UNITEDSTATES
 SECURITIESAND
EXCHANGE COMMISSION
 Washington,D.C.
20549
 
 Amendment
No. 1
  FORM
10-Q/A
 
 (MarkOne)
 
 x
              QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For
thequarterly period ended June 30, 2010
 
  ̈
              TRANSITION REPORT UNDER SECTION
      13 OR 15(d) OF THE EXCHANGEACT
 
 For
thetransition period from ______________ to _____________
 
 Commissionfile
number: 000-51516
 
 UNIVERSALTRAVEL
GROUP
 (Exactname
of registrant as specified in its charter)
 
 Nevada
              
              90-0296536(State
      or other jurisdiction of incorporation or
                organization)
              
              (I.R.S.
      Employer  IdentificationNo.)
 
 5th
      Floor, South Block, Building 11, Shenzhen
                Software
      Park, Zhongke 2nd Road,
                Nanshan
      District, Shenzhen, China
              
              518000(Address
      of principal executive offices)
              
              (Zip
      Code)
 
 86 755 83668489
 (Registrant’stelephone
number, including area code)
 
 (Former
      name, former address and former fiscal year, if changed since last report)
 
 Indicate by check mark whether
theregistrant (1) has filed reports required to be filed by Section 13 or 15(d)
ofthe Securities Exchange Act of 1934 during the preceding 12 months (or for
suchshorter period that the registrant was required to file such reports), and
(2)has been subject to such filing requirements for the past 90days.
 Yes x  No  ̈
 
 Indicateby
check mark whether the registrant has submitted electronically and posted onits
corporate Web site, if any, every Interactive Data File required to besubmitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of thischapter)
during the preceding 12 months (or for such shorter period that theregistrant
was required to submit and post
suchfiles).    Yes     ̈  No    ̈
 
 Indicateby
check mark whether the registrant is a large accelerated filer, anaccelerated
filer, a non-accelerated filer, or a smaller reporting company. Seethe
definitions of “large accelerated filer”, “accelerated filer” and
“smallerreporting company” in Rule 12b-2 of the Exchange Act.
 
 Large
      accelerated filer
                 ̈
                Accelerated
      filer
                oNon-accelerated
      filer
                 ̈
                Smaller
      reporting
                  company
                x
 
 Indicateby
check mark whether the registrant is a shell company (as defined in Rule12b-2 of
the Exchange Act). Yes  ̈  No x
 
 APPLICABLEONLY
TO ISSUERS INVOLVED IN BANKRUPTCY
 PROCEEDINGSDURING
THE PRECEDING FIVE YEARS
 
 Indicate by check mark whether
theregistrant has filed all documents and reports required to be filed by
Sections12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to
thedistribution of securities under a plan confirmed by
acourt.   Yes  ̈  No  ̈
 
 APPLICABLEONLY
TO CORPORATE ISSUERS
 
 Indicate the number of
sharesoutstanding of each of the issuer’s classes of common equity, as of the
latestpracticable date:
 
 As
ofAugust 6, 2010, there are 19,898,229 shares of $0.001 par value common
stockissued and outstanding.
  
 EXPLANATORY
NOTE
 
 In this
Amendment No. 1 to Quarterly Report on Form 10-Q (the "Form 10-Q/A") , we refer
to Universal Travel Group, a Nevada corporation, as "we," "us," "our" or "our
company."
 
 Subsequent
to filing our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010
on August 10, 2010, we discovered that we had erroneously indicated by check
mark on the first page on the Report that we were an "accelerated filer" instead
of a "smaller reporting company".  We have made this correction in
this Form 10-Q/A.
 
 Other
than the correction of the error described above, all other information in our
original Form 10-Q remains unchanged. For the convenience of the reader, this
amendment includes, in their entirety, those items in our original filing not
being amended. Except for the amendment, this Form 10-Q/A continues to describe
conditions as of our original filing, and does not update disclosures contained
herein to reflect events that occurred at a later date. Accordingly, this Form
10-Q/A should be read in conjunction with our other filings made with the SEC
subsequent to the filing of our Report, if any.
    
 
 
 FORM10-Q/A
 .UNIVERSALTRAVEL
GROUP
 INDEX
 
 PagePART
      I.
                                                          Financial
      Information
                                                          
                                                          1Item
      1.  Financial Statements (Unaudited)
                                                          
                                                          1Report
      of  Independent Registered Public AccountingFirm
                                                          
                                                          2Consolidated
      Balance Sheets as of  June 30, 2010 (Unaudited) and December 31,
      2009
                                                          
                                                          4Consolidated
      Statements of Income for the Three and Six Months Ended June 30, 2010 and
      2009 (Unaudited)
                                                          
                                                          5Consolidated
      Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009
      (Unaudited)
                                                          
                                                          7Consolidated
      Statements of Stockholders' Equity
                                                          
                                                          8Notes
      to Consolidated Financial Statements as of  June 30, 2010
      (Unaudited)
                                                          
                                                          9Item
      2.  Management’s Discussion and Analysis of Financial Condition
      or Plan of Operation
                                                          
                                                          40Item
      3.  Quantitative and Qualitative Disclosures About Market Risk.
                                                          
                                                          51Item
      4.  Controls and Procedures
                                                          
                                                          51PART
      II.
                                                          Other
      Information
                                                          
                                                          52Item
      1.  Legal Proceedings
                                                          
                                                          52Item
      1A. Risk Factors.
                                                          
                                                          52Item
      2.  Unregistered Sales of Equity Securities and Use of Proceeds
                                                          
                                                          52Item
      3.  Defaults Upon Senior Securities
                                                          
                                                          52Item
      4.  (Removed and Reserved).
                                                          
                                                          52Item
      5.  Other Information
                                                          
                                                          52Item
      6.  Exhibits
                                                          
                                                          52
 
 
 
 PARTI
- FINANCIAL INFORMATION
 
 Item1.
Financial Statements (Unaudited)
 UNIVERSALTRAVEL
GROUP
  CONSOLIDATEDFINANCIAL
STATEMENTS
  JUNE30,
2010
  1
 
 ACSB
      Acquavella,
      Chiarelli, Shuster, Berkower & Co., LLP517
      Route one
                    1
      Penn PlazaIselin,
      New Jersey, 08830
                    36the
      Floor732.855.9600
                    New
      York, NY 10119
 
 Report of
IndependentRegistered Public Accounting Firm
 
 To
theBoard of Directors and Stockholders of
 UniversalTravel
Group
  We
havereviewed the accompanying balance sheet of Universal Travel Group.
(the“Company”) as of June 30, 2010, and the related statements of
income,stockholders’ equity and comprehensive income, and cash flows for the
six-monthperiod ended June 30, 2010. These financial statements are the
responsibility ofthe company’s management.
  Weconducted
our review in accordance with the standards of the Public CompanyAccounting
Oversight Board (United States). A review of interim financialinformation
consists principally of applying analytical procedures and makinginquiries of
persons responsible for financial and accounting matters. It issubstantially
less in scope than an audit conducted in accordance with standardsof the Public
Company Accounting Oversight Board (United States), the objectiveof which is the
expression of an opinion regarding the financial statementstaken as a whole.
Accordingly, we do not express such an opinion.
  Based
onour review, we are not aware of any material modifications that should be
madeto the accompanying interim financial statements for them to be in
conformitywith accounting principles generally accepted in the United States
ofAmerica.
  We
havepreviously audited, in accordance with auditing standards of the Public
CompanyAccounting Oversight Board (United States), the consolidated balance
sheet ofthe Company as of December 31, 2009 and the related consolidated
statements ofincome, retained earnings and comprehensive income, and
consolidated statementof cash flows for the year then ended; and in our report
dated February 22,2010, we expressed an unqualified opinion on those financial
statements. In ouropinion, the information set forth in the accompanying
consolidated balancesheet as of December 31, 2009, is fairly stated, in all
material respects, inrelation to the consolidated balance sheet from which it
has beenderived.
  Acquavella,Chiarelli,
Shuster, Berkower & Co., LLP
  CertifiedPublic
Accountant
 New
York,N.Y.
 August10,
2010
  2
  TABLEOF
CONTENTS
  Consolidated Balance Sheets
                                          
                                          4Consolidated Statements of Income
                                          
                                          5-6Consolidated Statements of Cash Flows
                                          
                                          7Consolidated Statements of Stockholders’ Equity
                                          
                                          8Notes to Consolidated Financial Statements
                                          
                                          9-39
  3
  UNIVERSALTRAVEL
GROUP
 CONSOLIDATEDBALANCE
SHEETS
 JUNE30,
2010 AND DECEMBER 31, 2009
 
 6/30/2010
                            
                            
                            12/31/2009RestatedASSETSCash
      and cash equivalents
                            
                            $
                            43,591,459
                            
                            
                            $
                            36,677,422Accounts
      receivable, net
                            
                            
                            19,555,646
                            
                            
                            
                            17,321,174Other
      receivables and deposits, net
                            
                            
                            2,127,552
                            
                            
                            
                            257,907Due
      from related party
                            
                            
                            6,986,717
                            
                            
                            
                            -Trade
      deposit
                            
                            
                            7,706,484
                            
                            
                            
                            9,775,735Advances
                            
                            
                            -
                            
                            
                            
                            440,063Prepayments
                            
                            
                            2,389,960
                            
                            
                            
                            216,727Note
      receivable
                            
                            
                            227,182
                            
                            
                            
                            1,711,392Acquisition
      Deposits
                            
                            
                            3,599,530
                            
                            
                            
                            4,077,921Total
      Current Assets
                            
                            
                            86,184,529
                            
                            
                            
                            70,478,341Property,
      plant & equipment, net
                            
                            
                            6,487,219
                            
                            
                            
                            4,992,677Intangible
      assets
                            
                            
                            3,320,478
                            
                            
                            
                            339,240Goodwill
                            
                            
                            24,812,040
                            
                            
                            
                            9,896,270Total
      Noncurrent Assets
                            
                            
                            34,619,736
                            
                            
                            
                            15,228,187Total
      Assets
                            
                            $
                            120,804,266
                            
                            
                            $
                            85,706,528LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable and accrued expenses
                            
                            $
                            6,507,356
                            
                            
                            $
                            2,615,730Customer
      deposits
                            
                            
                            1,334,192
                            
                            
                            
                            2,000,117Income
      tax payable
                            
                            
                            2,063,161
                            
                            
                            
                            1,654,475Total
      Current Liabilities
                            
                            
                            9,904,710
                            
                            
                            
                            6,270,322Derivative
      liability
                            
                            
                            866,314
                            
                            
                            
                            1,815,319Total Liabilities
                            
                            
                            10,771,024
                            
                            
                            
                            8,085,641Stockholders'
      EquityCommon
      stock, $.001 par value, 70,000,000 shares authorized, 19,898,229 and
      16,714,457 issued and outstanding at June 30, 2010 and December
      31,  2009, respectively
                            
                            
                            19,898
                            
                            
                            
                            16,714Additional
      paid in capital
                            
                            
                            59,947,337
                            
                            
                            
                            37,671,645Other
      comprehensive income
                            
                            
                            1,284,434
                            
                            
                            
                            1,645,133Statutory
      reserve
                            
                            
                            732,282
                            
                            
                            
                            372,144Retained
      earnings
                            
                            
                            48,049,291
                            
                            
                            
                            37,915,251Total
      Stockholders' Equity
                            
                            
                            110,033,241
                            
                            
                            
                            77,620,887Total
      Liabilities and Stockholders' Equity
                            
                            $
                            120,804,265
                            
                            
                            $
                            85,706,528
 
 Theaccompanying
notes are an integral part of these consolidated financialstatements.
  4
  UNIVERSALTRAVEL
GROUP
 CONSOLIDATEDSTATEMENTS
OF INCOME
 FORTHE
THREE MONTHS ENDED JUNE 30,
 
 2010
                              
                              
                              2009Unaudited
                              
                              
                              RestatedGross
      revenues,
                              
                              $
                              36,741,613
                              
                              
                              $
                              18,405,473Cost
      of services
                              
                              
                              26,188,474
                              
                              
                              
                              11,875,779Gross
      profit
                              
                              
                              10,553,139
                              
                              
                              
                              6,529,694Selling,
      general and administrative expenses
                              
                              
                              3,461,037
                              
                              
                              
                              1,564,919Income
      from operations
                              
                              
                              7,092,102
                              
                              
                              
                              4,964,775Other
      income (expense)Other
      income
                              
                              
                              3,363
                              
                              
                              
                              2,591Gain/(Loss)
      on change in fair value of derivative liabilities
                              
                              
                              839,553
                              
                              
                              
                              (5,819,481
                              )Interest
      income
                              
                              
                              17,081
                              
                              
                              
                              12,358Total
      other income (expense)
                              
                              
                              859,997
                              
                              
                              
                              (5,804,532
                              )Income/(Loss)
      before income taxes –continuing operations
                              
                              
                              7,952,099
                              
                              
                              
                              (839,757
                              )Provision
      for income taxes
                              
                              
                              1,907,901
                              
                              
                              
                              1,020,955Income(Loss)
      from continuing operations
                              
                              
                              6,044,198
                              
                              
                              
                              (1,860,712
                              )Income/(loss)
      from discontinued operations
                              
                              
                              
                              
                              
                              
                              46,282Loss
      on disposition of discontinued operations
                              
                              
                              -
                              
                              
                              
                              (770,595
                              )Net
      income/(loss) from discontinued operation
                              
                              
                              -
                              
                              
                              
                              (724,313
                              )Net
      income/(loss)
                              
                              $
                              6,044,198
                              
                              
                              $
                              (2,585,025
                              )Comprehensive
      income/(loss)Net
      income/(loss)
                              
                              $
                              6,044,198
                              
                              
                              $
                              (2,585,025
                              )Foreign
      currency translation gains
                              
                              
                              55,759
                              
                              
                              
                              13,880Total
      comprehensive income/(loss)
                              
                              $
                              6,099,957
                              
                              
                              $
                              (2,571,145
                              )Income
      (Loss) per common share from continuing operationsBasic
                              
                              $
                              0.35
                              
                              
                              $
                              (0.14
                              )Diluted
                              
                              $
                              0.33
                              
                              
                              $
                              (0.13
                              )Net
      loss per common share – discontinued operationsBasic
                              
                              $
                              -
                              
                              
                              $
                              (0.05
                              )Diluted
                              
                              $
                              -
                              
                              
                              $
                              (0.05
                              )Total
      net income (loss) per common shareBasic
                              
                              $
                              0.35
                              
                              
                              $
                              (0.19
                              )Dilute
                              
                              $
                              0.33
                              
                              
                              $
                              (0.18
                              )Weighted
      average common shares outstandingBasic
                              
                              
                              17,404,834
                              
                              
                              
                              13,829,091Diluted
                              
                              
                              18,219,639
                              
                              
                              
                              14,301,057
  Theaccompanying
notes are an integral part of these audited consolidated financialstatements.
  5
  UNIVERSALTRAVEL
GROUP
 CONSOLIDATEDSTATEMENTS
OF INCOME
 FORTHE
SIX MONTHS ENDED JUNE 30,
 
 2010
                                    
                                    
                                    2009Unaudited
                                    
                                    
                                    RestatedGross
      revenues,
                                    
                                    $
                                    62,871,619
                                    
                                    
                                    $
                                    33,916,152Cost
      of services
                                    
                                    
                                    43,816,506
                                    
                                    
                                    
                                    21,614,649Gross
      profit
                                    
                                    
                                    19,055,113
                                    
                                    
                                    
                                    12,301,503Selling,
      general and administrative expenses
                                    
                                    
                                    6,524,679
                                    
                                    
                                    
                                    3,097,716Income
      from operations
                                    
                                    
                                    12,530,434
                                    
                                    
                                    
                                    9,203,787Other
      income (expense)Other
      income
                                    
                                    
                                    6,917
                                    
                                    
                                    
                                    6,419Gains/(losses)
      on change in fair value of derivative liabilities
                                    
                                    
                                    949,004
                                    
                                    
                                    
                                    (5,706,217
                                    )Interest
      income
                                    
                                    
                                    40,712
                                    
                                    
                                    
                                    23,296Total
      other income (expense)
                                    
                                    
                                    996,633
                                    
                                    
                                    
                                    (5,676,502
                                    )Income
      before income taxes - continuing operation
                                    
                                    
                                    13,527,067
                                    
                                    
                                    
                                    3,527,285Provision
      for income taxes
                                    
                                    
                                    3,393,028
                                    
                                    
                                    
                                    2,138,151Net
      income - continuing operation
                                    
                                    
                                    10,134,039
                                    
                                    
                                    
                                    1,389,134Income/(loss)
      from discontinued operations
                                    
                                    
                                    
                                    
                                    
                                    
                                    177,975Loss
      on didposition
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (770,595
                                    )Net
      income/(loss) from discontinued operation
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (592,620
                                    )Net
      income
                                    
                                    $
                                    10,134,039
                                    
                                    
                                    $
                                    796,514Comprehensive
      IncomeNet
      income
                                    
                                    $
                                    10,134,039
                                    
                                    
                                    $
                                    796,514Foreign
      currency translation gains/(losses)
                                    
                                    
                                    (360,699
                                    )
                                    
                                    
                                    48,587Total
      comprehensive income
                                    
                                    $
                                    9,773,340
                                    
                                    
                                    $
                                    845,101Net
      income per common share - continuing operationsBasic
                                    
                                    $
                                    0.59
                                    
                                    
                                    $
                                    0.10Diluted
                                    
                                    $
                                    0.57
                                    
                                    
                                    $
                                    0.10Net
      income/(loss) per common share - discontinued operationsBasic
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    (0.04
                                    )Diluted
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    (0.04
                                    )Total
      net income per common shareBasic
                                    
                                    $
                                    0.59
                                    
                                    
                                    $
                                    0.06Diluted
                                    
                                    $
                                    0.57
                                    
                                    
                                    $
                                    0.06Weighted
      average common shares outstandingBasic
                                    
                                    
                                    17,066,154
                                    
                                    
                                    
                                    13,851,530Diluted
                                    
                                    
                                    17,935,313
                                    
                                    
                                    
                                    14,277,656
  Theaccompanying
notes are an integral part of these audited consolidated financialstatements.
  6
  UNIVERSALTRAVEL
GROUP
 CONSOLIDATEDSTATEMENTS
OF CASH FLOWS
 FORTHE
SIX MONTHS ENDED JUNE 30,
 
 2010
                                                      
                                                      
                                                      2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
                                                      
                                                      $
                                                      10,134,039
                                                      
                                                      
                                                      $
                                                      796,514Add
      (deduct):Net
      income from discontinued operations
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      592,620Income
      from continuing operations
                                                      
                                                      
                                                      10,134,039
                                                      
                                                      
                                                      
                                                      1,389,134Depreciation
      and amortization
                                                      
                                                      
                                                      952,402
                                                      
                                                      
                                                      
                                                      190,739Provision
      for doubtful accounts
                                                      
                                                      
                                                      56,824
                                                      
                                                      
                                                      
                                                      10,905Stock
      based compensation
                                                      
                                                      
                                                      677,004
                                                      
                                                      
                                                      
                                                      495,725Gain
      on change in fair value of derivative liabilities
                                                      
                                                      
                                                      (949,004
                                                      )
                                                      
                                                      
                                                      5,706,217Accounts
      receivable
                                                      
                                                      
                                                      (1,885,974
                                                      )
                                                      
                                                      
                                                      (2,716,909
                                                      )Other
      receivable
                                                      
                                                      
                                                      (501,682
                                                      )
                                                      
                                                      
                                                      (4,725
                                                      )Due
      from related party
                                                      
                                                      
                                                      (6,986,717
                                                      )
                                                      
                                                      
                                                      -Advances
                                                      
                                                      
                                                      440,063
                                                      
                                                      
                                                      
                                                      (758
                                                      )Prepayments
                                                      
                                                      
                                                      (1,878,178
                                                      )
                                                      
                                                      
                                                      32,791Trade
      deposits
                                                      
                                                      
                                                      2,069,253
                                                      
                                                      
                                                      
                                                      3,168,216Escrow
      deposits
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      600,499Accounts
      payable and accrued expenses
                                                      
                                                      
                                                      3,307,393
                                                      
                                                      
                                                      
                                                      1,601,759Customer
      deposits
                                                      
                                                      
                                                      (665,925
                                                      )
                                                      
                                                      
                                                      (160,426
                                                      )Income
      tax payable
                                                      
                                                      
                                                      (223,354
                                                      )
                                                      
                                                      
                                                      (848,691
                                                      )Net
      cash (used in) provided by continuting operations
                                                      
                                                      
                                                      4,546,144
                                                      
                                                      
                                                      
                                                      9,464,476Net
      cash (used in) provided by discontinued operations
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      435,259Net
      cash provided by operating activities
                                                      
                                                      
                                                      4,546,144
                                                      
                                                      
                                                      
                                                      9,899,734CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of property & equipment
                                                      
                                                      
                                                      (1,864,774
                                                      )
                                                      
                                                      
                                                      (6,076,248
                                                      )Purchase
      of  intangibles
                                                      
                                                      
                                                      (51,359
                                                      )
                                                      
                                                      
                                                      (168,955
                                                      )Proceeds
      from collection of notes
                                                      
                                                      
                                                      1,484,210
                                                      
                                                      
                                                      
                                                      -Acquistion
      deposits
                                                      
                                                      
                                                      478,391
                                                      
                                                      
                                                      
                                                      -Paid
      for acquisition – net of cash acquired
                                                      
                                                      
                                                      (16,085,930
                                                      )
                                                      
                                                      
                                                      (1,035,125
                                                      )Net
      cash (used in) provided by continuing operations
                                                      
                                                      
                                                      (16,039,462
                                                      )
                                                      
                                                      
                                                      (7,280,328
                                                      )Net
      cash (used in) provided by investing activities
                                                      
                                                      
                                                      (16,039,462
                                                      )
                                                      
                                                      
                                                      (7,280,328
                                                      )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      of equity financing
                                                      
                                                      
                                                      18,768,054
                                                      
                                                      
                                                      
                                                      -Net
      cash provided by financing activities
                                                      
                                                      
                                                      18,768,054
                                                      
                                                      
                                                      
                                                      -Effect
      of exchange rate changes on cash and cash equivalents
                                                      
                                                      
                                                      (360,699
                                                      )
                                                      
                                                      
                                                      48,587Net
      change in cash and cash equivalents
                                                      
                                                      
                                                      6,914,037
                                                      
                                                      
                                                      
                                                      2,667,993Cash
      and cash equivalents, beginning balance
                                                      
                                                      
                                                      36,677,422
                                                      
                                                      
                                                      
                                                      15,720,182Cash
      and cash equivalents, ending balance
                                                      
                                                      $
                                                      43,591,459
                                                      
                                                      
                                                      $
                                                      18,388,175SUPPLEMENTAL
      DISCLOSURES:Cash
      paid during the year for:Income
      taxes
                                                      
                                                      $
                                                      2,984,342
                                                      
                                                      
                                                      $
                                                      3,043,089Other
      non-cash transactionsNet
      assets sold of discontinued operations
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      1,659,292Goodwill
      attributable to sold discontinued operations
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      3,630,539Note
      received on disposition
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (2,773,411
                                                      )Fair
      value of treasury stock received
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (2,780,950
                                                      )Loss
      on disposition
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (770,595
                                                      )Cash
      of discontinued operations
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      (1,035,125
                                                      )Purchased
      goodwill
                                                      
                                                      $
                                                      (14,915,770
                                                      )
                                                      
                                                      $
                                                      -Purchased
      intangible assets
                                                      
                                                      
                                                      (3,236,376
                                                      )
                                                      
                                                      
                                                      -Fair
      value of assets purchased less cash acquired
                                                      
                                                      
                                                      (767,601
                                                      )
                                                      
                                                      
                                                      -Acquisition
      financed with stock issuance
                                                      
                                                      
                                                      2,833,817
                                                      
                                                      
                                                      
                                                      -Acquisition
      paid for with cash - net of acquired
                                                      
                                                      $
                                                      (16,085,930
                                                      )
                                                      
                                                      $
                                                      -
 
 Theaccompanying
notes are an integral part of these audited consolidated financialstatements.
  7
  UNIVERSALTRAVEL
GROUP
 CONSOLIDATEDSTATEMENT
OF STOCKHOLDERS' EQUITY
 FORTHE
SIX MONTHS ENDED JUNE 30, 2010 AND THE YEAR ENDED DECEMBER 31,2009
 
 Additional
                            
                            
                            Other
                            
                            
                            
                            
                            
                            
                            
                            
                            TotalPaid
      In
                            
                            
                            Comprehensive
                            
                            
                            Retained
                            
                            
                            Statutory
                            
                            
                            Stockholders’Amount
                            
                            
                            Capital
                            
                            
                            Income
                            
                            
                            Earnings
                            
                            
                            Reserve
                            
                            
                            EquityBalance
      December 31, 2008
                            
                            
                            13,873,969
                            
                            
                            $
                            13,873
                            
                            
                            $
                            15,861,116
                            
                            
                            $
                            1,520,166
                            
                            
                            $
                            26,633,573
                            
                            
                            $
                            372,144
                            
                            
                            $
                            44,400,872RestatedCumulative
      effect of a change in accounting principle-adoption of EITF 07-05
      effective January 1, 2009
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (2,091,738
                            )
                            
                            
                            
                            
                            
                            
                            536,777
                            
                            
                            
                            
                            
                            
                            
                            (1,554,961
                            )Foreign
      currency translation adjustments
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            124,967
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            124,967Stock
      based compensation – Net of warrants exercise
                            
                            
                            41,120
                            
                            
                            
                            42
                            
                            
                            
                            1,154,367
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            1,154,409Fair
      market value Of treasury stock received and retired
                            
                            
                            (238,095
                            )
                            
                            
                            (239
                            )
                            
                            
                            (2,780,711
                            )
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (2,780,950
                            )Warrants
      exercised
                            
                            
                            811,941
                            
                            
                            
                            813
                            
                            
                            
                            6,571,017
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            6,571,830Options
      exercised
                            
                            
                            3,300
                            
                            
                            
                            3
                            
                            
                            
                            9,567
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            9,570Stock
      Subscription
                            
                            
                            2,222,222
                            
                            
                            
                            2,222
                            
                            
                            
                            18,948,027
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            18,950,249Income
      for the year  ended December 31, 2009
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            10,744,901
                            
                            
                            
                            
                            
                            
                            
                            10,744,901Balance
      December 31, 2009
                            
                            
                            16,714,457
                            
                            
                            $
                            16,714
                            
                            
                            $
                            37,671,645
                            
                            
                            $
                            1,645,133
                            
                            
                            $
                            37,915,251
                            
                            
                            $
                            372,144
                            
                            
                            $
                            77,620,887Balance
      December 31, 2009
                            
                            
                            16,714,457
                            
                            
                            $
                            16,714
                            
                            
                            $
                            37,671,645
                            
                            
                            $
                            1,645,133
                            
                            
                            $
                            37,915,251
                            
                            
                            $
                            372,144
                            
                            
                            $
                            77,620,887Foreign
      currency translation adjustments
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (360,699
                            )
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (360,699
                            )Stock
      based compensation
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            677,004
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            677,004Stock
      issued for acquisitions
                            
                            
                            326,629
                            
                            
                            
                            327
                            
                            
                            
                            2,833,491
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            2,833,818acquisitions
      adjustments
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            360,138
                            
                            
                            
                            360,138Stock
      Subscription
                            
                            
                            2,857,143
                            
                            
                            
                            2,857
                            
                            
                            
                            18,765,197
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            18,768,054Income
      for the six months  ended June 30, 2010
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            10,134,039
                            
                            
                            
                            
                            
                            
                            
                            10,134,039Balance
      June 30, 2010
                            
                            
                            19,898,229
                            
                            
                            $
                            19,898
                            
                            
                            $
                            59,947,337
                            
                            
                            $
                            1,284,434
                            
                            
                            $
                            48,049,290
                            
                            
                            $
                            732,282
                            
                            
                            $
                            110,033,241
 
 Theaccompanying
notes are an integral part of these audited consolidated financialstatements.
  8
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
  Note1
- ORGANIZATION
  UniversalTravel
Group was incorporated on January 28, 2004 under the laws of the State ofNevada.
Full Power Enterprise Global Limited – BVI was incorporated under thelaws of the
British Virginia Islands. Shenzhen Yuzhilu Aviation Service Co.,Ltd. was
incorporated on March 9, 1998 under the laws of the Peoples Republic ofChina
(PRC)., Shenzhen Speedy Dragon Enterprises Limited was incorporated inAugust of
2002 under the laws of PRC, Xian Golden Net Travel Serve Services
wasincorporated on July 25, 2001 under the laws of PRC, Shanghai Lanbao
TravelService Co., Ltd. was established in 2002 under the laws of Shanghai
China.Foshan Overseas International Travel Service Co., Ltd. was incorporated in
1990under the laws of PRC, Chongqing Universal Travel E-Commerce Co., Ltd.
andShenzhen Universal Travel Agency Co., Ltd. were both incorporated in 2009
underthe laws of PRC, Hebei Tianyuan Travel Agency Co., Ltd. was incorporated
inApril 1999 under the laws of PRC, Huangshan Holiday Travel Service Co., Ltd.
wasincorporated in April 1999 under the laws of PRC, Zhengzhou Yulongkang
TravelAgency Co., Ltd. was incorporated in 2000 under the laws
ofPRC,  Kunming Business Travel Service Co., Ltd. was incorporated
in1993 under the laws of PRC, Shanxi Jinyang Travel Agency Co., Ltd.
wasincorporated in 1988 under the laws of PRC. Full Power Enterprise Global
Limitedowns 100% of the Shenzhen Yuzhilu Aviation Service Co., Ltd. Collectively
thesecorporations are referred to herein as the Company.
  On
June12, 2009, the Company entered into a termination agreement with Shenzhen
SpeedyDragon Enterprise Limited. Accordingly, the Company has accounted for
ShenzhenSpeedy Dragon Enterprise Limited adiscontinued operations. The Company
is nowengaged in the travel business, including airline ticketing, hotel
reservationservices and technological solutions to travel reservations, and tour
planningand tour guide services.
  Note2
- SUMMARY
OFSIGNIFICANT ACCOUNTING POLICIES
  Basis ofPresentation
  Theaccompanying
audited consolidated financial statements have been prepared inconformity with
accounting principles generally accepted in the United States ofAmerica. The
Company's functional currency is the Chinese Renminbi, however theaccompanying
audited consolidated financial statements have been translated andpresented in
United States Dollars.
  Reclassification
  Certainprior-year
amounts have been reclassified to conform to the current-yearpresentation. These
reclassifications had no effect on reported income orlosses.
  9
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note2
- SUMMARY
OFSIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  DiscontinuedOperations
  On
June12, 2009, the Company entered into a termination agreement with Shenzhen
SpeedyDragon Enterprise Limited (“Speedy Dragon”). The Company had acquired all
theequity interest in Speedy Dragon on or about April 10, 2007 in exchange
for238,095 (post-reverse split) shares of the Company’s common stock and
aninterest-free promissory note in the principal amount of $3,000,000 payable
nolater than April 10, 2008 (see Note 7).  Pursuant to the
terminationagreement, the Company transferred back the equity interest in Speedy
Dragon onor before June 30, 2009 and that the 238,095 (post-reverse split)
shares of theCompany’s common stock were returned to the Company and canceled as
of June 30,2009.  In addition, the sole shareholder of Speedy Dragon
was alsorequired to return to the Company an aggregate of $2,773,411, in cash,
withinone year of the completion of all the formalities of the termination
agreement.The cash to be returned to the Company included a declared dividend in
theamount of $2,260,981 to be paid to the Company.
  The
losson disposal of Shenzhen Speedy Dragon Enterprises Ltd was asfollowing:
  Consideration
                        
                        $
                        5,554,361Goodwill
      attributable to sold Shenzhen Speedy Dragon Enterprises Ltd.
                        
                        
                        (3,630,539
                        )Net
      equity of Shenzhen Speedy Dragon Ltd.
                        
                        
                        (2,694,417
                        )Loss
      on disposition of discontinued operation
                        
                        $
                        (770,595
                        )
  Accordingly,the
Company has accounted for Shenzhen Speedy Dragon Enterprise Limited
asdiscontinued operations. The consolidated financial statements reflect
theoperating results and balance sheet items of the discontinued
operationsseparately from continuing operations. Prior year’s amounts have
beenreclassified to confirm with current year’s presentation of the
discontinuedoperations. The following table summarized the operating result of
thediscontinued operations for the three and six month ended June 30,2009:
  Six
      months ended
                        
                        
                        Three
      months endedJune
      30, 2009
                        
                        
                        June
      30, 2009Sales
                        
                        $
                        3,631,545
                        
                        
                        $
                        1,772,566Cost
      of sales
                        
                        
                        3,218,140
                        
                        
                        
                        1,613,857Gross
      profit
                        
                        
                        413,405
                        
                        
                        
                        158,709Operating
      expenses
                        
                        
                        190,989
                        
                        
                        
                        96,057Income
      from discontinued operation before income tax
                        
                        
                        222,416
                        
                        
                        
                        62,652Income
      tax
                        
                        
                        44,441
                        
                        
                        
                        16,370Net
      Income from discontinued operations
                        
                        $
                        177,975
                        
                        
                        $
                        46,282
  10
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
  Note2
- SUMMARY
OFSIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  TranslationAdjustment
  As ofJune
30, 2010 and December 31, 2009 the accounts of Universal Travel Group
weremaintained, and its financial statements were expressed, in Chinese
YuanRenminbi (CNY). Such financial statements were translated into U.S.
Dollars(USD) in accordance with the Foreign Currency Matters Topic of the
FASBAccounting Standards Codification (“ASC 830”) with the CNY as the
functionalcurrency. According to the Statement, all assets and liabilities were
translatedat the current exchange rate, stockholders equity are translated at
thehistorical rates and income statement items are translated at the
averageexchange rate for the period. The resulting translation adjustments are
reportedunder other comprehensive income in accordance with the Comprehensive
IncomeTopic of the FASB Accounting Standard Codification (“ASC 220”).
Transactiongains and losses are reflected in the income statement.
  Use ofEstimates
  Thepreparation
of financial statements in conformity with generally acceptedaccounting
principles requires management to make estimates and assumptions thataffect the
reported amounts of assets and liabilities and disclosure ofcontingent assets
and liabilities at the date of the financial statements andthe reported amounts
of revenues and expenses during the reporting period.Actual results could differ
from those estimates.
  Principles ofConsolidation
  Theconsolidated
financial statements include the accounts of Universal Travel Groupand 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 InternationalTravel
Service Co. Ltd., Chongqing Universal Travel E-Commerce Co., Ltd.,Shenzhen
Universal Travel  Agency Co., Ltd., Hebei Tianyuan TravelAgency Co.,
Ltd., Huangshan Holiday Travel Service Co., Ltd., ZhengzhouYulongkang Travel
Agency Co., Ltd., Kunming Business Travel Service Co., Ltd.,Shanxi Jinyang
Travel Agency Co., Ltd., and Full Power Enterprise Global Limitedcollectively
referred to herein as the Company.  On June 12, 2009 theCompany
entered into a termination agreement with Shenzhen Speedy DragonEnterprise
Limited. Accordingly, the Company has accounted for Shenzhen SpeedyDragon
Enterprise Limited as a discontinued operation. The consolidatedfinancial
statements reflect the operating results and balance sheet items ofthe
discontinued operations separately from continuing operations. Prior
year’samounts have been reclassified to confirm with current year’s presentation
ofthe discontinued operations.  All material inter-company
accounts,transactions and profits have been eliminated in consolidation.
  Risks andUncertainties
  TheCompany
is subject to substantial risks from, among other things, intensecompetition
associated with the industry in general, other risks associated withfinancing,
liquidity requirements, rapidly changing customer requirements,limited operating
history, foreign currency exchange rates and the volatility ofpublic markets.
  11
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
  Note2
- SUMMARY
OFSIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Contingencies
  Certainconditions
may exist as of the date the financial statements are issued. Theseconditions
may result in a future loss to the Company but which will only beresolved when
one or more future events occur or fail to occur. The Company’smanagement and
legal counsel assess such contingent liabilities, and suchassessment inherently
involves an exercise of judgment. In assessing losscontingencies related to
legal proceedings that are pending against the Companyor unasserted claims that
may result in such proceedings, the Company’s legalcounsel evaluates the
perceived merits of any legal proceedings or unassertedclaims as well as the
perceived merits of the amount of relief sought orexpected to be sought.
  If
theassessment of a contingency indicates that it is probable that a material
losshas been incurred and the amount of the liability can be estimated, then
theestimated liability would be accrued in the Company’s financial statements.
Ifthe assessment indicates that a potential material loss contingency is
notprobable but is reasonably possible, or is probable but cannot be
estimated,then the nature of the contingent liability, together with an estimate
of therange of possible loss if determinable and material would be disclosed.
Losscontingencies considered to be remote by management are generally not
disclosedunless they involve guarantees, in which case the guarantee would
bedisclosed.
  Cash and CashEquivalents
  Cash
andcash equivalents include cash on hand and cash in time deposits, certificates
ofdeposit and all highly liquid debt instruments with original maturities of
threemonths or less.
  AccountsReceivable
  TheCompany
maintains reserves for potential credit losses on accounts receivable.Management
reviews the composition of accounts receivable and analyzeshistorical bad debts,
customer concentrations, customer credit worthiness,current economic trends and
changes in customer payment patterns to evaluate theadequacy of these reserves.
Terms of the sales vary. Reserves are recordedprimarily on a specific
identification basis. Allowance for doubtful accountsamounted to $471,751 and
$414,927 as of June 30, 2010 and December 31, 2009,respectively.
 
 Description
                      
                      Balance at
                        beginning of year
                      
                      
                      Charged to
                        expenses
                      
                      
                      Deductions
                      
                      
                      Balance as of June
                        30, 2010Allowance
      for doubtful receivables
                      
                      $
                      414,927
                      
                      
                      $
                      56,824
                      
                      
                      $
                      -
                      
                      
                      $
                      471,751
  12
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note2
- SUMMARY
OFSIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  ReverseSplit
  On
March31, 2009 the Company effected a three-for-one (3:1) reverse split of
theCompany’s issued and outstanding shares of common stock, decreasing the
numberof outstanding shares from 41,619,966 to 13,873,969. These statements have
beenadjusted to reflect this reverse split on a historical pro-formabasis.
  Property, Plant
&Equipment
  Propertyand
equipment are stated at cost. Expenditures for maintenance and repairs
arecharged to earnings as incurred; additions, renewals and betterments
arecapitalized. When property and equipment are retired or otherwise disposed
of,the related cost and accumulated depreciation are removed from the
respectiveaccounts, and any gain or loss is included in operations. Depreciation
ofproperty and equipment is provided using the straight-line method
forsubstantially all assets with estimated lives of:
  Furniture
      and Fixtures
                    
                    5
      yearsTransportation
      equipment
                    
                    5
      yearsOffice
      equipment
                    
                    5
      yearsLeasehold
      Improvements
                    
                    5 –
      10 years
  As ofJune
30, 2010 and December 31, 2009, Property, Plant & Equipment of consistof the
following:
  June
      30, 2010
                      
                      
                      December
      31, 2009Office
      equipment
                      
                      $
                      6,137,874
                      
                      
                      $
                      4,146,637Transportation
      equipment
                      
                      
                      428,749
                      
                      
                      
                      150,232Furniture
      & fixtures
                      
                      
                      52,905
                      
                      
                      
                      23,560Leasehold
      improvements
                      
                      
                      1,465,385
                      
                      
                      
                      1,385,4818,084,913
                      
                      
                      
                      5,705,910Accumulated
      depreciation
                      
                      
                      (1,597,694
                      )
                      
                      
                      (713,233
                      )$
                      6,487,219
                      
                      
                      $
                      4,992,677
  Depreciationexpense
for the three months ended June 30, 2010 and 2009 was $ and
$77,997,respectively, of which $59,040 and $70,197 was included as part of cost
ofservices for the three months ended June 30, 2010 and 2009,respectively.
  Depreciationexpense
for the six months ended June 30, 2010 and 2009 was $645,905 and$60,082,
respectively, of which $107,232 and $140,424 was included as part ofcost of
services for the six months ended June 30, 2010 and 2009,respectively.
  13
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note2
- SUMMARY
OFSIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Goodwill
  Goodwillrepresents
the excess cost of a business acquisition over the fair value of thenet assets
acquired.  In accordance with the Intangibles, Goodwill andother topic
of the FASB Accounting Standard Codification (“ASC 350”),indefinite-life
identifiable intangible assets and goodwill are not amortized.Under the
provisions of ASC 350, we are required to perform an annual impairmenttest of
our goodwill. Goodwill impairment is determined using a
two-stepprocess.  The first step of the goodwill impairment test is
used toidentify potential impairment by comparing the fair value of a reporting
unit,which we define as our business segments, with its net book value or
carryingamount including goodwill. If the fair value of a reporting unit exceeds
itscarrying amount, goodwill of the reporting unit is considered not impaired
andthe second step of the impairment test is unnecessary.  If
thecarrying amount of a reporting unit exceeds its fair value, the second step
ofthe goodwill impairment test compares the implied fair value of the
reportingunit's goodwill with the carrying amount of that goodwill. If the
carryingamount of the reporting unit's goodwill exceeds the implied fair value
of thatgoodwill, an impairment loss is recognized in an amount equal to
thatexcess.  The implied fair value of goodwill is determined in the
samemanner as the amount of goodwill recognized in a
businesscombination.  The fair value of the reporting unit is
allocated to allof the assets and liabilities of that unit including any
unrecognized intangibleassets as if the reporting unit had been acquired in a
business combination andthe fair value of the reporting unit was the
purchase  price paid toacquire the reporting unit.  See Note
7, Purchase of Subsidiaries, foradditional information regarding goodwill.
  As ofJune
30, 2010 and December 31, 2009, Goodwill consists of thefollowing:
 
 June
      30, 2010
                        
                        
                        December
      31,2009Shanghai
      Lanbao Travel Service Co., Ltd.
                        
                        $
                        3,081,799
                        
                        
                        $
                        3,081,799Foshan
      International Travel Service Co., Ltd.
                        
                        
                        6,049,576
                        
                        
                        
                        6,049,576Xian
      Golden Net Travel Serve Services Co.,Ltd.
                        
                        
                        764,895
                        
                        
                        
                        764,895Zhengzhou
      Yulongkang Agency Co., Ltd.
                        
                        
                        4,102,061
                        
                        
                        
                        -Hebei
      Taiyuan Travel Agency Co., Ltd.
                        
                        
                        3,208,455
                        
                        
                        
                        -Huangshan
      Holiday Travel Service Co., Ltd
                        
                        
                        1,949,080
                        
                        
                        
                        -Kunming
      Business Travel Service Co., Ltd.
                        
                        
                        4,009,070
                        
                        
                        
                        -Shanxi
      Jinyang Travel Agency Co., Ltd.
                        
                        
                        1,647,104
                        
                        
                        
                        -$
                        24,812,040
                        
                        
                        $
                        9,896,270
  14
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note2
- SUMMARY
OFSIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Long-LivedAssets
  TheCompany
adopted the Property, Plant and Equipment Topic of the FASB AccountingStandard
Codification (“ASC 360”), which addresses financial accounting andreporting for
the impairment or disposal of long-lived assets and supersedesSFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and forLong-Lived Assets to
be Disposed Of, and the accounting and reporting provisionsof APB Opinion No.
30, Reporting the Results of Operations for a Disposal of aSegment of a
Business. The Company periodically evaluates the carrying value oflong-lived
assets to be held and used in accordance with ASC 360. ASC 360requires
impairment losses to be recorded on long-lived assets used inoperations when
indicators of impairment are present and the undiscounted cashflows estimated to
be generated by those assets are less than the assetscarrying amounts. In that
event, a loss is recognized based on the amount bywhich the carrying amount
exceeds the fair market value of the long-livedassets. Loss on long-lived assets
to be disposed of is determined in a similarmanner, except that fair market
values are reduced for the cost of disposal.Based on its review, the Company
believes that, as of March 31, 2010 andDecember 31, 2009 there were no
significant impairments of its long-livedassets.
  DerivativeLiability
  TheCompany
issued warrants in connection with the “Securities Purchase Agreement”dated
August 28, 2008 with certain reset exercise priceprovisions.  If the
Company issues or sells shares of its common stockafter the August 28, 2008
Securities Purchase Agreement or Financing for anamount less than the original
exercise price per share, the exercise price ofthe warrants is reduced to equal
the new issuance price of thoseshares.
  Upon
theCompany’s adoption of the Derivative and Hedging Topic of the FASB
AccountingStandards Codification (“ASC 815”) on January 1, 2009, the Company
determinedthat the warrants did not qualify for a scope exception under ASC 815
as theywere determined to not be indexed to the Company’s stock as prescribed by
ASC815.  On January 1, 2009, the warrants, under ASC 815,
werereclassified from equity to derivative liability for the then relative
fairmarket value of $2,091,738 and marked to market.  The values of
thewarrants were decreased by $536,776 from the warrants issuance date to
theadoption date of ASC 815 on January 1, 2009.  As of January 1,
2009,the cumulative effect in adopting ASC 815 was a reduction to additional
paid incapital of $2,091,738 to reclassify the warrants from equity to
derivativeliability and an increase in retained earnings of $536,776 as a
cumulativeeffect of a change in accounting principle to reflect the change in
the value ofthe warrants between their issuance date and January 1,
2009.  For thethree and six month ended June 30, 2010, the Company
recorded a gain on changein fair value of derivative liability of $109,451 and
$949,004, respectively, tomark to market for the increase in fair value of the
warrants during the threeand six month periods ended June 30,
2010.   Under ASC 815, thewarrants will be carried at fair value
and adjusted at each reportingperiod.
  TheCompany
determined the fair value of the reset provisions at January 1, 2009
was$1,554,961 as the initial fair value at the adoption date of EITF
No.07-05.  The fair value was determined using the Black Scholes
OptionPricing Model based on the following assumptions:  dividend
yield: 0%;volatility: 136%, risk free rate: 1.55%, expected term: 4.66 years.
  TheCompany
determined the fair value of the reset provisions at June 30, 2010 was886,314.
The fair value was determined using the Black Scholes Option PricingModel based
on the following assumptions: dividend yield: -0-%; volatility:115%, risk free
rate: 1.79%, expected term: 3.16years.
  15
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note2
- SUMMARY
OFSIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Fair Value of
FinancialInstruments
  FASBAccounting
Standards Codification Topic on Fair Value Measurements andDisclosures (“ASC
820”) requires that the Company disclose estimated fair valuesof financial
instruments. The carrying amounts reported in the statements offinancial
position for current assets and current liabilities qualifying asfinancial
instruments are a reasonable estimate of fair value.
  RevenueRecognition
  TheCompany’s
revenue recognition policies are in compliance with FASB AccountingStandards
Codification Topic on Revenue Recognition (“ASC 605”). Revenue isrecognized at
the date the price is fixed or determinable, the delivery iscompleted, no other
significant obligations of the Company exist andcollectability is reasonably
assured. Payments received before all of therelevant criteria for revenue
recognition are satisfied are recorded as unearnedrevenue.
  TheCompany
had four types of revenue stream from its four lines of businesses,namely (i)
air-ticketing (Shenzhen Yuzhilu Aviation Service Co., Ltd. andChongqing
Universal Travel E-Commerce Co., Ltd.), (ii) hotel reservations(Shanghai Lanbao
Travel Service Co., Ltd.), (iii) packaged tours (FoshanInternational Travel
Service Co., Ltd., Xian Golden Net Travel Serve ServicesCo, Ltd. and Shenzhen
Universal Travel Agency Co., Ltd.) and (iv) air cargoagency services (Shenzhen
Speedy Dragon Enterprises Ltd.).  On June12, 2009, the Company entered
into a termination agreement with Shenzhen SpeedyDragon Enterprise Ltd.
Accordingly the Company has accounted for Shenzhen SpeedyDragon Enterprise Ltd,
its air cargo agency services as a discontinued operation(see Note 2
Discontinued Operations).  Effective June 12, 2009, theCompany has
three types of revenue stream from its current three lines ofbusinesses.
  Air-ticketingservices
  TheCompany
receives commissions from travel suppliers for air-ticketing servicesthrough its
transaction and service platform under various services agreements.The Company
does not charge customers differently from the prices provided bytravel
suppliers.  The Company has no discretion on the air ticketprices or
the applicable commission rates as they are dictated by the travelsuppliers.
Commissions from air-ticketing services rendered are recognized afterair tickets
are issued. The Company presents revenues from such transactions ona net basis
in the statements of income as the Company, generally, does notassume inventory
risks and has no obligations for cancelled airline ticketreservations.
  16
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note2
- SUMMARY
OFSIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Revenue
Recognition(Continued)
  Hotel reservationservices
  TheCompany
receives commissions from travel suppliers for hotel room reservationsthrough
its transaction and service platform. The Company does not chargecustomers
differently from the prices provided by hotelsuppliers.  The Company
has no discretion on the hotel room prices orthe applicable commission rates as
they are dictated by the hotelsuppliers.  Commissions from hotel
reservation services rendered arerecognized after hotel customers have completed
their stay at the applicablehotel and upon confirmation of pending payment of
the commissions by the hotel.The Company presents revenues from such
transactions on a net basis in thestatements of income as the Company,
generally, does not assume inventory risksand has no obligations for cancelled
hotel reservations.
  Packaged-tour
  TheCompany
receives fees from providing domestic and cross-boarder travel tour
ourservices.  The Company contracts with traffic service
providers,accommodation providers and leisure service providers to purchase air
tickets,train and coach tickets, accommodation and leisure or entertainment
packages inbulk and then resell them to its customers with a
mark-up.  Feesgenerated from packaged-tour are recognized on a gross
basis in the statementsof income, when the tour is completed, as the Company,
generally, undertakes themajority of the business risk.  The Company
is the primary obligor topay the service providers upon rendering of those
services.  Inaddition, the Company acts as principal related to the
packaged-tour servicesrendered or when tour is completed and collections are
reasonablyassured.  Generally, the Company does not issue refund to
itscustomers unless cancellation is due to its and or the service
provider’snon-delivery of services. Historically, refunds and cancellations do
not have amaterial impact on the Company’s consolidated financial statements in
anyaccounting period.
  Air CargoBusiness
  TheCompany
received fees from its air cargo business. However, this businesssegment had
been accounted for as a discontinued operation upon consummation ofa termination
agreement with Shenzhen Speedy Dragon Enterprise Ltd dated June12,
2009.  The Company basically brokered air cargo spaces and resellthem
to local logistic companies to generate revenue.  The Company
hadcontracted with Chinese domestic airlines as its vendors to carry out its
cargoservices.  Revenues generated from air cargo business were
recognizedon a gross basis in the statements of income, when the service was
rendered, asthe Company, generally, undertook the majority of the
businessrisk.  The Company was the primary obligor to pay the
serviceproviders upon rendering of those services.  In addition, the
Companyacted as principal related to the air cargo services rendered and
collectionsare reasonably assured.  Customers were charged based on
the class andweight of goods shipped.
  Historically,the
Company has experienced minimum and or immaterial returns and orcancellation
from its four lines of businesses, which amount if any, would haveno material
impact on its consolidated financialstatements.  Accordingly, no
allowance has been provided for in theperiods presented.
  17
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note2
- SUMMARY
OFSIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Cost ofServices
  Costs
ofservices for air tickets cover mainly business and revenue
relatedtaxes.  Costs of services for hotel reservations cover mainly
businessand revenue related taxes, as well as commissions paid to the sales
agents forselling hotel rooms in the Company’s system.  Costs of
services forthe cargo agency business mainly include the costs of warehousing
and deliverycharges.  Costs of services for packaged tours include
meals,transportation (airline tickets, train tickets and car rental), lodging,
airporttransfers, tickets to local attractions and tours.
  Otherdirect
costs such as systems and related technologies used by each segmentoperations,
and costs associated with payment processing are also included inthe Company’s
Costs of Services. In addition, the Company allocates costs oflabor and
facilities, depreciation, communications, and utility expensesincurred by each
segment between costs of services and general
administrativeexpenses.  The percentage, ranging from 50% to 80%,
allocated to costsof sales is based on management estimate, and the percentage
allocated isestimated to be directly associated with the generation ofrevenues.
  Consolidatedcosts
such as stock-based compensation and corporate professional fees are
notallocated to any segment. These costs are reported as general operating
expensesin the Company’s Statements of Operations. For the three months ended
June 30,2010 and 2009, such expenses amounted $340.372 and $1,198,963,
respectively. Forthe six months ended June 30, 2010 and 2009, such expenses
amounted $677,004 and$1,504,751, respectively.
  Advertising
  Advertisingexpenses
consist primarily of costs of promotion for corporate image and productmarketing
and costs of direct advertising. The Company expenses all advertisingcosts as
incurred.
  IncomeTaxes
  TheCompany
utilizes FASB Accounting Standards Codification Topic on Income Taxes(“ASC
740”), which requires the recognition of deferred tax assets andliabilities for
the expected future tax consequences of events that have beenincluded in the
financial statements or tax returns. Under this method, deferredincome taxes are
recognized for the tax consequences in future years ofdifferences between the
tax bases of assets and liabilities and their financialreporting amounts at
each period end
based onenacted tax laws and statutory tax rates applicable to the periods in
which thedifferences are expected to affect taxable income. Valuation allowances
areestablished, when necessary, to reduce deferred tax assets to the
amountexpected to be realized.
  Statement of CashFlows
  Inaccordance
with FASB Accounting Standards Codification Topic on Statement ofCash flows
(“ASC 230”), cash flows from the Company’s operations are based uponthe local
currencies. As a result, amounts related to assets and liabilitiesreported on
the statement of cash flows will not necessarily agree with changesin the
corresponding balances on the balance sheet.
  18
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note2
- SUMMARY
OFSIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Intangibles
  Intangibleassets
are amortized using the straight-line method over their estimated periodof
benefit. Evaluation of the recoverability of intangible assets is madeannually
to take into account events or circumstances that warrant revisedestimates of
useful lives or that indicate that impairment exists. All of ourintangible
assets are subject to amortization. No impairments of intangibleassets have been
identified during any of the periods presented. The Company’sintangible assets
consist primarily of map of hotels and scenic spots used formarketing purposes,
CRM systems software, accounting software, and Organizationcost of new
companies. These definitive lived intangible assets are beingamortized over
their useful lives. Expenditures of $51,359 and $168,954 werecapitalized for the
six months ended June 30, 2010 and 2009, respectively, andwill be amortized over
a 5 year life.  In conjunction the acquisitionsduring the six months
ended June 30, 2010, the Company capitalized $3,236,376 ofIdentifiable
Intangible Assets, which are being amortized over 5 years. TheCompany recorded
amortization expenses for definitive lived intangible assets of$45,561 and
$55,572 for the six months ended June 30, 2010 and 2009, $29,046 and$28,545 for
the three months ended June 30, 2010 and 2009, respectively, andamortization
expenses for Identifiable Intangible Assets of $260,937 and$161,819 for the six
months and three months ended June 30, 2010, respectively.The Company will
record approximately $800,672, $762,162 and $683,499 over thenext three years,
respectively.
  Concentration of CreditRisk
  Financialinstruments
that potentially subject the Company to concentrations of creditrisk are cash,
accounts receivable and other receivables arising from its normalbusiness
activities. The Company places its cash in what it believes to becredit-worthy
financial institutions. The Company has a diversified customerbase, most of
which are in China. The Company controls credit risk related toaccounts
receivable through credit approvals, credit limits and monitoringprocedures. The
Company routinely assesses the financial strength of itscustomers and, based
upon factors surrounding the credit risk, establishes anallowance, if required,
for uncollectible accounts and, as a consequence,believes that its accounts
receivable credit risk exposure beyond such allowanceis limited.
  Net Income (Loss) PerShare
  TheCompany
accounts for net income (loss) per share in accordance with FASBAccounting
Standards Codification Topic on Earning Per Share (“ASC 260”), whichrequires
presentation of basic and diluted EPS on the face of the statement ofincome for
all entities with complex capital structures and requires areconciliation of the
numerator and denominator of the basic EPS computation tothe numerator and
denominator of the diluted EPS.  Basic net income(loss) per share is
computed by dividing net income (loss) by the weightedaverage number of shares
of common stock outstanding during eachperiod.  It excludes the
dilutive effects of potentially issuablecommon shares such as those related to
the Company’s warrants and stock options(calculated using the treasury stock
method).  Diluted net income(loss) per share is calculated by
including potentially dilutive share issuancesin the denominator.
  19
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
  Note2
- SUMMARY
OFSIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Net Income (Loss) Per
Share(Continued)
  Thefollowing
table sets forth the computation of basic and diluted earnings pershare of
common stock:
  Six
      months ended June 30,
                                
                                
                                Three
      months ended June 30,2010
                                
                                
                                2009
                                
                                
                                2010
                                
                                
                                2009Basic
      earnings (losses) from continuing operations per share:Numerator:Income
      (loss) from continuing operations  used in computing basic
      earnings (losses) per share
                                
                                $
                                10,134,039
                                
                                
                                $
                                1,389,134
                                
                                
                                $
                                6,044,198
                                
                                
                                $
                                (1,860,712
                                )Income
      (loss) from continuing operations applicable to common shareholders
                                
                                $
                                10,134,039
                                
                                
                                $
                                1,389,134
                                
                                
                                $
                                6,044,198
                                
                                
                                $
                                (1,860,712
                                )Denominator:Weighted
      average common shares outstanding
                                
                                
                                17,066,154
                                
                                
                                
                                13,851,530
                                
                                
                                
                                17,404,834
                                
                                
                                
                                13,829,091Basic
      earnings (losses) per share from continuing operations
                                
                                $
                                0.59
                                
                                
                                $
                                0.10
                                
                                
                                $
                                0.35
                                
                                
                                $
                                (0.14
                                )Diluted
      earnings (losses) per share from continuing operations:Numerator:Income
      (loss) from continuing operations used in computing diluted earnings
      (losses) per share
                                
                                $
                                10,134,039
                                
                                
                                $
                                1,389,134
                                
                                
                                $
                                6,044,198
                                
                                
                                $
                                (1,860,712
                                )Income
      (loss) from continuing operations applicable to common shareholders
                                
                                $
                                10,134,039
                                
                                
                                $
                                1,389,134
                                
                                
                                $
                                6,044,198
                                
                                
                                $
                                (1,860,712
                                )Denominator:Weighted
      average common shares outstanding
                                
                                
                                17,066,154
                                
                                
                                
                                13,851,530
                                
                                
                                
                                17,404,834
                                
                                
                                
                                13,829,091Weighted
      average effect of dilutive securities:Stock
      options and warrants
                                
                                
                                869,159
                                
                                
                                
                                426,126
                                
                                
                                
                                814,806
                                
                                
                                
                                471,966Shares
      used in computing diluted net income (loss) per share
                                
                                
                                17,935,313
                                
                                
                                
                                14,277,656
                                
                                
                                
                                18,219,639
                                
                                
                                
                                14,301,057Diluted
      earnings (losses) per share from continuing operations
                                
                                $
                                0.57
                                
                                
                                $
                                0.10
                                
                                
                                $
                                0.33
                                
                                
                                $
                                (0.13
                                )
  20
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
  Note2
- SUMMARY
OFSIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Net Income (Loss) Per
Share(Continued)
  SixmonthsendedJune30,
                                                                  
                                                                  
                                                                  ThreemonthsendedJune30,2010
                                                                  
                                                                  
                                                                  2009
                                                                  
                                                                  
                                                                  2010
                                                                  
                                                                  
                                                                  2009Basic
      earnings (losses) from discontinuing operations per share:Numerator:Income
      (loss) from discontinuing operations  used in computing basic
      earnings per share
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  (592,620
                                                                  )
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  (724,313
                                                                  )Income
      (loss) from discontinuing operations applicable to common shareholders
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  (592,620
                                                                  )
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  (724,313
                                                                  )Denominator:Weighted
      average common shares outstanding
                                                                  
                                                                  
                                                                  17,066,154
                                                                  
                                                                  
                                                                  
                                                                  13,851,530
                                                                  
                                                                  
                                                                  
                                                                  17,404,834
                                                                  
                                                                  
                                                                  
                                                                  13,829,091Basic
      earnings per share from discontinuing operations
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  (0.04
                                                                  )
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  (0.05
                                                                  )Diluted
      earnings (losses) per share from discontinuing operations:Numerator:Income
      (loss) from discontinuing operations used in computing diluted earnings
      (losses) per share
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  (592,620
                                                                  )
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  (724,313
                                                                  )Income
      (loss) from discontinuing operations applicable to common shareholders
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  (592,620
                                                                  )
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  (724,313
                                                                  )Denominator:Weighted
      average common shares outstanding
                                                                  
                                                                  
                                                                  17,066,154
                                                                  
                                                                  
                                                                  
                                                                  13,851,530
                                                                  
                                                                  
                                                                  
                                                                  17,404,834
                                                                  
                                                                  
                                                                  
                                                                  13,829,091Weighted
      average effect of dilutive securities:Stock
      options and  warrants
                                                                  
                                                                  
                                                                  869,159
                                                                  
                                                                  
                                                                  
                                                                  426,126
                                                                  
                                                                  
                                                                  
                                                                  814,806
                                                                  
                                                                  
                                                                  
                                                                  471,966Shares
      used in computing diluted net income (loss) per share
                                                                  
                                                                  
                                                                  17,935,313
                                                                  
                                                                  
                                                                  
                                                                  14,277,656
                                                                  
                                                                  
                                                                  
                                                                  18,219,639
                                                                  
                                                                  
                                                                  
                                                                  14,301,057Diluted
      earnings per share from discontinuing operations
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  (0.04
                                                                  )
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  (0.05
                                                                  )Total
      net income (loss) per common shareBasic
                                                                  
                                                                  $
                                                                  0.59
                                                                  
                                                                  
                                                                  $
                                                                  0.06
                                                                  
                                                                  
                                                                  $
                                                                  0.35
                                                                  
                                                                  
                                                                  $
                                                                  (0.19
                                                                  )Dilute
                                                                  
                                                                  $
                                                                  0.57
                                                                  
                                                                  
                                                                  $
                                                                  0.06
                                                                  
                                                                  
                                                                  $
                                                                  0.33
                                                                  
                                                                  
                                                                  $
                                                                  (0.18
                                                                  )
  21
 
 UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
  Note2
- SUMMARY
OFSIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Relatedparties
 Partiesare
considered to be related if one party has the ability, directly orindirectly, to
control the other party or exercise significant influence overthe other party in
making financial and operational decisions. Parties are alsoconsidered to be
related if they are subject to common control or commonsignificant influence.
Related parties may be individuals or corporateentities.
 Recent
AccountingPronouncements
  InFebruary,
2007, FASB issued SFAS 159 ‘The Fair Value Option for Financial Assetsand
Financial Liabilities’ – Including an Amendment of FABS Statement
No.115.  This statement permits entities to choose to measure many
financialinstruments and certain other items at fair value. This statement is
expected toexpand the use of fair value measurement, which is consistent with
the Board’slong-term measurement objectives for accounting for financial
instruments. This statement is effective as of the beginning of an entity’s
first fiscal yearthat begins after November 15, 2007. Early adoption is
permitted as of thebeginning of a fiscal year that begins on or before November
15, 2007, SFAS No159 was superseded by the Financial Instruments Topic of FASB
AccountingStandards Codification (“ASC 825”), the adoption of this accounting
requirementhas no effect on the Company’s consolidated financialstatements.
  InFebruary,
2007, FASB issued SFAS 159 ‘The Fair Value Option for Financial Assetsand
Financial Liabilities’ – Including an Amendment of FABS Statement
No.115.  This statement permits entities to choose to measure many
financialinstruments and certain other items at fair value. This statement is
expected toexpand the use of fair value measurement, which is consistent with
the Board’slong-term measurement objectives for accounting for financial
instruments. This statement is effective as of the beginning of an entity’s
first fiscal yearthat begins after November 15, 2007. Early adoption is
permitted as of thebeginning of a fiscal year that begins on or before November
15, 2007, SFAS No159 was superseded by the Financial Instruments Topic of FASB
AccountingStandards Codification (“ASC 825”), the adoption of this accounting
requirementhas no effect on the Company’s consolidated financialstatements.
  InDecember
2007, the FASB issued SFAS No. 160, “Non-controlling Interests inConsolidated
Financial Statements” (“SFAS 160”).  This Statement amends ARB51 to
establish accounting and reporting standards for the non-controlling(minority)
interest in a subsidiary and for the deconsolidation of a subsidiary.It
clarifies that a non-controlling interest in a subsidiary is an
ownershipinterest in the consolidated entity that should be reported as equity
in theconsolidated financial statements. This Statement is effective for fiscal
years,and interim periods within those fiscal years, beginning on or after
December15, 2008 (that is, January 1, 2009, for entities with calendar
year-ends). SFASNo 160 was superseded by the Consolidation Topic of FASB
Accounting StandardsCodification (“ASC 810”) The Company adopted SFAS 160 on
January 1, 2009. Theadoption of this statement had no effect on the Company’s
consolidated financialstatements.
  22
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note2
- SUMMARY
OFSIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Recent
AccountingPronouncements – (Continued)
  In
March2008, the FASB issued FASB Statement No. 161, Disclosures about
DerivativeInstruments and Hedging Activities. The new standard is intended to
improvefinancial reporting about derivative instruments and hedging activities
byrequiring enhanced disclosures to enable investors to better understand
theireffects on an entity’s financial position, financial performance, and
cashflows. It is effective for financial statements issued for fiscal years
andinterim periods beginning after November 15, 2008, with early
applicationencouraged. The new standard also improves transparency about the
location andamounts of derivative instruments in an entity’s financial
statements; howderivative instruments and related hedged items are accounted for
underStatement 133; and how derivative instruments and related hedged items
affectits financial position, financial performance, and cash flows. SFAS No 161
wassuperseded by the Derivative and Hedging Topic of FASB Accounting
StandardsCodification (“ASC 815”).
  On May
8,2008, the Financial Accounting Standards Board (FASB) issued Statement
ofFinancial Accounting Standards (SFAS) No. 162, The Hierarchy of
GenerallyAccepted Accounting Principles, which will provide framework for
selectingaccounting principles to be used in preparing financial statements that
arepresented in conformity with U.S. generally accepted accounting
principles(GAAP) for nongovernmental entities. With the issuance of SFAS No.
162, the GAAPhierarchy for nongovernmental entities will move from auditing
literature toaccounting literature.  SFAS No 162 was superseded by the
GeneralAccounting Principle Topic of FASB Accounting Standards Codification
(“ASC105”).
  InJune 2008,
the FASB ratified the consensus reached on Emerging Issues TaskForce (“EITF”)
Issue No. 07-05, 05”). EITF No. 07-05 clarifies thedetermination of
whether an instrument (or an embedded feature) is indexed to anentity’s own
stock, which would qualify as a scope exception under SFASNo. 133,
Accounting for Derivative Instruments and Hedging Activities. EITFNo. 07-05
is effective for financial statements issued for fiscal yearsbeginning after
December 15, 2008. EITF No. 07-05 was superseded by theDerivative and
Hedging Topic of FASB Accounting Standards Codification (“ASC815”). Based on the
Company’s evaluation of this issue, the adoption of thisaccounting requirement
has a material effect on the Company’s consolidatedfinancial statements, please
see note above under “DerivativeLiability”.
  In
June2009, the FASB issued amended standards for determining whether to
consolidate avariable interest entity. These amended standards eliminate a
mandatoryquantitative approach to determine whether a variable interest gives
the entitya controlling financial interest in a variable interest entity in
favor of aqualitatively focused analysis, and require an ongoing reassessment of
whetheran entity is the primary beneficiary. These amended standards are
effective forus beginning in the first quarter of fiscal year 2010 and we are
currentlyevaluating the impact that adoption will have on our consolidated
financialstatements.
  In
June2009, the FASB issued ASC 855 (previously SFAS No. 165, Subsequent
Events),which establishes general standards of accounting for and disclosures of
eventsthat occur after the balance sheet date but before the financial
statements areissued or available to be issued. It is effective for interim and
annual periodsending after June 15, 2009. There was no material impact upon the
adoption ofthis standard on the Company’s consolidated financialstatements.
  23
 
 UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
  Note2
- SUMMARY
OFSIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Recent
AccountingPronouncements – (Continued)
  In
August2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which
amendsASC Topic 820, Measuring Liabilities at Fair Value, which provides
additionalguidance on the measurement of liabilities at fair value. These
amendedstandards clarify that in circumstances in which a quoted price in an
activemarket for the identical liability is not available, we are required to
use thequoted price of the identical liability when traded as an asset, quoted
pricesfor similar liabilities, or quoted prices for similar liabilities when
traded asassets. If these quoted prices are not available, we are required to
use anothervaluation technique, such as an income approach or a market approach.
Theseamended standards are effective for us beginning in the fourth quarter of
fiscalyear 2009. There was no material impact upon the adoption of this standard
onthe Company’s consolidated financial statements.
  InJanuary
2010, the FASB issued Accounting Standards Update No. 2010-06 (ASU2010-06), Fair
Value Measurements and Disclosures which amends ASC Topic 820,adding new
requirements for disclosures for Levels 1 and 2, separate disclosuresof
purchases, sales, issuances, and settlements relating to Level 3 measurementsand
clarification of existing fair value disclosures.  ASU 2010-06
iseffective for interim and annual periods beginning after December 15,
2009,except for the requirement to provide Level 3 activity of purchases,
sales,issuances, and settlements on a gross basis, which will be effective for
fiscalyears beginning after December 15, 2010 (the Company’s fiscal year 2012);
earlyadoption is permitted.  The Company is currently evaluating the
impactof adopting ASU 2009-14 on its financial statements.
  Merger and
CorporateRestructure
  On
June26, 2006 the company entered into an agreement and plan of merger with
FullPower Enterprises Global Limited, a holding company that owns all of the
issuedand outstanding shares of Shenzhen Yuzhilu Aviation Service Company
Limited, theoperating Company. In substance the agreement is a recapitalization
of ShenzhenYuzhilu Aviation Service Company’s capital structure.
  Foraccounting
purposes, the company accounted for the transaction as a reverseacquisition and
with Full Power Enterprises Global Limited being the survivingentity. The
Company did not recognize goodwill or any intangible assets inconnection with
the transaction. Prior to the Agreement, the company was aninactive corporation
with no significant assets andliabilities.
  24
 
 UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note3
– TRADE DEPOSITS
ANDADVANCES
  Tradedeposits
represents amount held by Airlines and deposits. As of June 30,
2010and December 31, 2009 the Company had paid $7,706,484 and $9,775,735 as
tradedeposits respectively.
  Thefollowing
summaries the Company’s deposits outstanding by each of itssubsidiaries and the
nature and purpose of each deposit as of June 30, 2010 andDecember 31, 2009:
  June 30,
                                        
                                        
                                        December 31,2010
                                        
                                        
                                        2009Shenzhen
      Yuzhilu Aviation Service Co., Ltd:Deposit
      for tripeasy kiosks. The Company will start record of asset and
      depreciation on a 5 year straight-line method for the actual number of
      kiosk when they start operation.
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        1,465,592Deposit
      for central ticket system. This was a credit based for obtaining air
      tickets from third party before any payments, and the full amounts are
      returnable.
                                        
                                        
                                        3,834Deposit
      for airlines. This was a credit based for issuing air-tickets, and the
      full amount is returnable if the company discontinues air-ticket business.
                                        
                                        
                                        516,115
                                        
                                        
                                        
                                        2,811,004Deposit
      for Financial System Software
                                        
                                        
                                        -
                                        
                                        
                                        
                                        16,898Deposit
      for air-ports. This was a deposit for admittance to do marketing in
      air-ports, and is deductible against monthly rental obligation to
      air-ports
                                        
                                        
                                        -
                                        
                                        
                                        
                                        8,508Deposit
      for agencies. This was a credit based for the company to issue other
      ticket agencies' special fare air-ticket, and the full amount is
      returnable if the company discontinues its business with other agencies.
                                        
                                        
                                        3,529,929
                                        
                                        
                                        
                                        1,100,158Subtotal
                                        
                                        
                                        4,049,878
                                        
                                        
                                        
                                        5,402,160Huangshan
      Holiday Travel Agency Co., Ltd.:Advance
      payment to tour guides for expenses during leading the tour. This will be
      transferred to costs when the tour guide return from tour and provide
      supporting evidence.
                                        
                                        
                                        885
                                        
                                        
                                        
                                        -Subtotal
                                        
                                        
                                        885
                                        
                                        
                                        
                                        -Foshan
      Overseas International Travel Service Co. Ltd.:Deposit
      paid to tour companies.  This was a credit based for co-operate
      travel agencies, and is deductible against tour payments, the balance is
      returnable when cease doing business with these agencies.
                                        
                                        
                                        458,056
                                        
                                        
                                        
                                        969,261Advance
      payment to tour guides for expenses during leading the tour. This will be
      transferred to costs when the tour guide return from tour and provide
      supporting evidence.
                                        
                                        
                                        -
                                        
                                        
                                        
                                        243,342Subtotal
                                        
                                        
                                        458,056
                                        
                                        
                                        
                                        1,212,603Xian
      Golden Net Travel Serve Services, Ltd.:Deposit
      for Tour companies. This was a credit based for co-operate travel
      agencies, and is deductible against tour payments, the balance is
      returnable when cease doing business with these agencies
                                        
                                        
                                        560,353
                                        
                                        
                                        
                                        425,396Deposit
      for transportations.  This was a credit based for
      co-operate transportation suppliers, and is deductible against
      transportation payments, the balance is returnable when cease doing
      business with these agencies.
                                        
                                        
                                        -
                                        
                                        
                                        
                                        132,019Subtotal
                                        
                                        
                                        560,353
                                        
                                        
                                        
                                        557,415Chongqing
      Travel World E-Business Co., Ltd.Deposit
      for agencies. This was a credit based for the company to issue other
      ticket agencies' special fare air-ticket, and the full amount is
      returnable if the company discontinues its business with other agencies.
                                        
                                        
                                        2,600,447
                                        
                                        
                                        
                                        2,587,279Subtotal
                                        
                                        
                                        2,600,447
                                        
                                        
                                        
                                        2,587,279Shenzhen
      Universal TravelDeposit
      for agencies. This was a credit based for the company to issue other
      ticket agencies' special fare air-ticket, and the full amount is
      returnable if the company discontinues its business with other agencies.
                                        
                                        
                                        36,865
                                        
                                        
                                        
                                        16,278Subtotal
                                        
                                        
                                        36,865
                                        
                                        
                                        
                                        16,278Total
                                        
                                        $
                                        7,706,484
                                        
                                        
                                        $
                                        9,775,735
 
 TheCompany
cancelled a co-operation agreement with an unrelated company, to assistthat
company in their business development by participating in thatbusiness
operation and providing working capital funding and the unrelatedcompany
returned all advances. As of June 30, 2010 and December 31, 2009 theCompany has
advanced this company $0 and $440,063,respectively.
  25
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note4
- COMPENSATEDABSENCES
 
 Regulation45
of local PRC labor law entitles employees to annual vacation leave after 1year
of service. In general all leave must be utilized annually, with
propernotification. Any unutilized leave is cancelled.
  Note5 – 
RELATEDPARTY
TRANSACTIONS
 As ofJune
30, 2010, Due from related party account has balance of $6.99 million,which was
an advance for cash payment of two acquisitons in June. The paymentswere paid by
corporate account on June 28, 2010 and the related party returnedthe same amount
on August 10, 2010.
  
 Note 6-
INCOMETAXES
  TheCompany
through its subsidiary Shenzhen Yuzhilu Aviation Service Co., Ltd.is
governed by the Income Tax Laws of the PRC. Operations in the United Statesof
America have incurred net accumulated operating losses for income taxpurposes.
Pursuant to the PRC Income Tax Laws, the Enterprise Income Tax (EIT)the Company
has a statutory rate of 25%. The following is a reconciliation ofincome tax
expense for the three and six months ended June 30, 2010 and2009.
  Six months
                          
                          Six months
                          
                          Three months
                          
                          Three monthsended
                          
                          ended
                          
                          ended
                          
                          endedJune 30,
                          
                          June 30,
                          
                          June 30,
                          
                          June 30,2010
                          
                          2009
                          
                          2010
                          
                          2009Current
                          
                          $
                          3,393,028
                          
                          
                          $
                          2,138,151
                          
                          
                          $
                          1,907,901
                          
                          
                          $
                          1,020,955Deferred
                          
                          
                          
                          
                          
                          
                          -
                          
                          
                          
                          
                          
                          
                          
                          -Total
                          
                          $
                          3,393,028
                          
                          
                          $
                          2,138,151
                          
                          
                          $
                          1,907,901
                          
                          
                          $
                          1,020,955
  Note 7–
COMMITMENTS
  TheCompany
leases various office facilities under month-to-month arrangements.Rental
expense for leases consisted of $551,511 and $147,903 for six monthsended
June 30, 2010 and 2009, respectively. Rental expense for leases were$340,995 and
$52,966 for three months ended June 30, 2010 and
2009,respectively.  The Company has future minimum lease obligations
as ofJune 30, 2010 as follows:
  2011
                      
                      $
                      698,3952012
                      
                      
                      295,6702013
                      
                      
                      262,9342014
                      
                      
                      201,2742015
                      
                      
                      30,818There
      after
                      
                      
                      11,060Total
                      
                      $
                      1,500,151
  26
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
  Note 8–
COMMONSTOCK
  InJanuary
2007 the company adopted the Universal Travel Group 2007 EquityIncentive Plan.
Under the terms of this Plan the Company issued 1,256,667 sharesof the Company’s
stock, valued at $1,583,400, for services rendered during theperiod from October
2, 2006 through February 28, 2007.
  On
June28, 2010, the Company consummated the acquisition of a 100% interest in
KunmingBusiness Travel Agency Co., Ltd.  ("KBT") for a cash and
stocktransaction valued at approximately US$5.7 million in aggregate. This
amount isincluded in the cost of net assets and goodwill purchased.
  The
stockconsideration consisted of 79,487 newly issued shares of the Registrant’s
commonstock, which were given to KBT’s Shareholder immediately before the
completionof the Share Exchange Transaction. The cash consideration consisted
of$5,163,626.
  KBT
isengaged in the business of Chinese domestic tourism. The purchase price
wasdetermined based on arms' length negotiations between Universal Travel Group
andthe shareholder of KBT.
  Theacquisition
had been accounted for as a purchase business combination and theresults of
operations from the acquisition date have been included in theCompany's
consolidated financial statements in accordance with ASC810. Theallocation of
the purchase price is as follows:
  Cash
      acquired
                          
                          $
                          686,825Accounts
      receivable
                          
                          
                          1,983Due
      to shareholders
                          
                          
                          155,624Other
      assets
                          
                          
                          247,737Property
      Plant & Equipment
                          
                          
                          94,074Identifiable
      Intangibles
                          
                          
                          892,898Goodwill
                          
                          
                          4,009,070Total
      assets acquired
                          
                          
                          6,088,211Liabilities
      assumedAccounts
      & Income Taxes payable
                          
                          
                          244,784Other
      payable
                          
                          
                          107,559Total
                          
                          $
                          5,735,868
  Theexcess
of purchase price over tangible assets acquired and liabilities assumedwas
$4,901,968 of which 4,009,070 was recorded as goodwill. At the time of
theacquisition $892,898 of identifiable intangibles assets existed under
thecontractual-legal or the reparability criterion as required under ASC805.
  Prior
tothe acquisition, Kunming Business Travel Agency Co., Ltd. prepared its
financialstatements under accounting principles generally accepted in the United
Statesof America.
  On
June28, 2010, the Company consummated the acquisition of a 100% interest in
ShanxiJinyang Travel Agency Co., Ltd. ("SJT") for a cash and stock transaction
valuedat approximately US$2.3 million in aggregate. This amount is included in
thecost of net assets and goodwill purchased.
  27
 
 UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
  Note 8–
COMMON
STOCK(CONTINUED)
  The
stockconsideration consisted of 31,387 newly issued shares of the Registrant’s
commonstock, which were given to SJT’s Shareholder immediately before the
completionof the Share Exchange Transaction. The cash consideration consisted
of$2,038,946.
  SJT
isengaged in the business of Chinese domestic tourism. The purchase price
wasdetermined based on arms' length negotiations between Universal Travel Group
andthe shareholder of SJT.
  Theacquisition
had been accounted for as a purchase business combination and theresults of
operations from the acquisition date have been included in theCompany's
consolidated financial statements in accordance with ASC810. Theallocation of
the purchase price is as follows:
  Cash
      acquired
                          
                          $
                          18,655Due
      from shareholders
                          
                          
                          247,357Other
      assets
                          
                          
                          146,972Property
      Plant & Equipment
                          
                          
                          21,634Identifiable
      Intangibles
                          
                          
                          361,124Goodwill
                          
                          
                          1,647,104Total
      assets acquired
                          
                          
                          2,442,846Liabilities
      assumedAccounts
      & Income Taxes payable
                          
                          
                          38,087Other
      payable
                          
                          
                          139,827Total
                          
                          $
                          2,264,932
  Theexcess
of purchase price over tangible assets acquired and liabilities assumedwas
$2,008,228 of which 1,647,104 was recorded as goodwill. At the time of
theacquisition $361,124 of identifiable intangibles assets existed under
thecontractual-legal or the reparability criterion as required under ASC805.
  Prior
tothe acquisition, Shanxi Jinyang Travel Agency Co., Ltd. prepared its
financialstatements under accounting principles generally accepted in the United
Statesof America.
  On
March29, 2010 the Company consummated the acquisition of a 100% interest in
ZhengzhouYulongkang Travel agency Co. Ltd ("ZYT") for a cash and stock
transaction valuedat approximately US$4 million in aggregate. This amount is
included in the costof net assets and goodwill purchased.
  The
stockconsideration consisted of 60,634 newly issued shares of the Registrant’s
commonstock, which were given to ZYT’s Shareholder immediately before the
completionof the Share Exchange Transaction. The cash consideration consisted
of$5,141,764.
  ZYT
isengaged in the business of Chinese domestic tourism. The purchase price
wasdetermined based on arms' length negotiations between Universal Travel Group
andthe shareholder of ZYT.
  28
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
  Note 8–
COMMON
STOCK(CONTINUED)
  Theacquisition
had been accounted for as a purchase business combination and theresults of
operations from the acquisition date have been included in theCompany's
consolidated financial statements in accordance with ASC810. Theallocation of
the purchase price is as follows:
  Cash
      acquired
                          
                          $
                          1,147,303Accounts
      receivable
                          
                          
                          32,286Other
      assets
                          
                          
                          5,926Property
      Plant & Equipment
                          
                          
                          31,308Identifiable
      Intangibles
                          
                          
                          805,626Goodwill
                          
                          
                          4,102,061Total
      assets acquired
                          
                          
                          6,124,510Liabilities
      assumedAccounts
      & Income Taxes payable
                          
                          
                          364,999Other
      payable
                          
                          
                          46,575Total
                          
                          $
                          5,712,936
  Theexcess
of purchase price over tangible assets acquired and liabilities assumedwas
$4,907,687 of which 4,102,061 was recorded as goodwill. At the time of
theacquisition $805,626 of identifiable intangibles assets existed under
thecontractual-legal or the reparability criterion as required under ASC805.
  Prior
tothe acquisition, Zhengzhou Yulongkang Travel agency Co. Ltd prepared
itsfinancial statements under accounting principles generally accepted in
theUnited States of America.
  On
March26, 2010 the Company consummated the acquisition of a 100% interest in
HuangshanHoliday Travel Service Co., Ltd ("HHT") for a cash and stock
transaction valuedat approximately US$4 million in aggregate. This amount is
included in the costof net assets and goodwill purchased.
  The
stockconsideration consisted of 61,847 newly issued shares of the Registrant’s
commonstock, which were given to HHTs Shareholder immediately before the
completion ofthe Share Exchange Transaction. The cash consideration consisted
of$2,343,824.
  HHT
isengaged in the business of Chinese domestic tourism. The purchase price
wasdetermined based on arms' length negotiations between Universal Travel Group
andthe shareholder of HHT.
  Theacquisition
had been accounted for as a purchase business combination and theresults of
operations from the acquisition date have been included in theCompany's
consolidated financial statements in accordance with ASC810. Theallocation of
the purchase price is as follows:
  29
 
 UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note 8–
COMMON
STOCK(CONTINUED)
  Cash
      acquired
                            
                            $
                            87,867Accounts
      receivable
                            
                            
                            204,435Other
      assets
                            
                            
                            404,929Property
      Plant & Equipment
                            
                            
                            75,788Identifiable
      Intangibles
                            
                            
                            479,870Goodwill
                            
                            
                            1,949,080Total
      assets acquired
                            
                            
                            3,201,969Liabilities
      assumedAccounts
      & Income Taxes payable
                            
                            
                            223,734Other
      payable
                            
                            
                            48,720Total
                            
                            $
                            2,929,515
  Theexcess
of purchase price over tangible assets acquired and liabilities assumedwas
$2,428,950 of which 1,949,080 was recorded as goodwill. At the time of
theacquisition $479,870 of identifiable intangibles assets existed under
thecontractual-legal or the separability criterion as required under ASC805.
  Prior
tothe acquisition, Huangshan Holiday Travel Service Co., Ltd prepared
itsfinancial statements under accounting principles generally accepted in
theUnited States of America.
  On
March29, 2010 the Company consummated the acquisition of a 100% interest in
HebeiTianyuan Travel Agency Co., Ltd ("HTT") for a cash and stock transaction
valuedat approximately US$4.4 million in aggregate. This amount is included in
thecost of net assets and goodwill purchased.
  The
stockconsideration consisted of 93,283 newly issued shares of the Registrant’s
commonstock, which were given to HTT’s Shareholder immediately before the
completionof the Share Exchange Transaction. The cash consideration consisted
of$3,519,736.
  HTTis
engaged in the business of Chinese domestic tourism. The purchase price
wasdetermined based on arms' length negotiations between Universal Travel Group
andthe shareholder of HTT.
  Theacquisition
had been accounted for as a purchase business combination and theresults of
operations from the acquisition date have been included in theCompany's
consolidated financial statements in accordance with ASC810. Theallocation of
the purchase price is as follows:
  Cash
      acquired
                            
                            $
                            181,316Accounts
      receivable
                            
                            
                            166,618Other
      assets
                            
                            
                            465,034Property
      Plant & Equipment
                            
                            
                            42,308Identifiable
      Intangibles
                            
                            
                            696,858Goodwill
                            
                            
                            3,208,455Total
      assets acquired
                            
                            
                            4,760,589Liabilities
      assumedAccounts
      & Income Taxes payable
                            
                            
                            238,525Other
      payable
                            
                            
                            123,602Total
                            
                            $
                            4,398,462
  30
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
  Note 8–
COMMON
STOCK(CONTINUED)
  Theexcess
of purchase price over tangible assets acquired and liabilities assumedwas
$3,905,313 of which 3,208,455 was recorded as goodwill. At the time of
theacquisition $696,858 of identifiable intangibles assets existed under
thecontractual-legal or the separability criterion as required under ASC805.
  Prior
tothe acquisition, Hebei Tianyuan Travel Agency Co., Ltd prepared its
financialstatements under accounting principles generally accepted in the United
Statesof America.
  Pursuantto
a share exchange agreement, the Company issued 50,588 shares of newly
issuedshares of Common Stock to the former shareholders of Xian Golden Net
TravelServe Services, Inc. The shares were valued at $258,000, which was the
fairvalue of the shares at the date the of the exchange agreement. This amount
isincluded in the cost of net assets and goodwill purchased.
  On
August6, 2007 the Company consummated the acquisition of a 100% interest in
XianGolden Net Travel Serve Services, Inc. ("XGN") for a cash and stock
transactionvalued at approximately US$1.8 million in aggregate. This amount is
included inthe cost of net assets and goodwill purchased.
  The
stockconsideration consisted of 50,588 newly issued shares of the Registrant’s
commonstock, which were given to XGN’s Shareholders immediately before the
completionof the Share Exchange Transaction. The cash consideration consisted
of$1,542,000 in cash and payable no later than the first anniversary of the
MergerTransaction. The obligation to pay the cash consideration is evidenced by
aninterest-free promissory note between the Registrant and the
XGN’sShareholders.
  XGN
isengaged in the business of Chinese domestic tourism. The purchase price
wasdetermined based on arms' length negotiations between Universal Travel Group
andthe shareholders of XGN.
  Theacquisition
had been accounted for as a purchase business combination and theresults of
operations from the acquisition date have been included in theCompany's
consolidated financial statements in accordance with ASC 810. Theallocation of
the purchase price is as follows:
  Cash
      acquired
                        
                        $
                        45,356Accounts
      Receivable
                        
                        
                        142,462Loans  to
      Shareholder
                        
                        
                        1,075,504Property
      Plant & Equipment
                        
                        
                        773Goodwill
                        
                        
                        764,895Total
      assets acquired
                        
                        
                        2,028,990Liabilities
      assumedAccounts
      & Income Taxes payable
                        
                        
                        131,875Other
      payable
                        
                        
                        97,115Total
                        
                        $
                        1,800,000
  Theexcess
of purchase price over tangible assets acquired and liabilities assumedof
$764,895 was recorded as goodwill. At the time of the acquisition noidentifiable
intangibles assets existed under the contractual-legal or theseparability
criterion as required under ASC 805.
  31
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note 8–
COMMON
STOCK(CONTINUED)
  Prior
tothe acquisition, Xian Golden Net Travel Serve Services, Inc. prepared
itsfinancial statements under accounting principles generally accepted in
theUnited States of America.
  Pursuantto
a share exchange agreement, the Company issued 200,000 shares of newly
issuedshares of Common Stock to the former shareholders of Shanghai Lanbao
TravelServices Co., Ltd. The shares were valued at $1,092,000, which was the
fairvalue of the shares at the date of the exchange agreement. This amount
isincluded in the cost of net assets and goodwill purchased.
  On
August8, 2007, the Company consummated the acquisition of a 100% interest in
ShanghaiLanbao Travel Services Co., Ltd. ("SLB") for a cash and stock
transaction valuedat approximately US$3.92 million in aggregate. This amount is
included in thecost of net assets and goodwill purchased.
  The
stockconsideration consisted of 200,000 newly issued shares of the
Registrant’scommon stock immediately before the completion of the Share
ExchangeTransaction. The cash consideration consisted of $2,828,000 in cash and
payableno later than the first anniversary of the Merger Transaction. The
obligation topay the cash consideration is evidenced by interest-free promissory
notesbetween the Registrant and each of the SLB Shareholders.
  SLB
isengaged in the business of real time booking of travel related products via
theinternet. The purchase price was determined based on arms' length
negotiationsbetween Universal Travel Group and the shareholders of SLB.
  Theacquisition
had been accounted for as a purchase business combination and theresults of
operations from the acquisition date have been included in theCompany's
consolidated financial statements in accordance with SFAS 94. Theallocation of
the purchase price is as follows:
  Cash
      acquired
                            
                            $
                            28,510Accounts
      Receivable
                            
                            
                            1,265,352Loans  to  shareholders
                            
                            
                            178,665Property
      Plant & Equipment
                            
                            
                            9,376Goodwill
                            
                            
                            3,081,799Total
      assets acquired
                            
                            
                            4,563,702Liabilities
      assumedAccounts
      & Income Taxes payable
                            
                            
                            566,809Other
      payable
                            
                            
                            76,893Total
                            
                            $
                            3,920,000
  Theexcess
of purchase price over tangible assets acquired and liabilities assumedof
$3,081,799 was recorded as goodwill. At the time of the acquisition
noidentifiable intangibles assets existed under the contractual-legal or
theseparability criterion as required under ASC 825.
  Prior
tothe acquisition, Shanghai Lanbao Travel Services Co., Ltd. prepared
itsfinancial statements under accounting principles generally accepted in
theUnited States of America.
  32
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note 8–
COMMON
STOCK(CONTINUED)
  Pursuantto
a share exchange agreement, the Company issued 374,321 shares of newly
issuedshares of Common Stock and a promissory note to the former shareholders
ofFoshan 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
exchangeagreement. This amount is included in the cost of net assets and
goodwillpurchased.
  OnSeptember
20, 2007, the Company consummated the acquisition of a 100% interestin Foshan
Overseas International Travel Service Co., Ltd. ("FOI") for a cash andstock
transaction valued at approximately US$6.5 million in aggregate. Thisamount is
included in the cost of net assets and goodwillpurchased.
  Thestock
consideration consisted of 374,329 newly issued shares of the Registrant’scommon
stock, immediately before the completion of the Share ExchangeTransaction. The
cash consideration consisted of $3,153,500 due immediatelybefore the completion
of the Share Exchange Transaction and payable no laterthan the first anniversary
of the Merger Transaction. The obligation to pay thecash consideration is
evidenced by two interest-free promissory notes betweenthe Registrant and each
of the FOI Shareholders.
  FOI
isengaged in the business of domestic and international travel inquiries as
wellas corporate travel, offering specialized packages that include national
andinternational air ticket booking, hotel reservations, conference
centerreservations and rental cars. The purchase price was determined based on
arms'length negotiations between Universal Travel Group and the shareholders of
FOI.The acquisition had been accounted for as a purchase business combination
andthe results of operations from the acquisition date have been included in
theCompany's consolidated financial statements in accordance with ASC 810.
Theallocation of the purchase price is as follows:
  Cash
      acquired
                            
                            $
                            423,292Accounts
      Receivable
                            
                            
                            2,204,094Loans
      Shareholders
                            
                            
                            686,936Trade
      Deposits
                            
                            
                            513,317Prepaid
      Expenses
                            
                            
                            3,285Property
      Plant & Equipment
                            
                            
                            42,244Goodwill
                            
                            
                            6,049,576Total
      assets acquired
                            
                            
                            9,922,744Liabilities
      assumedAccounts
      & Income Taxes payable
                            
                            
                            3,126,718Other
      payable
                            
                            
                            296,026Total
                            
                            $
                            6,500,000
 
 Theexcess
of purchase price over tangible assets acquired and liabilities assumedof
$6,049,576 was recorded as goodwill. At the time of the acquisition
noidentifiable intangibles assets existed under the contractual-legal or
theseparability criterion as required under ASC 805.
  Prior
tothe acquisition, Foshan Overseas International Travel Service Co., Ltd.
preparedits financial statements under accounting principles generally accepted
in theUnited States of America.
  33
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note 8–
COMMON
STOCK(CONTINUED)
  OnAugust
28, 2008, Universal Travel Group (the “Company”) entered into aSecurities
Purchase Agreement with Access America Fund, LP, Chinamerica Fund LP,Pope
Investments II LLC, Heller Capital Investments, LLC, CGM as C/F Ronald I.Heller
IRA, Investment Hunter, LLC, MARed Investments, High Capital Funding,LLC, and
Merrill Lynch, Pierce, Fenner & Smith, FBO Beau L. Johnson(collectively, the
“Buyers”) to sell to the Buyers 1,529,569 shares of commonstock, par value
$0.001 of the Company (“Common Stock”) and warrants to purchase764,785 shares of
Common Stock for an aggregate purchase price of $7,112,500(the “Financing”).
(See footnote 2, derivative liability)
  OnDecember
15, 2009, the Company closed a Subscription Agreements with certaininvestors to
sell to them an aggregate of 2,222,222 shares of common stock ofthe Company, par
value $0.001 (the “Shares”) for a purchase price of $9.00 pershare and an
aggregate purchase consideration of $19,999,998. In connection withthe
subscription the company paid fees and other costs pertaining to theagreement
totaling $1,049,749. Net proceeds of the transaction
were$18,950,249.  The offer and sale of the Shares were made pursuant
toan effective Registration Statement on Form S-3 (Registration No. 333-
161139)initially filed with the Securities and Exchange Commission on August 7,
2009and amended on November 2, 2009. The Registration Statement was
declaredeffective on November 5, 2009.
  On
June21, 2010, the Company closed an underwriting agreement with Brean
Murrary,carret & Co., LLC, as representative of the underwriters, related to
apublic offering of 2, 857, 143 shares of the common stock, par value $0.001
(the“shares”) for a purchase price of $7.00 per share and an aggregate
purchaseconsideration of $20,000,001. In connection with the subscription the
companypaid 5% underwriting commission, fees and other costs pertainning to
theagreement totaling $1,231,947. Net proceeds of the transaction were
$18,768,054.The offer and sale of the Shares were made pursuant to an effective
RegistrationStatement on Form S-3 (Registration No. 333- 161139) initially filed
with theSecurities and Exchange Commission on August 7, 2009 and amended on
November 2,2009. The Registration Statement was declared effective on November
5,2009.
 
 Note 9–
STOCK
WARRANTS,OPTIONS, AND COMPENSATION
  OnFebruary
4, 2008, under the terms of an equity financing commitment, the companyissued
74,074 shares of common stock at the closing price of $ 8.10
pershare.  The proceeds of $599,994 were paid directly to
theshareholders of Foshan Overseas International Travel Service Co, for amount
duethem under Note obligation of the company.
  On May
7,2007, the Company issued, to a newly appointed Board member, an option grant
topurchase 33,333 shares of common stock at the closing price at $ 5.85 per
share.The exercisable period is two years from issuance. On June 23, 2008,
uponresignation, Board member has forfeited all options.
  OnSeptember
6, 2007, the Company issued, to a newly appointed Board member, anoption grant
to purchase 33,333 shares of common stock at the closing price at $8.55 per
share. The options are exercisable until June 1, 2017. On June 23,2008, upon
resignation, Board member has forfeited 22,222options.
  34
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note 9–
STOCK
WARRANTS,OPTIONS, AND COMPENSATION (CONTINUED)
  OnDecember
7, 2007, the Company issued, to another newly appointed Board member,an option
grant to purchase 33,333 shares of common stock at the closing priceof $ 11.25
per share. The options are exercisable until November 1,2017.
  Stockoptions—
the option holder has no voting or dividend rights. The company recordsthe
expense of the stock options over the related vesting period. The optionswere
valued using the Black-Scholes option-pricing model at the model at thedate of
grant stock option pricing. On May 28, 2008, upon resignation, Boardmember has
forfeited 22,222 options.
  On
June24, 2008, the Company issued, to another newly appointed Board member, an
optiongrant to purchase 33,333 shares of common stock at the closing price of $
4.56per share. The options are exercisable until July 1, 2018. Stock options—
theoption holder has no voting or dividend rights. The company records the
expenseof the stock options over the related vesting period. The options were
valuedusing the Black-Scholes option-pricing model at the model at the date of
grantstock option pricing.
  OnJanuary
20, 2009, pursuant to the Securities Purchase agreement entered into onAugust
28, the Company enacted the Universal Travel Group 2009 Incentive StockOption
Plan entitles the grant of up to 2,200,000 shares of common stock
ofUniversal Travel Group, par value $0.001 to certain employees of the
Companyeither as stock or stock options, and the subsequent exercise of any
stockoptions.  The options are exercisable until January 19, 2019,
with avesting period of six years. Average purchase price for the options is
$3.73 pershare. The options were valued using the Black-Scholes
option-pricingmodel at the date of grant stock option
pricing.  The total fairmarket value at grant date is $5,483,865. On
July 23, 2009 3,300 were exercisedat $2.90.
  OnSeptember
1, 2009, the Company issued, to another newly appointed Board member,an option
grant to purchase 10,000 shares of common stock at the closing priceof $ 8.82
per share. The options are exercisable until August 2019. Stockoptions— the
option holder has no voting or dividend rights. The company recordsthe expense
of the stock options over the related vesting period. The optionswere valued
using the Black-Scholes option-pricing model at the model at thedate of grant
stock option pricing.
  OnSeptember
1, 2009, the Company issued, to the newly appointed CFO an optiongrant to
purchase 105,000 shares of common stock at the closing price of $ 8.82per share.
The options are exercisable until August 2019.
  Expectedvolatility
is based on the historical volatility of the Company’s stock price.The expected
term represents the estimated average period of time that theoptions remain
outstanding. No dividend payouts were assumed, as the Company hasno plans to
declare dividends during the expected term of the stock options. Therisk-free
rate of return reflects the weighted average interest rate offered forzero
coupon treasury bonds over the expected term of the options. Based uponthis
calculation and pursuant to, ASC 718, the Company recorded a service
periodexpense of $677,004 and $495,725 for the six months ended June 30, 2010
and2009, and $340,372 and $330,725 for the three months ended June 30, 2010
and2009, respectively.
  35
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
  Note 9–
STOCK
WARRANTS,OPTIONS, AND COMPENSATION (CONTINUED)
  Total
                                  
                                  Exercise Price
                                  
                                  Remaining Life
                                  
                                  Aggregate
                                    Intrinsic ValueOutstanding,
      December 31, 2009
                                  
                                  
                                  1,603,888
                                  
                                  
                                  $
                                  2.70–11.25
                                  
                                  7.44-9.67yrs
                                  
                                  
                                  -Outstanding,
      June 30, 2010
                                  
                                  
                                  1,603,888
 
 Pursuantto
the Securities Purchase Agreement entered into On August 28, 2008, theCompany
issued warrants to purchase 764,786 shares of Common Stock. The unitpurchase
price was $4.65 per Common Share and arelated Warrant for the purchase of one-half a
Common Share, times the number ofCommon Shares purchased. Market Value of the
Company’s stock on August 28, 2008was $4.05. Each warrant has an Exercise Price
of $8.13 and a term of 5 yearsfrom the date of issuance.  The Company
measured and recognized anaggregate of $2,091,738 of the proceeds to additional
paid in capital uponissuance of these warrants. The terms of the warrants
provide for an adjustmentto the exercise price of these warrants if the company
closes on the sale orissuance of common stock at a price which is less than the
exercise price thenin effect for these warrants. Upon the Company’s adoption of
EITF No. 07-05on January 1, 2009, the Company determined that the
warrants did notqualify for a scope exception under SFAS No. 133 as they
were determined tonot be indexed to the Company’s stock as prescribed by
EITFNo. 07-05.  On January 1, 2009, the warrants were
reclassifiedfrom equity to derivative liability for the then fair market value
and marked tomarket (see Note 2 Derivative Liability).  On August 20, 2009
322,580warrants valued at $3,598,571 as of that date, were exercised under the
cashlessexercise provisions of the warrants. The Company issued 132,251 shares
of commonstock. On October 15, 2009, 215,054 warrants valued at $2,888,495 as of
thatdate were exercised under the cashless exercise provision of the warrants.
Thecompany issued 103,318 shares of common stock.
  Note 10-
OTHER
COMPREHENSIVEINCOME
  Balancesof
related after-tax components comprising accumulated other comprehensiveincome,
included in stockholders equity, as of June 30, 2010 and December
31,2009 are as follows:
  Foreign Currency
                                    
                                    
                                    Accumulated OtherTranslation
                                    
                                    
                                    ComprehensiveAdjustment
                                    
                                    
                                    IncomeBalance
      December 31, 2008
                                    
                                    $
                                    1,520,166
                                    
                                    
                                    $
                                    1,520,166Changes
      for year ended December 31, 2009
                                    
                                    
                                    124,967
                                    
                                    
                                    
                                    124,967Balance
      December 31, 2009
                                    
                                    
                                    1,645,133
                                    
                                    
                                    
                                    1,645,133Changes
      for  the six months ended June 30, 2010
                                    
                                    
                                    (360,699
                                    )
                                    
                                    
                                    (360,699
                                    )Balance
      at June 30, 2010
                                    
                                    $
                                    1,284,434
                                    
                                    
                                    $
                                    1,284,434
  36
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note11
- CURRENTVULNERABILITY
DUE TO CERTAIN RISK FACTORS
  TheCompany’s
operations are carried out in the PRC. Accordingly, the Company’sbusiness,
financial condition and results of operations may be influenced by thepolitical,
economic and legal environments in the PRC, and by the general stateof the PRC's
economy. The Company’s business may be influenced by changes ingovernmental
policies with respect to laws and regulations, anti-inflationarymeasures,
currency conversion and remittance abroad, and rates and methods oftaxation,
among other things.
  Note12
– MAJOR CUSTOMERSAND
CREDIT RISK
  TheCompany
derives a portion of its income from various Airlines. Most revenue iscleared
through IATA, a centralized reporting platform.
  Note13
-    SEGMENTINFORMATION
  Upon
thedisposition of Shenzhen Speedy Dragon Enterprises Limited pursuant to
atermination agreement dated June 12, 2009, the Company currently operates
andprepares accounting and other financial reports separately to management
foreleven major business organizations (Shenzhen Yuzhilu Aviation Service
Co.,Ltd., Shanghai Lanbao Travel Service Co., Ltd., Foshan International
TravelService Co., Ltd.,  Xian Golden Net Travel Serve Services,
ChongqingTravel World E-Business Co., Ltd., Shenzhen Universal Travel Agency
Co., Ltd.,Hebei Tianyuan Travel Agency Co., Ltd., Zhengzhou Yulongkang Travel
Agency Co.,Ltd., Huangshan Holiday Travel Service Co., Ltd., Kunming Business
TravelService Co., Ltd., and Shanxi Jinyang Travel Agency Co., Ltd.). Pursuant
to SFAS131 they disclose segments on a single entity basis, which in their case
is thelegal entity. Our air-ticketing segment relates to the segment reporting
ofShenzhen Yuzhilu Aviation Service Co., Ltd. and Chongqing Travel
WorldE-Business Co., Ltd., hotel reservation segment relates to Shanghai
LanbaoTravel Service Co., Ltd., packaged tours segment relates to Foshan
InternationalTravel Service Co., Ltd., Xi’an Golden Net Travel Serve Service
Company Ltd.,Shenzhen Universal Travel Agency Co., Ltd., Hebei Tianyuan Travel
Agency Co.,Ltd., Zhengzhou Yulongkang Travel Agency Co., Ltd., Huangshan Holiday
TravelService Co., Ltd., Kunming Business Travel Service Co., Ltd., and Shanxi
JinyangTravel Agency Co., Ltd.. Management monitors these segments
regularly tomake decisions about resources to be allocated to the segment and
assess itsperformance,
  37
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note13
-    SEGMENT
INFORMATION(CONTINUED)
  Thefollowing
tables’ present summarized information by segment:
  Air
                                                                                                                                                  Ticketing
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                Hotel
                                                                                                                                                  Reservation
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                Package
                                                                                                                                                  Tours
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                Other
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                TotalSix
      Months Ended June 30, 2010Sales,
      net
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                10,442,953
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                6,169,248
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                46,259,418
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                62,871,619Cost
      of sales
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                1,202,103
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                2,160,523
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                40,453,880
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                43,816,506Gross
      profit
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                9,240,850
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                4,008,725
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                5,805,538
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                19,055,113Income
      from operations
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                4,833,592
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                3,918,849
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                5,429,109
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                (654,482
                                                                                                                                                )
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                13,527,068Depreciation
      & Amortization
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                641,117
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                879
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                49,469
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                260,937
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                952,402Asset
      Expenditures
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                1,881,654
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                33,467
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                1,012
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                1,916,133Total
      assets
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                30,987,883
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                9,499,533
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                8,024,758
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                5,210,309
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                53,722,483Six
      Months Ended June 30, 2009Sales,
      net
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                6,045,642
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                5,230,975
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                22,639,535
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                33,916,152Cost
      of sales
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                651,979
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                1,683,627
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                19,279,043
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                21,614,649Gross
      profit
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                5,393,663
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                3,547,348
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                3,360,492
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                12,301,503Income
      from operations
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                3,722,661
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                3,471,539
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                2,846,988
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                (837,401
                                                                                                                                                )
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                9,203,787Depreciation
      & Amortization
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                180,515
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                2,618
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                7,606
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                190,739Asset
      Expenditures
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                6,076,248
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                6,076,248Total
      assets
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                30,987,883
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                9,499,533
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                8,024,758
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                5,210,309
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                53,722,483Three
      Months Ended June 30, 2010Sales,
      net
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                6,005,989
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                3,018,872
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                27,716,752
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                36,741,613Cost
      of sales
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                399,514
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                1,071,350
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                24,717,610
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                26,188,474Gross
      profit
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                5,606,475
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                1,947,522
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                2,999,142
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                10,553,139Income
      from operations
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                2,566,078
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                1,890,597
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                2,845,473
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                649,951
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                7,952,099Depreciation
      & Amortization
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                342,699
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                440
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                35,087
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                161,819
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                540,045Asset
      Expenditures
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                1,243,298
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                22,061
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                1,011
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                1,266,371Total
      assets
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                30,987,883
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                9,499,533
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                8,024,758
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                5,210,309
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                53,722,483Three
      Months Ended June 30, 2009Sales,
      net
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                3,294,514
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                2,714,144
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                12,396,815
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                18,405,473Cost
      of sales
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                349,173
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                910,164
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                10,616,442
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                11,875,779Gross
      profit
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                2,945,341
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                1,803,980
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                1,780,373
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                6,529,694Income
      from operations
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                2,147,871
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                1,772,243
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                1,461,127
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                (416,466
                                                                                                                                                )
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                4,964,775Depreciation
      & Amortization
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                100,886
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                1,557
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                3,640
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                106,083Asset
      Expenditures
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                4,815,850
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                -
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                4,815,850Total
      assets
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                30,987,883
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                9,499,533
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                8,024,758
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                5,210,309
                                                                                                                                                
                                                                                                                                                
                                                                                                                                                $
                                                                                                                                                53,722,483
 38
  UNIVERSALTRAVEL
GROUP
 NOTESTO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE30,
2010
 (UNAUDITED)
 
 Note14
-    SUBSEQUENTEVENTS
  On March 4, 2010, the company announced that it has entered
intoletters of intent to acquire four travel agency businesses in China –
TianjinHongxun Aviation Agency Co., Ltd. (“Tianjin Hongxun”), Shanxi Jinyang
TravelAgency Co., Ltd. (“Shanxi Jingyang”), Kunming Business travel Agency Co.,
Ltd.(“Kunming Business Travel”), and Shandong Century Aviation Development Co.,
Ltd.(“Shandong Century”) – for a total purchase consideration of $19.5 million.
Thecombined unaudited 2009 revenue and net income for the four travel agencies
were$23.0 million and $3.0 million, respectively.  The final
purchaseconsideration of Tianjin Hongxun and Shandong Century may be subject
toadjustment after completion of the diligence by the Company.
  On
July13, 2010, the company announced a partnership with Agoda, a subsidiary
ofPriceline.com, to strengthen its hotel reservation business segment and
upgradeits website, www.cnutg.com.
Underthe agreement, Universal Travel Group will offer its customers access to
Agoda’sinternational network of hotels. Through the updated cnutg.com
website,travelers will be able to enjoy special Agoda promotions and
instantconfirmation at tens of thousands of hotels worldwide.  Through
thispartnership with Universal Travel Group, Agoda intends to increase its
exposurein the large Chinese travel market.
  For
thesix months ended June 30, 2010, the Company has evaluated subsequent events
forpotential recognition and disclosure through August 9, 2010, the date of
thefinancial statement issuance.
  39
  Item2.  Management’s
Discussion and Analysis or Plan ofOperation.
 
 Forward-LookingStatements:
No Assurances Intended
 
 Inaddition
to historical information, this Quarterly Report containsforward-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 representManagement’s
belief as to the future of Universal TravelGroup.  Whether those
beliefs become reality will depend on manyfactors that are not under
management’s control.  Many risks anduncertainties exist that could
cause actual results to differ materially fromthose reflected in these
forward-looking statements. Readers are cautioned notto place undue reliance on
these forward-looking statements. We undertake noobligation to revise or
publicly release the results of any revision to theseforward-looking statements.
 
 BusinessOverview
 
 Headquarteredin
Shenzhen, Guangdong Province, the Company is a travel services provider inthe
People’s Republic of China and is engaged in providing reservation, booking,and
domestic and international travel and tourism services throughout thePeople’s
Republic of China via the internet, its TRIPEASY Kiosks and throughcustomer
representatives.
 
 Under
thetheme of "Wings towards a more colorful life", our core services include
tourpackaging, booking services for air tickets and hotelsreservations.
 
 In
2007,we completed the acquisition of Speedy Dragon Enterprise Limited,
specializingin air cargo agency; Xi'an Golden Net Travel Serve Services Co.,
Ltd.,specializing in travel packaged tours; Shanghai Lanbao Travel Service Co.,
Ltd.,specializing in hotel reservations and Foshan Overseas International
TravelService Co., Ltd., a PRC-based company that handles both domestic
andinternational travel inquiries.
 
 In
thesecond quarter of 2009, based on the past performance of our air cargo
business,as well as the market perspective of this business, we decided to spin
off ourSpeedy Dragon Enterprise Limited subsidiary, and as a result, exited the
aircargo business. We believe the spin-off was beneficial to us as it allowed us
toconcentrate on our core business of selling air tickets, hotel
accommodationsand packaged tours.
 
 In
orderto seize the opportunities arising from the economic promotion by the
Chinesegovernment of the mid and western regions of the PRC, we strategically
set upChongqing Universal Travel E-Business Co., Ltd. to strengthen our presence
inthat region in the second quarter of 2009 and began generating revenues in
thethird quarter of 2009.
 
 In
March2010, we completed the acquisition of Huangshan Holiday Travel Service Co.,
Ltd.("Huangshan Holiday"), Hebei Tianyuan International Travel Agency Co.,
Ltd.("Tianyuan"), and Zhengzhou Yulongkang Travel Agency Co., Ltd.
("Yulongkang").At the end of June 2010, we also completed the acquisition of
Shanxi JinyangTravel Agency Co., Ltd ("Shanxi Jinyang") and Kunming Business
Travel AgencyCo., Ltd (“Kunming Business Travel”), two other packaged tour
servicesproviders.
 
 Webelieve
that these acquisitions of travel service providers would help usfurther expand
our geographic coverage in the fast growing domestic travelmarket. We believe
our comprehensive service platform and broad customer reachwill enable us to
improve the sales volume and operation efficiency of these newacquisitions. On
the other hand, they will also help lift the sales volume andoperation
efficiency of our existing subsidiaries, and thus improve our overallearnings
and profit margins.
 
 40
 
 Wecurrently
have three discrete lines of business and revenue. Our air-ticketingsegment
relates to the segment reporting of Shenzhen Yuzhilu Aviation ServiceCo., Ltd.
and Chongqing Travel World E-Business Co., Ltd. Our hotel reservationsegment
relates to Shanghai Lanbao Travel Service Co., Ltd. Our packaged tourssegment
relates to the remaining eight operating subsidiaries: FoshanInternational
Travel Service Co., Ltd, Xi’an Golden Net Travel Serve ServiceCompany Limited,
Shenzhen Universal Travel Agency Co. Ltd, Huangshan HolidayTravel Service Co.,
Ltd., Hebei Tianyuan International Travel Agency Co., Ltd,Zhengzhou Yulongkang
Travel Agency Co., Ltd, Shanxi Jinyang Travel Agency Co.,Ltd and Kunming
Business Travel Agency Co., Ltd.
 
 Operationsof
each segment are exclusive to the operations of the associated
subsidiarycompany. Those new subsidiaries which previously had air-ticketing
service orhotel reservation services were consolidated into our existing
air-ticketing andhotel reservation services. With higher volume in these two
business segments,we believe that we now have better bargaining power with our
suppliers, theairlines or hotels.
 
 On
June21, 2010 we closed a common stock offering transaction. In this transaction,
weissued 2,857,143 shares of common stock at $7.00 per share for an
aggregateamount of $20 million.
 
 On
June24, 2010, upon the approval of the Civil Aviation Administration of
China(CAAC), a number of Chinese airlines claimed that they were authorized to
cutthe commission paid to travel agencies from 5% to 3%. Currently there has
beenno major impact on our existing businesses, since
these airlines hadonly reduce the commission rate for a few flights
departing from Beijing andShanghai.
 
 Webelieve
that airlines will still heavily rely on travel agencies to sell theirtickets in
the near future and will have to continue payment sales commissionsto them.
 
 We
alsoanticipate the proposed airline commission rate cut would accelerate
theconsolidation of  the Chinese travel industry. The more
efficientand better managed service providers will excel over their competitions
and gainmore market shares in this industry, while their smaller competitors
wouldeither consolidate with other agencies or wind up.
 
 In
July2010, we partnered with Agoda, a subsidiary of Priceline.com, to strengthen
ourhotel reservation business segment. Under this partnership agreement, we
offerour customers access to Agoda's international network of hotels. Through
ourwebsite, travelers will be able to enjoy special Agoda promotions and
instantconfirmation at tens of thousands of hotels worldwide. Also through
thispartnership, Agoda intends to increase its exposure in the large Chinese
travelmarket. This partnership offers us the opportunity to work with one of
theworld's largest online hotel reservation agencies and further strengthen
ourhotel reservation segment. The cooperation with Agoda fits with our strategy
ofexpanding our higher margin business segments. We intend to leverage
Agoda'sglobal brand awareness and look forward to higher volume in
hotelreservation.
 
 In
2009,we were selected one of the Top Ten Brands of Travel Services in the
People’sRepublic of China. We believe our quality of services will distinguish
us in ourlong term competitiveness.
 
 RESULTSOF
OPERATIONS
 
 THREEMONTHS
ENDED JUNE, 2010 AND 2009
 
 Thefollowing
table presents certain consolidated statement of operationsinformation derived
from the consolidated statements of income for the threemonths ended June 30,
2010 and 2009 respectively.
 
 Becausethe
Company had spun off its Speedy Dragon Enterprise Limited subsidiary andexited
the air cargo business in the second quarter of 2009, all numbersattributable to
continuing operations in the following discussion do not includethe operating
results of Speedy Dragon Enterprise Limited for the second quarterof 2009 and
its historical results.  Such had been reclassified asdiscontinued
operations.
 
 41
 
 Three months ended
                                  June 30, 2010
                                
                                
                                Three months ended
                                  June 30, 2009
                                
                                
                                Increase /
                                  Decrease
                                
                                PercentageRevenues
                                
                                $
                                36,741,612
                                
                                
                                $
                                18,405,473
                                
                                
                                $
                                18,336,139
                                
                                100
                                %Cost
      of Services
                                
                                
                                (26,188,473
                                )
                                
                                
                                (11,875,779
                                )
                                
                                
                                (14,312,694
                                )
                                121
                                %Gross
      Profit
                                
                                
                                10,553,139
                                
                                
                                
                                6,529,694
                                
                                
                                
                                4,023,445
                                
                                62
                                %SG&A
                                
                                
                                (3,461,037
                                )
                                
                                
                                (1,564,919
                                )
                                
                                
                                (1,896,118
                                )
                                121
                                %Income
      from Operations
                                
                                
                                7,092,102
                                
                                
                                
                                4,964,775
                                
                                
                                
                                2,127,327
                                
                                43
                                %Other
      income
                                
                                
                                3,363
                                
                                
                                
                                2,591
                                
                                
                                
                                772
                                
                                23
                                %Gain
      (Loss) on change in fair value of derivative liabilities
                                
                                
                                839,553
                                
                                
                                
                                (5,819,481
                                )
                                
                                
                                6,659,034
                                
                                N/MInterest
      income
                                
                                
                                17,081
                                
                                
                                
                                12,358
                                
                                
                                
                                4,723
                                
                                38
                                %Income
      before income taxes
                                
                                
                                7,952,099
                                
                                
                                
                                (839,757
                                )
                                
                                
                                8,791,856
                                
                                N/MProvision
      for income taxes
                                
                                
                                (1,907,901
                                )
                                
                                
                                (1,020,955
                                )
                                
                                
                                (886,945
                                )
                                87
                                %Income
      (Loss)  from continuing operations
                                
                                
                                6,044,198
                                
                                
                                
                                (1,860,712
                                )
                                
                                
                                7,904,910
                                
                                N/MIncome
      from discontinued operations
                                
                                
                                
                                
                                
                                
                                46,282
                                
                                
                                
                                (46,282
                                )Loss
      on disposition of discontinued operations
                                
                                
                                
                                
                                
                                
                                (770,595
                                )
                                
                                
                                770,595Net  Income
      (Loss)
                                
                                
                                6,044,198
                                
                                
                                
                                (2,585,025
                                )
                                
                                
                                8,629,223
                                
                                N/M
 
 For the three months
endedJune 30, 2010:
  Revenue Segment
                      
                      Air tickets
                        (YZL &
                        CTE)
                      
                      
                      (%) of
                        sector
                      
                      
                      Hotel (SLB)
                      
                      
                      (%) of
                        sector
                      
                      
                      Tours
                        (All Others)
                      
                      
                      (%) of
                        sector
                      
                      
                      TotalRevenue
                      
                      $
                      6,005,989
                      
                      
                      
                      16.3
                      %
                      
                      
                      3,018,872
                      
                      
                      
                      8.2
                      %
                      
                      
                      27,716,751
                      
                      
                      
                      75.4
                      %
                      
                      
                      36,741,612Cost
      of Services
                      
                      
                      (399,513
                      )
                      
                      
                      1.5
                      %
                      
                      
                      (1,071,350
                      )
                      
                      
                      4.1
                      %
                      
                      
                      (24,717,610
                      )
                      
                      
                      94.4
                      %
                      
                      
                      (26,188,473
                      )Gross
      Profit
                      
                      $
                      5,606,475
                      
                      
                      
                      53.1
                      %
                      
                      
                      1,947,522
                      
                      
                      
                      18.5
                      %
                      
                      
                      2,999,142
                      
                      
                      
                      28.4
                      %
                      
                      
                      10,553,139Gross
      Margin
                      
                      
                      93.3
                      %
                      
                      
                      
                      
                      
                      
                      64.5
                      %
                      
                      
                      
                      
                      
                      
                      10.8
                      %
                      
                      
                      
                      
                      
                      
                      28.7
                      %Segment
      effect in Gross Margin (*)
                      
                      
                      15.3
                      %
                      
                      
                      
                      
                      
                      
                      5.3
                      %
                      
                      
                      
                      
                      
                      
                      8.2
                      %
                      
                      
                      
                      
                      
                      
                      28.7
                      %
  For the three months
endedJune 30, 2009:
 
 Revenue Segment
                                        
                                        Air tickets
                                          (YZL)
                                        
                                        
                                        (%) of
                                          sector
                                        
                                        
                                        Hotel (SLB)
                                        
                                        
                                        (%) of
                                          sector
                                        
                                        
                                        Tours
                                          (All Others)
                                        
                                        
                                        (%) of
                                          sector
                                        
                                        
                                        TotalRevenue
                                        
                                        $
                                        3,294,514
                                        
                                        
                                        
                                        17.9
                                        %
                                        
                                        
                                        2,714,144
                                        
                                        
                                        
                                        14.7
                                        %
                                        
                                        
                                        12,396,815
                                        
                                        
                                        
                                        67.4
                                        %
                                        
                                        
                                        18,405,473Cost
      of Services
                                        
                                        
                                        (349,173
                                        )
                                        
                                        
                                        2.9
                                        %
                                        
                                        
                                        (910,164
                                        )
                                        
                                        
                                        7.7
                                        %
                                        
                                        
                                        (10,616,442
                                        )
                                        
                                        
                                        89.4
                                        %
                                        
                                        
                                        (11,875,779
                                        )Gross
      Profit
                                        
                                        $
                                        2,945,341
                                        
                                        
                                        
                                        45.1
                                        %
                                        
                                        
                                        1,803,980
                                        
                                        
                                        
                                        27.6
                                        %
                                        
                                        
                                        1,780,373
                                        
                                        
                                        
                                        27.3
                                        %
                                        
                                        
                                        6,529,694Gross
      Margin
                                        
                                        
                                        89.4
                                        %
                                        
                                        
                                        
                                        
                                        
                                        
                                        66.5
                                        %
                                        
                                        
                                        
                                        
                                        
                                        
                                        14.4
                                        %
                                        
                                        
                                        
                                        
                                        
                                        
                                        35.5
                                        %Segment
      effect in Gross Margin (*)
                                        
                                        
                                        16.0
                                        %
                                        
                                        
                                        
                                        
                                        
                                        
                                        9.8
                                        %
                                        
                                        
                                        
                                        
                                        
                                        
                                        9.7
                                        %
                                        
                                        
                                        
                                        
                                        
                                        
                                        35.5
                                        %
 
 (*)"Segment
effect in Gross Margin" was calculated by multiplying "the percentageof the
segment revenue over the total revenue" with "gross margin of the
relatedsector". This outlines how each segment contributes to the total
grossmargin.
 
 Revenue
 
 Ourair-ticketing
segment relates to the segment reporting of Shenzhen YuzhiluAviation Service
Co., Ltd. and Chongqing Travel World E-Business Co., Ltd. Ourhotel reservation
segment relates to Shanghai Lanbao Travel Service Co., Ltd.Our packaged tours
segment relates to the remaining eight operatingsubsidiaries: Foshan
International Travel Service Co., Ltd, Xi’an Golden NetTravel Serve Service
Company Limited, Shenzhen Universal Travel Agency Co. Ltd,Huangshan Holiday
Travel Service Co., Ltd., Hebei Tianyuan International TravelAgency Co., Ltd,
Zhengzhou Yulongkang Travel Agency Co., Ltd, Shanxi JinyangTravel Agency Co.,
Ltd and Kunming Business Travel Agency Co., Ltd. Operationsof each segment are
exclusive to the operations of the associated subsidiarycompany.
 
 42
 
 Revenuesfor
the three months ended June 30, 2010 were $36,741,612, compared to$18,405,473
for the same period 2009, an increase of $18,336,139, orapproximately 100%. The
contributions from the five newly acquired subsidiarieswere $11,643,472, or
31.7% of our total revenues for these three months.Excluding this effect,
revenues for the three months ended June 30, 2010 were$25,098,140, compared to
$18,405,473 for the same period 2009, an increase of$6,292,666, or approximately
36 %.
 
 We
haveexpended considerable efforts to expand our businesses, especially the
packagedtour business. This resulted in the acquisition of five new packaged
toursubsidiaries this year.  For that reason, along with the strong
demandfor travel demand as a result of the recovery of Chinese economy, and
thecontinuing effect of the Chinese government’s stimulus package, our revenue
forthe quarter ended June 30, 2010 increased significantly from the same period
theyear before.  The high growth rate is also helped by the
comparativelylower numbers in the same quarter last year, when the tourism
industry wasadversely affected by H1N1. We continue to see success in cross
marketing andselling our travel related products across our business segments
and increasedbrand awareness from online resales and the deployment of our TRIPEASYkiosks.
 
 Revenuefrom
air-ticketing segment were $6,005,989 for the three months ended June 30,2010
compared to $3,294,514 for the same period last year, an increase of$2,711,475,
or approximately 82%. This increase is generally driven by the samefactors
mentioned above, but more specifically, a result of the increased demandfor air
passenger transportation and higher ticket prices. We attribute thehigher air
ticket prices to the booming tourism, general inflation in Chineseeconomy, as
well as the airlines acting together on pricing. As China’s economyrecovers, we
believe that our growth in air-ticketing is sustainable in thecoming quarters.
 
 Revenuefrom
hotel reservations segment were $3,018,872 for the three months ended June30,
2010 compared to $2,714,144 for the same period in 2009, an increase of$304,728,
or approximately 11%. This increase is a result of the factorsmentioned above
for air tickets and the successful cross marketing of ourvarious business
segments. For this specific segment, we expect higherreservation volumes and
higher revenue growth in the coming quarters, after ourpartnership with Agoda to
leverage its global brand awareness and internationalhotel network.
 
 Revenuefrom
our packaged tour segment were $27,716,751 for the three months ended June30,
2010, compared to $12,396,815 for the same period in 2009, an increase
of$15,319,936, or approximately 124%. Excluding the effect of the five
newlyacquired subsidiaries, which was $11,643,472, our revenues from this
segmentwere $16,073,279 for the three months ended June 30, 2010, compared
to$12,396,815, for the same period in 2009, an increase of $3,676,465,
orapproximately 24%. This increase is a result of the recovery of Chinese
economy,the government’s stimulus package, and our strong efforts in carrying
ourvarious marketing programs.
 
 Cost ofServices
 
 Costs
ofservices for air tickets cover mainly business and revenue
relatedtaxes.  Costs of services for hotel reservations cover mainly
businessand revenue related taxes, as well as commissions paid to the sales
agents forselling hotel rooms in the Company’s system.   Costs of
servicesfor packaged tours include meals, transportation (airline tickets, train
ticketsand car rental), lodging, airport transfers, tickets to local attractions
andtours.
 
 Otherdirect
costs such as systems and related technologies used by each segmentoperations,
and costs associated with payment processing are also included inthe Company’s
Costs of Services. In addition, the Company allocates costs oflabor and
facilities, depreciation, communications, and utility expensesincurred by each
segment between costs of services and general
administrativeexpenses.  The percentage, ranging from 50% to 80%,
allocated to costsof sales is based on management estimate, and the percentage
allocated isestimated to be directly associated with the generation ofrevenues.
 
 43
 
 Costs
ofservices for the three months ended June 30, 2010 were $26,188,474 compared
to$11,875,779 for the same period in 2009, an increase of $14,312,695,
orapproximately 121%. The comparatively higher costs of services resulted
frompackaged tours making up a greater percentage of our total revenue and
theircorresponding higher cost of services. Excluding the costs of services for
thefive newly acquired subsidiaries, which was $9,821,769, costs of services
forthe three months ended June 30, 2010 were $16,366,705, compared to
$11,875,779,for the same period 2009, an increase of $4,490,926, or
approximately 38%. Theincrease is in tandem with the increase in revenue.
 
 Costs
ofservices from air-ticketing were $399,514 for the three months ended June
30,2010, compared to $349,173 for the same period last year, an increase
of$50,341, or approximately 14%. This increase is associated with the
higherbooking volumes, and the much higher increase of revenue in thissegment.
 
 Costs
ofservices from hotel-reservation were $1,071,350 for the three months ended
June30, 2010, compared to $910,164 for the same period last year, an increase
of$161,186, or approximately 18%. The increase is in tandem with the increase
ofrevenue.
 
 Costs
ofservices from packaged-tour were $24,717,610 for the three months ended June
30,2010, compared to $10,616,442 for the same period last year, an increase
of$14,101,168 or approximately 133%. The increase is in tandem with the
increaseof revenue. Excluding the effect of the costs of services for the five
newlyacquired subsidiaries, which was $9,821,769, our costs of services from
thissegment were $14,895,841, for the three months ended June 30, 2010 compared
to$10,616,442, for the same period in 2009, an increase of $4,279,399,
orapproximately 40%. The increase is also in tandem with the increase of
revenuein this segment.
 
 GrossProfit
 
 Grossprofit
for the three months ended June 30, 2010 was $10,553,139, compared to$6,529,694,
for the same period 2009, an increase of $4,023,445, orapproximately 62%. The
increase in gross profit is due to the same factorscontributing to the growth in
revenue. The exponential growth in both ourdomestic air-ticketing business and
hotel reservations business is a result ofsynergies from our packaged tour
operations.
 
 Grossprofit
in our air-ticketing segment was $5,606,475 for the three months endedJune 30,
2010, compared to $2,945,341 for the same period last year, an increaseof
$2,661,134, or approximately 90%. Gross profit margin for the three monthsended
June 30, 2010 was 93.3%, compared to 89.4% for the same period 2009, anincrease
of approximately 3.9%. The increase of gross margin for this segmentwas mainly
attributable to the increased demand for air passenger transportationand higher
ticket prices. The higher air ticket prices are a result of thebooming tourism
in China, the general inflation in Chinese economy, as well asthe airlines
acting together to determine pricing.
 
 Grossprofit
in our hotel reservation segment was $1,947,522 for the three monthsended June
30, 2010 compared to $1,803,980 for the same period last year, anincrease of
$143,542, or approximately 8%. Gross profit margin in this segmentfor the three
months ended June 30, 2010 was 64.5% compared to 66.5% for thesame period 2009,
a decrease of approximately 2%. The slightly decreased grossprofit margin is
mostly due to the reclassification of the costsassociated.
 
 Grossprofit
in our packaged tour segment was $2,999,142 for the three months endedJune 30,
2010 compared to $1,780,373 for the same period last year, an increaseof
$1,218,769, or approximately 68%.  Gross profit margin in thissegment
for the three months ended June 30, 2010 was 10.8% compared to 14.4% forthe same
period 2009, a decrease of 3.6%.  The reason for the loweroverall
gross profit margin is that we had to consolidate the five newlyacquired
subsidiaries in this segment and they had lower gross profit marginsgenerally.
Although currently these subsidiaries have lower profit margins thanthe existing
subsidiaries, we believe that they have great potential to improve,and their
strong local networks are critical in our nationwide expansionstrategy.
 
 44
 
 Ourair-ticketing
and hotel reservation have much higher gross margin than ourpackaged tour
business primarily as our revenue from air-ticketing and hotelreservation are
the commission we generate and our costs of service are mainlybusiness taxes,
systems and related technologies used in operations, costsassociated with
payment processing, and allocation of costs of labor andfacilities,
communications, and utility expenses, which all together are notsubstantial;
while costs of services for the packaged tours include meals,transportation
(airline tickets, train tickets and car rental), lodging, airporttransfers,
tickets to local attractions and tours, that all together are muchsubstantial
variable and fixed overheads.
 
 Consolidatedgross
margin for the three months ended June 30, 2010 came in at 28.7%, a 6.8%decrease
from the 35.5% the Company posted in the same period last year. Thelower gross
margin is mainly due to our changes in revenues mix. Due to thedifference in
revenues recognition, our packaged tour has lower gross margin.During the three
months ended June 30, 2010, revenues generated from packagedtours, which have a
smaller profit-margin, grew at a much higher rate thanrevenues generated from
air ticketing and hotel reservations, leading to loweroverall gross margin.
 
 Selling, General
andAdministrative Expenses
 
 Majorselling,
general, and administrative expenses for the three months ended June30, 2010 and
2009 are as follows:
 
 For the three months ended June 30,2010
                          
                          
                          2009Business
      related tax
                          
                          $
                          203,485
                          
                          
                          $
                          172,547Salary
      and commission
                          
                          
                          1,782,021
                          
                          
                          
                          744,230Marketing
                          
                          
                          120,241
                          
                          
                          
                          508Rent
                          
                          
                          93,355
                          
                          
                          
                          44,151Depreciation
      and amortization
                          
                          
                          384,002
                          
                          
                          
                          10,655Professional
      fees
                          
                          
                          394,245
                          
                          
                          
                          85,742Stock-based
      compensation
                          
                          
                          340,372
                          
                          
                          
                          330,724Other
      general and administrative expenses
                          
                          
                          143,316
                          
                          
                          
                          176,362Total
                          
                          $
                          3,461,037
                          
                          
                          $
                          1,564,919
 
 Selling,general
and administrative expenses totaled $3,461,037 for three months endedJune 30,
2010 compared to $1,564,919 for the same period last year, an increaseof
approximately 121%.
 
 Selling,general
and administrative expenses were approximately 9.4% of revenue for thethree
months ended June 30, 2010 as compared to 8.5% for the same period lastyear.
General increase in selling, general and administrative expenses are
inconnection with the growth in business operations during the three months
endedJune 30, 2010, as compared to the same period of last year. During the
secondquarter of 2010, we incurred extra professional fees and consolidation
expensesfor the aforesaid mergers and acquisitions, as well as for the $20
million ofcommon stock offering in June. To promote our businesses, especially
thepackaged tour programs, we spent $120,241 on  advertisements
thisquarter when we did not incur so much last year. In the second half of 2009,
weestablished two subsidiaries, Chongqing Universal Travel E-Business Co., Ltd
andShenzhen Universal Travel Agency Co. Ltd. Depreciation and amortization
expensesof these two newly established companies, have been taken into account
intoselling, general and administrative expenses since the third quarter of2009.
 
 Other Income(Expenses)
 
 Gain
onchange in fair value of derivative liability for the three months ended
June,2010 was $839,553 compared to a loss of $5,819,481 for same period last
year.The Company adopted Derivative and Hedging, ASC 815-40 effective January
1,2009. The warrants issued in connection with the “Securities Purchase
Agreement”dated August 28, 2008 were reclassified from equity to derivative
liability andmarked to market.  Therefore, the Company recorded a gain
on change infair value of derivative liability of $839,553 on June 30, 2010 to
mark tomarket for the decrease in fair value of the warrants from April 1, 2010
to June30, 2010.
 
 45
  NetIncome
 
 Netincome
was $6,044,198, or 16.5% of revenues for the three months ended June 30,2010,
compared to a loss of $2,585,025 for the same period last year. Thesignificant
increase in net income is mostly due to our efforts to expand ourbusiness, our
merger and acquisition strategy, as well as the non-cash gain onchange in fair
value of derivative liability and the effect of the discontinuedoperation.
 
 SIXMONTHS
ENDED JUNE, 2010 AND 2009
 
 Thefollowing
table presents certain consolidated statement of operationsinformation derived
from the consolidated statements of income for the sixmonths ended June 30, 2010
and 2009 respectively.
 
 Becausethe
Company had spun off its Speedy Dragon Enterprise Limited subsidiary andexited
the air cargo business in the second quarter of 2009, all numbersattributable to
continuing operations in the following discussion do not includethe operating
results of Speedy Dragon Enterprise Limited for the first quarterof 2009 and its
historical results.  Such had been reclassified asdiscontinued
operations.
 
 Six months ended
                            June 30, 2010
                          
                          
                          Six months ended
                            June 30, 2009
                          
                          
                          Increase /
                            Decrease
                          
                          
                          PercentageRevenues
                          
                          $
                          62,871,619
                          
                          
                          $
                          33,916,152
                          
                          
                          $
                          28,955,467
                          
                          
                          
                          85
                          %Cost
      of Services
                          
                          
                          (43,816,506
                          )
                          
                          
                          (21,614,152
                          )
                          
                          
                          (22,201,857
                          )
                          
                          
                          103
                          %Gross
      Profit
                          
                          
                          19,055,113
                          
                          
                          
                          12,301,503
                          
                          
                          
                          6,753,610
                          
                          
                          
                          55
                          %SG&A
                          
                          
                          (6,524,679
                          )
                          
                          
                          (3,097,716
                          )
                          
                          
                          (3,426,962
                          )
                          
                          
                          111
                          %Income
      from Operations
                          
                          
                          12,530,434
                          
                          
                          
                          9,203,787
                          
                          
                          
                          3,326,648
                          
                          
                          
                          36
                          %Other
      income
                          
                          
                          6,917
                          
                          
                          
                          6,419
                          
                          
                          
                          498
                          
                          
                          
                          8
                          %Gain
      on change in fair value of derivative liabilities
                          
                          
                          949,004
                          
                          
                          
                          (5,706,217
                          )
                          
                          
                          6,655,221
                          
                          
                          
                          N/MInterest
      income
                          
                          
                          40,712
                          
                          
                          
                          23,296
                          
                          
                          
                          17,416
                          
                          
                          
                          75
                          %Income
      before income taxes
                          
                          
                          13,527,068
                          
                          
                          
                          3,527,285
                          
                          
                          
                          9,999,783
                          
                          
                          
                          283
                          %Provision
      for income taxes
                          
                          
                          (3,393,028
                          )
                          
                          
                          (2,138,151
                          )
                          
                          
                          (1,254,877
                          )
                          
                          
                          59
                          %Income
      (Loss)  from continuing operations
                          
                          
                          10,134,039
                          
                          
                          
                          1,389,134
                          
                          
                          
                          8,744,905
                          
                          
                          
                          630
                          %Income
      from discontinued operations
                          
                          
                          
                          
                          
                          
                          177,975Loss
      on disposition of discontinued operations
                          
                          
                          
                          
                          
                          
                          (770,595
                          )Net  Income
                          
                          
                          10,134,039
                          
                          
                          
                          796,514
                          
                          
                          
                          9,337,525
                          
                          
                          
                          1172
                          %
 
 For the six months endedJune
30, 2010:
 
 Revenue Segment
                                                            
                                                            Air tickets
                                                              (YZL &
                                                              CTE)
                                                            
                                                            
                                                            (%) of
                                                              sector
                                                            
                                                            
                                                            Hotel (SLB)
                                                            
                                                            
                                                            (%) of
                                                              sector
                                                            
                                                            
                                                            Tours
                                                              (All Others)
                                                            
                                                            
                                                            (%) of
                                                              sector
                                                            
                                                            
                                                            TotalRevenue
                                                            
                                                            $
                                                            10,442,953
                                                            
                                                            
                                                            
                                                            16.6
                                                            %
                                                            
                                                            
                                                            6,169,248
                                                            
                                                            
                                                            
                                                            9.8
                                                            %
                                                            
                                                            
                                                            46,259,418
                                                            
                                                            
                                                            
                                                            73.6
                                                            %
                                                            
                                                            
                                                            62,871,619Cost of Services
                                                            
                                                            
                                                            (1,202,103
                                                            )
                                                            
                                                            
                                                            2.7
                                                            %
                                                            
                                                            
                                                            (2,160,523
                                                            )
                                                            
                                                            
                                                            4.9
                                                            %
                                                            
                                                            
                                                            (40,453,880
                                                            )
                                                            
                                                            
                                                            92.3
                                                            %
                                                            
                                                            
                                                            (43,816,506
                                                            )Gross
      Profit
                                                            
                                                            $
                                                            9,240,850
                                                            
                                                            
                                                            
                                                            48.5
                                                            %
                                                            
                                                            
                                                            4,008,725
                                                            
                                                            
                                                            
                                                            21.0
                                                            %
                                                            
                                                            
                                                            5,805,538
                                                            
                                                            
                                                            
                                                            30.5
                                                            %
                                                            
                                                            
                                                            19,055,113Gross
      Margin
                                                            
                                                            
                                                            88.5
                                                            %
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            65.0
                                                            %
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            12.5
                                                            %
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            30.3
                                                            %Segment
      effect in Gross Margin (*)
                                                            
                                                            
                                                            14.7
                                                            %
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            6.4
                                                            %
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            9.2
                                                            %
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            30.3
                                                            %
  For the six months endedJune
30, 2009:
 
 Revenue Segment
                      
                      Air tickets
                        (YZL)
                      
                      
                      (%) of
                        sector
                      
                      
                      Hotel (SLB)
                      
                      
                      (%) of
                        sector
                      
                      
                      Tours
                        (All Others)
                      
                      
                      (%) of
                        sector
                      
                      
                      TotalRevenue
                      
                      $
                      6,045,642
                      
                      
                      
                      17.8
                      %
                      
                      
                      5,230,975
                      
                      
                      
                      15.4
                      %
                      
                      
                      22,639,535
                      
                      
                      
                      66.8
                      %
                      
                      
                      33,916,152Cost
      of Services
                      
                      
                      (651,979
                      )
                      
                      
                      3.0
                      %
                      
                      
                      (1,683,627
                      )
                      
                      
                      7.8
                      %
                      
                      
                      (19,279,043
                      )
                      
                      
                      89.2
                      %
                      
                      
                      (21,614,649
                      )Gross
      Profit
                      
                      $
                      5,393,663
                      
                      
                      
                      43.8
                      %
                      
                      
                      3,547,348
                      
                      
                      
                      28.8
                      %
                      
                      
                      3,360,492
                      
                      
                      
                      27.3
                      %
                      
                      
                      12,301,503Gross
      Margin
                      
                      
                      89.2
                      %
                      
                      
                      
                      
                      
                      
                      67.8
                      %
                      
                      
                      
                      
                      
                      
                      14.8
                      %
                      
                      
                      
                      
                      
                      
                      36.3
                      %Segment
      effect in Gross Margin (*)
                      
                      
                      15.9
                      %
                      
                      
                      
                      
                      
                      
                      10.5
                      %
                      
                      
                      
                      
                      
                      
                      9.9
                      %
                      
                      
                      
                      
                      
                      
                      36.3
                      %
  46
  (*)"Segment
effect in Gross Margin" was calculated by multiplying "the percentageof the
segment revenue over the total revenue" with "gross margin of the
relatedsector". This outlines how each segment contributes to the total
grossmargin.
 
 Revenue
 
 Ourair-ticketing
segment relates to the segment reporting of Shenzhen YuzhiluAviation Service
Co., Ltd. and Chongqing Travel World E-Business Co., Ltd. Ourhotel reservation
segment relates to Shanghai Lanbao Travel Service Co., Ltd.Our packaged tours
segment relates to the remaining eight operatingsubsidiaries: Foshan
International Travel Service Co., Ltd, Xi’an Golden NetTravel Serve Service
Company Limited, Shenzhen Universal Travel Agency Co. Ltd,Huangshan Holiday
Travel Service Co., Ltd., Hebei Tianyuan International TravelAgency Co., Ltd,
Zhengzhou Yulongkang Travel Agency Co., Ltd, Shanxi JinyangTravel Agency Co.,
Ltd and Kunming Business Travel Agency Co., Ltd. Operationsof each segment are
exclusive to the operations of the associated subsidiarycompany.
 
 Revenuesfor
the six months ended June 30, 2010 were $62,871,619, compared to $33,916,152for
the same period 2009, an increase of $28,955,467, or approximately 85%.
Thecontributions from the five newly acquired subsidiaries were $16,917,786, or
27%of our total revenues for these six months. Excluding this effect, revenues
forthe six months ended June 30, 2010 were $45,953,833, compared to $33,916,152
forthe same period 2009, an increase of $12,037,681 or approximately35%.
 
 Theacquisition
of the five subsidiaries this year was primarily due to our effortsto expand our
businesses, especially the packaged tour business, along with thestrong demand
for travel demand as a result of the recovery of Chinese economy,and the
continuing effect of the Chinese government’s stimuluspackage.  The
high growth rate is also helped by the comparativelylower numbers in the same
quarter last year, when the tourism industry wasadversely affected by H1N1. We
continue to see success in cross marketing andselling our travel related
products across our business segments and increasedbrand awareness from online
resales and the deployment of our TRIPEASYkiosks.
 
 Revenuesfrom
air-ticketing segment were $10,442,953 for the six months ended June 30,2010
compared to $6,045,642 for the same period last year, an increase of$4,397,311,
or approximately 73%. This increase is generally driven by the samefactors
mentioned above, but more specifically, a result of the increased demandfor air
passenger transportation and higher ticket prices. We attribute thehigher air
ticket prices to the booming tourism, general inflation in Chineseeconomy, as
well as the airlines acting together on pricing. As China’s economyrecovers, we
believe that our growth in air-ticketing is sustainable in thecoming quarters.
 
 Revenuesfrom
hotel reservations segment were $6,169,248 for the six months ended June30, 2010
compared to $5,230,975 for the same period in 2009, an increase of$938,273, or
approximately 18%. This increase is a result of the factorsmentioned above for
air tickets and the successful cross marketing of ourvarious business segments.
For this specific segment, we expect higherreservation volumes and higher
revenue growth in the coming quarters, after ourpartnership with Agoda to
leverage its global brand awareness and internationalhotel network.
 
 Revenuesfrom
our packaged tour segment were $46,259,418 for the six months ended June30,
2010, compared to $22,639,535 for the same period in 2009, an increase
of$23,619,883, or approximately 104%. Excluding the effect of the five
newlyacquired subsidiaries, which was $16,917,786, our revenues from this
segmentwere $29,341,632 for the six months ended June 30, 2010, compared
to$22,639,535, for the same period in 2009, an increase of
$6,702,097,approximately 30%. This increase is a result of the recovery of
Chinese economy,the government’s stimulus package, and our strong efforts in
carrying ourvarious marketing programs.
 
 47
 
 Cost ofServices
 
 Costs
ofservices for air tickets cover mainly business and revenue
relatedtaxes.  Costs of services for hotel reservations cover mainly
businessand revenue related taxes, as well as commissions paid to the sales
agents forselling hotel rooms in the Company’s system.   Costs of
servicesfor packaged tours include meals, transportation (airline tickets, train
ticketsand car rental), lodging, airport transfers, tickets to local attractions
andtours.
 
 Otherdirect
costs such as systems and related technologies used by each segmentoperations,
and costs associated with payment processing are also included inthe Company’s
Costs of Services. In addition, the Company allocates costs oflabor and
facilities, depreciation, communications, and utility expensesincurred by each
segment between costs of services and general
administrativeexpenses.  The percentage, ranging from 50% to 80%,
allocated to costsof sales is based on management estimate, and the percentage
allocated isestimated to be directly associated with the generation ofrevenues.
 
 Costs
ofservices for the six months ended June 30, 2010 were $43,816,506 compared
to$21,614,649 for the same period in 2009, an increase of $22,201,857,
orapproximately 103%. The comparatively higher costs of services resulted
frompackaged tours making up a greater percentage of our total revenue and
theircorresponding higher cost of services . Excluding the effect of the costs
ofservices of the five newly acquired subsidiaries, which is $14,044,492, costs
ofservices for the six months ended June 30, 2010 were $29,772,024, compared
to$21,614,649, for the same period 2009, an increase of $8,157,365,
orapproximately 38%. The increase is in tandem with the increase of revenue.
 
 Costs
ofservices from air-ticketing were $1,202,103 for the six months ended June
30,2010, compared to $651,979 for the same period last year, an increase
of$550,124, or approximately 84%. The increase is in tandem with the increase
ofrevenue, and the higher percentage increase is mostly due to
ourreclassification of costs.
 
 Costs
ofservices from hotel-reservation were $2,160,523 for the six months ended
June30, 2010, compared to $1,683,627 for the same period last year, an increase
of$476,896, or approximately 28%. The increase is in tandem with the increase
ofrevenue, and the higher percentage increase is mostly due to
ourreclassification of costs.
 
 Costs
ofservices from packaged-tour were $40,453,880 for the six months ended June
30,2010, compared to $19,279,043 for the same period last year, an increase
of$21,174,837 or approximately 110%. The increase is in tandem with the
increaseof revenue. Excluding the effect of the costs of services for the five
newlyacquired subsidiaries, which was $14,044,492, our costs of services from
thissegment were $26,409,388 for the six months ended June 30, 2010 compared
to$19,279,043 for the same period in 2009, an increase of $7,130,345,
orapproximately 37%. The increase is also in tandem with the increase ofrevenue.
 
 GrossProfit
 
 Grossprofit
for the six months ended June 30, 2010 was $19,055,113 compared to$12,301,503,
for the same period 2009, an increase of $6,753,610, orapproximately 55%. The
increase in gross profit is due to the same factorscontributing to the growth in
revenue. The exponential growth in both ourdomestic air-ticketing business and
hotel reservations business is a result ofsynergies from our packaged tour
operations.
 
 Grossprofit
in our air-ticketing segment was $9,240,850 for the six months ended June30,
2010, compared to $5,393,663 for the same period last year, an increase
of$3,847,187, or approximately 71%. Gross profit margin for the six months
endedJune 30, 2010 was 88.5%, slightly lower than 89.2% for the same period
2009. Thestability in gross margin for this segment was mainly attributable to
theincreased demand for air passenger transportation and higher ticket prices
inthe second quarter, while it slipped a little in the first quarter mostly due
toseasonality. The higher air ticket prices came from the booming tourism,
thegeneral inflation in Chinese economy, as well as the airlines acting together
onpricing.
 
 48
 
 Grossprofit
in our hotel reservation segment was $4,008,725 for the six months endedJune 30,
2010 compared to $3,547,348 for the same period last year, an increaseof
$461,377, or approximately 13%. Gross profit margin in this segment for thesix
months ended June 30, 2010 was 65.0%, compared to 67.8% for the same period2009,
a decrease of 2.8%. The decreased gross profit margin is mostly due to
thereclassification of the costs associated.
 
 Grossprofit
in our packaged tour segment was $5,805,538 for the six months ended June30,
2010 compared to $3,360,492 for the same period last year, an increase
of$2,445,046, or approximately 73%.  Gross profit margin in this
segmentfor the six months ended June 30, 2010 was 12.5% compared to 14.8% for
the sameperiod 2009, a decrease of 2.3%.  The reason for the lower
overallgross profit margin is that we had to consolidate the five newly
acquiredsubsidiaries into this segment and they had  lower gross
profitmargins generally. Although currently these subsidiaries have lower
profitmargins than the existing subsidiaries, we believe that they have
greatpotential to improve, and their strong local networks are critical in
ournationwide expansion strategy.
 
 Ourair-ticketing
and hotel reservation have much higher gross margin than ourpackaged tour
business primarily as our revenues from air-ticketing and hotelreservation are
the commission we generated and our costs of service are mainlybusiness taxes,
systems and related technologies used in operations, costsassociated with
payment processing, and allocation of costs of labor andfacilities,
communications, and utility expenses, which all together are notsubstantial;
while costs of services for the packaged tours include meals,transportation
(airline tickets, train tickets and car rental), lodging, airporttransfers,
tickets to local attractions and tours, that all together are muchsubstantial
variable and fixed overheads.
 
 Consolidatedgross
margin for the six months ended June 30, 2010 came in at 30.3%, a 6%decrease
from the 36.3% we posted in the same period last year. The lower grossmargin is
mainly due to our changes in revenues mix. Due to the difference inrevenues
recognition, our packaged tour has lower gross margin. During the sixmonths
ended June 30, 2010, revenues generated from packaged tours, which have asmaller
profit-margin, grew at a much higher rate than revenues generated fromair
ticketing and hotel reservations, leading to lower overall grossmargin.
 
 Selling, General
andAdministrative Expenses
 
 Majorselling,
general, and administrative expenses for the six months ended June 30,2010 and
2009 are as follows:
 
 For the six months ended June 30,2010
                          
                          
                          2009Business
      related tax
                          
                          $
                          359,063
                          
                          
                          $
                          261,233Salary
      and commission
                          
                          
                          2,880,472
                          
                          
                          
                          1,465,152Marketing
                          
                          
                          195,339
                          
                          
                          
                          38,855Rent
                          
                          
                          196,029
                          
                          
                          
                          82,671Depreciation
      and amortization
                          
                          
                          645,905
                          
                          
                          
                          19,074Professional
      fees
                          
                          
                          659,250
                          
                          
                          
                          341,676Stock-based
      compensation
                          
                          
                          677,004
                          
                          
                          
                          495,725Other
      general and administrative expenses
                          
                          
                          911,617
                          
                          
                          
                          402,330Total
                          
                          $
                          6,524,679
                          
                          
                          $
                          3,097,716
 
 Selling,general
and administrative expenses totaled $6,524,679 for six months ended June30, 2010
compared to $3,097,716 for the same period last year, an increase
ofapproximately 111%.
 
 49
 
 Selling,general
and administrative expenses were approximately 10.4% of revenue for thesix
months ended June 30, 2010 as compared to 9.1% for the same period lastyear.
General increase in selling, general and administrative expenses are
inconnection with the growth in business operations during the six months
endedJune 30, 2010, as compared to the same period of last year. During the
firsthalf of 2010, we incurred extra professional fees and consolidation
expenses forthe aforesaid mergers and acquisitions, as well as for the $20
million of commonstock offering in June. To promote our businesses, especially
the packaged tourprograms, we spent $195,339 of advertisements in the first two
quarters of 2010,while we did not incur so much for the same period last year.
In the second halfof 2009, we established two subsidiaries, Chongqing Universal
Travel E-BusinessCo., Ltd and Shenzhen Universal Travel Agency Co. Ltd.
Depreciation andamortization expenses of these two newly established companies
have been takeninto account since the third quarter of 2009.
 
 Other Income(Expenses)
 
 Gain
onchange in fair value of derivative liability for the six months ended June,
2010was $949,004 compared to a loss of $5,706,217 for same period last year.
TheCompany adopted Derivative and Hedging, ASC 815-40 effective January 1,
2009.The warrants issued in connection with the “Securities Purchase Agreement”
datedAugust 28, 2008 were reclassified from equity to derivative liability and
markedto market.  Therefore, the Company recorded a gain on change in
fairvalue of derivative liability of $949,004 on June 30, 2010 to mark to market
forthe decrease in fair value of the warrants from January 1, 2010 to June
30,2010.
 
 NetIncome
 
 Netincome
was $10,134,039, or 16.1% of revenues for the six months ended June 30,2010,
compared to $796,514, or 4.1% of revenues for the same period last year.The
significant increase in net income is mostly due to our efforts to expandour
business, our merger and acquisition strategy, as well as the non-cash gainon
change in fair value of derivative liability and the effect of thediscontinued
operation.
 
 LIQUIDITY AND
CAPITALRESOURCES
 
 Cash
foroperations and liquidity needs are funded primarily through cash flows
fromoperations and short-term borrowings. Cash and cash equivalents were
$43,591,459as of June 30, 2010. Current assets and current liabilities as of
June 30, 2010were $86,184,528 and $10,771,024, respectively, yielding working
capital of$75,413,504. We believe that the funds available to us from operations
areadequate to meet our operating needs in 2010. For the six months ended June
30,2010, net cash provided by operating activities was approximately
$4,546,144,which resulted primarily from our organic operations and effective
management ofcash flow.
 
 Capitalexpenditure
 
 Totalcapital
expenditure for six months ended June 30, 2010 was $1,864,774 topurchase fixed
assets, primarily machinery and equipment, such as TRIPEASYkiosks.
Managementmay consider substantial increase in equipment or other supporting
machineryexpenditure to support the fast development and expansion of
ourbusiness.
 
 Working CapitalRequirements
 
 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 providethe necessary
cash flow to meet anticipated working capital requirements.However, our actual
working capital needs for the long and short term willdepend upon numerous
factors, including operating results, competition, theopportunity to acquire or
start-up new businesses, and the availability ofcredit facilities, none of which
can be predicted with certainty. Due to ourrapid growth and expansion, our need
for additional capital may arise, andmanagement will seek to raise capital for
the maintenance and expansion of ouroperations through the issuance of debt or
equity if necessary. To satisfy thesecapital needs due to our broad expansion in
PRC, as well as to set up more TRIPEASYkiosks, we may
incuradditional capital expenditure.
 
 50
 
 We fileda
Registration Statement on Form S-3 to register $50,000,000 worth of securitieson
Aug 7, 2009, which became effective on November 5, 2009. In December 15,2009, we
closed Subscription Agreements with certain investors to sell to theman
aggregate of 2,222,222 shares of common stocks for a consideration of
$20million. We also closed another common stock public offering transaction on
June16, 2010. In this transaction we issued 2,857,143 shares of common stocks
for anaggregate amount of $20 million.
 
 Unlessotherwise
indicated in a prospectus supplement, we intend to use the netproceeds from the
sale of the securities under the S-3 registration for generalcorporate purposes,
including expanding our products, and for general workingcapital
purposes.  We may also use a portion of the net proceeds toacquire or
invest in businesses and products that are complementary to our own,although we
have no current plans, commitments or agreements with respect to anyacquisitions
as of the date of the S-3 registration.
 
 Off Balance
SheetArrangements
 
 We
havenever entered into any off-balance sheet financing arrangements and have
neverestablished any special purpose entities. We have not guaranteed any debt
orcommitments of other entities or entered into any options on
non-financialassets.
 
 Item3.Quantitative and
QualitativeDisclosures About Market Risk.
 
 We currently do not hold or use
anyderivative or other financial instruments that expose us to substantial
marketrisk and we have no foreign exchange contracts.
 
 We are exposed to foreign exchange
riskarising from fluctuations in the exchange rate between U.S. Dollars
andRenminbi. Our operations are located in the People’s Republic of China
andsubstantially all of our revenues and assets are denominated in
Renminbi.However our reporting currency is the U.S. Dollar and some of our
expenses aredenominated in U.S. Dollars. As a result, our financial results are
potentiallysubject to the impact of changes in value between U.S. Dollars and
Renminbi. Ifthe Renminbi depreciates relative to the U.S. Dollar, the value of
our revenues,earnings and assets as reported in our financial statements
willdecline.
 
 Item4.  Controls
and Procedures.
 
 Evaluationof
our Disclosure Controls
 
 As of
theend of the period covered by this Quarterly Report on Form 10-Q/A, our
principalexecutive officer and principal financial officer have evaluated
theeffectiveness of our “disclosure controls and procedures”
(“DisclosureControls”). Disclosure Controls, as defined in Rule 13a-15(e) of the
SecuritiesExchange Act of 1934, as amended (the “Exchange Act”), are procedures
that aredesigned with the objective of ensuring that information required to
bedisclosed in our reports filed under the Exchange Act, such as this
QuarterlyReport, is recorded, processed, summarized and reported within the time
periodsspecified in the Securities and Exchange Commission’s rules and
forms.Disclosure Controls are also designed with the objective of ensuring that
suchinformation is accumulated and communicated to our management, including the
CEOand CFO, as appropriate to allow timely decisions regarding required
disclosure.Our management, including the CEO and CFO, does not expect that our
DisclosureControls will prevent all error and all fraud. A control system, no
matter howwell conceived and operated, can provide only reasonable, not
absolute,assurance that the objectives of the control system are met. Further,
the designof a control system must reflect the fact that there are resource
constraints,and the benefits of controls must be considered relative to their
costs. Becauseof the inherent limitations in all control systems, no evaluation
of controlscan provide absolute assurance that all control issues and instances
of fraud,if any, within the company have been detected. These inherent
limitationsinclude the realities that judgments in decision-making can be
faulty, and thatbreakdowns can occur because of simple error or mistake. The
design of anysystem of controls also is based in part upon certain assumptions
about thelikelihood of future events, and there can be no assurance that any
design willsucceed in achieving its stated goals under all potential
futureconditions.
 
 51
 
 Basedupon
their controls evaluation, our CEO and CFO have concluded that ourDisclosure
Controls are effective at a reasonable assurance level.
 
 Changesin
internal control over financial reporting
 
 Therehave
been no changes in our internal controls over financial reporting duringour
second fiscal quarter that have materially affected, or are reasonablylikely to
materially affect, our internal control over financialreporting.
 
 PARTII
- OTHER INFORMATION
 
 Item1.   Legal
Proceedings.
 
 There is no material legal proceeding pending againstus.
 
 Item1A.
Risk Factors
 
 Not
Applicable.
 
 Item2.   Unregistered
Sales of Equity Securities and Use ofProceeds
 
 None.
 
 Item 3.    Defaults Upon SeniorSecurities
 
 None.
 
 Item4.   (Removed
and Reserved).
 
 None.
 
 Item 5.    Other Information
 
 Not
applicable.
 
 Item 6.    Exhibits
 
 Copies
ofthe following documents are included as exhibits to this report pursuant to
Item601 of Regulation S-K.
 
 Exhibit No.
                      
                      SEC Ref.
                        No.
                      
                      Title
      of Document1
                      
                      31.1
                      
                      Certification
      of the Principal Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 20022.
                      
                      31.2
                      
                      Certification
      of the Principal Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of2002
  52
 
 3
              
              32.1
              
              Certification
      of the Principal Executive Officer pursuant to U.S.C. Section 1350 as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*4
              
              32.2
              
              Certification
      of the Principal Financial Officer pursuant to U.S.C. Section 1350 as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
 
 *The Exhibit attached to this Form
10-Q/A shall not be deemed "filed" for purposes of Section 18 of the
SecuritiesExchange Act of 1934 (the "Exchange Act") or otherwise subject to
liabilityunder that section, nor shall it be deemed incorporated by reference in
anyfiling under the Securities Act of 1933, as amended, or the Exchange Act,
exceptas expressly set forth by specific reference in suchfiling.
 
 SIGNATURES
 
 Inaccordance
with the Exchange Act, the registrant caused this report to be signedon its
behalf by the undersigned thereunto duly authorized.
 
 Date:August
12, 2010
 
 UNIVERSAL
      TRAVEL GROUPBy:
                /s/ Jiangping JiangJiangping
      JiangChairwoman
      and Chief Executive Officer(Principal
      Executive Officer)
 
 By:
                /
      s/ Yizhao ZhangYizhao
      ZhangChief
      Financial Officer(Principal
      Financial Officer)
  53