
                      $
                      1,474,390
                      
                      
                      $
                      1,474,390




Note
10 - CURRENT
VULNERABILITY DUE TO CERTAIN RISK FACTORS




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




Note
11 – MAJOR CUSTOMERS
AND CREDIT RISK




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




36




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




Note
12 -   SEGMENT
INFORMATION




Upon the
disposition of Shenzhen Speedy Dragon Enterprises Limited pursuant to a
termination agreement dated June 12, 2009, the Company currently operates and
prepares accounting and other financial reports separately to management for
nine major business organizations (Shenzhen Yuzhilu Aviation Service Co., Ltd.,
Shanghai Lanbao Travel Service Co., Ltd., Foshan International Travel Service
Co., Ltd.,  Xian Golden Net Travel Serve Services, Chongqing Travel
World E-Business Co., Ltd., Shenzhen Travel World Travel Agency Co., Ltd.),
Hebei Tianyuan Travel Agency Co., Ltd, Zhengzhou Yulongkang Travel Agency Co.,
Ltd, and Huangshan Holiday Travel Service Co., Ltd.. Pursuant to SFAS 131 they
disclose segments on a single entity 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. and Chongqing Travel World E-Business Co.,
Ltd., 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, Shenzhen Travel
World Travel Agency Co., Ltd, Hebei Tianyuan Travel Agency Co., Ltd, Zhengzhou
Yulongkang Travel Agency Co., Ltd, and Huangshan Holiday Travel Service Co.,
Ltd.. Management monitors these segments regularly to make decisions about
resources to be allocated to the segment and assess its
performance,




The
following tables’ present summarized information by segment:




Air
                                  Ticketing
                                
                                
                                Hotel
                                  Reservation
                                
                                
                                Package
                                  Tours
                                
                                
                                Other
                                
                                
                                TotalThree
      Months ended March 31, 2010Sales,
      net
                                
                                $
                                4,436,964
                                
                                
                                $
                                3,150,377
                                
                                
                                $
                                18,542,666
                                
                                
                                $
                                -
                                
                                
                                $
                                26,130,007Cost
      of sales
                                
                                $
                                802,589
                                
                                
                                $
                                1.089,173
                                
                                
                                $
                                15736,270
                                
                                
                                $
                                -
                                
                                
                                $
                                17,628,033Gross
      profit
                                
                                $
                                3,634,375
                                
                                
                                $
                                2,061,203
                                
                                
                                $
                                2,806,396
                                
                                
                                $
                                -
                                
                                
                                $
                                8,501,974Income
      from operations
                                
                                $
                                2,267,514
                                
                                
                                $
                                2,028,252
                                
                                
                                $
                                2,583,636
                                
                                
                                $
                                (1,304,433
                                )
                                
                                $
                                5,574,969Depreciation
      & Amortization
                                
                                $
                                245,389
                                
                                
                                $
                                1,483
                                
                                
                                $
                                65,859
                                
                                
                                $
                                99,118
                                
                                
                                $
                                411,849Asset
      Expenditures
                                
                                $
                                609,057
                                
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                609,057Total
      assets
                                
                                $
                                40,893,912
                                
                                
                                $
                                6.065,249
                                
                                
                                $
                                23,590,476
                                
                                
                                $
                                26,063,193
                                
                                
                                $
                                96,612,830Three
      Months ended March 31, 2009Sales,
      net
                                
                                $
                                2,751,128
                                
                                
                                $
                                2,516.831
                                
                                
                                $
                                10,242,729
                                
                                
                                $
                                -
                                
                                
                                $
                                15,510,679Cost
      of sales
                                
                                $
                                302,806
                                
                                
                                $
                                773,463
                                
                                
                                $
                                8,662,601
                                
                                
                                $
                                -
                                
                                
                                $
                                9,738,870Gross
      profit
                                
                                $
                                2,448,322
                                
                                
                                $
                                1,7433,368
                                
                                
                                $
                                1,580,119
                                
                                
                                $
                                -
                                
                                
                                $
                                5,771,809Income
      from operations
                                
                                $
                                1,574,790
                                
                                
                                $
                                1,699,296
                                
                                
                                $
                                1,385,861
                                
                                
                                $
                                (420,934
                                )
                                
                                $
                                4,239,012Depreciation
      & Amortization
                                
                                $
                                79,629
                                
                                
                                $
                                1,061
                                
                                
                                $
                                3,966
                                
                                
                                $
                                -
                                
                                
                                $
                                84,656Asset
      Expenditures
                                
                                $
                                1,260,398
                                
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                1,260,398Total
      assets
                                
                                $
                                28,210,039
                                
                                
                                $
                                8,294,048
                                
                                
                                $
                                10,547,861
                                
                                
                                $
                                6,110,342
                                
                                
                                $
                                53,162,290




37




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)




Note
13 -   SUBSEQUENT
EVENTS




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




For the
three months ended March 31, 2010, the Company has evaluated subsequent events
for potential recognition and disclosure through May 7, 2010, the date of the
financial statement issuance.




38





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





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





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





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





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





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





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





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





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


39





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





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





We aim to
be the foremost leading online travel services provider in the People’s Republic
of China, especially in the air ticketing service, hotel booking and packaged
tour providing sectors.




RESULTS
OF OPERATIONS





THREE
MONTHS ENDED MARCH 31, 2010 AND 2009





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





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




Three months ended
                        March 31, 2010
                      
                      
                      Three months ended
                        March 31, 2009
                      
                      
                      Increase /
                        Decrease
                      
                      
                      PercentageRevenues
                      
                      $
                      26,130,007
                      
                      
                      $
                      15,510,679
                      
                      
                      $
                      10,619,328
                      
                      
                      
                      68.5
                      %Cost
      of Services
                      
                      
                      (17,628,033
                      )
                      
                      
                      (9,738,870
                      )
                      
                      
                      (7,889,163
                      )
                      
                      
                      81.0
                      %Gross
      Profit
                      
                      
                      8,501,974
                      
                      
                      
                      5,771,809
                      
                      
                      
                      2,730,165
                      
                      
                      
                      47.3
                      %SG&A
                      
                      
                      (3,063,641
                      )
                      
                      
                      (1,532,797
                      )
                      
                      
                      (1,530,844
                      )
                      
                      
                      99.9
                      %Income
      from Operations
                      
                      
                      5,438,333
                      
                      
                      
                      4,239,012
                      
                      
                      
                      1,199,321
                      
                      
                      
                      28.3
                      %Other
      income
                      
                      
                      3,554
                      
                      
                      
                      3,828
                      
                      
                      
                      (274
                      )
                      
                      
                      -7.2
                      %Gain
      on change in fair value of derivative liabilities
                      
                      
                      109,450
                      
                      
                      
                      113,265
                      
                      
                      
                      (3,815
                      )
                      
                      
                      -3.4
                      %Interest
      income
                      
                      
                      23,631
                      
                      
                      
                      10,939
                      
                      
                      
                      12,692
                      
                      
                      
                      116.0
                      %Income
      before income taxes
                      
                      
                      5,574,969
                      
                      
                      
                      4,367,044
                      
                      
                      
                      1,207,925
                      
                      
                      
                      27.7
                      %Provision
      for income taxes
                      
                      
                      (1,485,128
                      )
                      
                      
                      (1,117,196
                      )
                      
                      
                      (367,932
                      )
                      
                      
                      32.9
                      %Net
      Income
                      
                      
                      4,089,841
                      
                      
                      
                      3,249,848
                      
                      
                      
                      839,993
                      
                      
                      
                      25.8
                      %Net
      income (loss) from discontinued operation
                      
                      
                      0
                      
                      
                      
                      131,693
                      
                      
                      
                      (131,693
                      )
                      
                      
                      -100
                      %Net
      Income
                      
                      
                      4,089,841
                      
                      
                      
                      3,381,541
                      
                      
                      
                      708,300
                      
                      
                      
                      20.9
                      %




40





For the three months ended
March 31, 2010:





Revenue Segment
                          
                          Air tickets
                            (YZL &
                            CTE)
                          
                          
                          (%) of
                            sector
                          
                          
                          Hotel (SLB)
                          
                          
                          (%) of
                            sector
                          
                          
                          Tours
                            (All Others)
                          
                          
                          (%) of
                            sector
                          
                          
                          TotalRevenue
                          
                          $
                          4,436,964
                          
                          
                          
                          17.0
                          %
                          
                          
                          3,150,376
                          
                          
                          
                          12.1
                          %
                          
                          
                          18,542,666
                          
                          
                          
                          71.0
                          %
                          
                          
                          26,130,007Cost
      of Services
                          
                          
                          (802,590
                          )
                          
                          
                          4.6
                          %
                          
                          
                          (1,089,173
                          )
                          
                          
                          6.2
                          %
                          
                          
                          (15,736,270
                          )
                          
                          
                          89.3
                          %
                          
                          
                          (17,628,033
                          )Gross
      Profit
                          
                          $
                          3,634,374
                          
                          
                          
                          42.7
                          %
                          
                          
                          2,061,203
                          
                          
                          
                          24.2
                          %
                          
                          
                          2,806,396
                          
                          
                          
                          33.0
                          %
                          
                          
                          8,501,974Gross
      Margin
                          
                          
                          81.9
                          %
                          
                          
                          
                          
                          
                          
                          65.4
                          %
                          
                          
                          
                          
                          
                          
                          15.1
                          %
                          
                          
                          
                          
                          
                          
                          32.5
                          %Segment effect in
      Gross Margin (*)
                          
                          
                          13.9
                          %
                          
                          
                          
                          
                          
                          
                          7.9
                          %
                          
                          
                          
                          
                          
                          
                          10.7
                          %
                          
                          
                          
                          
                          
                          
                          32.5
                          %





For the three months ended
March 31, 2009:





Revenue Segment
                                                              
                                                              Air tickets
                                                                (YZL)
                                                              
                                                              
                                                              (%) of
                                                                sector
                                                              
                                                              
                                                              Hotel (SLB)
                                                              
                                                              
                                                              (%) of
                                                                sector
                                                              
                                                              
                                                              Tours
                                                                (XGN & FOI)
                                                              
                                                              
                                                              (%) of
                                                                sector
                                                              
                                                              
                                                              TotalRevenue
                                                              
                                                              $
                                                              2,751,128
                                                              
                                                              
                                                              
                                                              17.7
                                                              %
                                                              
                                                              
                                                              2,516,831
                                                              
                                                              
                                                              
                                                              16.2
                                                              %
                                                              
                                                              
                                                              10,242,721
                                                              
                                                              
                                                              
                                                              66.0
                                                              %
                                                              
                                                              
                                                              15,510,679Cost
      of Services
                                                              
                                                              
                                                              (302,806
                                                              )
                                                              
                                                              
                                                              3.1
                                                              %
                                                              
                                                              
                                                              (773,463
                                                              )
                                                              
                                                              
                                                              7.9
                                                              %
                                                              
                                                              
                                                              (8,662,601
                                                              )
                                                              
                                                              
                                                              88.9
                                                              %
                                                              
                                                              
                                                              (9,738,870
                                                              )Gross
      Profit
                                                              
                                                              $
                                                              2,448,322
                                                              
                                                              
                                                              
                                                              42.4
                                                              %
                                                              
                                                              
                                                              1,743,368
                                                              
                                                              
                                                              
                                                              30.2
                                                              %
                                                              
                                                              
                                                              1,580,119
                                                              
                                                              
                                                              
                                                              27.4
                                                              %
                                                              
                                                              
                                                              5,771,809Gross
      Margin
                                                              
                                                              
                                                              89.0
                                                              %
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              69.3
                                                              %
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              15.4
                                                              %
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              37.2
                                                              %Segment effect in
      Gross Margin (*)
                                                              
                                                              
                                                              15.8
                                                              %
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              11.2
                                                              %
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              10.2
                                                              %
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              37.2
                                                              %




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





Revenue





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





Revenues
for the three months ended March 31, 2010 were $26,130,007 compared to
$15,510,679 for the same period 2009, an increase of $10,619,328, or
approximately 68.5%. The contributions from the three newly acquired
subsidiaries, Huangshan Holiday, Hebei Tianyuan and Zhengzhou Yulongkang, were
$5,274,313, or 20.18% of our total revenues for these three months. Excluding
this effect, revenues for the three months ended March 31, 2010 were $20,855,694
compared to $15,510,679 for the same period 2009, an increase of $5,345,015, or
approximately 34.5%.





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


41





Revenue
from air-ticketing segment were $4,436,964 for the three months ended March 31,
2010 compared to $2,751,128 for the same period last year, an increase of
approximately 61.3%. This increase is generally driven by the same factors
mentioned above, but more specifically, a result of the increased demand for air
passenger transportation. Our Chongqing subsidiary, Chongqing Universal Travel
E-Business Co., Ltd., has begun to contribute some revenues to this sector. As
China’s economy recovers, we believe that our growth in air-ticketing is
sustainable in the coming quarters.





Revenue
from hotel reservations segment were $3,150,376 for the three months ended March
31, 2010 compared to $2,516,831 for the same period in 2009, an increase of
approximately 25.2%. This increase is also a result of the factors mentioned
above for air tickets and the successful cross marketing of our various business
segments. During this quarter, a small part of the revenues from Huangshan
Holiday, the newly acquired subsidiary involved in the hotel reservation
segment, were also included in this sector.





Revenue
from our packaged tour segment were $18,542,666 for the three months ended March
31, 2010 for the three months ended March 31, 2010 compared to $10,242,721 for
the same period in 2009, an increase of approximately 81.0%. Excluding the
effect of the three newly acquired subsidiaries, which was $5,274,313, our
revenues from this segment were $13,268,353 for the three months ended March 31,
2010 compared to $10,242,721 for the same period in 2009, an increase of
approximately 29.5%.This increase is a result of the recovery of Chinese
economy, the government’s stimulus package, and our strong efforts in carrying
our various marketing programs.




Cost of
Services




Costs of
services for air tickets cover mainly 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 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.





Costs of
services for the three months ended March 31, 2010 were $17,628,033 compared to
$9,738,871 for the same period in 2009, an increase of $$7,889,162, or
approximately 81.0%. The comparatively higher costs of services result from
higher percentage of packaged tours in our revenues. Excluding the three newly
acquired subsidiaries, costs of services for the three months ended March 31,
2010 were $13,403,552 compared to $9,738,871 for the same period 2009, an
increase of $3,664,681, or approximately 37.6%.




Costs of
services from air-ticketing were $802,590 for the three months ended March 31,
2010, compared to $302,806 for the same period last year, an increase of
$499,784, or approximately 165.1%. The increase is mostly due to our
reclassification of costs associated.





Costs of
services from hotel-reservation were $1,089,173 for the three months ended March
31, 2010, compared to $773,463 for the same period last year, an increase
of $315,710, or approximately 40.8%. The increase is partly due to our
reclassification of costs associated.





Costs of
services from packaged-tour were $15,736,270 for the three months ended March
31, 2010, compared to $8,662,601 for the same period last year, an increase
of $7,073,668, or approximately 81.7%. The increase is in tandem with the
increase of revenue. Excluding the effect of the three newly acquired
subsidiaries, which was $4,222,725, our costs of services from this segment were
$11,513,545 for the three months ended March 31, 2010 compared to $8,662,601 for
the same period in 2009, an increase of approximately 32.9%. The increase is
also in tandem with the increase of revenue.


42




Gross
Profit





Gross
profit for the three months ended March 31, 2010 was $8,501,974 compared to
$5,771,809 for the same period 2009, an increase of approximately 47.3%. The
increase in gross profit is due to the same factors contributing to the growth
in revenue. The exponential growth in both our domestic air-ticketing business
and hotel reservations business is a result of synergies from our packaged tour
operations.





Gross
profit in our air-ticketing segment was $3,634,374 for the three months ended
March 31, 2010, compared to $2,448,322 for the same period last year, an
increase of approximately 48.4%. Gross profit margin in this segment for the
three months ended March 31, 2010 was 81.9% compared to 89.0 % for the same
period 2009, a decreased of approximately 7.1%. The decrease in gross margin was
mainly attributable to their reclassification of the costs associated, and to a
lesser extent, the consolidation of Chongqing's new operation in this segment.
Despite the decrease in profit margin, the significant increase in the sales
volume of this segment still resulted in an increase in the total gross profit
in our air-ticketing business operated by Shenzhen Yuzhilu Aviation Service Co.,
Ltd. and Chongqing Travel World E-Business Co., Ltd.





Gross
profit in our hotel reservation segment was $2,061,203 for the three months
ended March 31, 2010 compared to $1,743,368 for the same period last year, an
increase of approximately 18.2%. Gross profit margin in this segment for the
three months ended March 31, 2010 was 65.4% compared to 69.3% for the same
period 2009, a decrease of approximately 3.9%. The decrease of gross profit
margin was mainly due to our reclassification of certain costs
associated.





Gross
profit in our packaged tour segment was $2,806,396 for the three months ended
March 31, 2010 compared to $1,580,119 for the same period last year, an increase
of approximately 77.6%. Gross profit margin in this segment for the three months
ended March 31, 2010 was 15.1% compared to 15.4% for the same period 2009, a
decrease of approximately 0.3%.  The reason for the slightly lower
gross profit margin is that we offered discounts to certain big customers.
Despite the slight decrease in gross profit margin, total gross profit increased
in this segment as a result of the increased volume in our packaged travel
businesses operated by the existing businesses, as well as the additional three
new acquisitions.




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




Consolidated
gross margin for the three months ended March 31, 2010 came in at 32.5%, a
4.7% decrease from the 37.2% the Company posted in the same period last year.
The lower gross margin is mainly due to our changes in revenues mix. Due to the
difference in revenues recognition, our packaged tour has lower gross margin.
During the three months ended March 31, 2010, revenues generated from packaged
tours, which have a smaller profit-margin, grew at a much higher rate than
revenues generated from air ticketing and hotel reservations, leading to lower
overall gross margin.




43




Selling, General and
Administrative Expenses





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





For the three months ended March 31,2010
                  
                  
                  2009Business
      related tax
                  
                  $
                  155,578
                  
                  
                  $
                  88,686Salary
      and commission
                  
                  
                  1,098,451
                  
                  
                  
                  711,922Marketing
                  
                  
                  75,098
                  
                  
                  
                  38,347Rent
                  
                  
                  102,674
                  
                  
                  
                  38,520Depreciation
      and amortization
                  
                  
                  261,903
                  
                  
                  
                  8,419Professional
      fees
                  
                  
                  265,005
                  
                  
                  
                  255,934Stock-based
      compensation
                  
                  
                  336,632
                  
                  
                  
                  165,001Other
      general and administrative expenses
                  
                  
                  768,301
                  
                  
                  
                  225,968Total
                  
                  $
                  3,063,641
                  
                  
                  $
                  1,532,797





Selling,
general and administrative expenses totaled $3,063,641 for three months ended
March 31, 2010 compared to $1,532,797 for the same period last year, an increase
of approximately 99.9%.





Selling,
general and administrative expenses were approximately 11.7% of revenue for the
three months ended March 31, 2010 as compared to 9.9% for the same period last
year. General increase in selling, general and administrative expenses are in
connection with the growth in business operations during the three months ended
March 31, 2010, as compared to the same period of last year. During the first
quarter of 2010, we incurred extra professional fees and consolidation expenses
for the aforesaid three mergers and acquisitions. In addition, the slight
increase in percentage was also due to the issuance of stock based compensation
in early 2009 and the amortization of such stock based compensation, whereas the
stock based compensation is less significant during the same period last
year.




Other Income
(Expenses)





Gain on
change in fair value of derivative liability for the three months ended March
31, 2010 was $109,450 compared to $113,265 for same period last year. The
Company adopted Derivative and Hedging, ASC 815-40 effective January 1,
2009 and the warrants issued in connection with the “Securities Purchase
Agreement” dated August 28, 2008 were reclassified from equity to derivative
liability and marked to market.  Therefore, the Company recorded a gain on
change in fair value of derivative liability of $109,450 on March 31, 2010 to
mark to market for the increase in fair value of the warrants from January 1,
2010 to March 31, 2010.




Net
Income





Net
income was $4,089,841, or 15.7% of revenues for the three months ended March 31,
2010, compared to $3,381,541, or 21.8% of revenue for the same period last year.
The decrease in net income as a percentage of revenue is mostly due to the
change of revenue mix. The lower net margin compared to the same period last
year, mainly comes from our higher percentage of packaged-tour in our gross
revenues, and to a lesser extent, the effect of our discontinued operations and
more provisions for income taxes.




LIQUIDITY AND CAPITAL
RESOURCES





Cash for
operations and liquidity needs are funded primarily through cash flows from
operations and short-term borrowings. Cash and cash equivalents were $37,833,072
as of March 31, 2010. Current assets and current liabilities as of March 31,
2010 were $69,756,224 and $11,042,286, respectively, yielding working capital of
$58,713,938. We believe that the funds available to us from operations are
adequate to meet our operating needs in 2010. For the three months ended March
31, 2010, net cash provided by operating activities was approximately
$6,759,004, which resulted primarily from our organic operations and effective
management of cash flow.


44





Capital
expenditure





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





Working Capital
Requirements





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




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





Off Balance Sheet
Arrangements





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




Item
3.           Quantitative and Qualitative
Disclosures About Market Risk.





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





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


45





Item
4.  Controls and Procedures.





Evaluation
of our Disclosure Controls





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





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





Changes
in internal control over financial reporting





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





PART
II - OTHER INFORMATION





Item
      1.
            Legal
      Proceedings.





There is
no material legal proceeding pending against us.





Item 1A.
            Risk
      Factors





Not
Applicable.





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





None.





Item 3.
            Defaults Upon Senior
      Securities





None.




Item
      4.
            (Removed
      and Reserved).





None.





Item 5.
            Other
      Information





Not
applicable.


46





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





SIGNATURES





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





Date: May
10, 2010




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





By:
            /s/ Yizhao ZhangYizhao
      Zhang
              Chief
      Financial Officer
              (Principal
      Financial Officer)




47