UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q




(Mark
One)





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





For the
quarterly period ended September 30, 2009





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





For the
transition period from ______________ to _____________




Commission
file number: 000-51516





UNIVERSAL
TRAVEL GROUP


(Exact
name of registrant as specified in its charter)




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




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





86 755 836
68489


(Registrant’s
telephone number, including area code)




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





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





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





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





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





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





APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS





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





APPLICABLE
ONLY TO CORPORATE ISSUERS





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





As of
November 10, 2009, there are 14,468,901 shares of $0.001 par value common stock
issued and outstanding.









FORM
10-Q


.UNIVERSAL
TRAVEL GROUP


INDEX





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




2




PART
I - FINANCIAL INFORMATION





Item
1. Financial Statements (Unaudited)





UNIVERSAL
TRAVEL GROUP





CONSOLIDATED
FINANCIAL STATEMENTS





SEPTEMBER
30, 2009





TABLE
OF CONTENTS





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


3


UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
BALANCE SHEETS


SEPTEMBER
30, 2009 AND DECEMBER 31, 2008





September
      30,
                                          2009
                                        
                                        
                                        DECEMBER
      31,
                                          2008(Unaudited)AssetsCash
      and cash equivalents
                                        
                                        $
                                        23,492,115
                                        
                                        
                                        $
                                        15,720,182Accounts
      receivable, net
                                        
                                        
                                        15,145,415
                                        
                                        
                                        
                                        8,991,849Other
      receivables and deposits, net
                                        
                                        
                                        113,840
                                        
                                        
                                        
                                        62,547Trade
      deposit
                                        
                                        
                                        5,988,623
                                        
                                        
                                        
                                        6,571,164Advances
                                        
                                        
                                        439,475
                                        
                                        
                                        
                                        438,468Escrow
      deposits
                                        
                                        
                                        -
                                        
                                        
                                        
                                        762,800Prepaid
      expenses
                                        
                                        
                                        185,558
                                        
                                        
                                        
                                        312,409Note
      receivable
                                        
                                        
                                        2,174,260
                                        
                                        
                                        
                                        -Current
      assets held of discontinued operations
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,459,777Total
      Current Assets
                                        
                                        
                                        47,539,286
                                        
                                        
                                        
                                        35,319,196Property
      and equipment, net
                                        
                                        
                                        3,545,238
                                        
                                        
                                        
                                        242,648Intangible
      assets
                                        
                                        
                                        397,251
                                        
                                        
                                        
                                        307,335Goodwill
                                        
                                        
                                        9,896,270
                                        
                                        
                                        
                                        9,896,270Non-current
      assets held of discontinued operations
                                        
                                        
                                        -
                                        
                                        
                                        
                                        3,661,23113,838,759
                                        
                                        
                                        
                                        14,107,484Total
      Assets
                                        
                                        $
                                        61,378,045
                                        
                                        
                                        $
                                        49,426,680LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable and accrued expenses
                                        
                                        $
                                        3,733,125
                                        
                                        
                                        $
                                        1,691,689Customer
      deposits
                                        
                                        
                                        1,433,262
                                        
                                        
                                        
                                        1,039,942Income
      tax payable
                                        
                                        
                                        1,652,473
                                        
                                        
                                        
                                        1,731,246Current
      liabilities held of discontinued operations
                                        
                                        
                                        -
                                        
                                        
                                        
                                        562,931Total
      Current Liabilities
                                        
                                        
                                        6,818,860
                                        
                                        
                                        
                                        5,025,808Derivative
      liability
                                        
                                        
                                        4,710,798
                                        
                                        
                                        
                                        -Total  liabilities
                                        
                                        
                                        11,529,658
                                        
                                        
                                        
                                        5,025,808Stockholders'
      EquityCommon
      stock, $.001 par value, 70,000,000 shares authorized, 13,812,545 and
      13,873,969 shares issued and outstanding at September 30, 2009 and
      December 31, 2008, respectively
                                        
                                        
                                        13,812
                                        
                                        
                                        
                                        13,873Additional
      paid in capital
                                        
                                        
                                        15,198,351
                                        
                                        
                                        
                                        15,861,116Other
      comprehensive income
                                        
                                        
                                        1,584,310
                                        
                                        
                                        
                                        1,520,166Statutory
      reserve
                                        
                                        
                                        372,144
                                        
                                        
                                        
                                        372,144Retained
      earnings
                                        
                                        
                                        32,679,770
                                        
                                        
                                        
                                        26,633,573Total
      Stockholders' Equity
                                        
                                        
                                        49,848,387
                                        
                                        
                                        
                                        44,400,872Total
      Liabilities and Stockholders' Equity
                                        
                                        $
                                        61,378,045
                                        
                                        
                                        $
                                        49,426,680





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


4


UNIVERSAL TRAVEL
GROUP


CONSOLIDATED
STATEMENTS OF INCOME


FOR
THE THREE MONTHS ENDED SEPTEMBER 30,


(UNAUDITED)




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





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


5


UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
STATEMENTS OF INCOME


FOR
THE NINE MONTHS ENDED SEPTEMBER 30,


(UNAUDITED)




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





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


6





UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30,


(UNAUDITED)




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





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


7


UNIVERSAL
TRAVEL GROUP


CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND THE YEAR ENDED DECEMBER 31,
2008





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


8


UNIVERSAL
TRAVEL GROUP


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
30, 2009


(Unaudited)





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





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





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





Note
1 - ORGANIZATION





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





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





Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES





Basis of
Presentation


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





Reclassification


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


9





Discontinued
Operations


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





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





Consideration
                    
                    $
                    5,554,361Goodwill
      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 as
discontinued operations. The consolidated financial statements reflect the
operating results and balance sheet items of the discontinued operations
separately from continuing operations. Prior year’s amounts have been
reclassified to confirm with current year’s presentation of the discontinued
operations.





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




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




10




The
following summarized the assets and liabilities of discontinued operations as of
December 31, 2008:





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





Translation
Adjustment


As of
September 30, 2009 and December 31, 2008 the accounts of Universal Travel Group
were maintained, and its financial statements were expressed, in Chinese Yuan
Renminbi (CNY). Such financial statements were translated into U.S. Dollars
(USD) in accordance with the Foreign Currency Matters Topic of the FASB
Accounting Standards Codification (“ASC 830”) with the CNY as the functional
currency. According to the Statement, all assets and liabilities were translated
at the current exchange rate, stockholders equity are translated at the
historical rates and income statement items are translated at the average
exchange rate for the period. The resulting translation adjustments are reported
under other comprehensive income in accordance with the Comprehensive Income
Topic of the FASB Accounting Standard Codification (“ASC 220”). Transaction
gains and losses are reflected in the income statement.





Use of
Estimates


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





Principles of
Consolidation


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





Segment
information


Accounting
Standards Codification subtopic Segment Reporting 280-10 (“ASC 280-10”) which
establishes standards for reporting information regarding operating segments in
annual financial statements and requires selected information for those segments
to be presented in interim financial reports issued to
stockholders.  ASC 280-10 also establishes standards for related
disclosures about products and services and geographic areas. Operating segments
are identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision-making group, in making decisions how to allocate
resources and assess performance. The Company applies the management approach to
the identification of our reportable operating segment as provided in accordance
with ASC 280-10. The information disclosed herein materially represents all of
the financial information related to the Company’s principal operating
segment




11




Stock Based Compensation


Effective
for the year beginning January 1, 2006, the Company has adopted Accounting
Standards Codification subtopic 718-10, Compensation (“ASC 718-10”). The Company
made no employee stock-based compensation grants before December 31, 2005 and
therefore has no unrecognized stock compensation related liabilities or expense
unvested or vested prior to 2006. Stock-based compensation expense recognized
under ASC 718-10 for the three month and nine month periods ended September 30,
2009 was $306,432 and $802,157, respectively, and $0 and $155,802 for the three
and nine month period ended September 30, 2008, respectively.





Comprehensive Income
(Loss)


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





Risks and
Uncertainties


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





Contingencies


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





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





Cash and Cash
Equivalents


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





Accounts
Receivable


The
Company maintains reserves for potential credit losses on accounts receivable.
Management reviews the composition of accounts receivable and analyzes
historical bad debts, customer concentrations, customer credit worthiness,
current economic trends and changes in customer payment patterns to evaluate the
adequacy of these reserves. Terms of the sales vary. Reserves are recorded
primarily on a specific identification basis. Allowance for doubtful accounts
amounted to $224,100 and $210,139 as of September 30, 2009 and December 31,
2008, respectively.





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





12





Reverse
Split


On March
31, 2009 the Company effected a three-for-one (3:1) reverse split of the
Company’s issued and outstanding shares of common stock, decreasing the number
of outstanding shares from 41,619,966 to 13,873,969. All references in the
consolidated financial statements and the notes to consolidated financial
statements, number of shares, and share amounts have been retroactively restated
to reflect the reverse split.





Property, Plant &
Equipment


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


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




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





September
      30,
                        2009
                      
                      
                      December
                        31,
      2008Furniture
      and fixture
                      
                      $
                      19,258
                      
                      
                      $
                      18,247Transportation
      equipment
                      
                      
                      204,127
                      
                      
                      
                      143,332Office
      equipment
                      
                      
                      2,926,540
                      
                      
                      
                      360,145Leasehold
      improve
                      
                      
                      1,030,922
                      
                      
                      
                      31,3744,180,847
                      
                      
                      
                      553,098Accumulated
      depreciation
                      
                      
                      (635,609
                      )
                      
                      
                      (310,450
                      )$
                      3,545,238
                      
                      
                      $
                      242,648





Depreciation
expense for the three months ended September 30, 2009 and 2008 was $189,567 and
$9,212, respectively, of which $175,056 and $8,291 was included as part of cost
of services for the three months ended September 30, 2009 and 2008,
respectively.




Depreciation
expense for the nine months ended September 30, 2009 and 2008 was $324,734 and $
26,149, respectively, of which $292, 261 and $23,534 was included as part of
cost of services for the nine months ended September 30, 2009 and 2008,
respectively.





Goodwill


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


13





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





September
      30, 2009
                  
                  
                  December
      31,2008Shanghai
      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
                  
                  
                  764,895
                  
                  
                  
                  764,895$
                  9,896,270
                  
                  
                  $
                  9,896,270





Long-Lived
Assets


The
Company adopted the Property, Plant and Equipment Topic of the FASB Accounting
Standard Codification (“ASC 360”), which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. The Company
periodically evaluates the carrying value of long-lived assets to be held and
used in accordance with ASC 360. ASC 360 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets carrying amounts. In that event, a loss is
recognized based on the amount by which the carrying amount exceeds the fair
market value of the long-lived assets. Loss on long-lived assets to be disposed
of is determined in a similar manner, except that fair market values are reduced
for the cost of disposal. Based on its review, the Company believes that, as of
September 30, 2009 and December 31, 2008 there were no significant impairments
of its long-lived assets.





Derivative
Liability


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





Upon the
Company’s adoption of the Derivative and Hedging Topic of the FASB Accounting
Standards Codification (“ASC 815”) on January 1, 2009, the Company
determined that the warrants did not qualify for a scope exception under ASC 815
as they were determined to not be indexed to the Company’s stock as prescribed
by ASC 815.  On January 1, 2009, the warrants, under ASC 815, were
reclassified from equity to derivative liability for the then relative fair
market value of $2,091,738 and marked to market.  The value of the warrants
decreased by $536,776 from the warrants issuance date to the adoption date of
ASC 815, January 1, 2009.  As of January 1, 2009, the cumulative
effect in adopting ASC 815 was a reduction to additional paid in capital of
$2,091,738 to reclassify the warrants from equity to derivative liability and an
increase in retained earnings of $536,776 as a cumulative effect of a change in
accounting principle to reflect the change in the value of the warrants between
their issuance date and January 1, 2009.  For the three and nine month
periods ended September 30, 2009, the Company recorded a loss on change in fair
value of derivative liability of $847,754 and $6,553,971, respectively, to mark
to market for the increase in fair value of the warrants during the three and
nine-month periods ended September 30, 2009.   Under ASC 815, the
warrants will be carried at fair value and adjusted at each reporting
period.





The
Company determined the fair value of the reset provisions at January 1, 2009 was
$1,554,961 as the initial fair value at the adoption date of ASC
815-40.  The fair value was determined using the Black Scholes Option
Pricing Model based on the following assumptions:  dividend
yield: 0%; volatility: 136%, risk free rate: 1.55%, expected term: 4.66
years.





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





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




14




Fair Value of Financial
Instruments


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





Revenue
Recognition


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





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





Air-ticketing
services


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





Hotel reservation
services


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





Packaged-tour


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




15




Air Cargo
Business


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





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





Cost of
Services


Costs of
services for air tickets cover mainly business and revenue related
taxes.  Costs of services for hotel reservations cover mainly business
and revenue related taxes, as well as commissions paid to the sales agents for
selling hotel rooms in the Company’s system.  Costs of services for
the cargo agency business mainly include the costs of warehousing and delivery
charges.  Costs of services for packaged tours include meals,
transportation (airline tickets, train tickets and car rental), lodging, airport
transfers, tickets to local attractions and tours.





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





Consolidated
costs such as stock-based compensation and corporate professional fees are not
allocated to any segment. These costs are reported as general operating expenses
in the Company’s Statements of Operations. For the three months ended September
30, 2009 and 2008, such expenses amounted to $787,666 and $60,208, respectively.
For the nine months ended September 30, 2009 and 2008, such expenses amounted to
$1,625,068 and $216,010, respectively.





Advertising


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





Income
Taxes


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





Statement of Cash
Flows


In
accordance with FASB Accounting Standards Codification Topic on Statement of
Cash flows (“ASC 230”), cash flows from the Company’s operations are based upon
the local currencies. As a result, amounts related to assets and liabilities
reported on the statement of cash flows will not necessarily agree with changes
in the corresponding balances on the balance sheet.




16




Intangibles


Intangible
assets are amortized using the straight-line method over their estimated period
of benefit. Evaluation of the recoverability of intangible assets is made
annually to take into account events or circumstances that warrant revised
estimates of useful lives or that indicate that impairment exists. All of our
intangible assets are subject to amortization. No impairments of intangible
assets have been identified during any of the periods presented. The Company’s
intangible assets consist primarily of map of hotels and scenic spots used for
marketing purposes, CRM systems software, and Organization cost of new
companies. These definitive lived intangible assets are being amortized over
their useful lives.  Expenditures of $187,810 and $-0- were
capitalized in 2009 and 2008 and will be amortized over a 3 year
life.  The Company recorded amortization expense for definitive lived
intangible assets of $97,894 and $7,649 for the nine months ended September 30,
2009 and 2008, $42,322 and $1,762 for the three months ended September 30, 2009
and 2008, respectively. The Company will record approximately $169,286,
$169,286, and $58,679 over the next three years, respectively.





Concentration of Credit
Risk


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





Net Income (Loss) Per
Share


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





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




Nine
      months ended September 30,
                                    
                                    
                                    Three
      months ended September 30,2009
                                    
                                    
                                    2008
                                    
                                    
                                    2009
                                    
                                    
                                    2008Basic
      earnings from continuing operations per share:Numerator:Income
      from continuing operations used in computing basic earnings per
      share
                                    
                                    $
                                    6,102,040
                                    
                                    
                                    $
                                    7,589,376
                                    
                                    
                                    $
                                    4,712,905
                                    
                                    
                                    $
                                    4,331,140Income
      from continuing operations applicable to common
    shareholders
                                    
                                    $
                                    6,102,040
                                    
                                    
                                    $
                                    7,589,376
                                    
                                    
                                    $
                                    4,712,905
                                    
                                    
                                    $
                                    4,331,140Denominator:Weighted
      average common shares outstanding
                                    
                                    
                                    13,828,739
                                    
                                    
                                    
                                    12,306,715
                                    
                                    
                                    
                                    13,739,880
                                    
                                    
                                    
                                    12,306,715Basic
      earnings per share from continuing operations
                                    
                                    $
                                    0.44
                                    
                                    
                                    $
                                    0.62
                                    
                                    
                                    $
                                    0.34
                                    
                                    
                                    $
                                    0.35Diluted
      earnings per share from continuing operations:Numerator:Income
      from continuing operations used in computing diluted earnings per
      share
                                    
                                    $
                                    6,102,040
                                    
                                    
                                    $
                                    7,589,376
                                    
                                    
                                    $
                                    4,712,905
                                    
                                    
                                    $
                                    4,331,140Income
      from continuing operations applicable to common
    shareholders
                                    
                                    $
                                    6,102,040
                                    
                                    
                                    $
                                    7,589,376
                                    
                                    
                                    $
                                    4,712,905
                                    
                                    
                                    $
                                    4,331,140Denominator:Weighted
      average common shares outstanding
                                    
                                    
                                    13,828,739
                                    
                                    
                                    
                                    12,306,715
                                    
                                    
                                    
                                    13,739,880
                                    
                                    
                                    
                                    12,306,715Weighted
      average effect of dilutive securities:Stock
      options and warrants
                                    
                                    
                                    1,061,579
                                    
                                    
                                    
                                    55,556
                                    
                                    
                                    
                                    1,705,470
                                    
                                    
                                    
                                    55,556Shares
      used in computing diluted net income per share
                                    
                                    
                                    14,890,318
                                    
                                    
                                    
                                    12,362,271
                                    
                                    
                                    
                                    15,445,350
                                    
                                    
                                    
                                    12,362,271Diluted
      earnings per share from continuing operations
                                    
                                    $
                                    0.41
                                    
                                    
                                    $
                                    0.61
                                    
                                    
                                    $
                                    0.31
                                    
                                    
                                    $
                                    0.35




17




Nine
      months ended
                                          September
      30,
                                        
                                        
                                        Three
      months ended
                                          September
      30,2009
                                        
                                        
                                        2008
                                        
                                        
                                        2009
                                        
                                        
                                        2008Basic
      earnings (losses) from discontinued operations per share:Numerator:Income
      (loss) from discontinued operations  used in computing basic
      earnings per share
                                        
                                        $
                                        (592,620
                                        )
                                        
                                        $
                                        616,508
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        297,187Income
      (loss) from discontinued operations applicable to common
      shareholders
                                        
                                        $
                                        (592,620
                                        )
                                        
                                        $
                                        616,508
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        297,187Denominator:Weighted
      average common shares outstanding
                                        
                                        
                                        13,828,739
                                        
                                        
                                        
                                        12,306,715
                                        
                                        
                                        
                                        13,739,880
                                        
                                        
                                        
                                        12,306,715Basic
      earnings per share from discontinued operations
                                        
                                        $
                                        (0.04
                                        )
                                        
                                        $
                                        0.05
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        0.02Diluted
      earnings (losses) per share from discontinued operations:Numerator:Income
      (loss) from discontinued operations used in computing diluted earnings
      (losses) per share
                                        
                                        $
                                        (592,620
                                        )
                                        
                                        $
                                        616,508
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        297,187Income
      (loss) from discontinued operations applicable to common
      shareholders
                                        
                                        $
                                        (592,620
                                        )
                                        
                                        $
                                        616,508
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        297,187Denominator:Weighted
      average common shares outstanding
                                        
                                        
                                        13,828,739
                                        
                                        
                                        
                                        12,306,715
                                        
                                        
                                        
                                        13,739,880
                                        
                                        
                                        
                                        12,306,715Weighted
      average effect of dilutive securities:Stock
      options and  warrants
                                        
                                        
                                        -
                                        
                                        
                                        
                                        55,556
                                        
                                        
                                        
                                        1,705,470
                                        
                                        
                                        
                                        55,556Shares
      used in computing diluted net income (loss) per share
                                        
                                        
                                        13,828,739
                                        
                                        
                                        
                                        12,362,271
                                        
                                        
                                        
                                        15,445,350
                                        
                                        
                                        
                                        12,362,271Diluted
      earnings (loss) per share from discontinued operations
                                        
                                        $
                                        (0.04
                                        )
                                        
                                        $
                                        0.05
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        0.02Net
      income per common shareBasic
                                        
                                        $
                                        0.40
                                        
                                        
                                        $
                                        0.67
                                        
                                        
                                        $
                                        0.34
                                        
                                        
                                        $
                                        0.37Dilute
                                        
                                        $
                                        0.37
                                        
                                        
                                        $
                                        0.66
                                        
                                        
                                        $
                                        0.31
                                        
                                        
                                        $
                                        0.37





Recent Accounting
Pronouncements


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


18




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





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





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





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


19


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





Merger and Corporate
Restructure


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





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





Note
3 – TRADE DEPOSITS AND
ADVANCES





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





The
following summaries the Company’s deposits outstanding by each of its
subsidiaries and the nature and purpose of each deposit as of September 30, 2009
and December 31, 2008:





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




20





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





The
Company has entered into a co-operation agreement with an unrelated company, to
assist that company in their business development by participating in that
business operations and providing working capital funding. As of September 30,
2009 and December 31, 2008 the Company has advanced this company $439,475 and
$438,468 respectively.





Note
4 - COMPENSATED
ABSENCES


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





Note
5 - INCOME
TAXES


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





Nine months
                  ended
                
                
                Nine months
                  ended
                
                
                Three months
                  ended
                
                
                Three months
                  endedSeptember 30,
                
                
                September 30,
                
                
                September 30,
                
                
                September 30,Current
                
                $
                4,029,194
                
                
                $
                2,250,114
                
                
                $
                1,891,043
                
                
                $
                1,242,868Deferred
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Total
                
                $
                4,029,194
                
                
                $
                2,250,114
                
                
                $
                1,891,043
                
                
                $
                1,242,868




21




Note
6 – COMMITMENTS




The
Company leases various office facilities under month-to-month arrangements.
Rental expense for leases consisted of $309,711 and $132,446 for nine
months ended September 30, 2009 and 2008, respectively. Rental expense for
leases were $161,808 and $40,149 for three months ended September 30, 2009 and
2008, respectively.  The Company has future minimum lease obligations
as of September 30, 2009 as follows:


2010
                  
                  $
                  286,6912011
                  
                  
                  183,2412012
                  
                  
                  161,1392013
                  
                  
                  161,4902014
                  
                  
                  148,966Thereafter
                  
                  
                  19,557Total
                  
                  $
                  961,084





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




Note
7 – COMMON
STOCK





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





Pursuant
to a share exchange agreement, the Company issued 238,095 shares of newly issued
shares of Common Stock to the former shareholders of Shenzhen Speedy Dragon
Enterprises Limited. The shares were valued at $1,000,000, which was the fair
value of the shares at the date of the exchange agreement. This amount is
included in the cost of net assets and goodwill purchased.




On April
10, 2007 the Company consummated the acquisition of a 100% interest in Shenzhen
Speedy Dragon Enterprises Limited ("SSD") for a cash and stock transaction
valued at approximately US$4 million in aggregate. This amount is included in
the cost of net assets and goodwill purchased.





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





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





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


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


22





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





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





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




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





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





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





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





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





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





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





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


23




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





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





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





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





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





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





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





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





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





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


24


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





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





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





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





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





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





Note
8 – STOCK WARRANTS,
OPTIONS, AND COMPENSATION


On
February 4, 2008, under the terms of an equity financing commitment, the Company
issued 74,074 shares of common stock at the closing price of $ 8.10 per
share.  The proceeds of $599,994 were paid directly to the
shareholders of Foshan Overseas International Travel Service Co, for amount due
them under Note obligation of the Company.





On May 7,
2007, the Company issued, to a newly appointed Board member, an option grant to
purchase 33,333 shares of common stock at the closing price at $ 5.85 per share.
The exercisable period is two years from issuance. On June 23, 2008, upon
resignation, Board member has forfeited all options.





On
September 6, 2007, the Company issued, to a newly appointed Board member, an
option grant to purchase 33,333 shares of common stock at the closing price at $
8.55 per share. The options are exercisable until June 1, 2017. On June 23,
2008, upon resignation, Board member has forfeited 22,222
options.


25





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





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





On June
24, 2008, the Company issued, to another newly appointed Board member, an option
grant to purchase 33,333 shares of common stock at the closing price of $ 4.56
per share. The options are exercisable until July 1, 2018. The option holder has
no voting or dividend rights. The Company records the expense of the stock
options over the related vesting period. The options were valued using the
Black-Scholes option-pricing model at the model at the date of grant stock
option pricing.





On
January 20, 2009, pursuant to the Securities Purchase agreement entered into on
August 28, 2008, the Company enacted the Universal Travel Group 2009 Incentive
Stock Option Plan entitles the grant of up to 2,200,000 shares of common stock
of Universal Travel Group, par value $0.001 to certain employees of the Company
either as stock or stock options, and the subsequent exercise of any stock
options.  The options are exercisable until January 19, 2019, with a
vesting period of six years. Average purchase price for the options is $3.73 per
share. The options were valued using the Black-Scholes option-pricing model at
the date of grant stock option pricing.  The total fair market value
at grant date is $5,483,865. On July 23, 2009, 3,300 options were exercised at
$2.90.





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




On
September 1, 2009, the Company issued, to the newly appointed CFO an option
grant to purchase 105,000 shares of common stock at the closing price of $ 8.82
per share. The options are exercisable until August 2019. The option holder has
no voting or dividend rights. The company records the expense of the stock
options over the related vesting period. The options were valued using the
Black-Scholes option-pricing model at the model at the date of grant stock
option pricing.





Expected
volatility is based on the historical volatility of the Company’s stock price.
The expected term represents the estimated average period of time that the
options remain outstanding. No dividend payouts were assumed, as the Company has
no plans to declare dividends during the expected term of the stock options. The
risk-free rate of return reflects the weighted average interest rate offered for
zero coupon treasury bonds over the expected term of the options. Based upon
this calculation and pursuant to, ASC 718, the Company recorded a service period
expense of $306,432 and $802,157 for the three and nine months ending September
30, 2009, and $0 and  $155,802 for the three and nine months ended
September 30, 2008.





AggregateExercise
                    
                    
                    Remaining
                    
                    
                    IntrinsicTotal
                    
                    
                    Price
                    
                    
                    Life
                    
                    
                    ValueOutstanding,
      December 31, 2008
                    
                    
                    55,555
                    
                    
                    $
                    4.56-11.25
                    
                    
                    7.69-8.75yrs
                    
                    
                    
                    -Granted
      in 2009
                    
                    
                    2,200,000
                    
                    
                    $
                    2.70-3.84
                    
                    
                    9.31yrs
                    
                    
                    
                    -Granted
      in 2009
                    
                    
                    115,000
                    
                    
                    $
                    8.82
                    
                    
                    
                    9.92yrsExercised
      in 2009
                    
                    
                    (3,300
                    )
                    
                    
                    2.90
                    
                    
                    
                    -
                    
                    
                    
                    -Outstanding,
      September 30, 2009
                    
                    
                    2,367,255
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -


26





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





Note
9 - OTHER
COMPREHENSIVE INCOME


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





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





Note
10 - CURRENT
VULNERABILITY DUE TO CERTAIN RISK FACTORS


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





Note
11 – MAJOR CUSTOMERS
AND CREDIT RISK


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





Note
12 – ESCROW
DEPOSITS


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





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


27





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





Note
13 -   SEGMENT
INFORMATION


Upon the
disposition of Shenzhen Speedy Dragon Enterprises Limited pursuant to a
termination agreement dated June 12, 2009, the Company currently operates and
prepares accounting and other financial reports separately to management for six
major business organizations (Shenzhen Yuzhilu Aviation Service Co., Ltd.,
Shanghai Lanbao Travel Service Co., Ltd., Foshan International Travel Service
Co., Ltd.,  Xian Golden Net Travel Serve Services, Chongqing Travel
World E-Business Co., Ltd., and Shenzhen Travel World Travel Agency Co., Ltd.).
Pursuant to ASC 280-10they disclose segments on
a single entity basis, which in their case is the legal entity. Our
air-ticketing segment relates to the segment reporting of Shenzhen Yuzhilu
Aviation Service Co., Ltd. and Chongqing Travel World E-Business Co., Ltd.,
hotel reservation segment relates to Shanghai Lanbao Travel Service Co., Ltd,
packaged tours segment relates to Foshan International Travel Service Co., Ltd
and Xi’an Golden Net Travel Serve Service Company Limited, and Shenzhen Travel
World Travel Agency Co., Ltd. Management monitors these segments regularly
to make decisions about resources to be allocated to the segment and assess its
performance.





The
following tables’ present summarized information by segment:


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





28




Note
14 -   SUBSEQUENT
EVENTS


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





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





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


29





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


Forward-Looking
Statements: No Assurances Intended




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





Business
Overview





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





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





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





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





In order
to seize the opportunities arising from the economic promotion by the Chinese
government of the mid and western regions of the PRC, we strategically set up
Chongqing Travel World E-Business Co., Ltd. to strengthen our presence in that
region this year and it began generating revenues in the third quarter of 2009.
We believe that this expansion will contribute to our growth in the near
future.





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





We
currently have three discrete lines of business and revenue, and each is carried
out by a subsidiary of the Company. Our air-ticketing segment relates to the
segment reporting of Shenzhen Yuzhilu Aviation Service Co., Ltd. and Chongqing
Travel World E-Business Co., Ltd., hotel reservation segment relates to Shanghai
Lanbao Travel Service Co., Ltd, packaged tours segment relates to Foshan
International Travel Service Co., Ltd and Xi’an Golden Net Travel Serve Service
Company Limited, and Shenzhen Travel World Travel Agency Co., Ltd. Operations of
each segment are exclusive to the operations of the associated subsidiary
company.





30




Major
Factors Affecting the Travel Industry





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




Some of
these factors include:





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




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





According
to the statistics from the website of National Bureau of Statistics of China, in
July 2009, the People’s Republic of China’s first half year gross domestic
product (or “GDP”) grew to US$2.05trillion (RMB13.98trillion), representing a
7.1% growth year over year. The third quarter GDP growth rate also improved from
7.9% in the second quarter to 8.9% in the third quarter.




According
to the statistics from the website of National Tourism Administration of
People's Republic of China in July 2009, the People’s Republic of China’s first
half year domestic tourism spending grew to US$72.9 billion (approximately
RMB497.9 billion), representing a 10.6% growth year over year. We expect similar
or higher growth in the second half of 2009.





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





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





(ii)
            Seasonality
      in the Travel Service
Industry.





The
travel service industry is characterized by seasonal fluctuations and
accordingly our revenue may vary from quarter to quarter. To date, revenue
generated during the summer season of each year generally is higher than those
generated during the winter season, mainly because the summer season coincides
with the domestic peak business and leisure travel season. By contrast, the
winter season includes the Chinese New Year holiday, during which our customers
reduce their business activities.




These
seasonal trends are difficult to discern in our historical results because our
revenue structure has changed due to our expansion over the years into more
diversified fields and our revenue have grown substantially since
inception.





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





(iii)
            Disruptions
      in the Travel Industry.





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





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


31





·
            the snow
      storms which affected the People’s Republic of China during the Spring
      Festival of 2008;


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


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


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


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





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





RESULTS
OF OPERATIONS





THREE
MONTHS ENDED SEPTEMBER 30, 2009 AND 2008





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





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





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





For the three months ended
September 30, 2009:





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


32





For the three months ended
September 30, 2008:





Revenue Segment
                
                Air
      tickets
                  (YZL)
                
                
                (%)
      of
                  sector
                
                
                Hotel
      (SLB)
                
                
                (%)
      of
                  sector
                
                
                Tours
                  (XGN&FOI)
                
                
                (%)
      of
                  sector
                
                
                TotalRevenue
                
                $
                3,885,722
                
                
                
                19.38
                %
                
                $
                2,540,469
                
                
                
                12.67
                %
                
                $
                13,623,122
                
                
                
                67.95
                %
                
                $
                20,049,313Cost
      of Services
                
                $
                311,948
                
                
                
                2.41
                %
                
                $
                1,071,731
                
                
                
                8.29
                %
                
                $
                11,544,101
                
                
                
                89.30
                %
                
                $
                12,927,780Gross
      Profit
                
                $
                3,573,774
                
                
                
                50.18
                %
                
                $
                1,468,738
                
                
                
                20.62
                %
                
                $
                2,079,021
                
                
                
                29.19
                %
                
                $
                7,121,533Gross
      Margin
                
                
                91.97
                %
                
                
                
                
                
                
                57.81
                %
                
                
                
                
                
                
                15.26
                %
                
                
                
                
                
                
                35.52
                %Segment effect in
      Gross Margin (*)
                
                
                17.82
                %
                
                
                
                
                
                
                7.33
                %
                
                
                
                
                
                
                10.37
                %
                
                
                
                
                
                
                35.52
                %


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





Revenue





Our
air-ticketing segment relates to the segment reporting of Shenzhen Yuzhilu
Aviation Service Co., Ltd. and Chongqing Travel World E-Business Co., Ltd.,
hotel reservation segment relates to Shanghai Lanbao Travel Service Co., Ltd,
packaged tours segment relates to Foshan International Travel Service Co., Ltd
and Xi’an Golden Net Travel Serve Service Company Limited, and Shenzhen Travel
World Travel Agency Co., Ltd.





Revenue
for the three months ended September 30, 2009 was $29,784,918 compared to
$20,049,313 for the same period 2008, an increase of approximately 48.6%. This
increase was primarily due to our efforts to expand our businesses, along with
the strong demand for travel demand as a result of the Chinese government’s
stimulus package.  We continue to see success in cross marketing and
selling our travel related products across our business segments and increased
brand awareness from online resales and the deployment of our TRIPEASY
kiosks.





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





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





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





Cost of
Services




Costs of
services for air tickets cover mainly business and revenue related
taxes.  Costs of services for hotel reservations cover mainly business
and revenue related taxes, as well as commissions paid to the sales agents for
selling hotel rooms in the Company’s system. Costs of services for packaged
tours include meals, transportation (airline tickets, train tickets and car
rental), lodging, airport transfers, tickets to local attractions and
tours.


33





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





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





Gross
Profit





Gross
Profit for the three months ended September 30, 2009 was $10,006,311 compared to
$7,121,533 for the same period 2008, an increase of approximately 40.5%. The
increase in gross profit is due to the same factors contributing to the growth
in revenue. The exponential growth in both our domestic air-ticketing business
and hotel reservations business is a result of synergies from our packaged tour
operations.





Gross
profit in our air-ticketing segment was $4,092,898 for the three months ended
September 30, 2009 compared to $3,573,774 for the same period last year, an
increase of approximately 14.5%. Gross profit margin in this segment for the
three months ended September 30, 2009 was 84.0% compared to 92.0% for the same
period 2008, a decreased of approximately 8%. The decrease in gross margin was
mainly attributable to the consolidation of Chongqing's new operation in this
segment. Despite the decrease in profit margin, the significant increase in the
sales volume of this segment still resulted in an increase in the total gross
profit in our air-ticketing business operated by Shenzhen Yuzhilu Aviation
Service Co., Ltd. and Chongqing Travel World E-Business Co., Ltd.





Gross
profit in our hotel reservation segment was $3,136,301 for the three months
ended September 30, 2009 compared to $1,468,738 for the same period last year,
an increase of approximately 113.5%. Gross profit margin in this segment for the
three months ended September 30, 2009 was 81.8% compared to 57.8% for the same
period 2008, an increase of approximately 24.0%. The gross profit margin
increase was mainly due to significant increased booking volume in our direct
sales, as well as improved hotel booking volume in the industry and the
efficient management of cost. These factors together resulted in the significant
increase in the gross profit in our hotel reservation business operated by
Shanghai Lanbao Travel Service Co.





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




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


34





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





Selling, General and
Administrative Expenses





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





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





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





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





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





Other Income
(Expenses)





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





Loss on
change in fair value of derivative liability for the three months ended
September 30, 2009 was $847,754 compared to $0 for same period last year. The
Company adopted Derivative and Hedging, ASC 815-40 effective January 1,
2009 and the warrants issued in connection with the “Securities Purchase
Agreement” dated August 28, 2008 were reclassified from equity to derivative
liability and marked to market.  The Company recorded a loss on change in
fair value of derivative liability of $847,754 on September 30, 2009 to mark to
market for the increase in fair value of the warrants from June 30, 2009 to
September 30, 2009.


35





Net
Income





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





NINE
MONTHS ENDED SEPTEMBER 30, 2009 AND 2008





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





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





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





For the
nine months ended September 30, 2009:





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


36





For the
nine months ended September 30, 2008:





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





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





Revenue





Our
air-ticketing segment relates to the segment reporting of Shenzhen Yuzhilu
Aviation Service Co., Ltd. and Chongqing Travel World E-Business Co., Ltd.,
hotel reservation segment relates to Shanghai Lanbao Travel Service Co., Ltd,
packaged tours segment relates to Foshan International Travel Service Co., Ltd
and Xi’an Golden Net Travel Serve Service Company Limited, and Shenzhen Travel
World Travel Agency Co., Ltd.





Revenue
for the nine months ended September 30, 2009 was $63,701,070 compared to
$38,804,665 for the same period in 2008, an increase of approximately 64.2%.
This increase was primarily due to our ambitious efforts to expand our
businesses, along with the strong domestic travel demand supported by the
government’s stimulus package.  We continue to see success in cross
marketing and selling our travel related products across our business segments
and increased brand awareness from online sales and the deployment of our TRIPEASY kiosks.





Revenue
from our air-ticketing segment was $10,922,307 for the nine months ended
September 30, 2009 compared to $7,251,122 for the same period last year, an
increase of approximately 50.6%. This increase is driven by the organic growth
of Shenzhen Yuzhilu Aviation Service Co., Ltd., the contributions of Chongqing
Travel World E-Business Co., Ltd as well as the increase in air passenger
transportation. We witnessed strong demand from individual travelers, but
only a modest increase in business travelers.  We believe that
this is attributable to the Chinese government stimulating domestic
consumption, and the sluggish recovery in the PRC’s business
sector.





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





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





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





37




Cost of
services




Costs of
services for air tickets cover mainly business and revenue related
taxes.  Costs of services for hotel reservations cover mainly business
and revenue related taxes, as well as commissions paid to the sales agents for
selling hotel rooms in the Company’s system. Costs of services for packaged
tours include meals, transportation (airline tickets, train tickets and car
rental), lodging, airport transfers, tickets to local attractions and
tours.





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





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





Gross
Profit





Gross
profit for the nine months ended September 30, 2009 was $22,307,814 compared to
$12,990,635 for the same period last year, an increase of approximately 71.7%.
The increase in gross profit reflects the aforementioned integration of business
lines onto our online platform and higher percentage of packaged tour
revenue.




Gross
profit in air-ticketing was $9,486,561 for the nine months ended September 30,
2009 compared to $6,558,920 for the same period last year, an increase of
approximately 44.6%. Gross profit margin in this segment for the nine months
ended September 30, 2009 was 86.9% compared to 90.5% for the same period 2008, a
decreased of approximately 3.6%. The decrease in gross margin was mainly
attributable to the consolidation of Chongqing's new operation in this segment.
Despite the decrease in profit margin, the significant increase in the sales
volume of this segment still resulted in an increase in the total gross profit
in our air-ticketing business operated by Shenzhen Yuzhilu Aviation Service Co.,
Ltd., the contributions of Chongqing Travel World E-Business Co.,
Ltd.





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





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





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


38





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





Selling, General and
Administrative Expenses





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





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





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





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





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





Other Income
(Expenses)





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





Loss on
change in fair value of derivative liability for the nine months ended September
30, 2009 was $6,553,971 compared to $0 for the same period last year. The
Company adopted Derivative and Hedging, ASC 815-40 effective January 1,
2009 and the warrants issued in connection with the “Securities Purchase
Agreement” dated August 28, 2008 were reclassified from equity to derivative
liability and marked to market.  The Company recorded a gain on change in
fair value of derivative liability of $113,264 on March 31, 2009 to mark to
market for the decrease in fair value of the warrants from January 1, 2009 to
March 31, 2009, and recorded a loss on change in fair value of derivative
liability of $5,819,481 on June 30, 2009 to mark to market for the increase in
fair value of the warrants from March 31, 2009 to June 30, 2009, and recorded a
loss on change in fair value of derivative liability of $847,754 on September
30, 2009 to mark to market for the increase in fair value of the warrants from
June 30, 2009 to September 30, 2009.


39





Net
Income





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





Our
increase in revenues in the past three quarters reflects the development of the
PRC domestic tourism market, and dynamics of our overall operating platform and
synergies in our different business segments. Our innovative marketing mix and
marketing strategies, our cost synergies of combining online services with
traditional services, as well as the good integration of acquired businesses are
all important factors contributing to our performance thus far. Management
believes that these competitive advantages are sustainable in the long
term.




LIQUIDITY AND CAPITAL
RESOURCES





Cash for
operations and liquidity needs are funded primarily through cash flows from
operations and short-term borrowings. Cash and cash equivalents were $23,942,115
as of September 30, 2009. Current assets and current liabilities as of September
30, 2009, were $47,539,286 and $6,818,860, respectively, yielding working
capital of $40,720,426. We believe that the funds available to us from
operations are adequate to meet our operating needs in 2009. For the nine months
ended September 30, 2009, net cash provided by operating activities was
approximately $11,949,270, which resulted primarily from our organic operations
and effective management of cash flow.





Capital
expenditure





Total
capital expenditure for nine months ended September 30, 2009 was $3,627,267 to
purchase fixed assets, primarily machinery and equipment. Management may
consider substantial increase in equipment or other supporting machinery
expenditure to support the fast development and expansion of our
business.





Working Capital
Requirements





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


40


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





Off Balance Sheet
Arrangements





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





Item 3. Quantitative and Qualitative
Disclosures About Market Risk.





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





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





Item
4.    Controls and Procedures.





Evaluation
of our Disclosure Controls





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





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





Changes
in internal control over financial reporting





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




41





The
Company has set up an internal control department with qualified accounting
staffs which directly report to the Independent Audit Committee. Management
believes this would help strengthen the general internal control process. There
were no changes in our internal controls over financial reporting during our
third fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.





PART
II - OTHER INFORMATION





Item
      1.
            Legal
      Proceedings.





There is no material legal proceeding pending against us.





Item
1A. Risk Factors





Not Applicable.





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





None.




Item
      3.
            Defaults
      Upon Senior Securities





None.




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





None.





Item
      5.
            Other
      Information





Not applicable.





Item
      6.
            Exhibits





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





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





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


42




SIGNATURES





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




Date: November 13,
2009




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





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


43