**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, 2008





£
            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. Yes S 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
            S





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes £ No S





**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 4, 2008, there 37,031,258 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
            
            3Consolidated
                Balance Sheets as of June 30, 2008 (Unaudited) and December 31,
                2007
            
            4Consolidated
                Statements of Income for the Six Months Ended June 30, 2008 and 2007
                (Unaudited)
            
            5Consolidated
                Statements of Cash Flows for the Six Months Ended June 30, 2008 and
                2007
                (Unaudited)
            
            7Consolidated
                Statements of Stockholders' Equity
            
            8Notes
                to Consolidated Financial Statements as of June 30, 2008
                (Unaudited)
            
            9Item
                2.  Management’s Discussion and Analysis of Financial Condition or
                Plan of Operation
            
            19Item
                3.  Quantitative and Qualitative Disclosures About Market
                Risk.
            
            28Item
                4.  Controls and Procedures
            
            28PART
                II.
            
            Other
                InformationItem
                1.  Legal Proceedings
            
            29Item
                2.  Unregistered Sales of Equity Securities and Use of
                Proceeds
            
            29Item
                3.  Defaults Upon Senior Securities
            
            29Item
                4.  Submission of Matters to a Vote of Security
                Holders.
            
            29Item
                5.  Other Information
            
            29Item
                6.  Exhibits
            
            29Signatures
            
            31





(Inapplicable
      items have been omitted)





**PART
      I - FINANCIAL INFORMATION**





**Item
      1. Financial Statements (Unaudited)**





**UNIVERSAL
      TRAVEL GROUP**





**CONSOLIDATED
      FINANCIAL STATEMENTS**





**JUNE
      30, 2008**





**TABLE
      OF CONTENTS**





Report
                of Independent Registered Public Accounting Firm
            
            
            3ConsolidatedBalance
                Sheets
            
            
            4ConsolidatedStatements
                of Income
            
            
            5-6ConsolidatedStatements
                of Cash Flows
            
            
            7ConsolidatedStatements
                of Stockholders’ Equity
            
            
            8Notes
                to Consolidated Financial Statements
            
            
            9-18




2


***MORGENSTERN,
      SVOBODA & BAER, CPA’s, P.C.***




*CERTIFIED
      PUBLIC ACCOUNTANTS*


40
      Exchange Place, Suite 1820


New
      York,
      N.Y.10005


TEL:
      (212) 925-9490


FAX:
      (212) 226-9134


E-MAIL:
      MSBCPAS@gmail.com





Report
      of Independent Registered Public Accounting Firm




Board
      of
      Directors and Stockholders of


Universal
      Travel Group





We
      have
      reviewed the accompanying consolidated balance sheets of Universal Travel Group,
      Inc. as of June 30, 2008 and the consolidated statements of operations for
      the
      six months ended June 30, 2008 and 2007 and consolidated statements of cash
      flows and shareholders equity for the 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, 2007 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 18, 2008 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, 2007, is fairly
      stated, in all material respects, in relation to the consolidated balance sheet
      from which it has been derived.





Morgenstern,
      Svoboda & Baer CPA’s P.C.


Certified
      Public Accountants





New
      York,
      N.Y.


July
      27,
      2008


3





**UNIVERSAL
      TRAVEL GROUP**


**CONSOLIDATED
      BALANCE SHEET****S**


**JUNE
      30, 2008 and DECEMBER 31, 2007**





2008
            
            2007**ASSETS****Current
                Assets**Cash
                and cash equivalents
            
            $
            5,489,737
            
            $
            2,671,684Accounts
                receivable, net
            
            
            7,112,192
            
            
            5,403,820Other
                receivables and deposits, net
            
            
            328,457
            
            
            1,297,426Refundable
                acquisition deposit
            
            
            -
            
            
            1,453,050Due
                from shareholders
            
            
            267,055
            
            
            1,444,818Trade
                deposit
            
            
            4,773,333
            
            
            2,650,744Advances
            
            
            655,977
            
            
            616,861Prepaid
                expenses
            
            
            84,403
            
            
            713,668Total
                Current Assets
            
            
            18,711,154
            
            
            16,252,071Property
                & equipment, net
            
            
            120,675
            
            
            127,393Intangible
                assets
            
            
            1,762
            
            
            18,626Goodwill
            
            
            13,526,809
            
            
            13,526,80913,649,246
            
            
            13,672,828**Total
                Assets**
            
            $
            32,360,400
            
            $
            29,924,899**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                LiabilitiesNotes
                payable – bank
            
            $
            1,107,872
            
            $
            1,288,554Note
                payable – others
            
            
            599,737
            
            
            1,576,750Accounts
                payable and accrued expenses
            
            
            2,750,295
            
            
            3,604,666Customer
                deposits
            
            
            1,342,918
            
            
            1,132,886Income
                tax payable
            
            
            681,211
            
            
            664,995Total
                Current Liabilities
            
            
            6,482,033
            
            
            8,267,851**Stockholders'
                Equity**Common
                stock, $.001 par value, 70,000,000shares
                authorized,37,031,258
                and 36,809,036 issued and outstanding
            
            
            37,032
            
            
            36,810Additional
                paid in capital
            
            
            8,673,671
            
            
            8,601,534Other
                comprehensive income
            
            
            1,116,566
            
            
            545,164Statutory
                reserve
            
            
            372,144
            
            
            372,144Retained
                earnings
            
            
            15,678,954
            
            
            12,101,396Total
                Stockholders' Equity
            
            
            25,878,367
            
            
            21,657,048Total
                Liabilities and Stockholders' Equity
            
            $
            32,360,400
            
            $
            29,924,899





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


4





**UNIVERSAL
      TRAVEL GROUP**


**CONSOLIDATED
      STATEMENTS OF INCOME**


**FOR
      THE SIX MONTHS ENDED** **JUNE
      30** **,**




**2008**
            
            **2007**Gross
                revenues,
            
            $
            24,421,043
            
            $
            13,985,503Cost
                of services
            
            
            17,417,748
            
            
            9,111,071Gross
                Profit
            
            
            7,003,295
            
            
            4,874,432Selling,general
                and administrative expenses
            
            
            2,107,398
            
            
            1,409,943Stock
                based compensation
            
            
            155,802
            
            
            633,3602,263,200
            
            
            2,043,303**Income
                from operations**
            
            
            4,740,095
            
            
            2,831,129Other
                Income (Expense)Loss
                on asset disposal
            
            
            (1,104
            )
            
            -Other
                income
            
            
            8,378
            
            
            -Interest
                income
            
            
            11,940
            
            
            14,828Interest
                expense
            
            
            (65,004
            )
            
            (21,282
            )Total
                Other Income (Expense)
            
            
            (45,790
            )
            
            (6,454
            )**Income
                before income taxes**
            
            
            4,694,305
            
            
            2,824,675Provision
                for income taxes
            
            
            1,116,747
            
            
            519,153**Net
                income**
            
            $
            3,577,557
            
            $
            2,305,522Net
                income per common shareBasic
            
            $
            .097
            
            $
            .071Diluted
            
            $
            .096
            
            $
            .071Weighted
                average common shares outstandingBasic
            
            
            36,920,147
            
            
            32,692,142Diluted
            
            
            37,086,813
            
            
            32,692,142




5


**UNIVERSAL
      TRAVEL GROUP**


**CONSOLIDATED
      STATEMENTS OF INCOME**


**FOR
      THE THREE MONTHS ENDED** **JUNE
      30** **,**




**2008**
            
            **2007**Gross
                revenues,
            
            $
            14,344,739
            
            $
            7,024,363Cost
                of services
            
            
            10,184,990
            
            
            4,405,393Gross
                Profit
            
            
            4,159,749
            
            
            2,618,970Selling,general
                and administrative expenses
            
            
            1,251,876
            
            
            658,149Stock
                based compensation
            
            
            45,790
            
            
            -1,297,666
            
            
            658,149**Income
                from operations**
            
            
            2,862,083
            
            
            1,960,821Other
                Income (Expense)Loss
                on asset disposal
            
            
            -
            
            
            -Other
                income
            
            
            5,504
            
            
            -Interest
                income
            
            
            10,525
            
            
            4,728Interest
                expense
            
            
            (28,297
            )
            
            (20,302
            )Total
                Other Income (Expense)
            
            
            (12,268
            )
            
            (15,574
            )**Income
                before income taxes**
            
            
            2,849,815
            
            
            1,945.247Provision
                for income taxes
            
            
            736,122
            
            
            293,335**Net
                income**
            
            $
            2,113,693
            
            $
            1,651,912Net
                income per common shareBasic
            
            $
            .057
            
            $
            .051Diluted
            
            $
            .057
            
            $
            .051Weighted
                average common shares outstandingBasic
            
            
            36,920,147
            
            
            32,692,142Diluted
            
            
            37,086,813
            
            
            32,692,142





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


6




**UNIVERSAL
      TRAVEL GROUP**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE SIX MONTHS ENDED** **JUNE
      30** **,**




**2008**
            
            **2007****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                Income
            
            $
            3,577,557
            
            $
            2,305,522Adjustments
                to reconcile net income to net cashprovided
                by operating activities:Depreciation
                and amortization
            
            
            38,877
            
            
            37,715Loss
                on asset disposal
            
            
            1,105Stock
                based compensation
            
            
            155,802
            
            
            633,360(Increase)
                / decrease in assets:Accounts
                receivable
            
            
            (1,708,372
            )
            
            (1,489,590
            )Other
                receivable
            
            
            968,969
            
            
            (406,551
            )Advances
            
            
            (39,116
            )
            
            (2,229,923
            )Due
                from shareholder
            
            
            1,177,763
            
            
            49,863Prepaid
                expenses
            
            
            (54,172
            )
            
            10,674Trade
                deposits
            
            
            (2,122,588
            )
            
            192,593Deposits
            
            
            -
            
            
            5,633Increase
                / (decrease) in current liabilities:Accounts
                payable and accrued expenses
            
            
            (854,371
            )
            
            363,495Customer
                deposits
            
            
            210,032
            
            
            -Income
                tax payable
            
            
            16,216
            
            
            33,188Total
                Adjustments
            
            
            (2,209,855
            )
            
            (2,799,543
            )**Net
                cash provided by(used in) operating activities**
            
            
            1,367,702
            
            
            (494,021
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES**Purchase
                of property & equipment
            
            
            (17,063
            )
            
            (31,572
            )Proceeds
                from asset disposal
            
            
            663
            
            
            -Acquisition
                deposits
            
            
            1,453,050
            
            
            1,994,254Paid
                for acquisition - net of cash acquired
            
            
            -
            
            
            (2,982,200
            )**Net
                cash used by Investing activities**
            
            
            1,436,650
            
            
            (1,019,518
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES**(Repayments)Proceeds
                from bank loan - net
            
            
            (180,682
            )
            
            1,178,403Proceeds
                of equity financing
            
            
            599,994
            
            
            -Note
                payable - others
            
            
            (977,013
            )
            
            -**Net
                cash provided by financing activities**
            
            
            (557,701
            )
            
            1,178,403Effect
                of exchange rate changes on cash and cash equivalents
            
            
            571,402
            
            
            111,592Net
                change in cash and cash equivalents
            
            
            2,818,053
            
            
            (223,544
            )**Cash
                and cash equivalents, beginning balance**
            
            
            2,671,684
            
            $
            1,043,555**Cash
                and cash equivalents, ending balance**
            
            $
            5,489,737
            
            $
            820,011**SUPPLEMENTAL
                DISCLOSURES:**Cash
                paid during the year for:Interest
                payments
            
            $
            28,297
            
            $
            20,302Income
                Taxes
            
            $
            719,906
            
            $
            485,965Other
                non-cash transactionsPurchased
                Goodwill
            
            
            
            
            $
            (3,621,513
            )Fair
                value of assets purchased less cash acquired
            
            
            
            
            
            (360,687
            )Acquisition
                financed with stock issuance
            
            
            
            
            
            1,000,000Acquisition
                paid for with cash - net of acquired
            
            
            
            
            $
            (2,982,200
            )


7





**UNIVERSAL
      TRAVEL GROUP**


**CONSOLIDATED
      STATEMENT OF STOCKHOLDERS' EQUITY**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008**




Additional
            
            Other
            
            
            
            
            
            TotalCommon Stock
            
            Paid-In
            
            Comprehensive
            
            Retained
            
            Statutory
            
            Stockholders'Shares
            
            Amount
            
            Capital
            
            Income
            
            Earnings
            
            Reserve
            
            EquityBalance
                December 31, 2007
            
            
            36,809,036
            
            $
            36,810
            
            $
            8,601,534
            
            $
            545,
                164
            
            $
            12,101,396
            
            $
            372,144
            
            $
            21,657,048Stock
                based compensation
            
            
            
            
            
            
            
            
            45,790
            
            
            
            
            
            
            
            
            
            
            
            45,790Forfeited
                options
            
            
            
            
            
            
            
            
            (573,425
            )
            
            
            
            
            
            
            
            
            
            
            (573,425Foreign
                currency translation adjustments
            
            
            
            
            
            
            
            
            
            
            
            571,402
            
            
            
            
            
            
            
            
            571,402Equity
                Financing
            
            
            222,222
            
            
            222
            
            
            599,772
            
            
            
            
            
            
            
            
            
            
            
            599,994Income
                for the six months ended June 30, 2008
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,577,557
            
            
            
            
            
            3,577,557Balance
                June 30, 2008
            
            
            37,031,258
            
            $
            37,032
            
            $
            8,673,671
            
            $
            1,116,566
            
            $
            15,678,954
            
            $
            372,144
            
            $
            25,878,367





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


8


**UNIVERSAL
      TRAVEL GROUP**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30** **,
      2008**





**Note
      1 -** **ORGANIZATION**





Universal
      Travel Group was incorporated on January 28, 2004 under the laws of the State
      of
      Nevada. Full Power Enterprise Global Limited - BVI was incorporated under the
      laws of the British Virginia Islands. Shenzhen  Yuzhilu
      Aviation Service Co., Ltd was incorporated on March 9, 1998 under the laws
      of
      the Peoples Republic of China (PRC). Shenzhen Speedy Dragon Enterprises Limited
      was incorporated in August of 2002 under the laws of the Peoples Republic of
      China (PRC), Xian Golden Net Travel Serve Services was incorporated on July
      25,
      2001 under the laws of the Peoples Republic of China, Xian City, Shanghai Lanbao
      Travel Service Co., Ltd, was established in 2002 under the laws of Shanghai
      China. Foshan Overseas International Travel Service Co., Ltd. was incorporated
      in 1990 under the laws of the Peoples Republic of China. Full Power Enterprise
      Global Limited owns 100% of the Shenzhen Yuzhilu Aviation Service Co., Ltd.
      Collectively the seven corporations are referred to herein as the
      Company.





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





**Note
      2 -** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**





Basis
      of Presentation





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





Translation
      Adjustment


As
      of
      June 30, 2008 and December 31, 2007 the accounts of Universal Travel Group
      were
      maintained, and its financial statements were expressed, in Chinese Yuan
      Renminbi (CNY). Such financial statements were translated into U.S. Dollars
      (USD) in accordance with Statement of Financial Accounts Standards (SFAS) No.
      52, Foreign Currency Translation with the CNY as the functional currency.
      According to the Statement, all assets and liabilities were translated at the
      current exchange rate, stockholders equity are translated at the historical
      rates and income statement items are translated at the average exchange rate
      for
      the period. The resulting translation adjustments are reported under other
      comprehensive income in accordance with SFAS No. 130, Reporting Comprehensive
      Income as a component of shareholders equity. Transaction gains and losses
      are
      reflected in the income statement.





Use
      of
      Estimates





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





Principles
      of Consolidation





The
      consolidated financial statements include the accounts of Universal Travel
      Group
      and its wholly owned subsidiaries Shenzhen Yuzhilu Aviation Service Co., Ltd,
      Shenzhen Speedy Dragon Enterprises Limited, Shanghai Lanbao Travel Service
      Co.,
      Ltd, Xian Golden Net Travel Serve Services, Ltd., Foshan Overseas International
      Travel Service Co. Ltd. and Full Power Enterprise Global Limited collectively
      referred to herein as the Company. All material inter-company accounts,
      transactions and profits have been eliminated in
      consolidation.


9


**UNIVERSAL
      TRAVEL GROUP**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30** **,
      2008**




**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 $ 77,751 and $73,115 as of June 30, 2008 and December 31, 2007,
      respectively.





Property,
      Plant & Equipment




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


10


**UNIVERSAL
      TRAVEL GROUP**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30** **,
      2008**





**Note
      2 -** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**








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




As
      of
      June 30, 2008 and December 31, 2007 Property, Plant & Equipment consist of
      the following:





2008
            
            2007Furniture
                & fixture
            
            $
            18,247
            
            
            18,247Transportation
                equip
            
            
            183,024
            
            
            301,308Office
                equipment
            
            
            194,067
            
            
            177,004Leasehold
                improve
            
            
            31,374
            
            
            31,374426,712
            
            
            527,933Accumulated
                depreciation
            
            
            (306,037
            )
            
            (400,540
            )$
            120,675
            
            
            127,393





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,
      2008 and December 31, 2007 there were no significant impairments of its
      long-lived assets.





Fair
      Value of Financial Instruments





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





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.


11


**UNIVERSAL
      TRAVEL GROUP**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2008**








**Note
      2 -** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




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 at **** each
      period end based on enacted tax laws and statutory tax rates applicable to
      the
      periods in which the differences are expected to affect taxable income.
      Valuation allowances are established, when necessary, to reduce deferred tax
      assets to the amount expected to be realized.




Statement
      of Cash Flows


In
      accordance with SFAS No. 95, Statement of Cash Flows, cash flows from the
      Company’s operations is based upon the local currencies. As a result, amounts
      related to assets and liabilities reported on the statement of cash flows will
      not necessarily agree with changes in the corresponding balances on the balance
      sheet.




Intangibles


Intangible
      assets are amortized using the straight-line method over their estimated period
      of benefit. Evaluation of the recoverability of intangible assets is made
      annually to take into account events or circumstances that warrant revised
      estimates of useful lives or that indicate that impairment exists. All of our
      intangible assets are subject to amortization. No impairments of intangible
      assets have been identified during any of the periods presented.





Concentration
      of Credit Risk


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





Recent
      accounting pronouncements





In
      February 2006, FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial
      Instruments. SFAS No. 155 amends SFAS No 133, Accounting for Derivative
      Instruments and Hedging Activities, and SFAF No. 140, Accounting for Transfers
      and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS
      No.
      155, permits fair value re-measurement for any hybrid financial instrument
      that
      contains an embedded derivative that otherwise would require bifurcation,
      clarifies which interest-only strips and principal-only strips are not subject
      to the requirements of SFAS No. 133, establishes a requirement to evaluate
      interest in securitized financial assets to identify interests that are
      freestanding derivatives or that are hybrid financial instruments that contain
      an embedded derivative requiring bifurcation, clarifies that concentrations
      of
      credit risk in the form of subordination are not embedded derivatives, and
      amends SFAS No. 140 to eliminate the prohibition on the qualifying
      special-purpose entity from holding a derivative financial instrument that
      pertains to a beneficial interest other than another derivative financial
      instrument. This statement is effective for all financial instruments acquired
      or issued after the beginning of the Company’s first fiscal year that begins
      after September 15, 2006.





In
      March
      2006, the FASB issued FASB Statement No. 156, Accounting for Servicing of
      Financial Assets - an amendment to FASB Statement No. 140. Statement 156
      requires that an entity recognize a servicing asset or


12


**UNIVERSAL
      TRAVEL GROUP**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2008**





**Note
      2 -** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





servicing
      liability each time it undertakes an obligation to service a financial asset
      by
      entering into a service contract under certain situations. The new standard
      is
      effective for fiscal years beginning after September 15, 2006. The Company
      does not expect its adoption of this new standard to have a material impact
      on
      its financial position results of operations or cash flows.





In
      July
      2006, the FASB issued Interpretation No. 48 (FIN 48). “ *Accounting
      for uncertainty in Income Taxe* s *-
      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 derecognition, 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. We did not
      have
      a material impact on our consolidated financial position, results of operations
      or cash flows.





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. The management is currently
      evaluating the effect of this pronouncement on financial
      statements.





In
      September 2006, FASB issued SFAS 158 ‘Employers’ Accounting for Defined Benefit
      Pension and Other Postretirement Plans - an amendment of FASB Statements No.
      87,
      88, 106, and 132(R)’. This Statement improves financial reporting by requiring
      an employer to recognize the over funded or under funded status of a defined
      benefit postretirement plan (other than a multiemployer plan) as an asset or
      liability in its statement of financial position and to recognize changes in
      that funded status in the year in which the changes occur through comprehensive
      income of a business entity or changes in unrestricted net assets of a
      not-for-profit organization. This Statement also improves financial reporting
      by
      requiring an employer to measure the funded status of a plan as of the date
      of
      its year-end statement of financial position, with limited exceptions. An
      employer with publicly traded equity securities is required to initially
      recognize the funded status of a defined benefit postretirement plan and to
      provide the required disclosures as of the end of the fiscal year ending after
      December 15, 2006. An employer without publicly traded equity securities is
      required to recognize the funded status of a defined benefit postretirement
      plan
      and to provide the required disclosures as of the end of the fiscal year ending
      after June 15, 2007. However, an employer without publicly traded equity
      securities is required to disclose the following information in the notes to
      financial statements for a fiscal year ending after December 15, 2006, but
      before June 16, 2007, unless it has applied the recognition provisions of this
      Statement in preparing those financial statements.





a.
                A
                    brief description of the provisions of this
                    Statement


b.
            The
                date that adoption is required


c.
            The
                date the employer plans to adopt the recognition provisions of this
                Statement, if earlier.





The
      requirement to measure plan assets and benefit obligations as of the date of
      the
      employer’s fiscal year-end statement of financial position is effective for
      fiscal years ending after December 15, 2008. The management is currently
      evaluating the effect of this pronouncement on financial
      statements.





The
      Company believes that the adoption of these standards will have no material
      impact on its financial statements.


13


**UNIVERSAL
      TRAVEL GROUP**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2008**




**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. The management is currently evaluating the effect
      of
      this pronouncement on 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.








Merger
      and Corporate Restructure





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





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





The
      accompanying financial statements present the historical financial condition,
      results of operations and cash flows of the operating company prior to the
      merger.





**Note
      3 -** **TRADE
      DEPOSITS AND ADVANCES**




Trade
      deposits represents amount held by Airlines and deposits. As of June 30, 2008
      and December 31, 2007 the Company had paid $4,773,333 and $2,650,744 as trade
      deposits respectively.





During
      the year,  the
      Company 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, 2008 and December 31, 2007 the Company
      has advanced this company $655,977 and $616,861 respectively.


14


**UNIVERSAL
      TRAVEL GROUP**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2008**





**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
      varying statutory rate of 25%.





The
      following is a reconciliation of income tax expense as of June 30, 2008 and
      2007.





**2008**
            
            **2007**Current
            
            $
            1,116,747
            
            $
            519,153Deferred
            
            
            -
            
            
            -Total
            
            $
            1,116,747
            
            $
            519,153





**Note
      6 -** **COMMITTMENTS**




The
      Company leases various office facilities under month-to-month arrangements.
      Rental expense for leases consisted of $ 92,297 and $48,559 for the six months
      ended June 30, 2008 and 2007 respectively. The Company has future minimum lease
      obligations as of June 30, 2008 as follows:





2009
            
            $
            160,5972010
            
            $
            1,719Total
            
            $
            162,316





**Note
      7 – NOTES PAYABLE**





The
      following table summaries notes payable as of June 30, 2008:





Lender
            
            Due
                Date
            
            Interest
                Rate
            
            OutstandingChina
                Construction Bank
            
            
            July
                29, 2008
            
            
            8.55% per Annum
            
            $
            1,107,872





On
      September 20, 2007, the Company entered into a share exchange agreement with
      Foshan Overseas International Travel Service Co.(“FOI”), Led,, and the
      shareholders of FOI. The shareholders of FOI received a promissory note from
      the
      Company totaling $3,153,500. The promissory note bears no interest, with a
      maturity date of one year. Balance at June 30, 2008 and December 31, 2007 was
      $599,737 and $ 1,576,750 respectively.





**Note
      8 -** **COMMON
      STOCK**





In
      January 2007 the company adopted the Universal Travel Group 2007 Equity
      Incentive Plan. Under the terms of this Plan the Company issued 3,770,000 shares
      of the Company’s stock, valued at $1,583,400, for services rendered during the
      period from October 2, 2006 through February 28, 2007. As of June 30, 2007
      the
      financial Statements include a charge $633,360 with the remaining $950,040
      being
      expensed as of December 31, 2006.


15


**UNIVERSAL
      TRAVEL GROUP**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2008**








Pursuant
      to a share exchange agreement, the Company issued 714,285 shares of newly issued
      shares of Common Stock to the former shareholders of Shenzhen Speedy Dragon
      Enterprises Limited. The shares were valued at $1,000,000, which was the fair
      value of the shares at the date of the exchange agreement. This amount is
      included in the cost of net assets and goodwill purchased.





Pursuant
      to a share exchange agreement, the Company issued 151,765 shares of newly issued
      shares of Common Stock to the former shareholders of Xian Golden Net Travel
      Serve Services, Inc. The shares were valued at $258,000, which was the fair
      value of the shares at the date the of the exchange agreement. This amount
      is
      included in the cost of net assets and goodwill purchased.





Pursuant
      to a share exchange agreement, the Company issued 600,000 shares of newly issued
      shares of Common Stock to the former shareholders of Shanghai Lanbao Travel
      Services Co., Ltd. The shares were valued at $1,092,000, which was the fair
      value of the shares at the date of the exchange agreement. This amount is
      included in the cost of net assets and goodwill purchased.





Pursuant
      to a share exchange agreement, the Company issued 1,122,986 shares of newly
      issued shares of Common Stock and a promissory note to the former shareholders
      of Foshan Overseas International Travel Service Co., Ltd.. The shares were
      valued at $ 3,346,500, which was the fair value of the shares at the date of
      exchange agreement. This amount is included in the cost of net assets and
      goodwill purchased.





**Note
      9 -** **STOCK
      WARRANTS, OPTIONS, AND COMPENSATION**





On
      February 4, 2008, under the terms of an equity financing commitment, the company
      issued 222,222 shares of common stock at the closing price of $2.70. The
      proceeds of $599,994 were paid directly to the shareholders of Foshan Overseas
      International Travel Service Co, for amount due them under Note obligation
      of
      the company.





On
      May 7,
      2007, the Company issued, to a newly appointed Board member, an option grant
      to
      purchase 100,000 shares of common stock at the closing price at $ 1.95. The
      exercisable period is two years from issuance. On June 23, 2008, upon
      resignation, Board member has forfeited all options.





On
      September 6, 2007, the Company issued, to a newly appointed Board member, an
      option grant to purchase 100,000 shares of common stock at the closing price
      at
      $ 2.85. The options are exercisable until June 1, 2017. On June 23, 2008, upon
      resignation, Board member has forfeited 66,667 options.





On
      December 7, 2007, the Company issued, to another newly appointed Board member,
      an option grant to purchase 100,000 shares of common stock at the closing price
      of $ 3.75. The options are exercisable until November 1, 2017.




Stock
      options— The option holder has no voting or dividend rights. The company records
      the expense of the stock options over the related vesting period. The options
      were valued using the Black-Scholes option-pricing model at the model at the
      date of grant stock option pricing. On May 28, 2008, upon resignation, Board
      member has forfeited 66,667 options.





On
      June
      24, 2008, the Company issued, to another newly appointed Board member, an option
      grant to purchase 100,000 shares of common stock at the closing price of $
      1.52.
      The options are exercisable until July 1, 2018. Stock options— The option holder
      has no voting or dividend rights. The company records the expense of the stock
      options over the related vesting period. The options were valued using the
      Black-Scholes option-pricing model at the model at the date of grant stock
      option pricing.


16


**UNIVERSAL
      TRAVEL GROUP**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2008**




Six months endedJune 30, 2008Expected
                volatility
            
            
            146%Expected
                term (in years)Richard
                P. Randall
            
            
            9James
                Treacy
            
            
            9Yizhao
                Zhang
            
            
            10Expected
                dividends
            
            
            -Risk-free
                rate of return (weighted average)
            
            
            3%Weighted
                average grant-date fair value
            
            $
            1.52-3.75





Expected
      volatility is based on the historical volatility of the Company’s stock price.
      The expected term represents the estimated average period of time that the
      options remain outstanding. No dividend payouts were assumed, as the Company
      has
      no plans to declare dividends during the expected term of the stock options.
      The
      risk-free rate of return reflects the weighted average interest rate offered
      for
      zero coupon treasury bonds over the expected term of the options. Based upon
      this calculation and pursuant to, as EITF 96-18, the Company recorded a service
      period expense of $155,082 for the six months ending June 30, 2008.





AggregateExercise
            
            Remaining
            
            IntrinsicTotal
            
            Price
            
            Life
            
            ValueOutstanding,
                December 31, 2007
            
            
            300,000
            
            
            -
            
            
            -
            
            
            -Granted
                in 2008
            
            
            100,000
            
            
            -
            
            
            -
            
            
            -Forfeited
                in 2008
            
            
            (233,334
            )Exercised
                in 2008
            
            
            -
            
            
            -
            
            
            -
            
            
            -Outstanding, June
                30, 2008
            
            
            166,666





**Note
      10 -** **OTHER
      COMPREHENSIVE INCOME**





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





Foreign Currency
              Translation
              Adjustment
            
            Accumulated
              Other
              Comprehensive
              IncomeBalance
                December 31, 2007
            
            $
            545,164
            
            $
            545,164Changes
                for 6 months ended June 30, 2008
            
            
            571,402
            
            
            571,402Balance
                at June 30, 2008
            
            $
            1,116,566
            
            $
            1,116,566


17


**UNIVERSAL
      TRAVEL GROUP**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2008**





**Note
      11 -** **CURRENT
      VULNERABILITY DUE TO CERTAIN RISK FACTORS**


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





**Note
      12 -** **MAJOR
      CUSTOMERS AND CREDIT RISK**


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


18


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





**Forward-Looking
      Statements: No Assurances Intended**




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





**Business
      Overview**





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





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





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





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





**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.


19


Some
      of
      these factors include:





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





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





According
      to the statistics from the website of National Bureau of Statistics of China,
      in
      February 2008, the People’s Republic of China’s gross domestic product (or
“GDP”) grew from US$1.7 trillion in 2003 to US$3.4 trillion in 2007,
      representing a compound annual growth rate of 16%. GDP per capita in the same
      period rose from US$1,273 to US$2,559, representing a 15% compound annual growth
      rate.





According
      to the statistics from the website of National Bureau of Statistics of China
      in
      February 2008, domestic tourism spending grew from US$41.6 billion in 2003
      to
      US$106.5 billion in 2007, representing a compound annual growth of 23%.





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





·
            domestic
                passenger transportation volume grew 15.7% in 2007 compared to 2006;


·
            domestic
                cargo transportation volume grew 9.4% in 2007 compared to
                2006;


·
            domestic
                passenger transportation volume grew 5.8% for the first half of 2008
                compared to the same period of 2007;


·
            domestic
                cargo transportation volume grew 6.6% for the first half of 2008
                compare
                to the same period of 2007.





The
      slower growth of the aviation industry for the first half of 2008 reflects
      the
      seasonality that the first half of the year, which is slower. This seasonality
      factor is further compounded by the increase in oil prices and the snowstorms
      during February of this year.





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.


20


***(iv)***  ***Disruptions
      in the Travel Industry*** .





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





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





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


·
            the
                Olympics in August 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 the Olympics, which affect our cargo agency business;
                and


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




**RESULTS
      OF OPERATIONS**





*THREE
      MONTHS ENDED JUNE 30, 2008 AND 2007*





The
      following table presents certain consolidated statement of operations
      information derived from the consolidated statements of income for three months
      ended June 30, 2008 and same period 2007.





**Three months**
              **ended June 30, 2008******
            
            **Three months**
              **ended June 30, 2007******
            
            **Increase/**
              **(Decrease)**
            
            **Percentage**Revenue
            
            $
            14,344,739
            
            $
            7,024,363
            
            $
            7,320,376
            
            
            104.2
            %Cost
                of services
            
            
            (10,184,990
            )
            
            (4,405,393
            )
            
            (5,779,597
            )
            
            131.2
            %Gross
                Profit
            
            
            4,159,749
            
            
            2,618,970
            
            
            1,540,779
            
            
            58.8
            %Selling,
                general and administrative expenses
            
            
            (1,251,876
            )
            
            (658,149
            )
            
            (593,727
            )
            
            90.2
            %Stock-based
                compensation
            
            
            (45,790
            )
            
            0
            
            
            (45,790
            )
            
            N/AIncome
                from operations
            
            
            2,862,083
            
            
            1,960,821
            
            
            901,262
            
            
            46.0
            %Other
                income
            
            
            16,029
            
            
            4,728
            
            
            11,301
            
            
            239.0
            %Interest
                expenses
            
            
            (28,297
            )
            
            (20,302
            )
            
            (7,995
            )
            
            39.4
            %Provision
                for income taxes
            
            
            (736,122
            )
            
            (293,335
            )
            
            (442,787
            )
            
            150.9
            %Net
                income
            
            
            2,113,693
            
            
            1,651,912
            
            
            461,781
            
            
            28.0
            %


21


Revenue
      Segment Analysis





For
      the
      three months ended June 30, 2008:





**Air-ticketing**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Cargo Agency**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Hotel**
            
            **Percentage**
              **Of**
              **Revenue**
              **(%)**
            
            **Travel**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Total**Sales
            
            $
            1,936,520
            
            
            13.5%
            
            $
            2,541,764
            
            
            17.7%
            
            $
            1,411,818
            
            
            9.8%
            
            $
            8,454,637
            
            
            58.9%
            
            $
            14,344,739Cost
                of Services
            
            $
            99,612
            
            
            1.0%
            
            $
            2,287,955
            
            
            22.5%
            
            $
            504,988
            
            
            5.0%
            
            $
            7,292,435
            
            
            71.6%
            
            $
            10,184,990Gross
                Profit
            
            $
            1,836,907
            
            
            44.2%
            
            $
            253,810
            
            
            6.1%
            
            $
            906,830
            
            
            21.8%
            
            $
            1,162,202
            
            
            27.9%
            
            $
            4,159,749





For
      the
      three months ended June 30, 2007





**Air-ticketing**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Cargo Agency**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Hotel**
            
            **Percentage**
              **Of**
              **Revenue**
              **(%)**
            
            **Travel**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Total**Sales
            
            $
            1,835,765
            
            
            26.1%
            
            $
            5,188,598
            
            
            73.9%
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            7,024,363Cost
                of Services
            
            $
            95,460
            
            
            2.2%
            
            $
            4,309,933
            
            
            97.8%
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            4,405,393Gross
                Profit
            
            $
            1,740,305
            
            
            66.4%
            
            $
            878,665
            
            
            33.6%
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            2,618,970





Revenue





Revenue
      for the three months ended June 30, 2008 were $14,344,739  compared
      to $7,024,363 for the same period 2007, an increase of approximately  104.2%.
      This increase is due to the company’s strategic expansion into hotel reservation
      and packaged tours business via acquisitions of Xi’an Golden Net Travel Service
      Company Limited, Shanghai Lanbao Travel Service Company Limited and Foshan
      Overseas International Travel Service Co., Ltd.





Revenue
      from air-ticketing was $1,936,520
      for the three months ended June 30, 2008 compared to $1,835,765 for the same
      period last year, an increase of approximately 5.5%. This increase is due to
      the
      seasonality of the industry. We believe our more diversified business model
      had
      help us weather the effects of the earthquakes in May 2008 on the travel
      industry as a whole.





Revenue
      generated by cargo agency for the three months ended June 30, 2008 was
      $ $2,541,764
      compared to $5,188,598 for the same period 2007, a decrease of approximately
      51%. This decrease is due to the increase in global oil prices as well as the
      increase security for imports and exports due to the Beijing Olympics. We
      anticipate that our cargo agency revenue will increase the latter half of
      2008.





Despite
      of no comparable segments for the same period last year, revenue generated
      from
      our hotel reservation and packaged tours services comprise a fairly substantial
      portion of our total revenue, 9.8% and 58.9% of total revenue
      respectively.





Gross
      Profit





Gross
      Profit for three months ended June 30, 2008 was $4,159,749 compared to
      $2,618,970 for three months ended June 30, 2007, an increase of approximately
      58.8%. The increase in gross profit reflects the company’s strategic expansion
      into profitable hotel reservation and packaged tours business via acquisitions.
      The increase also reflects the results of an efficient management and control
      of
      our operations by an experienced management team.





Gross
      profit margin for three months ended June 30, 2008 was 29.0% compared to 37.3%
      for three months ended June 30, 2008. This decrease is primarily due to the
      acquisition of a lower gross margin businesses in 2007. Despite the short term
      decrease in gross profit margin, we believe that this strategic move will bring
      a higher long term value to guarantee stable and long term growth of our various
      business segments as a whole. We believe that our gross profit margins will
      improve as our four business segments begin to integrate.


22


Selling,
      General and Administrative Expenses





Selling,
      general and administrative expenses for three months ended June 30, 2008 totaled
      $1,251,876 compared to $658,149 for three months ended June 30, 2007, an
      increase of approximately 90.2%.




Selling,
      general and administrative expenses were approximately 8.7% of revenue for
      three
      months ended June 30, 2008 as compared to 9.4% for three months ended June
      30,
      2007.





The
      increase in selling, general and administrative expenses reflects the increase
      in our expenses as a result of acquiring of Xi’an Golden Net Travel Service
      Company Limited, Shanghai Lanbao Travel Service Company Limited and Foshan
      Overseas International Travel Service Co., Ltd.





The
      decrease in selling, general and administrative expenses as a percentage of
      revenue reflect the fact that certain expenses did not grow proportionately
      with
      the increase in our revenue and there are economies of scale. The decrease
      of
      selling, general and administrative expenses as a percentage of the revenue
      is
      also a result of management performing effective control over its expenses
      despite the growth in its revenue.





Stock
      based compensation ** reflects
      standard amount of options issued to U.S independent directors.





Interest
      expense for three months ended June 30, 2008 totaled $28,297 compared to $20,302
      for three months ended June 30, 2007. The increase in interest expense reflects
      the expenses we incurred through financing via short term bank loans to support
      our expansion while our market valuation was still low.





Net
      Income





Net
      income was $2,113,692 or 14.7% of revenue for three months ended June 30, 2008,
      compared to $1,651,912 or 23.5% of revenue for three months ended June 30,
      2007.





The
      increase in net income reflects the continued growth in our business and the
      income derived from the acquisitions of Xi’an Golden Net Travel Service Company
      Limited, Shanghai Lanbao Travel Service Company Limited and Foshan Overseas
      International Travel Service Co., Ltd.





The
      decrease in net income as a percentage of revenue in the result of the
      acquisitions of lower net income margin businesses. We believe that despite
      the
      short term decrease in net income margin, the acquisitions will bring a more
      stable and long term growth to our business as a whole. By integrating the
      different business segments and leveraging off the synergies between such
      segments, we believe that we will be able to improve our net income
      margin.





*SIX
      MONTHS ENDED JUNE 30, 2008 AND 2007*





The
      following table presents certain consolidated statement of operations
      information derived from the consolidated statements of income for six months
      ended June 30, 2008 and same period 2007.


23





**Six Months ended**
              **June 30, 2008******
            
            **Six Months ended**
              **June 30, 2007******
            
            **Increase/**
              **(Decrease)******
            
            **Percentage**Revenue
            
            $
            24,421,043
            
            $
            13,985,503
            
            $
            10,435,540
            
            
            74.6
            %Cost
                of services
            
            
            (7,417,748
            )
            
            (9,111,071
            )
            
            (8,306,677
            )
            
            91.2
            %Gross
                Profit
            
            
            7,003,295
            
            
            4,874,432
            
            
            2,128,863
            
            
            43.7
            %Selling,
                General and Administrative expenses
            
            
            (2,107,398
            )
            
            (1,409,943
            )
            
            (697,455
            )
            
            49.5
            %Stock-based
                compensation
            
            
            (155,802
            )
            
            (633,360
            )
            
            477,558
            
            
            -75.4
            %Income
                from operations
            
            
            4,740,095
            
            
            2,831,129
            
            
            1,908,966
            
            
            67.4
            %Other
                income
            
            
            19,213
            
            
            14,828
            
            
            4,385
            
            
            29.6
            %Interest
                expenses
            
            
            (65,004
            )
            
            (21,282
            )
            
            (43,722
            )
            
            205.4
            %Provision
                for income taxes
            
            
            (1,116,747
            )
            
            (519,153
            )
            
            (597,594
            )
            
            115.1
            %Net
                income
            
            
            3,577,557
            
            
            2,305,522
            
            
            1,272,035
            
            
            55.2
            %





Revenue
      Segment Analysis





For
      the
      six months ended June 30, 2008:





**Air-ticketing**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Cargo Agency**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Hotel**
            
            **Percentage**
              **Of**
              **Revenue**
              **(%)**
            
            **Travel**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Total**Sales
            
            $
            3,365,400
            
            
            13.8%
            
            $
            5,665,690
            
            
            23.2%
            
            $
            2,024,296
            
            
            8.3%
            
            $
            13,365,657
            
            
            54.7%
            
            $
            24,421,043Cost
                of Services
            
            $
            173,113
            
            
            1.0%
            
            $
            4,896,575
            
            
            28.1%
            
            $
            699,660
            
            
            4.0%
            
            $
            11,648,400
            
            
            66.9%
            
            $
            17,417,748Gross
                Profit
            
            $
            3,192,286
            
            
            45.6%
            
            $
            769,116
            
            
            11.0%
            
            $
            1,324,636
            
            
            18.9%
            
            $
            1,717,257
            
            
            24.5%
            
            $
            7,003,295




For
      the
      six months ended June 30, 2007:





**Air-ticketing**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Cargo Agency**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Hotel**
            
            **Percentage**
              **Of**
              **Revenue**
              **(%)**
            
            **Travel**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Total**Sales
            
            $
            3,505,818
            
            
            25.1%
            
            $
            10,479,685
            
            
            74.9%
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            13,985,503Cost
                of Services
            
            $
            181,806
            
            
            2.0%
            
            $
            8,929,265
            
            
            97.9%
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            9,111,071Gross
                Profit
            
            $
            3,324,012
            
            
            68.2%
            
            $
            1,550,419
            
            
            37.5%
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            4,874,432


24


Revenue





Revenue
      for the six months ended June 30, 2008 was $24,421,043  compared
      to $13,985,503 for six months ended June 30, 2007, an increase of
      approximately  74%.
      This
      increase is attributable to our organic growth as well as our expansion into
      the
      air cargo agency, packaged tours services and hotel booking services business
      through the acquisitions of Xi’an Golden Net Travel Service Company Limited,
      Shanghai Lanbao Travel Service Company Limited and Foshan Overseas International
      Travel Service Co., Ltd.





Gross
      profit for the six months ended June 30, 2008 was $7,003,295 compared to
      $4,874,432 for six months ended June 30, 2007, an increase of approximately
      43%.
      The increase in gross profit reflects our aggressive growth strategy as
      exemplified by continued growth in our traditional customer base and the
      acquisitions of Xi’an Golden Net Travel Service Company Limited, Shanghai Lanbao
      Travel Service Company Limited and Foshan Overseas International Travel Service
      Co., Ltd.





Gross
      profit margin for six months ended June 30, 2008 was 28.7% compared to 34.9%
      for
      six months ended June 30, 2007. This decrease is primarily due to the
      acquisition of a lower gross margin businesses in 2007. Despite the short term
      decrease in gross profit margin, we believe that this strategic move will bring
      a higher long term value to guarantee stable and long term growth of our various
      business segments as a whole. We believe that our gross profit margins will
      improve as our four business segments begin to integrate and leverage off the
      synergism of these various segments.





Selling,
      general and administrative expenses for six months ended June 30, 2008 totaled
      $2,107,398 compared to $1,409,943 for six months ended June 30, 2007. Selling,
      general and administrative expenses was approximately 8.6% of revenue for six
      months ended June 30, 2008 as compared to 10.1% for six months ended June 30,
      2007. The increase in selling, general and administrative expenses is a result
      acquiring Xi’an Golden Net Travel Service Company Limited, Shanghai Lanbao
      Travel Service Company Limited and Foshan Overseas International Travel Service
      Co., Ltd.





The
      decrease in selling, general and administrative expenses as a percentage of
      revenue reflects the fact that certain expenses did not grow proportionately
      with the increase in our revenue. The decrease of selling, general and
      administrative expenses as a percentage of revenue is also indicative of
      effective controls over expenses.





Stock-based
      compensation ** reflects
      standard amount of options issued to U.S independent directors.





Interest
      expense for six months ended June 30, 2008 totaled $65,004 compared to $21,282
      for six months ended June 30, 2007, an increase of approximately 205%. The
      increase in interest expense is a result of the expenses incurred from short
      term bank loans to support our expansion while our market valuation was still
      low.





Net
      Income





Net
      income was $3,577,557 or 14.6% of revenue for the six months ended June 30,
      2008, compared to $2,305,522 or 16.5% of revenue for the six months ended June
      30, 2007. The increase in net income reflects the continued growth in our
      business and the additional income derived through Xi’an Golden Net Travel
      Service Company Limited, Shanghai Lanbao Travel Service Company Limited and
      Foshan Overseas International Travel Service Co., Ltd.





The
      decrease in net income as a percentage of revenues reflects the acquisitions
      of
      lower net income margin businesses. However, we believe that despite the short
      term decrease in net income margin, these acquisitions will bring a more stable
      and long term growth to our business as a whole. We anticipate improving our
      net
      income margins by integrating our four business segments and leveraging off
      the
      synergies created.





We
      believe a more meaningful comparison should be made for the first quarter ended
      March 31, 2008 to the second quarter ended June 30, 2008 because it will reveal
      the progress from quarter to quarter of all our business segments including
      our
      two new business segments, namely the hotel reservations and travel packaged
      services businesses.


25


FIRST
      QUARTER ENDED MARCH 31, 2007 AND THE SECOND QUARTER ENDED JUNE 30,
      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, 2008 and March 31, 2008.


**Three Months**
              **ended June 30, 2008**
            
            **Three Months**
              **ended March 31,**
              **2008**
            
            **Increase /**
              **(Decrease)**
            
            **Percentage**Revenue
            
            
            14,344,739
            
            
            10,076,304
            
            
            4,268,435
            
            
            42.4
            %Cost
                of services
            
            
            -10,184,990
            
            
            -7,232,758
            
            
            -2,952,232
            
            
            40.8
            %Gross
                Profit
            
            
            4,159,749
            
            
            2,843,546
            
            
            1,316,203
            
            
            46.3
            %Selling,
                General and Administrative expenses
            
            
            -1,251,876
            
            
            -855,522
            
            
            -396,354
            
            
            46.3
            %Stock-based
                compensation
            
            
            -45,790
            
            
            -110,012
            
            
            64,222
            
            
            -58.4
            %Income
                from operations
            
            
            2,862,083
            
            
            1,878,012
            
            
            984,071
            
            
            52.4
            %Other
                income
            
            
            16,029
            
            
            3,184
            
            
            12,845
            
            
            403.4
            %Interest
                expenses
            
            
            -28,297
            
            
            -36,707
            
            
            8,410
            
            
            -22.9
            %Provision
                for income taxes
            
            
            -736,122
            
            
            -380,625
            
            
            -355,497
            
            
            93.4
            %Net
                income
            
            
            2,113,693
            
            
            1,463,864
            
            
            649,829
            
            
            44.4
            %





Revenue
      Segment Analysis





For
      the
      first quarter ended March 31, 2008





**Air-ticketing**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Cargo Agency**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Hotel**
            
            **Percentage**
              **Of**
              **Revenue**
              **(%)**
            
            **Travel**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Total**Sales
            
            $
            1,428,880
            
            
            14.2%
            
            $
            3,123,926
            
            
            31.0%
            
            $
            612,478
            
            
            6.1%
            
            $
            4,911,020
            
            
            48.7%
            
            $
            10,076,304Cost
                of Services
            
            $
            73,501
            
            
            1.0%
            
            $
            2,608,620
            
            
            36.1%
            
            $
            194,672
            
            
            2.7%
            
            $
            4,355,965
            
            
            60.2%
            
            $
            7,232,758Gross
                Profit
            
            $
            1,355,379
            
            
            47.7%
            
            $
            515,306
            
            
            18.1%
            
            $
            417,806
            
            
            14.7%
            
            $
            555,055
            
            
            19.5%
            
            $
            2,843,546





For
      the
      second quarter ended June 30, 2008





**Air-ticketing**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Cargo Agency**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Hotel**
            
            **Percentage**
              **Of**
              **Revenue**
              **(%)**
            
            **Travel**
            
            **Percentage**
              **of**
              **Revenue**
              **(%)**
            
            **Total**Sales
            
            $
            1,936,520
            
            
            13.5%
            
            $
            2,541,764
            
            
            17.7%
            
            $
            1,411,818
            
            
            9.8%
            
            $
            8,454,637
            
            
            58.9%
            
            $
            14,344,739Cost
                of Services
            
            $
            99,612
            
            
            1.0%
            
            $
            2,287,955
            
            
            22.5%
            
            $
            504,988
            
            
            5.0%
            
            $
            7,292,435
            
            
            71.6%
            
            $
            10,184,990Gross
                Profit
            
            $
            1,836,907
            
            
            44.2%
            
            $
            253,810
            
            
            6.1%
            
            $
            906,830
            
            
            21.8%
            
            $
            1,162,202
            
            
            27.9%
            
            $
            4,159,749


26


Revenue





Revenue
      for the three months ended June 30, 2008 was $14,344,739  compared
      to $10,076,304 for the three months ended March 31, 2008, an increase of
      approximately  42.4%.
      This increase is attributable primarily to the growth in the packaged tours
      segment of roughly 72%.





We
      believe that the package tour business would bring more stable growth to our
      business and has a better business development potential alongside our
      air-ticketing and hotel reservation business segments . By contrast, because
      of
      the increase in global oil prices and the increased security over imports and
      exports as a result of the Beijing Olympics, our cargo agency business’ s growth
      has been somewhat stifled. We believe that this segment will improve with
      declining oil prices and the passing of the Olympics in the second half of
      2008.





Gross
      Profit





Gross
      profit for the three months ended June 30, 2008 was $4,159,749 compared to
      $2,843,546 for the three months ended March 31, 2008, an increase of
      approximately 46.3%. The increase in gross profit is a result of our aggressive
      growth strategy as to expand our various business segments organically.





Gross
      profit margin for the three months ended June 30, 2008 was 29.0% compared to
      28.2% for the three months ended March 31, 2008. We managed to successfully
      maintain our gross profit margin despite the earthquakes in the Sichuan province
      which adversely affected the travel industry there. We attribute this success
      from the synergies and diversity of our various business segments.





Selling,
      General and Administrative Expenses





Selling,
      general and administrative expenses for the three months ended June 30, 2008,
      totaled $1,251,876 compared to $855,522 for the three months ended March 31,
      2008, an increase of $396,354 or approximately 46.3%.





Selling,
      general and administrative expenses were approximately 8.7% of revenue in the
      three months ended June 30, 2008 as compared to 8.5% for the three months ended
      March 31, 2008. The increase in selling, general and administrative expenses
      is *in
      tandem* with the
      growth of our business and the slight increase in selling, general and
      administrative expenses as a percentage of revenue reflects effective control
      over expenses in spite of a fast growing business.





Stock
      based compensation ** reflects
      standard amount of options issued to U.S independent directors.





Interest
      expense for the three months ended June 30, 2008 totaled $28,297 compared to
      $36,707 for the three months ended March 31, 2008. The decrease in interest
      expense is a result of us paying down the principal of our bank loans gradually.





Net
      Income





Net
      income was $2,113,693 or 14.7% of revenue for the three months ended June 30,
      2008, compared to $1,463,864 or 14.5% of revenues for the three months ended
      March 31, 2008. The increase in net income reflects the continued growth in
      our
      business and the increase in net income as a percentage of revenue is a result
      of effective management of cost of services as well as our successful strategic
      focus on online integration, which provides synergies among our diversified
      business segments.


27


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 $5,489,737
      at June 30, 2008. Current assets and current liabilities as of June 30, 2008,
      were $18,711,154 and $6,482,003, yielding working capital of $12,229,151. We
      believe that the funds available to us from operations are adequate to meet
      our
      operating needs in 2008 and satisfy the debt incurred in connection with the
      acquisition of Foshan Overseas International Travel Service Co., Ltd.
      ($599,737). For the six months ended June 30, 2008, net cash provided by
      operating activities was approximately $ 1,367,702 ,
      which
      resulted primarily from our organic operations and effective management of
      cash
      flow.




Capital
      expenditure





Total
      capital expenditure for six months ended June 30, 2008 was $17,063 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 for
      at
      least the following 12 months. However, our actual working capital needs for
      the
      long and short term will depend upon numerous factors, including operating
      results, competition, the opportunity to acquire or start-up new businesses,
      and
      the availability of credit facilities, none of which can be predicted with
      certainty. Due to our rapid growth and expansion, our need for additional
      capital may arise, and management will seek to raise capital for the maintenance
      and expansion of our operations through the issuance of debt or equity if
      necessary. There can be no assurance that such financing will be available
      or,
      if available, will be on terms acceptable to us. Future expansion will be
      limited by the availability of financing.





Off
      Balance Sheet Arrangements





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





**Item
      3.**  **Quantitative
      and Qualitative Disclosures About Market Risk.**





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





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





**Item
      4.**  **Controls
      and Procedures.**





We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our reports filed pursuant to the
      Exchange Act is recorded, processed, summarized and reported within the time
      periods specified in the SEC's rules, regulations and related forms, and that
      such information is accumulated and communicated to our principal executive
      officer and principal financial officer, as appropriate, to allow timely
      decisions regarding required disclosure.


28


Based
      on
      an evaluation of our disclosure controls and procedures as of June 30, 2008,
      and
      the financial statements contained in this report, our principal executive
      officer and our principal financial officer have determined that our disclosure
      controls and procedures were effective as of the end of the period covered
      by
      this report.





There
      were no changes in our internal control over financial reporting (as such term
      is defined in Rule 13A-15(F) under the Exchange Act during our quarter ended
      June 30, 2008, that materially affected or are reasonably likely to materially
      affect our internal control over financial reporting.




**PART
      II - OTHER INFORMATION**





**Item
                1.**
            **Legal
                Proceedings.**





There
      is
      no material legal proceeding pending against us.





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





None.





**Item
                3.**
            **Defaults
                Upon Senior Securities**





None.




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





None.





**Item
                5.**
            **Other
                Information**





Not
      applicable.





**Item
                6.**
            **Exhibits**





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





**Exhibit
                No.**
            
            **SEC
                Ref. No.**
            
            **Title
                of Document**1
            
            31.1
            
            Certification
                of the Principal Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 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*


29





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.


30


**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 5, 2008




UNIVERSAL
                TRAVEL GROUPBy:
            /s/
                Jiangping JiangJiangping
                Jiang
              Chairman
                and Chief Executive Officer
              (Principal
                Executive Officer)By:
            /s/ Huijie
                GaoHuijie
                Gao
              Vice
                President of Corporate Finance
              (Principal
                Financial Officer)


31