-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AXCq4sgTij3ZuK8udpUlo9JHKKDGf1cht0sbiOu8nOUnvuOlv+9otubthlv4XVMg lpi+USYBte47lhl3V3m6Rg== 0001144204-09-059120.txt : 20091116 0001144204-09-059120.hdr.sgml : 20091116 20091113182626 ACCESSION NUMBER: 0001144204-09-059120 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20090930 FILED AS OF DATE: 20091116 DATE AS OF CHANGE: 20091113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIVERSAL TRAVEL GROUP CENTRAL INDEX KEY: 0001336644 STANDARD INDUSTRIAL CLASSIFICATION: TRANSPORTATION SERVICES [4700] IRS NUMBER: 200667864 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-34284 FILM NUMBER: 091183095 BUSINESS ADDRESS: STREET 1: SHENNAN ROAD, HUALIAN CENTER STREET 2: ROOM 301 - 309 CITY: SHENZHEN, STATE: F4 ZIP: 00000 BUSINESS PHONE: 86 7558 3668 489 MAIL ADDRESS: STREET 1: SHENNAN ROAD, HUALIAN CENTER STREET 2: ROOM 301 - 309 CITY: SHENZHEN, STATE: F4 ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: TAM of Henderson, Inc. DATE OF NAME CHANGE: 20060328 FORMER COMPANY: FORMER CONFORMED NAME: Hair Therapists, Inc. DATE OF NAME CHANGE: 20050819 10-Q 1 v166226_10q.htm Unassociated Document

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 September 30, 2009

o
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 o 

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

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

Large accelerated filer
 o
Accelerated filer
 £
       
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£    No x 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     Yes £    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 November 10, 2009, there are 14,468,901 shares of $0.001 par value common stock issued and outstanding.
 
 
FORM 10-Q
.UNIVERSAL TRAVEL GROUP
INDEX

       
Page
         
PART I.
  
Financial Information
  
  3
       
 
   
Item 1.  Financial Statements ( Unaudited)
     3
         
   
Consolidated Balance Sheets as of September 30, 2009 (Unaudited) and December 31, 2008
  
  4
         
   
 Consolidated Statements of Income for the Nine Months Ended September 30, 2009 and 2008 (Unaudited)
  
  5
         
   
 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008 (Unaudited)
  
  7
         
   
Consolidated Statements of Stockholders' Equity
  
  8
         
   
Notes to Consolidated Financial Statements as of September 30, 2009 (Unaudited)
  
  9
         
   
Item 2.  Management’s Discussion and Analysis of Financial Condition or Plan of Operation
  
  30
         
   
Item 3.  Quantitative and Qualitative Disclosures About Market Risk.
  
  41
         
   
Item 4.  Controls and Procedures
  
  41
         
PART II.
  
Other Information
  
  42
         
   
Item 1.  Legal Proceedings
  
  42
         
   
Item 1A. Risk Factors.
  
  42
         
   
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
  
 42
         
   
Item 3.  Defaults Upon Senior Securities
  
  42
         
   
Item 4.  Submission of Matters to a Vote of Security Holders.
  
  42
         
   
Item 5.  Other Information
  
  42
         
   
Item 6.  Exhibits
  
  42
 
2
 
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

UNIVERSAL TRAVEL GROUP

CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

TABLE OF CONTENTS

Consolidated Balance Sheets
  4
   
Consolidated Statements of Income
  5
   
Consolidated Statements of Cash Flows
  7
   
Consolidated Statements of Stockholders’ Equity
  8
   
Notes to Consolidated Financial Statements
  9

 
3
 

UNIVERSAL TRAVEL GROUP
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2009 AND DECEMBER 31, 2008

   
September 30,
2009
    
DECEMBER 31,
2008
  
 
  
(Unaudited)
        
Assets
                
Cash and cash equivalents
   $ 23,492,115     $ 15,720,182  
Accounts receivable, net
     15,145,415       8,991,849  
Other receivables and deposits, net
     113,840       62,547  
Trade deposit
     5,988,623       6,571,164  
Advances
     439,475       438,468  
Escrow deposits
     -       762,800  
Prepaid expenses
     185,558       312,409  
Note receivable
     2,174,260       -  
Current assets held of discontinued operations
     -       2,459,777  
Total Current Assets
     47,539,286       35,319,196  
                 
Property and equipment, net
     3,545,238       242,648  
Intangible assets
     397,251       307,335  
Goodwill
     9,896,270       9,896,270  
Non-current assets held of discontinued operations
     -       3,661,231  
      13,838,759       14,107,484  
Total Assets
   $ 61,378,045     $ 49,426,680  
                 
 LIABILITIES AND STOCKHOLDERS' EQUITY
                
Current Liabilities
                
Accounts payable and accrued expenses
   $ 3,733,125     $ 1,691,689  
Customer deposits
     1,433,262       1,039,942  
Income tax payable
     1,652,473       1,731,246  
Current liabilities held of discontinued operations
     -       562,931  
Total Current Liabilities
     6,818,860       5,025,808  
                 
Derivative liability
     4,710,798       -  
                 
Total  liabilities
     11,529,658       5,025,808  
                 
Stockholders' Equity
                
Common stock, $.001 par value, 70,000,000 shares authorized, 13,812,545 and 13,873,969 shares issued and outstanding at September 30, 2009 and December 31, 2008, respectively
       13,812       13,873  
Additional paid in capital
     15,198,351       15,861,116  
Other comprehensive income
     1,584,310       1,520,166  
Statutory reserve
     372,144       372,144  
Retained earnings
     32,679,770       26,633,573  
Total Stockholders' Equity
     49,848,387       44,400,872  
Total Liabilities and Stockholders' Equity
   $ 61,378,045     $ 49,426,680  

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

 
4
 

UNIVERSAL TRAVEL GROUP
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
 
  
  
2009
    
2008
  
Revenues
   $ 29,784,918     $ 20,049,313  
Cost of services
     19,778,607       12,927,780  
Gross Profit
     10,006,311       7,121,533  
                 
Selling, general and administrative expenses
     2,572,977       1,545,239  
Income from operations
     7,433,334       5,576,294  
                 
Other Income (Expense)
                
Other income
     2,459       1,485  
Loss on change in fair value of derivative liabilities
     (847,754 )     -  
Interest income
     15,909       9,751  
Interest expense
     -       (13,522 )
Total Other (Expense)
     (829,386 )     (22,867 )
Income before income taxes –continuing operations
     6,603,948       5,574,008  
                 
Provision for income taxes
     (1,891,043 )     (1,242,868 )
Income from continuing operations
   $ 4,712,905     $ 4,331,140  
Income from discontinued operations
     -       297,187  
Net Income
   $ 4,712,905     $ 4,628,327  
                 
Comprehensive Income
                
Net Income
   $ 4,712,905     $ 4,628,327  
Foreign currency translation gains
     15,557       157,299  
Total Comprehensive income
   $ 4,728,462     $ 4,785,626  
                 
Income per common share from continuing operations
                
Basic
   $ .34     $ .35  
Diluted
   $ .31     $ .35  
Income per common share – discontinued operations
                
Basic
   $ -     $ .02  
Diluted
   $ -     $ .02  
Net income per common share
                
Basic
   $ .34     $ .37  
Dilute
   $ .31     $ .37  
Weighted average common shares outstanding
                
Basic
     13,739,880       12,306,715  
Diluted
     15,445,350       12,362,271  

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

 
5
 

UNIVERSAL TRAVEL GROUP
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
 
   
2009
    
2008
  
Revenues
   $
63,701,070
    
$
38,804,665
  
Cost of services
    
41,393,256
      
25,814,030
  
Gross Profit
    
22,307,814
      
12,990,635
  
Selling, general and administrative expenses
    
5,670,694
      
3,102,851
  
Income from operations
    
16,637,120
      
9,887,784
  
                 
Other Income (Expense)
                
Loss on disposal of assets
    
-
      
(1,104
)
Other income
    
8,879
      
9,863
  
Loss on change of fair value of derivative liabilities
    
(6,553,971
)
    
-
  
Interest income
    
39,206
      
21,473
  
Interest expense
    
-
      
(78,526
)
Total Other (Expense)
    
(6,505,887
6)
    
(48,294
)
Income before income taxes –continuing operations
    
10,131,234
      
9,839,490
  
                 
Provision for income taxes
    
(4,029,194
)
    
(2,250,114
)
Income from continuing operations
    
6,102,040
    
$
7,589,376
  
Income from discontinued operations
    
177,975
      
616,508
  
Loss on disposition of discontinued operations
    
(770,595
)
    
-
  
Income (loss) from discontinued operation
    
(592,620
)
    
616,508
  
Net Income
   $
5,509,420
     $
8,205,884
  
                 
Comprehensive Income
                
Net Income
   $
5,509,420
     $
8,205,884
  
Foreign currency translation gains
    
64,144
      
728,701
  
Total Comprehensive income
   $
5,573,564
     $
8,934,585
  
                 
Income per common share from continuing operations
                
Basic
   $
.44
    
$
.62
  
Diluted
   $
.41
    
$
.61
  
Income (loss) per common share from discontinued operations
                
Basic
   $
(.04
)
  
$
.05
  
Diluted
   $
(.04
)
  
$
.05
  
Net income per common share
                
Basic
   $
.40
    
$
.67
  
Dilute
   $
.37
    
$
.66
  
Weighted average common shares outstanding
                
Basic
    
13,828,739
      
12,306,715
  
Diluted
    
14,890,318
      
12,362,271
  

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

 
6
 

UNIVERSAL TRAVEL GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
 
   
2009
    
2008
  
         
Restated
  
CASH FLOWS FROM OPERATING ACTIVITIES
                
Net Income
  
$
5,509,420
    
$
8,205,884
  
Add (deduct):
                
Loss (income) from discontinued operations
    
592,620
      
(616,508
)
Income from continuing operations
    
6,102,040
      
7,589,376
  
                 
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation and amortization
    
422,628
      
49,850
  
Provision for doubtful accounts
    
13,961
      
7,175
  
                 
Stock based compensation
    
           802,157
      
155,802
  
Loss on change in fair value of derivative liabilities
    
6,553,971
      
-
  
Loss on asset disposal
    
-
      
1,105
  
(Increase) / decrease in assets:
                
Accounts receivable
    
(6,156,621
)
    
(3,349,639
)
Other receivable
    
(51,293
)
    
1,093,233
  
Advances
    
(1,007
)
    
179,352
  
Due from shareholder
    
-
      
1,306,933
  
Prepaid expenses
    
126,851
      
(418,791
)
Trade deposits
    
582,541
      
(1,964,100
)
Escrow deposits
    
762,800
      
(762,800
) 
Increase / (decrease) in current liabilities:
                
Accounts payable and accrued expenses
    
2,041,436
      
(1,812,486
)
Customer deposits
    
393,320
      
57,184
  
Income tax payable
    
(78,773
)
    
544,722
  
Net cash provided by continuing operations
    
11,514,011
      
2,676,916
  
Net cash provided by discontinued operations
    
435,259
      
214,432
  
Net cash provided by operating activities
    
11,949,270
      
2,891,348
  
                 
CASH FLOWS FROM INVESTING ACTIVITIES
                
Purchase of property and equipment
    
(3,627,267
)
    
(27,742
)
Purchase of intangibles
    
(187,810
)
    
-
  
Proceeds from collection of Notes     599,151       -  
Proceeds from asset disposals
    
-
      
663
  
Acquisition deposits
    
-
      
1,453,050
  
Net cash (used in) provided by continuing operations
    
(3,215,926
)
    
1,425,971
  
Net cash (used in) provided by discontinued operations
    
(1.035,125
) 
    
-
  
Net cash (used in) provided by Investing activities
    
(4,251,051
)
    
1,425,971
  
                 
CASH FLOWS FROM FINANCING ACTIVITIES
                
Repayments of bank loan
    
-
      
(1,288,554
)
Proceeds of equity financing
    
-
      
7,712,494
  
Proceeds from warrants exercise
    
9,570
      
-
  
Note payable – others
    
-
      
(1,576,750
)
Net cash (used in) provided by continuing operations
    
9,570
      
4,847,190
  
Net cash (used in) provided by discontinued operations
    
-
      
-
  
Net cash provided by financing activities
    
9,570
      
4,847,190
  
                 
Effect of exchange rate changes on cash and cash equivalents
    
64,144
      
728,701
  
                 
Net change in cash and cash equivalents
    
7,771,933
      
9,893,210
  
Cash and cash equivalents, beginning balance
    
15,720,182
      
2,671,684
  
Cash and cash equivalents, ending balance
  
$
23,492,115
    
$
12,564,894
  
                 
SUPPLEMENTAL DISCLOSURES:
                
Cash paid during the period for:
                
Interest payments
  
$
-
    
$
78,525
  
Income Taxes
  
$
4,164,214
    
$
1,885,819
  
                 
Net assets sold of discontinued operations
  
$
1,659,292
          
Goodwill attributable to sold discontinued operations
    
3,630,539
          
Notes received on disposition
    
(2,773,411
)
        
                 
Fair value of Treasury stock received
    
(2,780,950
)
        
Loss on Disposition
    
(770,595
)
        
Net cash of discontinued operations
  
$
(1,035,125
)
        

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

 
7
 

UNIVERSAL TRAVEL GROUP
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND THE YEAR ENDED DECEMBER 31, 2008

   
Common Stock
    
Additional
Paid In
    
Other
Comprehensive
    
Retained
    
Statutory
    
Total
Stockholders’
  
   
Shares
    
Amount
    
Capital
    
Income
    
Earnings
    
Reserve
    
Equity
  
Balance December 31, 2008
    
13,873,969
    
$
13,873
    
$
15,861,116
    
$
1,520,166
    
$
26,633,573
    
$
372,144
    
$
44,400,872
  
                                                         
Cumulative effect of a change in accounting principle-adoption of Derivative and Hedging, ASC 815-40, effective January 1, 2009
                    
(2,091,738
)
            
536,777
              
(1,554,961
)
                                                         
Foreign currency translation adjustments
                            
64,144
                      
64,144
  
                                                         
Stock-based compensation – Net of warrants exercise
    
41,120
      
42
      
802,115
                              
802,157
  
                                                         
Fair value of Treasury Stock received and retired
    
(238,095
)
    
(239
)
    
(2,780,711
)
                            
(2,780,950
)
                                                         
Warrants exercised
    
132,251 
      
133 
      
3,398,002 
                              
3,398,135
  
Options exercised
    
3,300
      
3
      
9,567
                              
9,570
  
                                                         
Income for the nine months  ended September 30, 2009
                                    
5,509,420
              
5,509,420
  
                                                         
Balance September 30, 2009
    
13,812,545
      
13,812
      
15,198,351
      
1,584,310
      
32,679,770
      
372,144
      
49,848,387
  
                                                         
Balance December 31, 2007
    
12,270,326
    
$
12,269
    
$
8,626,075
    
$
545,164
    
$
12,101,396
    
$
372,144
    
$
21,657,048
  
                                                         
Foreign currency translation adjustments
                            
975,002
                      
975,002
  
                                                         
Forfeited options
                    
(683,437
)
                            
(683,437
)
                                                         
Stock-based compensation
                    
207,588
                              
207,588
  
                                                         
Equity financings
    
74,074
      
74
      
599,920
                              
599,994
  
Equity financings
    
1,529,569
      
1,530
      
7,110,970
                              
7,112,500
  
                                                         
Income for the  year ended December 31, 2008
                                    
14,532,177
              
14,532,177
  
                                                         
Balance December 31, 2008
    
13,873,969
    
$
13,873
    
$
15,861,116
    
$
1,520,166
    
$
26,633,573
    
$
372,144
    
$
44,400,872
  

 
8
 

UNIVERSAL TRAVEL GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009
(Unaudited)

The accompanying unaudited consolidated financial statements of Universal Travel Group (the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Accordingly, the results from operations for the three and nine-month period ended September 30, 2009, are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.  The unaudited consolidated financial statements should be read in conjunction with the consolidated December 31, 2008 financial statements and footnotes thereto included in the Company's Form 10-K/A filed with the SEC on October 29, 2009.

The consolidated financial statements as December 31, 2008 have been derived from the audited consolidated financial statements at that date but do not include all disclosures required by the accounting principles generally accepted in the United States of America.

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.  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 as discontinued 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 unaudited 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 unaudited 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. The Company has reclassified and included all costs directly associated with the generation of revenue in its cost of services. These costs were previously classified as selling, general, and administrative expenses in the consolidated financial statements.  This reclassification has resulted in no change in the Company’s reported Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008 and Consolidated Statements of Cash Flows for nine months ended September 30, 2009 and 2008.  The reclassification did affect the individual components of the Company’s Consolidated Statements of Income for the three and nine months ended September 30, 2008. The Company’s Consolidated Statements of Income for the three and nine months ended September 30, 2009 reflect the proper classification of costs of services. Costs of services that were reclassified from the Company’s selling, general, and administrative expenses amounted to $ 322,635 and $999,105 for the three and nine months ended September 30, 2008, respectively.  However, this reclassification had no effect on the reported consolidated net income.

 
9
 

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.

The loss on disposal of Shenzhen Speedy Dragon Enterprises Ltd was as following:

Consideration
  
$
5,554,361
  
Goodwill attributable to sold Shenzhen Speedy Dragon Enterprises Ltd.
    
(3,630,539
)
Net equity of Shenzhen Speedy Dragon Ltd.
    
(2,694,417
)
Loss on disposition of discontinued operation
  
$
(770,595
)

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 and nine months ended September 30, 2009 and 2008, respectively:
 
   
Nine months
Ended
    
Nine months
ended
    
Three months
ended
    
Three months
ended
  
   
September 30,
    
September 30,
    
September 30,
    
September 30,
  
   
2009
    
2008
    
2009
    
2008
  
Sales
   $ 3,631,545     $ 8,520,022     $ -     $ 2,854,332  
                                 
Cost of sales
     (3,218,140 )     (7,259,803 )     -       (2,363,228 )
                                 
Gross profit
     413,405       1,260,219       -       491,104  
                                 
Operating expenses
     (190,989 )     (469,112 )     -       (128,818 )
Income from discontinued operation before income tax
     222,416       790,107       -       362,286  
                                 
Income tax
     (44,441 )     (174,599 )     -       (65,099 )
Income from discontinued operations, net of income tax
   $ 177,975     $ 616,508     $       $ 297,187  
 
10
 
The following summarized the assets and liabilities of discontinued operations as of December 31, 2008:

Cash and cash equivalents
  
$
484,349
  
Accounts receivable, net
    
1,723,357
  
Other receivables and deposits, net
    
78,866
  
Trade deposit
    
6,848
  
Prepaid expenses
    
166,357
  
Current assets held of discontinued operations
  
$
2,459,777
  
Non-current assets held of discontinued operations
    
3,661,231
  
Total assets held of discontinued operations
  
$
6,121,008
  
Accounts payable and accrued expenses
  
$
527,467
  
Customer deposits
    
7,308
  
Income tax payable
    
28,156
  
Current liabilities held of discontinued operations
  
$
562,931
  

Translation Adjustment
As of September 30, 2009 and December 31, 2008 the accounts of Universal Travel Group were maintained, and its financial statements were expressed, in Chinese Yuan Renminbi (CNY). Such financial statements were translated into U.S. Dollars (USD) in accordance with 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., 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 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.

Segment information
Accounting Standards Codification subtopic Segment Reporting 280-10 (“ASC 280-10”) which establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders.  ASC 280-10 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The Company applies the management approach to the identification of our reportable operating segment as provided in accordance with ASC 280-10. The information disclosed herein materially represents all of the financial information related to the Company’s principal operating segment
 
 
11
 
 
Stock Based Compensation
Effective for the year beginning January 1, 2006, the Company has adopted Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”). The Company made no employee stock-based compensation grants before December 31, 2005 and therefore has no unrecognized stock compensation related liabilities or expense unvested or vested prior to 2006. Stock-based compensation expense recognized under ASC 718-10 for the three month and nine month periods ended September 30, 2009 was $306,432 and $802,157, respectively, and $0 and $155,802 for the three and nine month period ended September 30, 2008, respectively.

Comprehensive Income (Loss)
The Company adopted Accounting Standards Codification subtopic 220-10, Comprehensive Income (“ASC 220-10”) which establishes standards for the reporting and displaying of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. ASC 220-10 requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available for sale securities.

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

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

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

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

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 $224,100 and $210,139 as of September 30, 2009 and December 31, 2008, respectively.

Description
  
Balance
at
beginning
of
year
    
Charged to
expenses
    
Deductions
    
Balance at end
of period
  
Allowance for doubtful receivables 2009
  
$
210,139
    
$
13,961
    
$
-
    
$
224,100
  


 
12
 

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. All references in the consolidated financial statements and the notes to consolidated financial statements, number of shares, and share amounts have been retroactively restated to reflect the reverse split.

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 years
Transportation equipment
  
5 years
Office equipment
  
5 years
Leasehold Improvements
  
5 – 10 years
 
As of September 30, 2009 and December 31, 2008 Property, Plant & Equipment of consist of the following:

   
September 30,
2009
    
December
31, 2008
  
Furniture and fixture
   $ 19,258     $ 18,247  
Transportation equipment
     204,127       143,332  
Office equipment
     2,926,540       360,145  
Leasehold improve
     1,030,922       31,374  
  
     4,180,847       553,098  
Accumulated depreciation
     (635,609 )     (310,450 )
  
   $ 3,545,238     $ 242,648  

Depreciation expense for the three months ended September 30, 2009 and 2008 was $189,567 and $9,212, respectively, of which $175,056 and $8,291 was included as part of cost of services for the three months ended September 30, 2009 and 2008, respectively.
 
Depreciation expense for the nine months ended September 30, 2009 and 2008 was $324,734 and $ 26,149, respectively, of which $292, 261 and $23,534 was included as part of cost of services for the nine months ended September 30, 2009 and 2008, respectively.

Goodwill
Goodwill represents the excess cost of a business acquisition over the fair value of the net assets acquired.  In accordance with 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 Subsidiary, for additional information regarding goodwill.

 
13
 

As of September 30, 2009 and December 31, 2008, Goodwill consists of the following:

   
September 30, 2009
    
December 31,2008
  
Shanghai Lanbao Travel Service Co., Ltd.
     3,081,799       3,081,799  
Foshan International Travel Service Co., Ltd.
     6,049,576       6,049,576  
Xian Golden Net Travel Serve Services
     764,895       764,895  
    $ 9,896,270     $ 9,896,270  

Long-Lived Assets
The Company adopted the Property, Plant and Equipment Topic of the FASB Accounting Standard Codification (“ASC 360”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. 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 September 30, 2009 and December 31, 2008 there were no significant impairments of its long-lived assets.

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

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 and nine month periods ended September 30, 2009, the Company recorded a loss on change in fair value of derivative liability of $847,754 and $6,553,971, respectively, to mark to market for the increase in fair value of the warrants during the three and nine-month periods ended September 30, 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 ASC 815-40.  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.

In August 2009, the Company issued 132,251 shares of its commons stock in exchange for 322,580 of such warrants exercised under the cashless exercise provisions of the warrants (see Note 7 and 8). The fair value of the 322,580 warrants on the exercise date amounted to $3,398,135. Accordingly, the fair value of the exercised warrants was reclassified to permanent equity.

The Company determined the fair value of the remaining warrants at September 30, 2009 was $4,710,798. The fair value was determined using the Black Scholes Option Pricing Model based on the following assumptions: dividend yield: - -0-%; volatility: 121%, risk free rate: 1.49%, expected term: 3.91 years.
 
14
 
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 discontinued operations (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.

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.
 
15
 
Air Cargo Business
The Company received fees from its air cargo business. However, this business segment had been accounted for as a discontinued operation upon consummation of a termination agreement with Shenzhen Speedy Dragon Enterprise Ltd dated June 12, 2009.  The Company basically brokered air cargo spaces and resell them to local logistic companies to generate revenue.  The Company had contracted with Chinese domestic airlines as its vendors to carry out its cargo services.  Revenues generated from air cargo business were recognized on a gross basis in the statements of income, when the service was rendered, as the Company, generally, undertook the majority of the business risk.  The Company was the primary obligor to pay the service providers upon rendering of those services.  In addition, the Company acted as principal related to the air cargo services rendered and collections are reasonably assured.  Customers were charged based on the class and weight of goods shipped.

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

Cost of Services
Costs of services for air tickets cover mainly 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 months ended September 30, 2009 and 2008, such expenses amounted to $787,666 and $60,208, respectively. For the nine months ended September 30, 2009 and 2008, such expenses amounted to $1,625,068 and $216,010, respectively.

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

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

Statement of Cash Flows
In accordance with FASB Accounting Standards Codification Topic on Statement of Cash flows (“ASC 230”), cash flows from the Company’s operations are based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.
 
16
 
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 $187,810 and $-0- were capitalized in 2009 and 2008 and will be amortized over a 3 year life.  The Company recorded amortization expense for definitive lived intangible assets of $97,894 and $7,649 for the nine months ended September 30, 2009 and 2008, $42,322 and $1,762 for the three months ended September 30, 2009 and 2008, respectively. The Company will record approximately $169,286, $169,286, and $58,679 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.

The following table sets forth the computation of basic and diluted earnings per share of common stock:
 
   
Nine months ended September 30,
    
Three months ended September 30,
  
   
2009
    
2008
    
2009
    
2008
  
Basic earnings from continuing operations per share:
                        
Numerator:
                        
Income from continuing operations used in computing basic earnings per share
   $ 6,102,040     $ 7,589,376     $ 4,712,905     $ 4,331,140  
Income from continuing operations applicable to common shareholders
   $ 6,102,040     $ 7,589,376     $ 4,712,905     $ 4,331,140  
Denominator:
                                
Weighted average common shares outstanding
     13,828,739       12,306,715       13,739,880       12,306,715  
Basic earnings per share from continuing operations
   $ 0.44     $ 0.62     $ 0.34     $ 0.35  
Diluted earnings per share from continuing operations:
                                
Numerator:
                                
Income from continuing operations used in computing diluted earnings per share
   $ 6,102,040     $ 7,589,376     $ 4,712,905     $ 4,331,140  
Income from continuing operations applicable to common shareholders
   $ 6,102,040     $ 7,589,376     $ 4,712,905     $ 4,331,140  
Denominator:
                                
Weighted average common shares outstanding
     13,828,739       12,306,715       13,739,880       12,306,715  
Weighted average effect of dilutive securities:
                                
Stock options and warrants
     1,061,579       55,556       1,705,470       55,556  
Shares used in computing diluted net income per share
     14,890,318       12,362,271       15,445,350       12,362,271  
Diluted earnings per share from continuing operations
   $ 0.41     $ 0.61     $ 0.31     $ 0.35  
 
17
 
   
Nine months ended
September 30,
    
Three months ended
September 30,
  
   
2009
    
2008
    
2009
    
2008
  
Basic earnings (losses) from discontinued operations per share:
                        
Numerator:
                        
Income (loss) from discontinued operations  used in computing basic earnings per share
   $ (592,620 )   $ 616,508     $ -     $ 297,187  
Income (loss) from discontinued operations applicable to common shareholders
   $ (592,620 )   $ 616,508     $ -     $ 297,187  
Denominator:
                                
Weighted average common shares outstanding
     13,828,739       12,306,715       13,739,880       12,306,715  
Basic earnings per share from discontinued operations
   $ (0.04 )   $ 0.05     $ -     $ 0.02  
Diluted earnings (losses) per share from discontinued operations:
                                
Numerator:
                                
Income (loss) from discontinued operations used in computing diluted earnings (losses) per share
   $ (592,620 )   $ 616,508     $ -     $ 297,187  
Income (loss) from discontinued operations applicable to common shareholders
   $ (592,620 )   $ 616,508     $ -     $ 297,187  
Denominator:
                                
Weighted average common shares outstanding
     13,828,739       12,306,715       13,739,880       12,306,715  
Weighted average effect of dilutive securities:
                                
Stock options and  warrants
     -       55,556       1,705,470       55,556  
Shares used in computing diluted net income (loss) per share
     13,828,739       12,362,271       15,445,350       12,362,271  
Diluted earnings (loss) per share from discontinued operations
   $ (0.04 )   $ 0.05     $ -     $ 0.02  
Net income per common share
                                
Basic
   $ 0.40     $ 0.67     $ 0.34     $ 0.37  
Dilute
   $ 0.37     $ 0.66     $ 0.31     $ 0.37  

Recent Accounting Pronouncements
In May 2009, the FASB issued SFAS No. 165, “Subsequent Events”, which is included in ASC Topic 855, Subsequent Events. ASC Topic 855 established principles and requirements for evaluating and reporting subsequent events and distinguishes which subsequent events should be recognized in the financial statements versus which subsequent events should be disclosed in the financial statements. ASC Topic 855 also required disclosure of the date through which subsequent events are evaluated by management.  ASC Topic 855 was effective for interim periods ending after June 15, 2009 and applies prospectively.  Because ASC Topic 855 impacted the disclosure requirements, and not the accounting treatment for subsequent events, the adoption of ASC Topic 855 did not impact our results of operations or financial condition. 

 
18
 
 
Effective July 1, 2009, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.

In August 2009, the FASB issued ASU No. 2009-05, Measuring Liabilities at Fair Value, which provides additional guidance on how companies should measure liabilities at fair value under ASC 820. The ASU clarifies that the quoted price for an identical liability should be used. However, if such information is not available, an entity may use, the quoted price of an identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities traded as assets, or another valuation technique (such as the market or income approach). The ASU also indicates that the fair value of a liability is not adjusted to reflect the impact of contractual restrictions that prevent its transfer and indicates circumstances in which quoted prices for an identical liability or quoted price for an identical liability traded as an asset may be considered level 1 fair value measurements. This ASU is effective October 1, 2009. The Company is currently evaluating the impact of this standard, but would not expect it to have a material impact on the Company’s consolidated results of operations or financial condition.

In September 2009, the FASB issued ASU No. 2009-12, Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), that amends ASC 820 to provide guidance on measuring the fair value of certain alternative investments such as hedge funds, private equity funds and venture capital funds. The ASU indicates that, under certain circumstance, the fair value of such investments may be determined using net asset value (NAV) as a practical expedient, unless it is probable the investment will be sold at something other than NAV. In those situations, the practical expedient cannot be used and disclosure of the remaining actions necessary to complete the sale is required. The ASU also requires additional disclosures of the attributes of all investments within the scope of the new guidance, regardless of whether an entity used the practical expedient to measure the fair value of any of its investments. This ASU is effective October 1, 2009. The Company is currently evaluating the impact of this standard, but would not expect it to have a material impact on the Company’s consolidated results of operations or financial condition.

In October 2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force, that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements. As a result of these amendments, multiple-deliverable revenue arrangements will be separated in more circumstances than under existing U.S. GAAP. The ASU does this by establishing a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis. This ASU also eliminates the residual method of allocation and will require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the overall arrangement proportionally to each deliverable based on its relative selling price. Expanded disclosures of qualitative and quantitative information regarding application of the multiple-deliverable revenue arrangement guidance are also required under the ASU. The ASU does not apply to arrangements for which industry specific allocation and measurement guidance exists, such as long-term construction contracts and software transactions. ASU No. 2009-13 is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on its consolidated results of operations and financial condition.

 
19
 

In October 2009, the FASB issued ASU No. 2009-14, Certain Revenue Arrangements That Include Software Elements—a consensus of the FASB Emerging Issues Task Force, that reduces the types of transactions that fall within the current scope of software revenue recognition guidance. Existing software revenue recognition guidance requires that its provisions be applied to an entire arrangement when the sale of any products or services containing or utilizing software when the software is considered more than incidental to the product or service. As a result of the amendments included in ASU No. 2009-14, many tangible products and services that rely on software will be accounted for under the multiple-element arrangements revenue recognition guidance rather than under the software revenue recognition guidance. Under the ASU, the following components would be excluded from the scope of software revenue recognition guidance:  the tangible element of the product, software products bundled with tangible products where the software components and non-software components function together to deliver the product’s essential functionality, and undelivered components that relate to software that is essential to the tangible product’s functionality. The ASU also provides guidance on how to allocate transaction consideration when an arrangement contains both deliverables within the scope of software revenue guidance (software deliverables) and deliverables not within the scope of that guidance (non-software deliverables). ASU No. 2009-14 is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on its consolidated results of operations and financial condition.

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

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

Note 3 – TRADE DEPOSITS AND ADVANCES

Trade deposits represents amount held by Airlines and deposits. As of September 30, 2009 and December 31, 2008 the Company had paid $5,988,623 and $6,571,164 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 September 30, 2009 and December 31, 2008:

   
September 30, 2009
    
December 31,
2008
  
Shenzhen Yuzhilu Aviation Service Co., Ltd:
            
Deposit for 600 sets of kiosk. The Company will start record of asset and depreciation on a 5 year straight-line method for the actual number of kiosk when they start operation.
  
$
798,519
    
$
3,171,851
  
CRM System Design.  This was a prepayment to the design of CRM system, and the Company will start record of intangible asset and amortize over 5 year period when the CRM system begin to operate.
    
-
      
41,216
  
Design fee for kiosk. The Company will start amortization at the percentage of actual number of kiosk operative over total 600 set of kiosk at the time the actual number of kiosk starts operation.
    
34,573
      
103,479
  
Deposit for airlines. This was a credit based for issuing air-tickets, and the full amount is returnable if the company discontinues air-ticket business.
    
642,988
      
674,277
  
Deposit for air-ports. This was a deposit for admittance to do marketing in air-ports, and is deductible against monthly rental obligation to air-ports
    
8,497
      
21,631
  
Deposit for agencies. This was a credit based for the company to issue other ticket agencies' special fare air-ticket, and the full amount is returnable if the company discontinues its business with other agencies.
    
1,098,687
      
1,096,170
  
Subtotal
  
$
2,583,264
    
$
5,108,624
  
 
20

 (Continued)
  
September 30, 2009
    
December 31,
2008
  
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.
  
$
551,856
    
$
632,726
  
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.
    
145,398
      
230,574
  
Subtotal
    
697,254
      
863,300
  
Xian Golden Net Travel Serve Services, Ltd.:
                
Deposit for Luoyang Tour companies. This was a credit based for co-operate travel agencies, and is deductible against tour payments, the balance is returnable when cease doing business with these agencies
    
29,298
      
292,312
  
Deposit for Henan Tour companies.  This was a credit based for co-operate travel agencies, and is deductible against tour payments, the balance is returnable when cease doing business with these agencies.
    
14,649
      
219,234
  
Deposit for transportations.  This was a credit based for co-operate transportation suppliers, and is deductible against transportation payments, the balance is returnable when cease doing business with these agencies.
    
14,649
      
87,694
  
Subtotal
    
58,596
      
599,240
  
Chongqing Travel World E-Business Co., Ltd.
                
Deposit for agencies. This was a credit based for the company to issue other ticket agencies' special fare air-ticket, and the full amount is returnable if the company discontinues its business with other agencies.
    
585,967
      
-
  
Deposits for Leasehold Construction
    
2,063,542
          
Subtotal
    
2,649,509
      
-
  
Total
  
$
5,988,623
    
$
6,571,164
  

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 September 30, 2009 and December 31, 2008 the Company has advanced this company $439,475 and $438,468 respectively.

Note 4 - COMPENSATED ABSENCES
Regulation 45 of local PRC labor law entitles employees to annual vacation leave after 1 year of service. In general all leave must be utilized annually, with proper notification. Any unutilized leave is cancelled.

Note 5 - INCOME TAXES
The Company through its subsidiary Shenzhen Yuzhilu Aviation Service Co. is governed by the Income Tax Laws of the PRC. Operations in the United States of America have incurred net accumulated operating losses for income tax purposes. Pursuant to the PRC Income Tax Laws, the Enterprise Income Tax (EIT) the Company has a statutory rate of 25%. The following is a reconciliation of income tax expense for the three and nine months ended September 30, 2009 and 2008.

   
Nine months
ended
    
Nine months
ended
    
Three months
ended
    
Three months
ended
  
   
September 30,
    
September 30,
    
September 30,
    
September 30,
  
Current
  
$
4,029,194
    
$
2,250,114
    
$
1,891,043
    
$
1,242,868
  
Deferred
    
-
      
-
      
-
      
-
  
Total
  
$
4,029,194
    
$
2,250,114
    
$
1,891,043
    
$
1,242,868
  
 
21
 
Note 6 – COMMITMENTS
 
The Company leases various office facilities under month-to-month arrangements. Rental expense for leases consisted of $309,711 and $132,446 for nine months ended September 30, 2009 and 2008, respectively. Rental expense for leases were $161,808 and $40,149 for three months ended September 30, 2009 and 2008, respectively.  The Company has future minimum lease obligations as of September 30, 2009 as follows:
2010
  
$
286,691
  
2011
    
183,241
  
2012
    
161,139
  
2013
    
161,490
  
2014
    
148,966
  
Thereafter
    
19,557
  
Total
  
$
961,084
  

Pursuant to the Securities Purchase Agreement entered into on August 28, 2008, the Company and the Buyers in this Agreement entered into a Lock up Agreement. Under the Lock-Up Agreement, the Principal Shareholder agreed that she would not sell any of the Lock-Up Shares, 5,000,000 shares of Common Stock and options to purchase 2,000,000 shares of Common Stock, and shall not transfer such shares for twelve (12) months.
 
Note 7 – COMMON STOCK

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

Pursuant to a share exchange agreement, the Company issued 238,095 shares of newly issued shares of Common Stock to the former shareholders of Shenzhen Speedy Dragon Enterprises Limited. The shares were valued at $1,000,000, which was the fair value of the shares at the date of the exchange agreement. This amount is included in the cost of net assets and goodwill purchased.
 
On April 10, 2007 the Company consummated the acquisition of a 100% interest in Shenzhen Speedy Dragon Enterprises Limited ("SSD") for a cash and stock transaction valued at approximately US$4 million in aggregate. This amount is included in the cost of net assets and goodwill purchased.

The stock consideration consisted of 238,095 newly issued shares of the Registrant’s common stock, which were given to SSD’s sole Shareholder immediately before the completion of the Share Exchange Transaction. The cash consideration consisted of $3,000,000 in cash and payable no later than the first anniversary of the Merger Transaction. The obligation to pay the cash consideration is evidenced by interest-free promissory notes between the Registrant and the SSD Shareholder.

SSD is engaged in the business of air freight forwarding. The purchase price was determined based on arms' length negotiations between Universal Travel Group and the shareholder of SSD.

The acquisition had been accounted for as a purchase business combination and the results of operations from the acquisition date have been included in the Company's consolidated financial statements in accordance with ASC810. The allocation of the purchase price is as follows:
Cash acquired
  
$
17,800
  
Loans receivable
    
90,096
  
Loans shareholder
    
251,184
  
Property Plant & Equipment
    
22,995
  
Goodwill
    
3,630,539
  
Total assets acquired
    
4,012,614
  
Liabilities assumed
        
Accounts & Income Taxes payable
    
3,587
  
Other payable
    
9,026
  
Total
  
$
4,000,000
  

 
22
 

The excess of purchase price over tangible assets acquired and liabilities assumed of $3,630,359 was recorded as goodwill. At the time of the acquisition no identifiable intangibles assets existed under the contractual-legal or the separability criterion as required under ASC 805.

Prior to the acquisition, Shenzhen Speedy Dragon Enterprises Limited prepared its financial statements under accounting principles generally accepted in the United States of America. Pursuant to a termination agreement dated June 12, 2009 between the Company and Shenzhen Speedy Dragon Enterprises Limited (see Note 2 Discontinued Operations), the Company transferred back its equity interest in Shenzhen Speedy Dragon Enterprises Limited on or before June 30, 2009 and that the 238,095 shares of the Company’s common stock were returned from the sole shareholder of Shenzhen Speedy Dragon Enterprises Limited to the Company. The returned shares were canceled as of June 30, 2009.  

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.

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

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

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

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

 
23
 
 
On August 8, 2007, the Company consummated the acquisition of a 100% interest in Shanghai Lanbao Travel Services Co., Ltd. ("SLB") for a cash and stock transaction valued at approximately US$3.92 million in aggregate. This amount is included in the cost of net assets and goodwill purchased.

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

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

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

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

 The excess of purchase price over tangible assets acquired and liabilities assumed of $3,081,799 was recorded as goodwill. At the time of the acquisition no identifiable intangibles assets existed under the contractual-legal or the separability criterion as required under ASC 805.

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

Pursuant to a share exchange agreement, the Company issued 374,329 shares of newly issued shares of 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 $3,153,000 due immediately before the completion of the Share Exchange Transaction and payable no later than the first anniversary of the Merger Transaction. The obligation to pay the cash consideration is evidenced by two interest-free promissory notes between the Registrant and each of the FOI Shareholders.

 
24
 

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

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

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

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

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)

During the nine months ended September 30, 2009, the Company issued 41,120 shares of common stock in exchange for exercise of previously issued warrants, 3,300 shares of common stock in exchange for exercise of stock options, and 132,251 shares of common stock in exchange for exercise of 322,580 warrants related to the August 28, 2008 equity financing.

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.

 
25
 

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

The option holder has no voting or dividend rights. The Company records the expense of the stock options over the related vesting period. The options were valued using the Black-Scholes option-pricing model at the model at the date of grant stock option pricing. On May 28, 2008, upon resignation, Board member has forfeited 22,222 options.

On June 24, 2008, the Company issued, to another newly appointed Board member, an option grant to purchase 33,333 shares of common stock at the closing price of $ 4.56 per share. The options are exercisable until July 1, 2018. 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, 2008, 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 options 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. 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. 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 $306,432 and $802,157 for the three and nine months ending September 30, 2009, and $0 and  $155,802 for the three and nine months ended September 30, 2008.

                     
Aggregate
  
         
Exercise
    
Remaining
    
Intrinsic
  
   
Total
    
Price
    
Life
    
Value
  
                         
Outstanding, December 31, 2008
    
55,555
    
$
4.56-11.25
    
7.69-8.75yrs
      
-
  
Granted in 2009
    
2,200,000
    
$
2.70-3.84
    
9.31yrs
      
-
  
Granted in 2009
    
115,000
    
$
8.82
      
9.92yrs
          
Exercised in 2009
    
(3,300
) 
    
2.90
      
-
      
-
  
                                 
Outstanding, September 30, 2009
    
2,367,255
      
-
      
-
      
-
  

 
26
 

Pursuant to the Securities Purchase Agreement entered into On August 28, 2008, the Company issued warrants to purchase 764,786 shares of Common Stock. The unit purchase price was $4.65 per Common Share and a related Warrant for the purchase of one-half a Common Share, times the number of Common Shares purchased. Market Value of the Company’s stock on August 28, 2008 was $4.05. Each warrant has an Exercise Price of $8.13 and a term of 5 years from the date of issuance.  The Company measured and recognized an aggregate of $2,091,738 of the proceeds to additional paid in capital upon issuance of these warrants. The terms of the warrants provide for an adjustment to the exercise price of these warrants if the company closes on the sale or issuance of common stock at a price which is less than the exercise price then in effect for these warrants.  Upon the Company’s adoption of Accounting Standards Codification subtopic 815-40, Derivatives and Hedging (“ASC 815-40”) effective January 1, 2009, the Company determined that the warrants did not qualify for a scope exception under Accounting Standards Codification subtopic 815-10, Derivatives and Hedging (“ASC 815-10”) as they were determined to not be indexed to the Company’s stock as prescribed by ASC 815-40.  On January 1, 2009, the warrants were reclassified from equity to derivative liability for the then relative fair market value and marked to market (see Note 2 Derivative Liability).  In August 2009, the Company issued 132,251 shares of its commons stock in exchange for 322,580 of such warrants exercised under the cashless exercise provisions of the warrants (see Note 2 and Note 7). The fair value of the 322,580 warrants on the exercise date amounted to $3,398,135. Accordingly, the fair value of the exercised warrants was reclassified to permanent equity.

Note 9 - OTHER COMPREHENSIVE INCOME
Balances of related after-tax components comprising accumulated other comprehensive income, included in stockholders equity, as of September 30, 2009 and December 31, 2008 are as follows:

   
Foreign Currency
Translation
Adjustment
    
Accumulated Other
Comprehensive
Income
  
Balance December 31, 2007
  
$
545,164
    
$
545,164
  
Changes for year ended December 31, 2008
    
975,002
      
975,002
  
Balance December 31, 2008
    
1,520,166
      
1,520,166
  
Changes for nine months ended September 30, 2009
    
64,144
      
64,144
  
Balance at September 30, 2009
  
$
1,584,310
    
$
1,584,310
  

Note 10 - CURRENT VULNERABILITY DUE TO CERTAIN RISK FACTORS
The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC's economy. The Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Note 11 – MAJOR CUSTOMERS AND CREDIT RISK
The Company derives a portion of its income from various Airlines. Most revenue is cleared thru IATA, a centralized reporting platform.

Note 12 – ESCROW DEPOSITS
Pursuant to the Securities Purchase Agreement entered into on August 28, 2008, the Company agreed that it will deposit $500,000 of the proceeds in escrow to pay the fees and expenses in connection with a public relations and investor relations campaign. The Company also agreed that it engage a Chief Financial Officer who shall be fluent in English and Mandarin, who understands and has a working knowledge of United States generally accepted accounting principles, who has had significant responsibility for the preparation and filing of quarterly, annual and current reports with the SEC and who has experience working with or in United States capital market participants.

As of September 30, 2008 $337,200 has been prepaid out of this escrow account in connection with the public and investor relations campaign for services covering a one year period. This prepayment is being amortized accordingly. Remaining balance was released to the Company during the three months ended September 30, 2009.

 
27
 

The Company agreed that it would deposit $600,000 of the proceeds in escrow under the Escrow Agreement, to be released only upon the dual signatures of the Chief Executive Officer of the Company and the representative of the Buyers designated in the Escrow Agreement following the engagement of a Chief Financial Officer. During the nine months ended September 30. 2009, $600,000 was released from escrow to the Company.

Note 13 -   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 six 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., and Shenzhen Travel World Travel Agency Co., Ltd.). Pursuant to ASC 280-10 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, and Shenzhen Travel World Travel Agency 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
    
Total
  
   
Nine Months Ended September 30, 2009
  
Sales, net
  
$
10,922,307
    
$
9,063,229
    
$
43,715,534
    
$
-
    
$
63,701,070
  
Cost of sales
  
$
1,435,746
    
$
2,379,580
    
$
37,577,930
    
$
-
    
$
41,393,256
  
Gross profit
  
$
9,486,561
    
$
6,683,649
    
$
6,137,604
    
$
-
    
$
22,307,814
  
Income from operations
  
$
6,797,123
    
$
5,987,617
    
$
5,477,448
    
$
(1,625,068
)
  
$
16,637,120
  
Depreciation & Amortization
  
$
407,904
    
$
3,384
    
$
11,340
    
$
-
    
$
422,628
  
Fixed Assets Expenditures
  
$
3,625,948
    
$
-
    
$
1,318
    
$
-
    
$
3,627,266
  
Total assets
  
$
37,386,452
    
$
11,746,801
    
$
10,146,807
    
$
2,097,985
    
$
61,378,045
  
   
Nine Months Ended September 30, 2008
  
Sales, net
  
$
7,251,122
    
$
4,564,765
    
$
26,988,778
    
$
-
    
$
38,804,665
  
Cost of sales
  
$
692,202
    
$
1,929,327
    
$
23,192,501
    
$
-
    
$
25,814,030
  
Gross profit
  
$
6,558,920
    
$
2,635,438
    
$
3,796,277
    
$
-
    
$
12,990,635
  
Income from operations
  
$
4,388,807
    
$
2,539,453
    
$
3,175,534
    
$
(216,010
)
  
$
9,887,784
  
Depreciation & Amortization
  
$
30,021
    
$
3,161
    
$
16,668
    
$
-
    
$
49,850
  
Fixed Asset Expenditures
  
$
19,721
    
$
5,673
    
$
2,348
    
$
-
    
$
27,742
  
Total assets
  
$
23,687,525
    
$
5,179,451
    
$
8,575,633
    
$
1,490,501
    
$
38,933,110
  
   
Three Months Ended September 30, 2009
  
Sales, net
  
$
4,876,665
    
$
3,832,254
    
$
21,075,999
    
$
-
    
$
29,784,918
  
Cost of sales
  
$
783,767
    
$
695,953
    
$
18,298,887
    
$
-
    
$
19,778,607
  
Gross profit
  
$
4,092,898
    
$
3,136,301
    
$
2,777,112
    
$
-
    
$
10,006,311
  
Income from operations
  
$
3,074,462
    
$
2,516,078
    
$
2,630,460
    
$
(787,666
)
  
$
7,433,334
  
Depreciation & Amortization
  
$
227,389
    
$
766
    
$
3,734
    
$
-
    
$
231,889
  
Fixed Asset Expenditures
  
$
67,244
    
$
-
    
$
1,318
    
$
 
   
$
68,562
  
Total assets
  
$
37,386,452
    
$
11,746,801
    
$
10,146,807
    
$
2,097,985
    
$
61,378,045
  
   
Three Months Ended September 30, 2008
  
Sales, net
  
$
3,885,722
    
$
2,540,469
    
$
13,623,122
    
$
-
    
$
20,049,313
  
Cost of sales
  
$
311,948
    
$
1,071,731
    
$
11,544,101
    
$
-
    
$
12,927,780
  
Gross profit
  
$
3,573,774
      
1,468,738
      
2,079,021
      
-
      
7,121,533
  
Income from operations
  
$
2,377,829
    
$
1,410,678
    
$
1,847,995
    
$
(60,208
) 
  
$
5,576,294
  
Depreciation & Amortization
  
$
5,679
    
$
1,013
    
$
9,356
    
$
-
    
$
16,048
  
Fixed Asset Expenditures
  
$
10,670
    
$
-
    
$
-
    
$
-
    
$
10,679
  
Total assets
  
$
23,687,525
    
$
5,179,451
    
$
8,575,633
    
$
1,490,501
    
$
38,933,110
  

28
 
Note 14 -   SUBSEQUENT EVENTS
On October 26, 2009 the Company filed Registration Statement in connection with the registration of its common stock, $0.001 par value (the “Common Stock”), under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the listing of Common Stock on the New York Stock Exchange. The Common Stock had been registered under Section 12(g) of the Exchange Act. This Statement was amended on November 2, 2009.

On October 29, 2009 the Company withdrew its’ class of securities from listing and registration on the NYSE Amex.

We have evaluated subsequent events through the date of filing, November 13, 2009.

 
29
 

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 Travel World E-Business Co., Ltd. to strengthen our presence in that region this year and it began generating revenues in the third quarter of 2009. We believe that this expansion will contribute to our growth in the near future.

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.

We currently have three discrete lines of business and revenue, and each is carried out by a subsidiary of the Company. 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, and Shenzhen Travel World Travel Agency Co., Ltd. Operations of each segment are exclusive to the operations of the associated subsidiary company.

30
 
Major Factors Affecting the Travel Industry

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

 
(i)
Growth in the Overall Economy and Demand for Travel Services in the People’s Republic of China.
 
We expect that our financial results will continue to be affected by the overall growth of the economy and demand for travel services in the People’s Republic of China and the rest of the world.

According to the statistics from the website of National Bureau of Statistics of China, in July 2009, the People’s Republic of China’s first half year gross domestic product (or “GDP”) grew to US$2.05trillion (RMB13.98trillion), representing a 7.1% growth year over year. The third quarter GDP growth rate also improved from 7.9% in the second quarter to 8.9% in the third quarter.
 
According to the statistics from the website of National Tourism Administration of People's Republic of China in July 2009, the People’s Republic of China’s first half year domestic tourism spending grew to US$72.9 billion (approximately RMB497.9 billion), representing a 10.6% growth year over year. We expect similar or higher growth in the second half of 2009.

           According to the statistics from the website of Civil Aviation Administration of China, domestic air passenger transportation volume grew 20.0% for the nine months ended September 30, 2009 compared to the same period in 2008.

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

 
(ii)
Seasonality in the Travel Service Industry.

The travel service industry is characterized by seasonal fluctuations and accordingly our revenue may vary from quarter to quarter. To date, revenue generated during the summer season of each year generally is higher than those generated during the winter season, mainly because the summer season coincides with the domestic peak business and leisure travel season. By contrast, the winter season includes the Chinese New Year holiday, during which our customers reduce their business activities.
 
These seasonal trends are difficult to discern in our historical results because our revenue structure has changed due to our expansion over the years into more diversified fields and our revenue have grown substantially since inception.

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

 
(iii)
Disruptions in the Travel Industry.

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

Examples of some events which affected our travel industry last year were:

 
31
 

 
·
the snow storms which affected the People’s Republic of China during the Spring Festival of 2008;
 
·
the Olympics in August 2008 which led to an increase in prices for hotels, airline and other travel-related costs and accordingly, a similar increase in travel products;
 
·
the earthquakes in May 2008 which affected travel in the Sichuan area;
 
·
the threat of terrorist attacks and increased security over international events, such as the Olympics; and
 
·
a downturn in international economies such as in the United States.

Global events such as the widespread infection of the H1N1 flu this year could similarly disrupt travel and affect the travel industry adversely. However, we cannot quantify the impact of the flu presently.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

The following table presents certain consolidated statement of operations information derived from the consolidated statements of income for the three months ended September 30, 2009 and 2008 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 third quarter of 2009 and its historical results.  Such had been reclassified as discontinued operations.

   
Three months ended
September 30, 2009
    
Three months ended
September 30, 2008
    
Increase /
Decrease
    
Percentage
  
Revenues
   $ 29,784,918     $ 20,049,313     $ 9,735,605       48.6 %
Cost of Services
     (19,778,607 )     (12,927,780 )     (6,850,827 )     53.0 %
Gross Profit
     10,006,311       7,121,533       2,884,778       40.5 %
SG&A
     (2,572,977 )     (1,545,239 )     (1,027,738 )     66.5 %
Income from Operations
     7,433,334       5,576,294       1,857,040       33.3 %
Other income
     2,459       1,485       974       65.6 %
Loss on change in fair value of derivative liabilities
     (847,754 )     -       (847,754 )        
Interest income
     15,909       9,751       6,158       63.2 %
Interest expense
     -       (13,522 )     13,522       -100.0 %
Income before income taxes
     6,603,948       5,574,008       1,029,940       18.5 %
Provision for income taxes
     (1,891,043 )     (1,242,868 )     (648,175 )     52.2 %
Net Income – continuing operations
     4,712,905       4,331,140       381,765       8.8 %
                                 
Income from discontinued operations
             297,187       (297,187 )     -100.0 %
Net Income
   $ 4,712,905     $ 4,628,327     $ 84,578       1.8 %

For the three months ended September 30, 2009:

Revenue Segment
  
Air tickets
(YZL &
CQT)
    
(%) of
sector
    
Hotel (SLB)
    
(%) of
sector
    
Tours
(XGN, SZT
& FOI)
    
(%) of
sector
    
Total
  
Revenue
   $ 4,876,665       16.37 %   $ 3,832,254       12.87 %   $ 21,075,999       70.76 %   $ 29,784,918  
Cost of Services
     783,767       3.96 %     695,953       3.52 %     18,298,887       92.52 %     19,778,607  
Gross Profit
   $ 4,092,898       40.90 %   $ 3,136,301       31.34 %   $ 2,777,112       27.75 %   $ 10,006,311  
Gross Margin
     83.93 %             81.84 %             13.18 %             33.60 %
Segment effect in Gross Margin (*)
     13.74 %             10.53 %             9.32 %             33.60 %

 
32
 

For the three months ended September 30, 2008:

Revenue Segment
  
Air tickets
(YZL)
    
(%) of
sector
    
Hotel (SLB)
    
(%) of
sector
    
Tours
(XGN&FOI)
    
(%) of
sector
    
Total
  
Revenue
   $ 3,885,722       19.38 %   $ 2,540,469       12.67 %   $ 13,623,122       67.95 %   $ 20,049,313  
Cost of Services
   $ 311,948       2.41 %   $ 1,071,731       8.29 %   $ 11,544,101       89.30 %   $ 12,927,780  
Gross Profit
   $ 3,573,774       50.18 %   $ 1,468,738       20.62 %   $ 2,079,021       29.19 %   $ 7,121,533  
Gross Margin
     91.97 %             57.81 %             15.26 %             35.52 %
Segment effect in Gross Margin (*)
     17.82 %             7.33 %             10.37 %             35.52 %
(*) "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 and Xi’an Golden Net Travel Serve Service Company Limited, and Shenzhen Travel World Travel Agency Co., Ltd.

Revenue for the three months ended September 30, 2009 was $29,784,918 compared to $20,049,313 for the same period 2008, an increase of approximately 48.6%. This increase was primarily due to our efforts to expand our businesses, along with the strong demand for travel demand as a result 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.  

Revenue from air-ticketing was $4,876,665 for the three months ended September 30, 2009 compared to $3,885,722 for the same period last year, an increase of approximately 25.5%. This increase is generally driven by the same factors mentioned above, but more specifically a result of the increased demand for air passenger transportation. We witnessed strong demand from individual travelers, but only a modest increase of business travelers during the third quarter of 2009.  We believe that this is attributable to China’s stimulation of consumption policies, and the sluggish recovery in its business sector.

Revenue from hotel reservations was $3,832,254 for the three months ended September 30, 2009 compared to$ 2,540,469 for the same period in 2008, an increase of approximately 50.8%. This increase is also a result of the factors mentioned above for air tickets and the successful cross marketing of our various business segments.

Revenue from our packaged tour segment was $21,075,999 for the three months ended September 30, 2009 compared to $13,623,122 for the same period in 2008, an increase of approximately 54.7%. This increase is a result of the government’s stimulus package, cross marketing across our various business segments and a longer public holiday period during the PRC Golden Week of 2009, which included both the National Celebration Holidays and Mid-Autumn Festival. Normally the Golden Week includes only the  National Celebration Holidays.

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.

 
33
 

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

Consolidated expenses such as stock-based compensation and corporate professional fees are not allocated to any segment as costs of sales. Instead, the Company disclosed these two numbers in Others (Corporate Expense) of its Segment Information footnote (Note 13) and these expenses were included in the selling, general, and administrative expenses.

Gross Profit

Gross Profit for the three months ended September 30, 2009 was $10,006,311 compared to $7,121,533 for the same period 2008, an increase of approximately 40.5%. 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 $4,092,898 for the three months ended September 30, 2009 compared to $3,573,774 for the same period last year, an increase of approximately 14.5%. Gross profit margin in this segment for the three months ended September 30, 2009 was 84.0% compared to 92.0% for the same period 2008, a decreased of approximately 8%. The decrease in gross margin was mainly attributable to 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 $3,136,301 for the three months ended September 30, 2009 compared to $1,468,738 for the same period last year, an increase of approximately 113.5%. Gross profit margin in this segment for the three months ended September 30, 2009 was 81.8% compared to 57.8% for the same period 2008, an increase of approximately 24.0%. The gross profit margin increase was mainly due to significant increased booking volume in our direct sales, as well as improved hotel booking volume in the industry and the efficient management of cost. These factors together resulted in the significant increase in the gross profit in our hotel reservation business operated by Shanghai Lanbao Travel Service Co.

Gross profit in our packaged tour segment was $2,777,112 for the three months ended September 30, 2009 compared to $2,079,021 for the same period last year, an increase of approximately 33.6%. Gross profit margin in this segment for the three months ended September 30, 2009 was 13.2% compared to 15.3% for the same period 2008, a decrease of approximately 2.1%.   Usually domestic packaged tours have lower profit margin than oversea packaged tours in China, mainly due to the greater number of domestic packaged tour operators as compared to the overseas packaged tour operators. During the third quarter, sales of our packaged tours consisted of a higher percentage of domestic tours. Consequently leading to lower gross profit margin in this segment. Another factor that contributed to the 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 Foshan International Travel Service Co., Ltd and Xi'an Golden Net Travel Serve Service Company Limited, and Shenzhen Travel World Travel Agency Co.
 
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.

 
34
 

Consolidated gross margin for the three months ended September 30, 2009 came in at 33.6%, a 1.9% decrease from the 35.5% the Company posted in the same period last year. As outlined in the above tables, gross profit for air-ticketing decreased the total gross margin by 4.1%, gross profit for hotel reservations improved the total gross margin by 3.2%, gross profit for packaged travel decreased the total gross margin by 1.0%, which in total, decreased the total gross profit by 1.9%. Revenues generated from packaged tours, which have a smaller profit-margin, grew at a much higher rate in the third quarter than revenues generated from air ticketing and hotel reservations.

Selling, General and Administrative Expenses

Major selling, general, and administrative expenses for the three months ended September 30, 2009 and 2008 are as follows:

   
For the three months ended September 30,
  
   
2009
    
2008
  
             
Business related tax
  
$
562,807
    
$
123,484
  
Salary and commission
    
673,939
      
1,116,441
  
Marketing
    
34,410
      
19,874
  
Rent
    
67,197
      
19,367
  
Depreciation and amortization
    
23,189
      
1,097
  
Professional fees
    
249,375
      
72,784
  
Stock-based compensation
    
306,432
      
-
  
Other general and administrative expenses
    
655,629
      
192,192
  
Total
  
$
2,572,977
    
$
1,545,239
  

Selling, general and administrative expenses totaled $2,572,977 for three months ended September 30, 2009 compared to $1,545,239 for the same period last year, an increase of approximately 66.5%.

Stock-based compensation reflects standard options issuance to our independent directors as well as another 2.2 million options issued in January 20, 2009 to our management team. It is the first time the management was granted options since the Company went public in July 2006. During the third quarter, the Company granted 105,000 additional stock options to newly appointed CFO and 10,000 additional options to newly appointed Director, details of these options are outlined in Note 8 to our financial statements. Total non-cash charge associated with the stock-based compensation was $306,432, or 1.0% of revenue for the three months ended September 30, 2009.

Selling, general and administrative expenses were approximately 8.6% of revenue for the three months ended September 30, 2009 as compared to 7.7% for the same period last year. The slight increase in percentage was mainly due to the issuance of stock based compensation in 2009 and the amortization of such stock based compensation, whereas the stock based compensation is less significant during 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 September 30, 2009, as compared to the same period of last year.

Other Income (Expenses) 

            Interest expense for three months ended September 30, 2009 totaled $0 compared to $13,522 for the same period last year. The decrease in interest expense reflects the fact that we paid off all our bank loans in July 2008 and our ability to manage our cash flow.

Loss on change in fair value of derivative liability for the three months ended September 30, 2009 was $847,754 compared to $0 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.  The Company recorded a loss on change in fair value of derivative liability of $847,754 on September 30, 2009 to mark to market for the increase in fair value of the warrants from June 30, 2009 to September 30, 2009.

 
35
 

Net Income

Net income was 4,712,905, or 15.8% of revenues for the three months ended September 30, 2009, compared to $4,628,327 or 23.1% of revenue for the same period last year. The lower net margin compared to the same period last year, mainly comes from the non-cash charge of loss on change in fair value of derivative liabilities, the non-cash expenditure from the 2009 Incentive Stock Option Plan, and to a lesser extent, the higher percentage of packaged-tour in our gross revenues. Excluding the effect of provision for income taxes, the increase in net income was mainly due to an increase in income from operations in the amount of approximately $1.9 million, offset by approximately $848,000 of non-cash loss on change in fair value of derivative liability as described above, and approximately $297,000 decrease in income from discontinued operations.

NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

The following table presents certain consolidated statement of operations information derived from the consolidated statements of income for the nine months ended September 30, 2009 and 2008.

Because the Company had spun off its Speedy Dragon Enterprise Limited subsidiary, and exited the air cargo business, all numbers attributable to continuing operation in the following discussion do not include the operating result of Speedy Dragon Enterprise Limited for the nine months ended September 30, 2009, and its historical results. 

   
Nine months ended
September 30, 2009
    
Nine months ended
September 30, 2008
    
Increase /
Decrease
    
Percentage
  
Revenues
   $ 63,701,070     $ 38,804,665     $ 24,896,405       64.2 %
Cost of Services
     (41,393,256 )     (25,814,030 )     (15,579,226 )     60.4 %
Gross Profit
     22,307,814       12,990,635       9,317,179       71.7 %
SG&A
     (5,670,694 )     (3,102,851 )     (2,567,843 )     82.8 %
Income from Operations
     16,637,120       9,887,784       6,749,336       68.3 %
Other income
     8,879       8,759       120       1.4 %
Loss on change in fair value of derivative liabilities
     (6,553,971 )     -       (6,553,971 )        
Interest income
     39,206       21,473       17,733       82.6 %
Interest expense
     -       (78,526 )     78,526       -100.0 %
Income before income taxes
     10,131,234       9,839,490       291,744       3.0 %
Provision for income taxes
     (4,029,194 )     (2,250,114 )     (1,779,080 )     79.1 %
Net Income – continuing operations
     6,102,040       7,589,376       (1,487,336 )     -19.6 %
                                 
Income from discontinued operations
     177,975       616,508       (438,533 )     -71.1 %
Loss on disposition of discontinued operations
     (770,595 )     -       (770,595 )        
Net Income
   $ 5,509,420     $ 8,205,884     $ (2,696,464 )     -32.9 %

For the nine months ended September 30, 2009:

Revenue Segment
  
Air tickets
(YZL &
CQT)
    
(%) of
sector
    
(%) of
sector
    
Hotel (SLB)
    
(%) of
sector
    
Tours
(XGN, SZT
& FOI)
    
(%) of
sector
    
Total
  
Revenue
   $ 10,922,307       17.15 %     0.00 %   $ 9,063,229       14.23 %   $ 43,715,534       68.63 %   $ 63,701,070  
Cost of Services
     1,435,746       3.47 %     0.00 %     2,379,580       5.75 %     37,577,930       90.78 %     41,393,256  
Gross Profit
   $ 9,486,561       42.53 %     0.00 %   $ 6,683,649       29.96 %   $ 6,137,604       27.51 %   $ 22,307,814  
Gross Margin
     86.85 %                     73.74 %             14.04 %             35.02 %
Segment effect in Gross Margin (*)
     14.89 %                     10.49 %             9.64 %             35.02 %

 
36
 

For the nine months ended September 30, 2008:

Revenue Segment
  
Air tickets
(YZL)
    
(%) of
sector
    
Hotel (SLB)
    
(%) of
sector
    
Tours
(XGN&FOI)
    
(%) of
sector
    
Total
  
Revenue
   $ 7,251,122       18.69 %   $ 4,564,765       11.76 %   $ 26,988,778       69.55 %   $ 38,804,665  
Cost of Services
     692,202       2.68 %     1,929,327       7.47 %     23,192,501       89.84 %     25,814,030  
Gross Profit
   $ 6,558,920       50.49 %   $ 2,635,438       20.29 %   $ 3,796,277       29.22 %   $ 12,990,635  
Gross Margin
     90.45 %             57.73 %             14.07 %             33.48 %
Segment effect in Gross Margin (*)
     16.90 %             6.79 %             9.78 %             33.48 %

(*) "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 and Xi’an Golden Net Travel Serve Service Company Limited, and Shenzhen Travel World Travel Agency Co., Ltd.

Revenue for the nine months ended September 30, 2009 was $63,701,070 compared to $38,804,665 for the same period in 2008, an increase of approximately 64.2%. This increase was primarily due to our ambitious efforts to expand our businesses, along with the strong domestic travel demand supported by the government’s stimulus package.  We continue to see success in cross marketing and selling our travel related products across our business segments and increased brand awareness from online sales and the deployment of our TRIPEASY kiosks.
  
Revenue from our air-ticketing segment was $10,922,307 for the nine months ended September 30, 2009 compared to $7,251,122 for the same period last year, an increase of approximately 50.6%. This increase is driven by the organic growth of Shenzhen Yuzhilu Aviation Service Co., Ltd., the contributions of Chongqing Travel World E-Business Co., Ltd as well as the increase in air passenger transportation. We witnessed strong demand from individual travelers, but only a modest increase in business travelers.  We believe that this is attributable to the Chinese government stimulating domestic consumption, and the sluggish recovery in the PRC’s business sector.

Revenue from our hotel reservation segment was $9,063,229 for the nine months ended September 30, 2009 compared to $4,564,765 for the same period last year, an increase of approximately 98.5%. Our organic growth was driven by the successful integration and the synergies among our various business segments and also the consolidation of marketing channels among the subsidiaries in major domestic cities.

Revenue from our packaged tour segment was $43,715,534 for the nine months ended September 30, 2009 compared to $26,988,778 for the same period last year, an increase of approximately 62.0%. The growth in the three packaged-tour subsidiaries were driven by the successful integration, the synergies among segments and also the consolidation of marketing channels among the subsidiaries in major domestic cities.

Because the average price of our travel products and the commission rates have not been lifted during the past three quarters, we believe the greatest impact to our financial performance was from the growth of our business volume.

37
 
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.

Consolidated expenses such as stock-based compensation and corporate professional fees are not allocated to any segment as costs of sales. Instead, the Company disclosed these two numbers in Others (Corporate Expense) of its Segment Information footnote (Note 13) and these expenses were included in the selling, general, and administrative expenses.

Gross Profit

Gross profit for the nine months ended September 30, 2009 was $22,307,814 compared to $12,990,635 for the same period last year, an increase of approximately 71.7%. The increase in gross profit reflects the aforementioned integration of business lines onto our online platform and higher percentage of packaged tour revenue.
 
Gross profit in air-ticketing was $9,486,561 for the nine months ended September 30, 2009 compared to $6,558,920 for the same period last year, an increase of approximately 44.6%. Gross profit margin in this segment for the nine months ended September 30, 2009 was 86.9% compared to 90.5% for the same period 2008, a decreased of approximately 3.6%. The decrease in gross margin was mainly attributable to 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., the contributions of Chongqing Travel World E-Business Co., Ltd.

Gross profit in hotel reservation was $6,683,649 for the nine months ended September 30, 2009 compared to $2,635,438 for the same period last year, an increase of approximately 153.6%. Gross profit margin in this segment for the nine months ended September 30, 2009 was 73.7% compared to 57.7% for the same period 2008, an increase of approximately 16.0%. The gross profit margin increase was mainly due tosignificant increased booking volume in our direct sales, as well as improved hotel booking volume in the industry and the efficient management of cost. These factors together resulted in the significant increase in the gross profit in our hotel reservation business operated by Shanghai Lanbao Travel Service Co.

Gross profit in packaged tour was $6,137,604 for the nine months ended September 30, 2009 compared to $3,796,277 for the same period last year, an increase of approximately 61.7%. Gross profit margin in this segment for the nine months ended September 30, 2009 was 14.0% compared to 14.0% for the same period 2008. As the cost of service is at a similar percentage to the revenue for the comparable period last year, the gross profit increase is in tandem with the increase in our packaged travel businesses operated by Foshan International Travel Service Co., Ltd and Xi’an Golden Net Travel Serve Service Company Limited, and more recently, Shenzhen Travel World Travel Agency Co.

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.

 
38
 

Consolidated gross margin for the nine months ended September 30, 2009 came in at 35.0%, a 1.5% improvement over the 33.5% the Company posted in the same period last year. As outlined in the above tables, gross profit for air-ticketing decreased the total gross margin by 2.0%, gross profit for hotel reservations improved the total gross margin by 3.6%, gross profit for packaged travel decreased the total gross margin by 0.1%, which in total, decreased the total gross profit by 1.5%.

Selling, General and Administrative Expenses

Major selling, general, and administrative expenses for the nine months ended September 30, 2009 and 2008 are as follows:

   
For the nine months ended September 30,
  
             
   
2009
    
2008
  
             
Business related tax
  
$
824,040
    
$
231,747
  
Salary and commission
    
2,130,091
      
1,988,860
  
Marketing
    
73,265
      
109,889
  
Rent
    
149,868
      
47,793
  
Depreciation and amortization
    
42,263
      
3,380
  
Professional fees
    
591,051
      
143,952
  
Stock-based compensation
    
802,157
      
155,802
  
Other general and administrative expenses
    
1,057,959
      
421,428
  
Total
  
$
5,670,694
    
$
3,102,851
  

Selling, general and administrative expenses for nine months ended September 30, 2009 totaled $5,670,694 compared to $3,102,851 for the same period last year, an increase of approximately 82.8%.

Stock-based compensation reflects standard options issuance to our independent directors as well as another 2.2 million options issued in January 20 2009 to our management team. It is the first time the management was granted options since the Company went public in July 2006.  During the third quarter, the Company granted 105,000 additional stock options to newly appointed CFO and 10,000 additional options to newly appointed Director, details of these options are outlined in Note 8 to our financial statements. Total non-cash charge associated with the stock-based compensation was $802,157, or 1.0% of revenue for the nine months ended September 30, 2009.

Selling, general and administrative expenses were approximately 8.9% of revenue for the nine months ended September 30, 2009 as compared to 8.0% for same period last year, which was mainly because of the rapid increase in stock based compensation as a result of rapid growth in share price.

Other Income (Expenses) 

            Interest expense for nine months ended September 30, 2009 totaled $0 compared to $78,526 for the same period last year. The decrease in interest expense reflects the fact that we paid off all our bank loans in July 2008 and our ability to manage our cash flow.

Loss on change in fair value of derivative liability for the nine months ended September 30, 2009 was $6,553,971 compared to $0 for the 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.  The Company recorded a gain on change in fair value of derivative liability of $113,264 on March 31, 2009 to mark to market for the decrease in fair value of the warrants from January 1, 2009 to March 31, 2009, and recorded a loss on change in fair value of derivative liability of $5,819,481 on June 30, 2009 to mark to market for the increase in fair value of the warrants from March 31, 2009 to June 30, 2009, and recorded a loss on change in fair value of derivative liability of $847,754 on September 30, 2009 to mark to market for the increase in fair value of the warrants from June 30, 2009 to September 30, 2009.

 
39
 

Net Income

Net income was $5,509,420 or 8.6% of revenue for the nine months ended September 30, 2009, compared to $8,205,884 or 21.1% of revenue for the same period last year. Excluding the effect of provision for income taxes, the decrease in net income was mainly due to an increase in income from operations in the amount of approximately $6.7 million, offset by approximately $6.6 million of non-cash loss on change in fair value of derivative liability as described above, and approximately $439,000 decrease in income from discontinued operations as well as approximately $771,000 of loss from disposition of discontinued operations.

Our increase in revenues in the past three quarters reflects the development of the PRC domestic tourism market, and dynamics of our overall operating platform and synergies in our different business segments. Our innovative marketing mix and marketing strategies, our cost synergies of combining online services with traditional services, as well as the good integration of acquired businesses are all important factors contributing to our performance thus far. Management believes that these competitive advantages are sustainable in the long term.
 
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 $23,942,115 as of September 30, 2009. Current assets and current liabilities as of September 30, 2009, were $47,539,286 and $6,818,860, respectively, yielding working capital of $40,720,426. We believe that the funds available to us from operations are adequate to meet our operating needs in 2009. For the nine months ended September 30, 2009, net cash provided by operating activities was approximately $11,949,270, which resulted primarily from our organic operations and effective management of cash flow.

Capital expenditure

Total capital expenditure for nine months ended September 30, 2009 was $3,627,267 to purchase fixed assets, primarily machinery and equipment. 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. Currently we are strategically expanding our business operations in Chongqing, the largest metropolis in Southwest China, and Xi’an, the largest metropolis in Northwest of China. To satisfy these capital needs, as well as to set up more TRIPEASY kiosks, we may incur additional capital expenditure.

 
40
 

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

Off Balance Sheet Arrangements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

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

Item 4.    Controls and Procedures.

Evaluation of our Disclosure Controls

(a)           Evaluation of Disclosure Controls and Procedures: As of September 30, 2009, our management carried out an evaluation, under the supervision of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's system of disclosure controls and procedures pursuant to the Exchange Act and Rules 13a-15(e) and 15d-15(e) promulgated thereunder.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were not effective, as of the date of their evaluation, for the purposes of recording, processing, summarizing and timely reporting material information required to be disclosed in reports filed under the Exchange Act.

Because certain accounting errors were discovered during this period, the Company determined to restate its consolidated financial statements as of March 31, 2009, June 30, 2009 and for the year ended December 31, 2008.

Changes in internal control over financial reporting

(b)           Changes in internal control over financial reporting:  There were no changes in internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially effect, our internal control over financial reporting.
 
 
41
 

The Company has set up an internal control department with qualified accounting staffs which directly report to the Independent Audit Committee. Management believes this would help strengthen the general internal control process. There were no changes in our internal controls over financial reporting during our third 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.
Submission of Matters to a Vote of Security Holders.

  None.

Item 5.
Other Information

  Not applicable.

Item 6.
Exhibits

  Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.
  
Exhibit No. 
SEC Ref.
No. 
Title of Document
     
1
31.1
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
2.
31.2
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
3
32.1
Certification of the Principal Executive Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
     
4
32.2
Certification of the Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

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

 
42
 
 
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: November 13, 2009  
 
  UNIVERSAL TRAVEL GROUP
   
 
By:  
/s/ Jiangping Jiang
 
Jiangping Jiang
Chairwoman and Chief Executive Officer
(Principal Executive Officer)

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

 
43
 
EX-31.1 2 v166226_ex31-1.htm
EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
 
I, Jiangping Jiang, certify that:

1.             I have reviewed this quarterly report on Form 10-Q of Universal Travel Group.

2.             Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.             Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.             The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a)             designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; and
b)             designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
c)             evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)             disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s fiscal quarter ended September 30, 2009, that has materially affected or is reasonably likely to materially affect the registrant’s internal controls over financial reporting.

5.             The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a)             all significant deficiencies and material weakness in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and
b)             any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date: November 13, 2009
/s/ Jiangping Jiang
 
Jiangping Jiang
 
Title: Chairwoman and Chief Executive Officer
 
(Principal Executive Officer)
 
 
 
 EX-31.2 3 v166226_ex31-2.htm
EXHIBIT 31.2

CERTIFICATION OF VICE PRESIDENT OF CORPORATE FINANCE PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Yizhao Zhang, certify that:

1.             I have reviewed this quarterly report on Form 10-Q of Universal Travel Group.

2.             Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.             Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.             The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a)             designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; and
b)             designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
c)             evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)             disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s fiscal quarter ended September 30, 2009, that has materially affected or is reasonably likely to materially affect the registrant’s internal controls over financial reporting.

5.             The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a)             all significant deficiencies and material weakness in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and
b)             any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 13, 2009
/s/ Yizhao Zhang
 
Yizhao Zhang
 
Title: Chief Financial Officer
 
(Principal Financial Officer)

 
 
EX-32.1 4 v166226_ex32-1.htm
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
The undersigned, the Chairwoman and Chief Executive Officer of Universal Travel Group (the "Company"), does hereby certify under the standards set forth and solely for the purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2009 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Dated: November 13, 2009
      
/s/ Jiangping Jiang
       
Jiangping Jiang
Chairwoman and Chief Executive Officer
 
 
 
EX-32.2 5 v166226_ex32-2.htm
EXHIBIT 32.2

CERTIFICATION OF VICE PRESIDENT OF CORPORATE FINANCE
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, the Chief Financial Officer of Universal Travel Group (the "Company"), does hereby certify under the standards set forth and solely for the purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2009 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Dated: November 13, 2009
      
/s/ Yizhao Zhang
       
Yizhao Zhang
Chief Financial Officer

 
 
-----END PRIVACY-ENHANCED MESSAGE-----