UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q




(Mark
One)





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





For the
quarterly period ended June 30, 2009





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





For the
transition period from ______________ to _____________




Commission
file number: 000-51516





UNIVERSAL
TRAVEL GROUP


(Exact
name of registrant as specified in its charter)




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




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





86 755 836
68489


(Registrant’s
telephone number, including area code)







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





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





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





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





Large
      accelerated filer
             ̈
            Accelerated
      filer
             ̈Non-accelerated
      filer
             ̈
            Smaller
      reporting company
            x





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





APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS





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





APPLICABLE
ONLY TO CORPORATE ISSUERS





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





As of
August 11, 2009, there are 13,680,294 shares of $0.001 par value common stock
issued and outstanding.







FORM
10-Q


UNIVERSAL
TRAVEL GROUP


INDEX





PagePART
      I.
                      
                      Financial
      InformationItem
      1.  Financial Statements ( Unaudited)
                      
                      3Report
      of  Independent Registered Public Accounting
Firm
                      
                      5Consolidated
      Balance Sheets as of June 30, 2009 (Unaudited) and December 31,
      2008
                      
                      6Consolidated
      Statements of Income for the Six Months Ended June 30, 2009 and 2008
      (Unaudited)
                      
                      7Consolidated
      Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008
      (Unaudited)
                      
                      9Consolidated
      Statements of Stockholders' Equity
                      
                      10Notes
      to Consolidated Financial Statements as of June 30, 2009
      (Unaudited)
                      
                      11Item
      2.  Management’s Discussion and Analysis of Financial Condition or
      Plan of Operation
                      
                      28Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk.
                      
                      37Item
      4.  Controls and Procedures
                      
                      38PART
      II.
                      
                      Other
      InformationItem
      1.  Legal Proceedings
                      
                      38Item
      1A. Risk Factors.
                      
                      38Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
                      
                      38Item
      3.  Defaults Upon Senior Securities
                      
                      38Item
      4.  Submission of Matters to a Vote of Security
    Holders.
                      
                      39Item
      5.  Other Information
                      
                      39Item
      6.  Exhibits
                      
                      39


2


PART
I - FINANCIAL INFORMATION





Item
1. Financial Statements (Unaudited)





UNIVERSAL
TRAVEL GROUP





CONSOLIDATED
FINANCIAL STATEMENTS





JUNE
30, 2009


3





TABLE
OF CONTENTS





Report
      of Independent Registered Public Accounting
    Firm
                      3ConsolidatedBalance
      Sheets
                      4ConsolidatedStatements
      of Income
                      7-8ConsolidatedStatements
      of Cash Flows
                      9ConsolidatedStatements
      of Stockholders’ Equity
                      10Notes
      to Consolidated Financial Statements
                      11-27


4


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


517
Route One


Broadway


Iselin,
New Jersey 08830


Suite
766


732.
855.9600
 New York,
NY  10004




Fax:732.855.9559


212.867.1319


www.acsbco.com





Report of
Independent Registered Public Accounting Firm





Board of
Directors and Stockholders of


Universal
Travel Group





We have
reviewed the accompanying consolidated balance sheets of Universal Travel Group,
Inc. as of June 30, 2009 and the consolidated statements of operations for the
three and six months ended June 30, 2009 and 2008 and consolidated statements of
cash flows and shareholders equity for the three and six months then ended.
These financial statements are the responsibility of the Company's
management.





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





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





We have
previously audited, in accordance with auditing standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet of
Universal Travel Group, Inc. as of December 31, 2008 and the related
consolidated statements of income retained earnings and comprehensive income,
and consolidated statements of cash flows for the year then ended; and in our
report dated March 3, 2009 we expressed an unqualified opinion on those
financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet as of December 31, 2008, is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.





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


Certified
Public Accountants





New York,
N.Y.


August
10, 2009


5




UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
BALANCE SHEETS


JUNE
30, 2009 AND DECEMBER 31, 2008





6/30/2009
                  
                  
                  12/31/2008(Unaudited)
                  
                  
                  (Audited)ASSETSCurrent
      AssetsCash
      and cash equivalents
                  
                  $
                  18,388,175
                  
                  
                  $
                  16,204,531Accounts
      receivable, net
                  
                  
                  11,708,758
                  
                  
                  
                  10,715,206Other
      and deposits, net
                  
                  
                  67,272
                  
                  
                  
                  141,413Trade
      deposit
                  
                  
                  3,402,948
                  
                  
                  
                  6,737,521Advances
                  
                  
                  439,226
                  
                  
                  
                  438,468Escrow
      deposits
                  
                  
                  162,301
                  
                  
                  
                  762,800Prepaid
      expenses
                  
                  
                  279,618
                  
                  
                  
                  319,257Note
      receivable
                  
                  
                  512,430
                  
                  
                  
                  -Dividend
      receivable
                  
                  
                  2,260,981
                  
                  
                  
                  -Total
      Current Assets
                  
                  
                  37,221,709
                  
                  
                  
                  35,319,196Property
      & equipment, net
                  
                  
                  6,183,786
                  
                  
                  
                  273,340Intangible
      assets
                  
                  
                  420,718
                  
                  
                  
                  307,335Goodwill
                  
                  
                  9,896,270
                  
                  
                  
                  13,526,80916,500,774
                  
                  
                  
                  14,107,484Total
      Assets
                  
                  $
                  53,722,483
                  
                  
                  $
                  49,426,680LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable and accrued expenses
                  
                  $
                  3,293,448
                  
                  
                  $
                  2,219,156Customer
      deposits
                  
                  
                  879,515
                  
                  
                  
                  1,047,250Income
      tax payable
                  
                  
                  882,555
                  
                  
                  
                  1,759,402Total
      Current Liabilities
                  
                  
                  5,055,518
                  
                  
                  
                  5,025,808Total  liabilities
                  
                  
                  5,055,518
                  
                  
                  
                  5,025,808Stockholders'
      EquityCommon
      stock, $.001 par value, 70,000,000 shares authorized, 13,915,089 and
      13,873,969 issued and outstanding, includes 238,095 and 0 in treasury
      stock
                  
                  
                  13,914
                  
                  
                  
                  13,873Additional
      paid in capital
                  
                  
                  17,081,723
                  
                  
                  
                  15,861,116Treasury
      Stock
                  
                  
                  (2,780,950
                  )
                  
                  
                  -Other
      comprehensive income
                  
                  
                  1,568,753
                  
                  
                  
                  1,520,166Statutory
      reserve
                  
                  
                  372,144
                  
                  
                  
                  372,144Retained
      earnings
                  
                  
                  32,411,381
                  
                  
                  
                  26,633,573Total
      Stockholders' Equity
                  
                  
                  48,666,965
                  
                  
                  
                  44,400,872Total
      Liabilities and Stockholders' Equity
                  
                  $
                  53,722,483
                  
                  
                  $
                  49,426,680





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


6





UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
STATEMENTS OF INCOME


FOR
THE THREE MONTHS ENDED JUNE
30,


(UNAUDITED)




2009
                              
                              
                              2008Gross
      revenues,
                              
                              $
                              18,405,473
                              
                              
                              $
                              11,802,974Cost
      of services
                              
                              
                              11,521,673
                              
                              
                              
                              7,897,036Gross
      Profit
                              
                              
                              6,883,800
                              
                              
                              
                              3,905,938Selling,
      general and administrative expenses
                              
                              
                              1,588,301
                              
                              
                              
                              1,072,347Stock
      based compensation
                              
                              
                              1,055,648
                              
                              
                              
                              45,790Total
      expenses
                              
                              
                              2,643,949
                              
                              
                              
                              1,118,137Income
      from operations
                              
                              
                              4,239,851
                              
                              
                              
                              2,787,801Other
      Income (Expense)Other
      income
                              
                              
                              2,591
                              
                              
                              
                              5,504Interest
      income
                              
                              
                              12,358
                              
                              
                              
                              10,307Interest
      expense
                              
                              
                              -
                              
                              
                              
                              (28,297
                              )Total
      Other Income (Expense)
                              
                              
                              14,949
                              
                              
                              
                              (12,486
                              )Income
      before income taxes –continuing operations
                              
                              
                              4,254,800
                              
                              
                              
                              2,775,315Provision
      for income taxes
                              
                              
                              1,020,955
                              
                              
                              
                              701,374Net
      income – continuing operations
                              
                              $
                              3,233,845
                              
                              
                              $
                              2,073,941Income
      from discontinued operations
                              
                              
                              62,652
                              
                              
                              
                              74,500Tax
      on income from discontinued operations
                              
                              
                              (16,370
                              )
                              
                              
                              (34,748
                              )Dividend
      from discontinued operations
                              
                              
                              2,260,981
                              
                              
                              
                              -Loss
      on disposition of discontinued operations
                              
                              
                              (3,031,576
                              )
                              
                              
                              -Net
      loss from discontinued operation
                              
                              
                              (724,313
                              )
                              
                              
                              39,752Net
      Income
                              
                              
                              2,509,532
                              
                              
                              
                              2,113,693Comprehensive
      IncomeNet
      Income
                              
                              
                              2,509,532
                              
                              
                              
                              2,113,693Foreign
      currency translation gains
                              
                              
                              13,880
                              
                              
                              
                              220,231Total
      Comprehensive income
                              
                              
                              2,523,412
                              
                              
                              
                              2,333,924Net
      income per common share – continuing operationsBasic
                              
                              $
                              0.24
                              
                              
                              $
                              .17Diluted
                              
                              $
                              0.23
                              
                              
                              $
                              .17Net
      income per common share – discontinued operationsBasic
                              
                              $
                              (0.05
                              )
                              
                              $
                              -Diluted
                              
                              $
                              (0.05
                              )
                              
                              $
                              -Weighted
      average common shares outstandingBasic
                              
                              
                              13,676,994
                              
                              
                              
                              12,306,715Diluted
                              
                              
                              14,122,917
                              
                              
                              
                              12,362,271


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


7





UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
STATEMENTS OF INCOME


FOR
THE SIX MONTHS ENDED JUNE
30,


(UNAUDITED)





2009
                    
                    
                    2008Gross
      revenues,
                    
                    $
                    33,916,152
                    
                    
                    $
                    18,755,352Cost
      of services
                    
                    
                    20,938,269
                    
                    
                    
                    12,521,173Gross
      Profit
                    
                    
                    12,977,883
                    
                    
                    
                    6,234,179Selling,
      general and administrative expenses
                    
                    
                    3,278,371
                    
                    
                    
                    1,766,887Stock
      based compensation
                    
                    
                    1,220,648
                    
                    
                    
                    155,802Total
      expenses
                    
                    
                    4,499,019
                    
                    
                    
                    1,922,689Income
      from operations
                    
                    
                    8,478,864
                    
                    
                    
                    4,311,490Other
      Income (Expense)Loss
      on disposal of assets
                    
                    
                    -
                    
                    
                    
                    (1,104
                    )Other
      income
                    
                    
                    6,419
                    
                    
                    
                    8,378Interest
      income
                    
                    
                    23,296
                    
                    
                    
                    11,722Interest
      expense
                    
                    
                    -
                    
                    
                    
                    (65,004
                    )Total
      Other Income (Expense)
                    
                    
                    29,715
                    
                    
                    
                    (46,008
                    )Income
      before income taxes –continuing operations
                    
                    
                    8,508,579
                    
                    
                    
                    4,265,482Provision
      for income taxes
                    
                    
                    2,138,151
                    
                    
                    
                    1,007,246Net
      income – continuing operations
                    
                    $
                    6,370,428
                    
                    
                    $
                    3,258,236Income
      from discontinued operations
                    
                    
                    222,416
                    
                    
                    
                    428,822Tax
      on income from discontinued operations
                    
                    
                    (44,441
                    )
                    
                    
                    (109,501
                    )Dividend
      from discontinued operations
                    
                    
                    2,260,981
                    
                    
                    
                    -Loss
      on disposition of discontinued operations
                    
                    
                    (3,031,576
                    )
                    
                    
                    -Net
      loss from discontinued operation
                    
                    
                    (592,620
                    )
                    
                    
                    319,321Net
      Income
                    
                    
                    5,777,808
                    
                    
                    
                    3,577,557Comprehensive
      IncomeNet
      Income
                    
                    
                    5,777,808
                    
                    
                    
                    3,577,557Foreign
      currency translation gains
                    
                    
                    48,587
                    
                    
                    
                    571,402Total
      Comprehensive income
                    
                    
                    5,826,395
                    
                    
                    
                    4,148,95Net
      income per common share – continuing operationsBasic
                    
                    $
                    .47
                    
                    
                    $
                    .27Diluted
                    
                    $
                    .45
                    
                    
                    $
                    .26Net
      income per common share – discontinued operationsBasic
                    
                    $
                    (0.04
                    )
                    
                    $
                    .03Diluted
                    
                    $
                    (0.04
                    )
                    
                    $
                    .03Weighted
      average common shares outstandingBasic
                    
                    
                    13,676,994
                    
                    
                    
                    12,306,715Diluted
                    
                    
                    14,122,917
                    
                    
                    
                    12,362,271


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


8





UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE SIX MONTHS ENDED JUNE
30,


(UNAUDITED)




2009
                  
                  
                  2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      Income
                  
                  $
                  5,777,808
                  
                  
                  $
                  3,577,557Adjustments
      to reconcile net income to net cashprovided
      by operating activities:Depreciation
      and amortization
                  
                  
                  195,997
                  
                  
                  
                  38,877Provision
      for doubtful accounts
                  
                  
                  11,005
                  
                  
                  
                  -Stock
      based compensation
                  
                  
                  1,220,647
                  
                  
                  
                  155,802Loss
      on disposition of discontinued operation
                  
                  
                  3,031,576
                  
                  
                  
                  -Loss
      on asset disposal
                  
                  
                  -
                  
                  
                  
                  1,105(Increase)
      / decrease in assets:Accounts
      receivable
                  
                  
                  (2,767,660
                  )
                  
                  
                  (1,708,372
                  )Other
      receivable
                  
                  
                  (66,628
                  )
                  
                  
                  968,969Advances
                  
                  
                  (758
                  )
                  
                  
                  (39,116
                  )Due
      from shareholder
                  
                  
                  -
                  
                  
                  
                  1,177,763Prepaid
      expenses
                  
                  
                  32,779
                  
                  
                  
                  (54,172
                  )Trade
      deposits
                  
                  
                  3,282,462
                  
                  
                  
                  (2,122,588
                  )Escrow
      deposits
                  
                  
                  600,499
                  
                  
                  
                  -Increase
      / (decrease) in current liabilities:Accounts
      payable and accrued expenses
                  
                  
                  1,386,871
                  
                  
                  
                  (854,371
                  )Customer
      deposits
                  
                  
                  (167,735
                  )
                  
                  
                  210,032Income
      tax payable
                  
                  
                  (860,497
                  )
                  
                  
                  16,216Total
      Adjustments
                  
                  
                  5,898,558
                  
                  
                  
                  (2,209,855
                  )Net
      cash provided by(used in) operating activities
                  
                  
                  11,676,366
                  
                  
                  
                  1,367,702CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of property & equipment
                  
                  
                  (6,076,248
                  )
                  
                  
                  (17,063
                  )Purchase
      of intangibles
                  
                  
                  (168,955
                  )
                  
                  
                  -Proceeds
      from asset disposals
                  
                  
                  -
                  
                  
                  
                  663Proceeds
      of disposition of subsidiary – net of cash sold
                  
                  
                  (1,035,125
                  )
                  
                  
                  -Dividend
      receivable
                  
                  
                  (2,260,981
                  )Acquisition
      deposits
                  
                  
                  -
                  
                  
                  
                  1,453,050Net
      cash used by Investing activities
                  
                  
                  (9,541,309
                  )
                  
                  
                  1,436,650CASH
      FLOWS FROM FINANCING ACTIVITIES(Repayments)Proceeds
      from bank loan – net
                  
                  
                  -
                  
                  
                  
                  (180,682
                  )Proceeds
      of equity financing
                  
                  
                  -
                  
                  
                  
                  599,994Note
      payable – others
                  
                  
                  -
                  
                  
                  
                  (977,013
                  )Net
      cash provided by financing activities
                  
                  
                  -
                  
                  
                  
                  (557,701
                  )Effect
      of exchange rate changes on cash and cash equivalents
                  
                  
                  48,587
                  
                  
                  
                  571,402Net
      change in cash and cash equivalents
                  
                  
                  2,183,644
                  
                  
                  
                  2,818,053Cash
      and cash equivalents, beginning balance
                  
                  
                  16,204,531
                  
                  
                  
                  2,671,684Cash
      and cash equivalents, ending balance
                  
                  $
                  18,388,175
                  
                  
                  $
                  5,489,737





SUPPLEMENTAL
      DISCLOSURES:Cash
      paid during the year for:Interest
      payments
                
                $
                -
                
                
                $
                28,297Income
      Taxes
                
                $
                3,043,089
                
                
                $
                719,906





Net
      assets sold in disposition of subsidiary
                  
                  $
                  1,659,292Goodwill
      attributable to sold subsidiary
                  
                  
                  3,630,539Notes
      received on disposition
                  
                  
                  (512,430
                  )Fair
      value of Treasury stock received
                  
                  
                  (2,780,950
                  )Loss
      on Disposition
                  
                  
                  (3,031,576
                  )Cash
      of disposed subsidiary
                  
                  $
                  (1,035,125
                  )





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


9




UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY


FOR
THE SIX MONTHS ENDED JUNE 30, 2009 AND THE YEAR ENDED DECEMBER 31,
2008





Common Stock
                      
                      
                      Additional
                        Paid In
                        Capital
                      
                      
                      Other
                        Comprehensive
                        Income
                      
                      
                      Retained
                        Earnings
                      
                      
                      Treasury
                        Stock
                      
                      
                      Statutory
                        Reserve
                      
                      
                      Total
                        Stockholders’
                        EquityShares
                      
                      
                      AmountBalanceDecember
      31, 2008
                      
                      
                      13,873,969
                      
                      
                      $
                      13,873
                      
                      
                      $
                      15,861,116
                      
                      
                      $
                      1,520,166
                      
                      
                      $
                      26,633,573
                      
                      
                      
                      
                      
                      $
                      372,144
                      
                      
                      $
                      44,400,872Foreign
      currency translation adjustments
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      48,587
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      48,587Stock
      Based Compensation – Net of warrants exercise
                      
                      
                      41,120
                      
                      
                      
                      41
                      
                      
                      
                      1,220,607
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      1,220,648FMV
      Of Treasury Stock received
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (2,780,950
                      )
                      
                      
                      
                      
                      
                      
                      (2,780,950
                      )Income
      for the six months ended June 30,2009
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      5,777,808
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      5,777,808Balance
      June 30, 2009
                      
                      
                      13,915,089
                      
                      
                      $
                      13,914
                      
                      
                      $
                      17,081,723
                      
                      
                      $
                      1,568,753
                      
                      
                      $
                      32,411,381
                      
                      
                      
                      (2,780,950
                      )
                      
                      $
                      372,144
                      
                      
                      $
                      48,666,965BalanceDecember
      31, 2007
                      
                      
                      12,270,326
                      
                      
                      $
                      12,269
                      
                      
                      $
                      8,626,075
                      
                      
                      $
                      545,164
                      
                      
                      $
                      12,101,396
                      
                      
                      
                      
                      
                      
                      $
                      372,144
                      
                      
                      $
                      21,657,048Foreign
      currency translation adjustments
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      975,002
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      975,002Forfeited
      options
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (683,437
                      )
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (683,437
                      )Stock
      Based Compensation
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      207,588
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      207,588EquityFinancings
                      
                      
                      74,074
                      
                      
                      
                      74
                      
                      
                      
                      599,920
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      599,9941,529,569
                      
                      
                      
                      1,530
                      
                      
                      
                      7,110,970
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      7,112,500Warrants
      issuedIncome
      for the  year ended December 31, 2008
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      14,532,177
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      14,532,177Balance
      December 31, 2008
                      
                      
                      13,873,969
                      
                      
                      $
                      13,873
                      
                      
                      $
                      15,861,116
                      
                      
                      $
                      1,520,166
                      
                      
                      $
                      26,633,573
                      
                      
                      
                      
                      
                      
                      $
                      372,144
                      
                      
                      $
                      44,400,872





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




10




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009





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), Xian Golden Net Travel Serve Services Co.,
Ltd.  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 People’s Republic of
China.  Full Power Enterprise Global Limited owns 100% of the Shenzhen
Yuzhilu Aviation Service Co., Ltd. Collectively the seven corporations are
referred to herein as the Company.





The
Company is now engaged in the travel business, including airline ticketing,
hotel reservation services and air cargo transportation services, technological
solutions to travel reservations, and tour planning and tour guide
services.





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES





Basis of
Presentation





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





Translation
Adjustment





As of
June 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 Statement of Financial Accounts Standards (SFAS) No.
52, Foreign Currency Translation with the CNY as the functional currency.
According to the Statement, all assets and liabilities were translated at the
current exchange rate, stockholders equity are translated at the historical
rates and income statement items are translated at the average exchange rate for
the period. The resulting translation adjustments are reported under other
comprehensive income in accordance with SFAS No. 130, Reporting Comprehensive
Income as a component of shareholders equity. Transaction gains and losses are
reflected in the income statement.





Use of
Estimates





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


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.,
Shanghai Lanbao Travel Service Co., Ltd., Xian Golden Net Travel Serve Services
Co., 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. All material inter-company
accounts, transactions and profits have been eliminated in
consolidation.


11


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)





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 $ 221,044 and $210,139 as of June 30, 2009 and December 31, 2008,
respectively.





Description
                  
                  Balance
                    at
                    beginning
                    of
                    year
                  
                  
                  Charged to
                    expenses
                  
                  
                  Deductions
                  
                  
                  Balance at end
                    of periodAllowance
      for doubtful receivables2009
                  
                  $
                  210,139
                  
                  
                  $
                  11,005
                  
                  
                  $
                  -
                  
                  
                  $
                  221,044





Reverse
Split





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


12





UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)





Property, Plant &
Equipment




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





Furniture
      and Fixtures
              5
      yearsTransportation
      equipment
              5
      yearsOffice
      equipment
              5
      yearsLeasehold
      Improvements
              5 –
      10 years





As of
June 30, 2009 and December 31, 2008 Property, Plant & Equipment consist of
the following:





2009
                                                
                                                
                                                2008Furniture
      & fixture
                                                
                                                $
                                                18,247
                                                
                                                
                                                $
                                                18,247Transportation
      equip
                                                
                                                
                                                183,024
                                                
                                                
                                                
                                                183,024Office
      equipment
                                                
                                                
                                                2,880,093
                                                
                                                
                                                
                                                358,761Leasehold
      improve
                                                
                                                
                                                3,548,464
                                                
                                                
                                                
                                                31,3746,629,828
                                                
                                                
                                                
                                                602,085Accumulated
      depreciation
                                                
                                                
                                                (446,043
                                                )
                                                
                                                
                                                (328,745
                                                )$
                                                6,183,786
                                                
                                                
                                                $
                                                273,340





Depreciation
expense for the six months ended June 30, 2009 and 2008 was $140,424 and
$22,012, respectively.





Goodwill





Goodwill
represents the excess cost of a business acquisition over the fair value of the
net assets acquired.  In accordance with Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets (Statement
142), indefinite-life identifiable intangible assets and goodwill are not
amortized. Under the provisions of Statement 142, we are required to perform an
annual impairment test of our goodwill. Goodwill impairment is determined using
a two-step process.  The first step of the goodwill impairment test is
used to identify potential impairment by comparing the fair value of a reporting
unit, which we define as our business segments, with its net book value or
carrying amount including goodwill. If the fair value of a reporting unit
exceeds its carrying amount, goodwill of the reporting unit is considered not
impaired and the second step of the impairment test is
unnecessary.  If the carrying amount of a reporting unit exceeds its
fair value, the second step of the goodwill impairment test compares the implied
fair value of the reporting unit's goodwill with the carrying amount of that
goodwill. If the carrying amount of the reporting unit's goodwill exceeds the
implied fair value of that goodwill, an impairment loss is recognized in an
amount equal to that excess.  The implied fair value of goodwill is
determined in the same manner as the amount of goodwill recognized in a business
combination.  The fair value of the reporting unit is allocated to all
of the assets and liabilities of that unit including any unrecognized intangible
assets as if the reporting unit had been acquired in a business combination and
the fair value of the reporting unit was the purchase price paid to acquire the
reporting unit.  See Note 7, Common Stock, for additional information
regarding goodwill.


13


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)





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





6/30/2009
                                          
                                          
                                          12/31/2008Shenzhen
      Speedy Dragon Enterprises Ltd.
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          3,630,539Shanghai
      Lanbao Travel Service Co., Ltd.
                                          
                                          
                                          3,081,799
                                          
                                          
                                          
                                          3,081,799Foshan
      International Travel Service Co., Ltd.
                                          
                                          
                                          6,049,576
                                          
                                          
                                          
                                          6,049,576Xian
      Golden Net Travel Serve Services Co., Ltd
                                          
                                          
                                          764,895
                                          
                                          
                                          
                                          764,895$
                                          9,896,270
                                          
                                          
                                          $
                                          13,526,809





Long-Lived
Assets




The
Company adopted Statement of Financial Accounting Standards No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets (SFAS 144), which addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets and supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, and the accounting and
reporting provisions of APB Opinion No. 30, Reporting the Results of Operations
for a Disposal of a Segment of a Business. The Company periodically evaluates
the carrying value of long-lived assets to be held and used in accordance with
SFAS 144. SFAS 144 requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets carrying amounts. In that event, a loss is recognized based on the
amount by which the carrying amount exceeds the fair market value of the
long-lived assets. Loss on long-lived assets to be disposed of is determined in
a similar manner, except that fair market values are reduced for the cost of
disposal. Based on its review, the Company believes that, as of June 30, 2009
and December 31, 2008 there were no significant impairments of its long-lived
assets.





Fair Value of Financial
Instruments





Statement
of financial accounting standard No. 107, Disclosures about Fair Value of
Financial Instruments, requires that the Company disclose estimated fair values
of financial instruments. The carrying amounts reported in the statements of
financial position for current assets and current liabilities qualifying as
financial instruments are a reasonable estimate of fair value.





Revenue
Recognition





The
Company’s revenue recognition policies are in compliance with Staff accounting
bulletin (SAB) 104. Revenue is recognized at the date the price is fixed or
determinable, the delivery is completed, no other significant obligations of the
Company exist and collectability is reasonably assured. Payments received before
all of the relevant criteria for revenue recognition are satisfied are recorded
as unearned revenue.





The
Company’s revenue recognition policies are in compliance with Staff accounting
bulletin (SAB) 104. Revenue is recognized at the date the price is fixed or
determinable, the delivery is completed, no other significant obligations of the
Company exist and collectability is reasonably assured. Payments received before
all of the relevant criteria for revenue recognition are satisfied are recorded
as unearned revenue. The Company has  four types of revenue, 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.).


14





UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)





Air-ticketing





Shenzhen
Yuzhilu Aviation Service Co., Ltd (“Yuzhilu”) and Chongqing Universal Travel
E-Commerce Co., Ltd.(“Chongqing") receives commissions from travel suppliers for
air-ticketing under various services agreements. Commissions from air-ticketing
services rendered are recognized after air tickets are issued. The Company’s
revenue from such transactions is on a net basis in the consolidated statements
of income as the Company, generally, does not assume inventory risks and has no
obligations for cancelled air-ticket reservations.





Hotel
Reservations





Shanghai
Lanbao Travel Service Co., Ltd (“Shanghai Lanbao”) receives commissions from
travel suppliers for hotel room reservations. Commissions from hotel reservation
service rendered are recognized after hotel customers have completed their stay
at the applicable hotel and upon confirmation of pending payment of the
commissions by the hotel.  The Company’s revenue from such
transactions is on a net basis in the consolidated statements of income as the
Company, generally, does not assume inventory risks and has no obligations for
cancelled hotel reservations.





Packaged
Tour





Foshan
International Travel Service Co., Ltd. and Xian Golden Net Travel Serve Services
Co., Ltd. and Shenzhen Universal Travel Agency Co., Ltd. provide domestic and
cross-border travel tour services. We contract 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 our customers with a mark-up.  We have
two sources of revenue: one from payment by individual customers and the other,
through group sales.  We recognize gross revenue when a tour is
completed.





Air Cargo
Business





Our air
cargo business basically brokers air cargo spaces and resells them to local
logistic companies to generate revenue. Our customers are charged based on the
class and weight of goods shipped. Gross revenue is recognized upon rendering of
services.





Advertising





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




Income
Taxes





The
Company utilizes SFAS No. 109, Accounting for Income Taxes, which requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts ateach period end based on
enacted tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.





Statement of Cash
Flows





In
accordance with SFAS No. 95, Statement of Cash Flows, cash flow from the
Company’s operations is based upon the local currency. 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.


15


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)




Intangibles





Intangible
assets are amortized using the straight-line method over their estimated period
of benefit. Evaluation of the recoverability of intangible assets is made
annually to take into account events or circumstances that warrant revised
estimates of useful lives or that indicate that impairment exists. All of our
intangible assets are subject to amortization. No impairments of intangible
assets have been identified during any of the periods presented. The Company’s
intangible assets consist primarily of maps 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 $168,954 and $316,107 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 $53,279 and $-0- for the six months ended June 30, 2009 and
2008, respectively. The Company will record approximately $165,333, $165,333,
and $100,363 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 the People’s Republic of China. The Company controls
credit risk related to accounts receivable through credit approvals, credit
limits and monitoring procedures. The Company routinely assesses the financial
strength of its customers and, based upon factors surrounding the credit risk,
establishes an allowance, if required, for uncollectible accounts and, as a
consequence, believes that its accounts receivable credit risk exposure beyond
such allowance is limited.





Net Income Per
Share





Basic net
income per share is computed on the basis of the weighted average number of
common shares outstanding during the period. Diluted net income per share is
computed on the basis of the weighted average number of common shares and common
share equivalents outstanding. Dilutive securities having an anti-dilutive
effect on diluted net income per share are excluded from the calculation.
Dilution is computed by applying the treasury stock method. Under this method,
options and warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the
period.


16




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)




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





Six
      months ended June 30,2009
                
                
                2008Basic
      net income per share:Numerator:Net
      income used in computing basic net income per share
                
                $
                6,370,428
                
                
                $
                3,258,236Net
      income applicable to common shareholders
                
                $
                6,370,428
                
                
                $
                3,258,236Denominator:Weighted
      average common shares outstanding
                
                
                13,676,994
                
                
                
                12,306,715Basic
      net income per share
                
                $
                0.47
                
                
                $
                0.27Diluted
      net income per share:Numerator:Net
      income used in computing diluted net income per share
                
                $
                6,370,428
                
                
                $
                3,258,236Net
      income applicable to common shareholders
                
                $
                6,370,428
                
                
                $
                3,258,236Denominator:Weighted
      average common shares outstanding
                
                
                13,676,994
                
                
                
                12,306,715Weighted
      average effect of dilutive securities:Stock
      warrants
                
                
                445,923
                
                
                
                55,556Shares
      used in computing diluted net income per share
                
                
                14,122,917
                
                
                
                12,362,271Diluted
      net income per share
                
                $
                0.45
                
                
                $
                0.26





Recent accounting
pronouncements





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





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


17





UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





In
February, 2007, FASB issued SFAS 159 “The Fair Value
Option for Financial Assets and Financial Liabilities” – Including an Amendment
of FABS Statement No. 115.  This statement permits entities to choose
to measure many financial instruments and certain other items at fair value.
This statement is expected to expand the use of fair value measurement, which is
consistent with the Board’s long-term measurement objectives for accounting for
financial instruments.  This statement is effective as of the
beginning of an entity’s first fiscal year that begins after November 15,
2007.  Based on the Company’s evaluation of this issue, the adoption
of this accounting requirement has no effect on the Company’s financial
statements.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”. This Statement amends ARB 51 to establish
accounting and reporting standards for the noncontrolling (minority) interest in
a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. SFAS No. 160 is effective for the Company’s fiscal year
beginning October 1, 2009. Management is currently evaluating the effect of this
pronouncement on financial statements.





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





On May 8,
2008, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 162, The Hierarchy of Generally
Accepted Accounting Principles, which will provide framework for selecting
accounting principles to be used in preparing financial statements that are
presented in conformity with U.S. generally accepted accounting principles
(GAAP) for nongovernmental entities. With the issuance of SFAS No. 162, the GAAP
hierarchy for nongovernmental entities will move from auditing literature to
accounting literature.  The Company is currently assessing the impact of
SFAS No. 162 on its financial position and results of operations.





In
June 2008, the FASB ratified the consensus reached on Emerging Issues Task
Force (“EITF”) Issue No. 07-05, Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity’s Own Stock (“EITF
No. 07-05”). EITF No. 07-05 clarifies the determination of whether an
instrument (or an embedded feature) is indexed to an entity’s own stock, which
would qualify as a scope exception under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. EITF No. 07-05 is effective
for financial statements issued for fiscal years beginning after
December 15, 2008. Based on the Company’s evaluation of this issue, the
adoption of this accounting requirement has no effect on the Company’s financial
statements.





Merger and Corporate
Restructure





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


18





UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





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 June 30, 2009
and December 31, 2008 the Company had paid $3,402,948 and $6,737,520 as trade
deposits respectively.





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 June 30, 2009
and December 31, 2008 the Company has advanced this company $439,226 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 six months ended
June 30, 2009 and 2008.





2009
                        
                        
                        2008Current
                        
                        $
                        2,138,151
                        
                        
                        $
                        1,116,747Deferred
                        
                        
                        -
                        
                        
                        
                        -Total
                        
                        $
                        1,145,266
                        
                        
                        $
                        380,625


Note 6 -COMMITTMENTS




The
Company leases various office facilities under month-to-month arrangements.
Rental expense for leases consisted of $ 147,903 and $92,297 for six months
ended June 30, 2009 and 2008 respectively. The Company has future minimum lease
obligations as of June 30, 2009 as follows:





2010
                      
                      $
                      146,8292011
                      
                      $
                      63,3132012
                      
                      $
                      12,0812013
                      
                      $
                      11,1882014
                      
                      $
                      10,367Thereafter
                      
                      $
                      20,931Total
                      
                      $
                      264,710


19





UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009





Note 6 –COMMITMENTS
(CONTINUED)





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. This amount is included in the cost of net
assets and goodwill purchased.





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




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





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





Cash
      acquired
                      
                      $
                      17,800Loans
      receivable
                      
                      
                      90,096Loans
      shareholder
                      
                      
                      251,184Property
      Plant & Equipment
                      
                      
                      22,995Goodwill
                      
                      
                      3,630,539Total
      assets acquired
                      
                      
                      4,012,614Liabilities
      assumedAccounts
      & Income Taxes payable
                      
                      
                      3,587Other
      payable
                      
                      
                      9,026Total
                      
                      $
                      4,000,000





The
excess of purchase price over tangible assets acquired and liabilities assumed
of $3,630,359 was recorded as goodwill. At the time of the acquisition no
identifiable intangibles assets existed under the contractual-legal or the
separability criterion as required under SFAS 141.





Prior to
the acquisition, Shenzhen Speedy Dragon Enterprises Limited prepared its
financial statements under accounting principles generally accepted in the
United States of America.


20




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009





Note
7 – COMMON STOCK
(CONTINUED)





As of
June 12, 2009, the Company entered into a termination agreement with Shenzhen
Speedy Dragon Enterprise Limited. Under the term of agreement, Shenzhen Speedy
Dragon Enterprises Limited returned the 714,285 pre- reserve split shares of the
Company’s common stock back and agreed to return to the Company RMB 3,500,000 ($
512,430) within one year.





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





Consideration
                          
                          $
                          3,293,380Goodwill
      attributable to sold Shenzhen Speedy Dragon Enterprises
    Ltd.
                          
                          
                          (3,630,539
                          )Net
      equity of Shenzhen Speedy Dragon Ltd.
                          
                          
                          (2,694,417
                          )Loss
      on disposal
                          
                          $
                          (3,031,576
                          )





The
following table summarized the operating result of the discontinued operations
for the six months ended Jun 30,  2009 and 2008
respectively:





2009
                  
                  
                  2008Sales
                  
                  $
                  3,631,545
                  
                  
                  $
                  5,665,690Cost
      of sales
                  
                  
                  (3,218,140
                  )
                  
                  
                  (4,896,575
                  )Gross
      profit
                  
                  
                  413,405
                  
                  
                  
                  769,115Operating
      expenses
                  
                  
                  (190,989
                  )
                  
                  
                  (340,293
                  )Income
      from discontinued operation before income tax
                  
                  
                  222,416
                  
                  
                  
                  428,822Income
      tax
                  
                  
                  (44,441
                  )
                  
                  
                  (109,501
                  )Net
      Income
                  
                  $
                  177,975
                  
                  
                  $
                  319,321





Per FASB
144, Shenzhen Speedy Dragon Enterprises Ltd is presented as discontinued
operation in the income statement.




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 Co., Ltd. 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 Co., Ltd.  ("XGN") for a cash and
stock transaction valued at approximately US$1.8 million. This amount is
included in the cost of net assets and goodwill purchased.





The stock
consideration consisted of 50,588 newly issued shares of the Company’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 Company 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.


21




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009





Note
7 – COMMON STOCK
(CONTINUED)





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





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





The
excess of purchase price over tangible assets acquired and liabilities assumed
of $764,895 was recorded as goodwill. At the time of the acquisition no
identifiable intangibles assets existed under the contractual-legal or the
separability criterion as required under SFAS 141.





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





On August
8, 2007, the Company consummated the acquisition of a 100% interest in Shanghai
Lanbao Travel Services Co., Ltd. ("SLB") for a cash and stock transaction valued
at approximately US$3.92 million. 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 Company’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 Company
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.


22




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009





Note
7 – COMMON STOCK
(CONTINUED)





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





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




The
excess of purchase price over tangible assets acquired and liabilities assumed
of $3,081,799 was recorded as goodwill. At the time of the acquisition no
identifiable intangibles assets existed under the contractual-legal or the
separability criterion as required under SFAS 141.





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




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





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




The stock
consideration consisted of 374,329 newly issued shares of the Company’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
Company and each of the FOI Shareholders.




FOI is
engaged in the business of domestic and international travel inquiries as well
as corporate travel, offering specialized packages that include national and
international air ticket booking, hotel reservations, conference center
reservations and rental cars. The purchase price was determined based on arms'
length negotiations between Universal Travel Group and the shareholders of FOI.
The acquisition had been accounted for as a purchase business combination and
the results of operations from the acquisition date have been included in the
Company's consolidated financial statements in accordance with SFAS 94. The
allocation of the purchase price is as follows:


23




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009





Note
7 – COMMON STOCK
(CONTINUED)





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




The
excess of purchase price over tangible assets acquired and liabilities assumed
of $6,049,576 was recorded as goodwill. At the time of the acquisition no
identifiable intangibles assets existed under the contractual-legal or the
separability criterion as required under SFAS 141.





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




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





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.  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. The
exercisable period is two years from issuance. On June 23, 2008, upon
resignation, the 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. The options are exercisable until June 1, 2017. On June 23, 2008, upon
resignation, the Board member has forfeited 22,222 options.





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





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


24





UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009





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




options—
The option holder has no voting or dividend rights. The Company records the
expense of the stock options over the related vesting period. The options were
valued using the Black-Scholes option-pricing model at the model at the date of
grant stock option pricing.





On
January 20, 2009, pursuant to the Securities Purchase agreement entered into on
August 28, the Company enacted the Universal Travel Group 2009 Incentive Stock
Option Plan entitles the grant of up to 2,200,000 shares of common stock of
Universal Travel Group, par value $0.001 to certain employees of the Company
either as stock or stock options, and the subsequent exercise of any stock
options.  The options are exercisable until 1/19/2019, with a vesting
period of six years. Average purchase price for the options is $3.73 per
share.





Six
      months endedJune
      30, 2009Expected
      Volatility
                        
                        
                        107.6
                        %Expected
      term (in years)Richard
      P. Randall
                        
                        
                        7.93James
      Treacy
                        
                        
                        8.35Yizhao
      Zhang
                        
                        
                        9Jiangping
      Jiang
                        
                        
                        9.56Others
                        
                        
                        9.56Expected
      dividends
                        
                        
                        -Risk-free
      rate of return (weighted average)
                        
                        
                        1.64
                        %Weighted
      average grant-date fair value
                        
                        
                        Range
      $2.67-11.25





Expected
volatility is based on the historical volatility of the Company’s stock price.
The expected term represents the estimated average period of time that the
options remain outstanding. No dividend payouts were assumed, as the Company has
no plans to declare dividends during the expected term of the stock options. The
risk-free rate of return reflects the weighted average interest rate offered for
zero coupon treasury bonds over the expected term of the options. Based upon
this calculation and pursuant to, as EITF 96-18, the Company recorded a service
period expense of $1,220,607 for the six months ending June 30,
2009.




AggregateExercise
                      
                      
                      Remaining
                      
                      
                      IntrinsicTotal
                      
                      
                      Price
                      
                      
                      Life
                      
                      
                      ValueOutstanding,
      December 31, 2008
                      
                      
                      55,555
                      
                      
                      $
                      4.56-11.25
                      
                      
                      7.93-9yrs
                      
                      
                      
                      -Granted
      in 2009
                      
                      
                      2,200,000
                      
                      
                      $
                      2.70-3.84
                      
                      
                      9.56yrs
                      
                      
                      
                      -Exercised
      in 2008
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Outstanding,
      June 30, 2009
                      
                      
                      2,255,555
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -




Pursuant
to the Securities Purchase Agreement entered into on August 28, 2008, the
Company issued warrants to purchase 764,785 shares of Common Stock. The unit
purchase price was $4.65per Common Share and a
related Warrant for the purchase of one-half a Common Share, times the number of
Common Shares purchased. Market Value of the Company’s stock on August 28, 2008
was $4.05. Accordingly approximately $45,887 of the amount recorded as
additional paid in capital for the transaction is attributable to the sale these
warrants.  Each warrant has an Exercise Price of $8.13 and a term of 5
years from the date of issuance.


25


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009





Note
9 - OTHER
COMPREHENSIVE INCOME





Balances
of related after-tax components comprising accumulated other comprehensive
income, included in stockholders equity, as of June 30, 2009  and
December 31, 2008 are as follows:





Foreign
      Currency
                  Translation
                  Adjustment
                
                
                Accumulated
                  Other
                  Comprehensive
                  IncomeBalance
      December 31, 2007
                
                
                545,164
                
                
                
                545,164Changes
      for year ended December 31, 2008
                
                
                975,002
                
                
                
                975,002Balance
      December 31, 2008
                
                $
                1,520,166
                
                
                $
                1,520,166Changes
      for six months ended June 30, 2009
                
                
                45,587
                
                
                
                45,587Balance
      at June 30, 2009
                
                $
                1,568,753
                
                
                $
                1,568,753





Note
10 - CURRENT
VULNERABILITY DUE TO CERTAIN RISK FACTORS





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





Note
11 – MAJOR CUSTOMERS
AND CREDIT RISK





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





Note
12 – ESCROW
DEPOSITS





Pursuant
to the Securities Purchase Agreement entered into on August 28, 2008, the
Company agreed that it will deposit $500,000 of the proceeds in escrow to pay
the fees and expenses in connection with a public relations and investor
relations campaign. The Company also agreed that it engage a Chief Financial
Officer who shall be fluent in English and Mandarin, who understands and has a
working knowledge of United States generally accepted accounting principles, who
has had significant responsibility for the preparation and filing of quarterly,
annual and current reports with the SEC and who has experience working with or
in United States capital market participants. As of September 30, 2008 $337,200
has been prepaid out of this escrow account in connection with the public and
investor relations campaign for services covering a one year period. This
prepayment is being amortized accordingly.




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





Note
13 -   SEGMENT
INFORMATION





We
separately operate and prepare accounting and other financial reports 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 Co., Ltd, Chongqing Travel World E-Business Co., Ltd., and Shenzhen
Travel World Travel Agency Co., Ltd.. Pursuant to SFAS 131, they disclose
segments on a single entity basis, which in their case is the legal entity. Our
air-ticketing segment relates to the segment reporting of Shenzhen Yuzhilu
Aviation Service Co., Ltd. and Chongqing Travel World E-Business Co.,
Ltd.,  hotel reservation segment relates to Shanghai Lanbao Travel
Service Co., Ltd, packaged tours segment relates to Foshan International Travel
Service Co., Ltd and Xi’an Golden Net Travel Serve Service Company Limited, and
Shenzhen Travel World Travel Agency Co., Ltd.. Management monitors these
segments regularly to make decisions about resources to be allocated to the
segments and assess each segment’s performance.
The following tables present summarized information by
segment:


26




UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009




Note 13
-SEGMENT
INFORMATION (CONTINUED)


Air
      Ticketing
                                                              
                                                              
                                                              
                                                              Hotel
      Reservation
                                                              
                                                              
                                                              
                                                              Packaged
      Tours
                                                              
                                                              
                                                              
                                                              Other
                                                              
                                                              
                                                              
                                                              TotalSix Months Ended June 30,
      2009Sales,
      net
                                                              
                                                              $
                                                              6,045,642
                                                              
                                                              
                                                              $
                                                              5,230,975
                                                              
                                                              
                                                              $
                                                              22,639,535
                                                              
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              33,916,152Cost
      of sales
                                                              
                                                              $
                                                              324,698
                                                              
                                                              
                                                              $
                                                              1,334,528
                                                              
                                                              
                                                              $
                                                              19,279,043
                                                              
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              20,938,269Gross
      profit
                                                              
                                                              $
                                                              5,720,944
                                                              
                                                              
                                                              $
                                                              3,896,447
                                                              
                                                              
                                                              $
                                                              3,360,492
                                                              
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              12,977,883Income
      from operations
                                                              
                                                              $
                                                              3,734,340
                                                              
                                                              
                                                              $
                                                              3,480,003
                                                              
                                                              
                                                              $
                                                              2,856,412
                                                              
                                                              
                                                              $
                                                              (7,095,078
                                                              )
                                                              
                                                              $
                                                              2,975,677Total
      assets
                                                              
                                                              $
                                                              30,987,883
                                                              
                                                              
                                                              $
                                                              9,499,533
                                                              
                                                              
                                                              $
                                                              8,024,758
                                                              
                                                              
                                                              $
                                                              5,210,309
                                                              
                                                              
                                                              $
                                                              53,722,483Six
      Months Ended June 30, 2008


Sales,
      net
                  
                  $
                  3,365,400
                  
                  
                  $
                  2,024,296
                  
                  
                  $
                  13,365,656
                  
                  
                  $
                  
                  
                  
                  $
                  18,755,352Cost
      of sales
                  
                  $
                  173,113
                  
                  
                  $
                  699,660
                  
                  
                  $
                  11,648,400
                  
                  
                  $
                  
                  
                  
                  $
                  12,521,173Gross
      profit
                  
                  $
                  3,192,287
                  
                  
                  $
                  1,324,636
                  
                  
                  $
                  1,717,256
                  
                  
                  $
                  
                  
                  
                  $
                  6,234,179Income
      from operations
                  
                  $
                  1,949,892
                  
                  
                  $
                  1,132,164
                  
                  
                  $
                  1,339,228
                  
                  
                  $
                  (155,802
                  )
                  
                  $
                  4,265,482Total
      assets
                  
                  $
                  17,648,350
                  
                  
                  $
                  3,721,709
                  
                  
                  $
                  8,134,644
                  
                  
                  $
                  2,855,697
                  
                  
                  $
                  32,360,400




Note
14 -   SUBSEQUENT
EVENTS





On July
20, 2009, the Company entered into a waiver agreement with its investors under
the certain Securities Purchase Agreement dated August 28,
2008.  Pursuant to the Securities Purchase Agreement, the Company had
agreed to provide certain registration rights to the investors under the
Securities Act of 1933. Under the terms of waiver agreement, the investors had
agreed to waive their rights to any damages and liabilities arising out of the
non-registration of the Registrable Securities as of July 20, 2009.





On August
7, 2009, the Company filed a shelf registration in a Registration Statement on
Form S-3 with a maximum of $50,000,000 worth of common stock for future business
expansion.





Upon the
Company’s adoption of EITF No. 07-05, the Company evaluated the Investor
Warrants and determined that the Investor Warrants did not qualify for a scope
exception under SFAS No. 133 as they were determined to not be indexed to the
Company’s stock as prescribedby EITF No. 07-05.
However, On August 10, 2009, the Company entered into an Agreement to Amend
Warrants with the Investors to amend the warrants sold to the Investors on
August 28, 2008.  Section 7d of the warrants is amended to
(i) limit the instances in which a dilutive issuance will cause an
adjustment to the exercise price of the Investor warrants and
(ii) eliminate the provision that correspondingly increased the number of
shares underlying the Investor warrants in the event of a dilutive issuance that
causes an adjustment to the exercise price. As part consideration of the
Investors’ agreement  to amend the warrants,  the Company
agreed to grant the Investors a cashless exercise feature to their warrants. As
a result of these amendments, the Investor Warrants now qualify for the scope
exception under SFAS No. 133 and, accordingly, as of June 30, 2009, are
classified into the Stockholders Equity section of the Company’s balance
sheet.





On August
10, 2009, the Company also entered into a Make Good Securities Escrow Supplement
Agreement with its investors under that certain Securities Purchase Agreement
dated August 28, 2008.  Pursuant to the Supplement Agreement, Section
1.6 of the Make Good Securities Escrow Agreement that it had executed with its
Investors on August 28, 2008 is amended to exclude the effects of EITF 07-5 when
determining whether the 2008 Performance Threshold and the 2009 Performance
Threshold have been reached by the Company.


27


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





Forward-Looking
Statements: No Assurances Intended




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





Business
Overview





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





Under the
theme 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 expanded
our business operations into Chongqing, the metropolis of the Southwest China,
and Xi’an, the metropolis of the Northwest China. We set up Chongqing Travel
World E-Business Co., Ltd. to be our headquarters in that region.





We
believe that these expansions 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.





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:


28




(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 second quarter GDP growth rate also improved
from 6.1% in the first quarter to 7.9% in the second 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$72.9billion (approximately
RMB497.9 billion), representing a 10.6% growth year over year.





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





·
            domestic
      air passenger transportation volume grew 19.6% in the first half
      year  of 2009 compared to the same period in
    2008;





·
            domestic
      cargo transportation volume dropped 3.1% in the first half year of 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:


29




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


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


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


·
              the threat of terrorist attacks
      and increased security over international events, such as the Olympics,;
      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.





RESULTS
OF OPERATIONS





THREE
MONTHS ENDED JUNE 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 June 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 second quarter of
2009 and its historical results.


30




USD$
                                        
                                        Three
      months
                                          ended
      June
                                          30,2008
                                        
                                        
                                        (%)
      of
                                          sector
                                        
                                        
                                        Three
      months
                                          ended
      June
                                          30,2009
                                        
                                        
                                        (%)
      of
                                          sector
                                        
                                        
                                        Increase
      /
                                          (Decrease)
                                        
                                        
                                        (%)Gross
      Revenues
                                        
                                        
                                        11,802,974
                                        
                                        
                                        
                                        100.0
                                        %
                                        
                                        
                                        18,405,473
                                        
                                        
                                        
                                        100.0
                                        %
                                        
                                        
                                        6,602,499
                                        
                                        
                                        
                                        55.9
                                        %Air-tickets
                                        
                                        
                                        1,936,519
                                        
                                        
                                        
                                        16.4
                                        %
                                        
                                        
                                        3,294,514
                                        
                                        
                                        
                                        17.9
                                        %
                                        
                                        
                                        1,357,995
                                        
                                        
                                        
                                        70.1
                                        %Hotels
                                        
                                        
                                        1,411,818
                                        
                                        
                                        
                                        12.0
                                        %
                                        
                                        
                                        2,714,144
                                        
                                        
                                        
                                        14.7
                                        %
                                        
                                        
                                        1,302,326
                                        
                                        
                                        
                                        92.2
                                        %Packaged
      Tour
                                        
                                        
                                        8,454,637
                                        
                                        
                                        
                                        71.6
                                        %
                                        
                                        
                                        12,396,815
                                        
                                        
                                        
                                        67.4
                                        %
                                        
                                        
                                        3,942,178
                                        
                                        
                                        
                                        46.6
                                        %Cost
      of Services
                                        
                                        
                                        -7,897,036
                                        
                                        
                                        
                                        100.0
                                        %
                                        
                                        
                                        -11,521,673
                                        
                                        
                                        
                                        100.0
                                        %
                                        
                                        
                                        -3,624,637
                                        
                                        
                                        
                                        45.9
                                        %Air-tickets
                                        
                                        
                                        -99,612
                                        
                                        
                                        
                                        1.3
                                        %
                                        
                                        
                                        -180,119
                                        
                                        
                                        
                                        1.6
                                        %
                                        
                                        
                                        -80,507
                                        
                                        
                                        
                                        80.8
                                        %Hotels
                                        
                                        
                                        -504,988
                                        
                                        
                                        
                                        6.4
                                        %
                                        
                                        
                                        -725,113
                                        
                                        
                                        
                                        6.3
                                        %
                                        
                                        
                                        -220,125
                                        
                                        
                                        
                                        43.6
                                        %Packaged
      Tour
                                        
                                        
                                        -7,292,436
                                        
                                        
                                        
                                        92.3
                                        %
                                        
                                        
                                        -10,616,441
                                        
                                        
                                        
                                        92.1
                                        %
                                        
                                        
                                        -3,324,005
                                        
                                        
                                        
                                        45.6
                                        %Gross
      Profit
                                        
                                        
                                        3,905,938
                                        
                                        
                                        
                                        100.0
                                        %
                                        
                                        
                                        6,883,800
                                        
                                        
                                        
                                        100.0
                                        %
                                        
                                        
                                        2,977,862
                                        
                                        
                                        
                                        76.2
                                        %Air-tickets
                                        
                                        
                                        1,836,907
                                        
                                        
                                        
                                        47.0
                                        %
                                        
                                        
                                        3,114,395
                                        
                                        
                                        
                                        45.2
                                        %
                                        
                                        
                                        1,277,488
                                        
                                        
                                        
                                        69.5
                                        %Hotels
                                        
                                        
                                        906,830
                                        
                                        
                                        
                                        23.2
                                        %
                                        
                                        
                                        1,989,031
                                        
                                        
                                        
                                        28.9
                                        %
                                        
                                        
                                        1,082,201
                                        
                                        
                                        
                                        119.3
                                        %Packaged
      Tour
                                        
                                        
                                        1,162,201
                                        
                                        
                                        
                                        29.8
                                        %
                                        
                                        
                                        1,780,374
                                        
                                        
                                        
                                        25.9
                                        %
                                        
                                        
                                        618,173
                                        
                                        
                                        
                                        53.2
                                        %SG&A
                                        
                                        
                                        -1,072,347
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -1,588,301
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -515,954
                                        
                                        
                                        
                                        48.1
                                        %Stock
      based compensation
                                        
                                        
                                        -45,790
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -1,055,648
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -1,009,858
                                        
                                        
                                        
                                        2205.4
                                        %Income
      from Operations
                                        
                                        
                                        2,787,801
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        4,239,851
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,452,050
                                        
                                        
                                        
                                        52.1
                                        %Loss
      on disposal of assets
                                        
                                        
                                        -
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -Other
      income
                                        
                                        
                                        5,504
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        2,591
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -2,913
                                        
                                        
                                        
                                        -52.9
                                        %Interest
      income
                                        
                                        
                                        10,307
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        12,358
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        2,051
                                        
                                        
                                        
                                        19.9
                                        %Interest
      expense
                                        
                                        
                                        -28,297
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        28,297
                                        
                                        
                                        
                                        -100.0
                                        %Income
      before income taxes
                                        
                                        
                                        2,775,315
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        4,254,800
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,479,485
                                        
                                        
                                        
                                        53.3
                                        %Provision
      for income taxes
                                        
                                        
                                        -701,374
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -1,020,955
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -319,581
                                        
                                        
                                        
                                        45.6
                                        %Net
      Income – continuing operations
                                        
                                        
                                        2,073,941
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        3,233,854
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -1,159,913
                                        
                                        
                                        
                                        55.9
                                        %Income
      from discontinued operations
                                        
                                        
                                        74,500
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        62,652
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -11,848
                                        
                                        
                                        
                                        -15.9
                                        %Tax
      on income from discontinued operations
                                        
                                        
                                        -34,748
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -16,370
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        18,378
                                        
                                        
                                        
                                        -52.9
                                        %Dividend
      from discontinued operations
                                        
                                        
                                        -
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        2,260,981
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        2,260,981Loss
      on disposition of discontinued operations
                                        
                                        
                                        -
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -3,031,576
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -3,031,576Net
      Loss from discontinued operation
                                        
                                        
                                        39,752
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -724,313
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -764,065
                                        
                                        
                                        
                                        -1922.1
                                        %Net
      Income
                                        
                                        
                                        2,113,693
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        2,509,532
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        395,839
                                        
                                        
                                        
                                        18.7
                                        %




31


Revenue





Revenue
for the three months ended June 30, 2009 was $18,405,473 compared to $11,802,974
for the same period 2008, an increase of approximately 55.9%. This increase was
primarily due to the strong domestic travel demand supported by the government’s
stimulus package and a long Labor Day public holiday period.   In
addition, we continue to see success in cross marketing and selling our travel
related products across our business segments and increased brand awareness from
the deployment of our TRIPEASY kiosks as evidenced
by the increase in usage of these kiosks.  This revenue increase was
partially offset by a decrease in outbound and inbound travel as a result of the
threat caused by the H1N1 flu.





Revenue
from air-ticketing was $3,294,514 for the three months ended June 30, 2009
compared to $1,936,519 for the same period last year, an increase of
approximately 70.1%. 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 second 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 $2,714,144 for the three months ended June 30, 2009
compared to $1,411,818 for the same period in 2008, an increase of approximately
99.2%. This increase is also a result of the the factors mentioned above for air
tickets and the successful cross marketing of our various business
segments.





Revenue
from our packaged tour segment was $12,396,815 for the three months ended June
30, 2009 compared to $8,454,637 for the same period in 2008, an increase of
approximately 46.6%. This increase is a result of the government’s stimulus
package, cross marketing across our various business segments and a long public
holiday period during the second quarter of 2009.





Cost of
Services




Cost of
services for the three months ended June 30, 2009 was $11,521,673 compared to
$7,897,036 for the same period 2008, an increase of approximately 45.9%. This
increase was in tandem with the increase in our  revenue and scale of
business.





We
attribute our costs of services for each segment by each subsidiary as each
subsidiary is involved in a discrete segment of our overall
business.





Cost of
services in our air-ticketing segment was $180,119 for the three months ended
June 30, 2009 compared to $99,612 for the same period last year, an increase of
approximately 80.8%. This is in tandem with the increase in our air-ticketing
business operated by YZL.





Cost of
services in our hotel reservation segment was $725,113 for the three months
ended June 30, 2009 compared to $504,988 for the same period 2008, an increase
of approximately 43.6%.  This is in tandem with the increase in our
hotel reservation business operated by SLB. The lower increase in cost of
services compared to the increase in revenue is a result of our focus on direct
sales.





Cost of
services in our packaged tour segment was $10,616,441 for the three months ended
June 30, 2009 compared to $7,292,436 for the same period 2008, an increase of
approximately 45.6%. This is in tandem with the increase in our packaged travel
businesses operated by XGN and FOI.


32


Gross
Profit





Gross
Profit for the three months ended June 30, 2009 was $6,883,800 compared to
$3,905,938 for the same period 2008, an increase of approximately 76.2%. The
increase in gross profit is due to the same factors contributing to the growth
in revenue. The exponential growth in both our domestic air-ticketing business
and hotel reservations business is a result of synergies from our packaged tour
operations.





Gross
profit in our air-ticketing segment was $3,114,395 for the three months ended
June 30, 2009 compared to $1,836,907 for the same period last year, an increase
of approximately 69.5%. As the cost of service is at a similar percentage to the
revenue for the comparable period last year, this increase is in tandem
with the increase in our air-ticketing business operated by YZL.





Gross
profit in our hotel reservation segment was $1,989,031 for the three months
ended June 30, 2009 compared to $906,830 for the same period last year, an
increase of approximately 119.3%. This is in tandem with the increase in our
hotel reservation business operated by SLB.





Gross
profit in our packaged tour segment was $1,780,374 for the three months ended
June 30, 2009 compared to $1,162,201 for the same period last year, an increase
of approximately 53.2%. This is in tandem with the increase in our packaged
travel businesses operated by XGN and FOI.





Gross
margin for three months ended June 30, 2009 came in at 37.4%, a 4.30%
improvement over the 33.1% the Company posted in the same period last year. This
is the result of the Company’s departure from the less profitable air cargo
agency business and its focus on direct and online sales as well as the roll out
of its TRIPEASY
kiosks into more regions in China.





Selling, General and
Administrative Expenses





Selling,
general and administrative expenses totaled $1,588,301 for three months ended
June 30, 2009 compared to $1,072,347 for same period last year, an increase of
approximately 48.1%.





Selling,
general and administrative expenses were approximately 8.6% of revenue for the
three months ended June 30, 2009 as compared to 9.1% for the same period last
year. This is a direct result of management’s efficient management of
costs.





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 second quarter, the non-cash charge
associated with the stock-based compensation was $1,055,648, or 5.7% of
revenue.





During
the second quarter, based on the past performance of our air cargo business, as
well as the market’s perception 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 business had been under pressure from the
contraction of manufacturing in the Pearl River Delta.  We decided to
exit this business and concentrate on our core competence in the air-ticketing,
hotel reservations and packaged tour industry. We incurred a net loss from
discontinued operation of $724,313.





Net
Income





Net
income was 2,509,532, or 13.6% of revenues for the three months ended June 30,
2009, compared to $2,113,693 or 17.9% of revenue for the same period last year.
Despite incurring a more than $1 million non-cash compensation charge and
$724,313 loss due to discontinued operations, our net income still increased
18.7%, compared with the net income for the same period in 2008.





SIX
MONTHS ENDED JUNE 30, 2009 AND 2008





The
following table presents certain consolidated statement of operations
information derived from the consolidated statements of income for the six
months ended June 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 six months ended June 30, 2009, and its historical
results.


33





USD$
                  
                  Six
      months
                    ended
      June
                    30,2008
                  
                  
                  (%)
      of
                    sector
                  
                  
                  Six
      months
                    ended
      June
                    30,2009
                  
                  
                  (%)
      of
                    sector
                  
                  
                  Increase
      /
                    (Decrease)
                  
                  
                  (%)Gross
      Revenues
                  
                  
                  18,755,352
                  
                  
                  
                  100.0
                  %
                  
                  
                  33,916,152
                  
                  
                  
                  100.0
                  %
                  
                  
                  15,160,800
                  
                  
                  
                  80.8
                  %Air-tickets
                  
                  
                  3,365,400
                  
                  
                  
                  17.9
                  %
                  
                  
                  6,045,642
                  
                  
                  
                  17.8
                  %
                  
                  
                  2,680,242
                  
                  
                  
                  79.6
                  %Hotels
                  
                  
                  2,024,296
                  
                  
                  
                  10.8
                  %
                  
                  
                  5,230,975
                  
                  
                  
                  15.4
                  %
                  
                  
                  3,206,679
                  
                  
                  
                  158.4
                  %Packaged
      Tour
                  
                  
                  13,365,656
                  
                  
                  
                  71.3
                  %
                  
                  
                  22,639,535
                  
                  
                  
                  66.8
                  %
                  
                  
                  9,273,879
                  
                  
                  
                  69.4
                  %Cost
      of Services
                  
                  
                  -12,521,173
                  
                  
                  
                  100.0
                  %
                  
                  
                  -20,938,269
                  
                  
                  
                  100.0
                  %
                  
                  
                  -8,417,096
                  
                  
                  
                  67.2
                  %Air-tickets
                  
                  
                  -173,113
                  
                  
                  
                  1.4
                  %
                  
                  
                  -324,698
                  
                  
                  
                  1.6
                  %
                  
                  
                  -151,585
                  
                  
                  
                  87.6
                  %Hotels
                  
                  
                  -699,660
                  
                  
                  
                  5.6
                  %
                  
                  
                  -1,334,528
                  
                  
                  
                  6.4
                  %
                  
                  
                  -634,868
                  
                  
                  
                  90.7
                  %Packaged
      Tour
                  
                  
                  -11,648,400
                  
                  
                  
                  93.0
                  %
                  
                  
                  -19,279,043
                  
                  
                  
                  92.1
                  %
                  
                  
                  -7,630,643
                  
                  
                  
                  65.5
                  %Gross
      Profit
                  
                  
                  6,234,179
                  
                  
                  
                  100.0
                  %
                  
                  
                  12,977,883
                  
                  
                  
                  100.0
                  %
                  
                  
                  6,743,704
                  
                  
                  
                  108.2
                  %Air-tickets
                  
                  
                  3,192,287
                  
                  
                  
                  51.2
                  %
                  
                  
                  5,720,944
                  
                  
                  
                  44.1
                  %
                  
                  
                  2,528,657
                  
                  
                  
                  79.2
                  %Hotels
                  
                  
                  1,324,636
                  
                  
                  
                  21.2
                  %
                  
                  
                  3,896,447
                  
                  
                  
                  30.0
                  %
                  
                  
                  2,571,811
                  
                  
                  
                  194.2
                  %Packaged
      Tour
                  
                  
                  1,717,256
                  
                  
                  
                  27.5
                  %
                  
                  
                  3,360,492
                  
                  
                  
                  25.9
                  %
                  
                  
                  1,643,236
                  
                  
                  
                  95.7
                  %SG&A
                  
                  
                  -1,766,887
                  
                  
                  
                  
                  
                  
                  
                  -3,278,371
                  
                  
                  
                  
                  
                  
                  
                  -1,511,484
                  
                  
                  
                  85.5
                  %Stock
      based compensation
                  
                  
                  -155,802
                  
                  
                  
                  
                  
                  
                  
                  -1,220,648
                  
                  
                  
                  
                  
                  
                  
                  -1,064,846
                  
                  
                  
                  683.5
                  %Income
      from Operations
                  
                  
                  4,311,490
                  
                  
                  
                  
                  
                  
                  
                  8,478,864
                  
                  
                  
                  
                  
                  
                  
                  4,167,374
                  
                  
                  
                  96.7
                  %Loss
      on disposal of assets
                  
                  
                  -1,104
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  1,104Other
      income
                  
                  
                  8,378
                  
                  
                  
                  
                  
                  
                  
                  6,419
                  
                  
                  
                  
                  
                  
                  
                  -1,959
                  
                  
                  
                  -23.4
                  %Interest
      income
                  
                  
                  11,722
                  
                  
                  
                  
                  
                  
                  
                  23,296
                  
                  
                  
                  
                  
                  
                  
                  11,574
                  
                  
                  
                  98.7
                  %Interest
      expense
                  
                  
                  -65,004
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  65,004
                  
                  
                  
                  -100.0
                  %Income
      before income taxes
                  
                  
                  4,265,482
                  
                  
                  
                  
                  
                  
                  
                  8,508,579
                  
                  
                  
                  
                  
                  
                  
                  4,243,097
                  
                  
                  
                  99.5
                  %Provision
      for income taxes
                  
                  
                  -1,007,246
                  
                  
                  
                  
                  
                  
                  
                  -2,138,151
                  
                  
                  
                  
                  
                  
                  
                  -1,130,905
                  
                  
                  
                  112.3
                  %Net
      Income – continuing operations
                  
                  
                  3,258,236
                  
                  
                  
                  
                  
                  
                  
                  6,370,428
                  
                  
                  
                  
                  
                  
                  
                  3,112,192
                  
                  
                  
                  95.5
                  %Income
      from discontinued operations
                  
                  
                  428,822
                  
                  
                  
                  
                  
                  
                  
                  222,416
                  
                  
                  
                  
                  
                  
                  
                  -206,406
                  
                  
                  
                  -48.1
                  %Tax
      on income from discontinued operations
                  
                  
                  -109,501
                  
                  
                  
                  
                  
                  
                  
                  -44,441
                  
                  
                  
                  
                  
                  
                  
                  65,060
                  
                  
                  
                  -59.4
                  %Dividend
      from discontinued operations
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  2,260,981
                  
                  
                  
                  
                  
                  
                  
                  2,260,981Loss
      on disposition of discontinued operations
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -3,031,576
                  
                  
                  
                  
                  
                  
                  
                  -3,031,576Net
      Loss from discontinued operation
                  
                  
                  319,321
                  
                  
                  
                  
                  
                  
                  
                  -592,620
                  
                  
                  
                  
                  
                  
                  
                  -911,941
                  
                  
                  
                  -285.6
                  %Net
      Income
                  
                  
                  3,577,557
                  
                  
                  
                  
                  
                  
                  
                  5,777,808
                  
                  
                  
                  
                  
                  
                  
                  2,200,251
                  
                  
                  
                  61.5
                  %




34


Revenue





Revenue
for the six months ended June 30, 2009 was $33,916,152 compared to $18,755,352
for the same period in 2008, an increase of approximately 80.8%. This increase
was primarily due to the strong domestic travel demand supported by the
government’s stimulus package and a long Labor Day public holiday
period.   In addition, we continue to see success in cross
marketing and selling our travel related products across our business segments
and increased brand awareness from the deployment of our TRIPEASY kiosks as evidenced
by the increase in usage of these kiosks.  This revenue increase was
partially offset by a decrease in outbound and inbound travel as a result of the
threat caused by the H1N1 flu.




Revenue
from our air-ticketing segment was $ 6,045,642 for the six months ended June 30,
2009 compared to $ 3,365,400 for the same period last year, an increase of
approximately 79.6%. This increase is driven by the organic growth of YZL, and
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 $5,230,975 for the six months ended June
30, 2009 compared to $2,024,296 for the same period last year, an increase of
approximately158.4%. 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 $22,639,535 for the six months ended June 30,
2009 compared to $13,365,656 for the same period last year, an increase of
approximately 69.4%. The growth in these two subsidiaries were driven by the
successful integration, the synergies among segments and also the consolidation
of marketing channels among the subsidiaries in major domestic
cities.





Because
the average price of our travel products and commission rates remained stable ,
we believe the greatest impact to our financial performance was from the growth
of our business volume.





Cost of
services




Cost of
services for the six months ended June 30, 2009 was $20,938,269 compared to
$12,521,173 for the same period last year, an increase of approximately 67.2%.
This increase was primarily due to the increase in business in our air-ticket,
hotel reservation and packaged tours.




Cost of
services in our air-ticketing segment was $324,698 for the six months ended June
30, 2009 compared to $173,113 for the same period last year, an increase of
approximately 87.6%. This increase is due to the growth of our ticketing
business.





Cost of
services in our hotel reservation segment was $1,334,528 for the six months
ended June 30, 2009 compared to $699,660 for the same period last year, an
increase of approximately 90.7%. This increase is a result of the acquisition
and organic growth of SLB.





Cost of
services in our packaged tour segment was $19,279,043 for the six months ended
June 30, 2009 compared to $11,648,400 for the same period last year, an increase
of approximately 65.5%. This increase is a result of the acquisition and organic
growth of XGN and FOI.





Gross
Profit





Gross
profit for the six months ended June 30, 2009 was $12,977,883 compared to
$6,234,179 for the same period last year, an increase of approximately 108.2%.
The increase in gross profit reflects the aforementioned integration of business
lines onto our online platform and higher percentage of packaged tour
revenue.


35


Gross
profit in air-ticketing was $5,720,944 for the six months ended June 30, 2009
compared to $3,192,287 for the same period last year, an increase of
approximately 79.2%. As the cost of services is at a similar percentage of the
revenue for the comparable period, this increase is similar with the increase in
our air-ticketing business operated by YZL.





Gross
profit in hotel reservation was $3,896,447 for the six months ended June 30,
2009 compared to $1,324,636 for the same period last year, an increase of
approximately 194.2%. This is in tandem with the increase in our hotel
reservation business operated by SLB.





Gross
profit in packaged tour was $3,360,492 for the six months ended June 30, 2009
compared to $1,717,256 for the same period last year, an increase of
approximately 95.7%. This is in tandem with the increase in our packaged travel
businesses operated by XGN and FOI.





Gross
margin for six months ended June 30, 2009 came in at 38.3%, a 5.1% improvement
over the 33.2% the Company posted in the same period last year. This increase is
mostly is due to the spin off of lower margin air cargo agency business, and the
Company’s focus on direct and online sales as well as the rollout of our TRIPEASY kiosks into more
regions in China.





Selling, General and
Administrative Expenses





Selling,
general and administrative expenses for six months ended June 30, 2009 totaled
$3,278,371 compared to $1,766,887 for the same period last year, an increase of
approximately 85.5%.





Selling,
general and administrative expenses were approximately 9.7% of revenue for the
six months ended June 30, 2009 as compared to 9.4% for the six months ended June
30, 2008. This is a direct result of management’s efficient management of
costs.





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.  For the six months ended June 30,
2009, the non-cash charge was $1,220,648, or 3.6% of revenue.





Net
Income





Net
income was $5,777,808 or 17.0% of revenue for the six months ended June 30,
2009, compared to $3,577,557 or 19.1% of revenue for the same period last year.
Although we incurred more than $1.2 million in non-cash compensation charge and
$592,620 loss due to the discontinued operations, our net income for the first
six months of 2009 still increased 61.5%, compared with that of the same period
in 2008.





Our
increase in both revenues and net income in the past two 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.


36


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 $18,388,175
as of June 30, 2009. Current assets and current liabilities as of June 30, 2009,
were $37,221,709 and $5,055,518 yielding working capital of $32,166,191. We
believe that the funds available to us from operations are adequate to meet our
operating needs in 2009. For the six months ended June 30, 2009, net cash
provided by operating activities was approximately $11,676,336, which resulted
primarily from our organic operations and effective management of cash
flow.





Capital
expenditure





Total
capital expenditure for six months ended June 30, 2009 was $6,076,248 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.





We have
filed a Registration Statement on  Form S-3 to register $50,000,000
worth of common stock on Aug 7, 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. Hhowever 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.


37


Item
4. Controls and Procedures.





Evaluation
of our Disclosure Controls





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




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




Changes
in internal control over financial reporting





The
Company has set up an internal control department with qualified accounting
staff which directly report to the Independent Audit Committee. Management
believes this would help strengthen the general internal control process. There
has been no major changes in our internal controls over financial reporting
during our second 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.





Item1A.
            Risk
      Factors





Not
Applicable.





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





None.





Item 3.
            Defaults Upon Senior
      Securities





None.


38





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





None.





Item 5.
            Other
      Information





Not
applicable.





Item 6.
            Exhibits





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





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





*The Exhibit attached to this Form 10-Q
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.


39




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: August 11,
2009




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




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




40